Structured Settlement Protection Acts are intended to protect former Plaintiffs who find it necessary to sell their structured settlement by requiring things like financial disclosures up front and court approval on the back end before the transfer transaction can be finalized. While the front end requirements are fairly straightforward and are generally complied with, some factoring companies have found ways to thwart the court approval process through forum shopping.
The spirit and intent of the SSPAs in requiring judicial approval was to have the judiciary serve as a watchdog to ensure such transfer transactions were in the “best interests” of sellers and their dependents, but, the Acts did not require such approval to occur in the originating venue or court. Rather, such transactions can generally be approved by any court of competent jurisdiction within the State. So, factoring companies whose primary concern is maximizing the discount rate charged to former Plaintiffs have identified courthouses with judges who are less likely to thoroughly review the details of the transfer, due to caseloads or other factors, to obtain the court approval required. The resulting “rubber-stamping” of the transfer transactions through this type of forum shopping thwarts the good intent of such Acts, and, is allowing such companies that use inflated discount rates to push such transactions through to the detriment of the Plaintiffs who chose to sell.
While the mechanism to police such companies exists, as long as companies can thwart the intent of such Acts by forum shopping, Plaintiffs will remain at risk. Therefore, it is important that we all familiarize ourselves with these issues so that we can protect former clients. There is certainly no easy answer to this problem, and, with strained judicial budgets and overloaded dockets, we must be cognizant of the fact that, despite all best intentions, there are realistic limits to what the courts can do. Certainly, if a former client seeks advice, we as lawyers can encourage them to consider all of their other options first before selling, we can help them in finding reputable companies to speak with should they need to sell, and we can point out to them that they should only sell when it is truly in the “best interests” of themselves and their dependents. We can also advocate for more judicial recognition of this practice of forum shopping so that it becomes more difficult for the court system to be manipulated to the detriment of former injury victims or their families. Hopefully, with more awareness and activism, the protections of the SSPAs enacted throughout this country can be more effectively implemented and enforced.
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