A Louisiana state court has ruled in Stone Street Capital v. McClendon that MetLife and Travelers had no right to withhold a structured settlement payment from Stone Street Capital which Stone Street had previously purchased, with court approval pursuant to the Louisiana structured settlement protection act, despite the original annuitant/payee's death prior to the payment date.
This 2012 case, which was featured in a presentation by Earl Nesbitt at the NASP 2012 Annual Conference, reinforces the finality of settlement transfer orders. According to Nesbitt, it also calls into question other cases where Travelers, as owner of structured settlement annuities, has ordered structured settlement annuity issuers to stop making payments to transfer companies following the death of the original annuitant/payees despite existing court orders approving those transfers.
- In 1990, Shelia McClendon entered into a structured settlement in which Travelers Insurance Company, as assignee, purchased an annuity from Travelers Life and Annuity Company, which later became MetLife Annuity Company of Connecticut in 2006.
- On July 27, 2007, Shelia McClendon entered into a purchase and sale agreement with Stone Street Capital to sell her right to a $51,800.51 payment due October 15, 2010.
- On September 20, 2007 the same court which subsequently heard the Stone Street v. McClendon case signed an order approving the transfer.
- In the 2007 transfer proceeding, Stone Street gave proper notice to MetLife (as annuity issuer) and Travelers (as annuity owner) neither of whom raised any objections.
- MetLife subsequently sent a letter to Stone Street advising that MetLife would make the assigned payment to Stone Street in compliance with the order.
- The transfer order provided an indemnity, allegedly requested by Travelers and MetLife, to protect them from any further suit by any party asserting an ownership claim or a right to the assigned payment.
- Shelia McClendon died in 2008.
- Pursuant to instructions from Travelers, MetLife did not pay Stone Street the October 15, 2010 payment when due.
- Following Stone Street's inquiry, MetLife and Travelers informed Stone Street that other persons had competing demands for the October 15, 2010 payment and, to resolve the conflict, Stone Street must file a declaratory judgment action which Stone Street did file.
- On July 15, 2011, Travelers filed a preemptory exception of nonjoinder of indispensable parties.
- Travelers' exception claimed Shelia McClendon had passed away and that both her estate and the estate of Peatrice Jackson, whom Travelers claimed was the annuity beneficiary, were indispensable parties to Stone Street's declaratory judgment lawsuit.
- On August 4, 2011 MetLife answered Stone Street's petition and included a reconventional demand for consursus (a form of interpleader).
- None of the parties disputed, either at the time of the 2007 transfer hearing or at the time of the subsequent declaratory judgment suit, that Stone Street properly complied with Louisiana's structured settlement protection act.
Stone Street's Argument
- The declaratory judgment action was filed against MetLife and Travelers and also against the parties Travelers told Stone Street to file against.
- Stone Street subsequently asserted, however, that MetLife was the only party against whom Stone Street needed a judgment in this lawsuit.
- Therefore, Stone Street asked that everyone else be dismissed from Stone Street's motion for summary judgment.
- According to Stone Street, the declaratory judgment proceeding should not have been necessary.
- Stone Street fully complied with the Louisiana structured settlement protection act and a transfer order was previously entered without objections from MetLife or Travelers.
- The 2007 transfer order required MetLife to make the October 15, 2010 payment to Stone Street.
- MetLife ignored their own prior letter wherein MetLife stated it received the order and agreed to comply.
- The principle of res judicata should prevent MetLife from pleading concursus because its claim was previously prosecuted to judgment.
- Traveler's request for a declaratory judgment and MetLife's consursus proceeding represented "improper accumulations of actions".
- Although some state structured settlement protection statutes require a change of annuity beneficiary, the Louisiana statute does not because beneficiaries are not required to receive notice or be named parties.
- Louisiana law further holds:
- Until a person dies that person has the right to sell assets that person owns.
- Except for irrevocable beneficiaries, no one has a vested right to the status of a beneficiary under a life insurance contract if the death of the insured has not occurred.
- Neither MetLife nor Travelers were parties to the 2007 transfer order so that order had no res judicata effect on MetLife.
- Travelers, the annuity owner, told MetLife not to make the October 15, 2010 payment to Stone Street.
- Nothing in the 2007 transfer order addressed what would happen to the October 15, 2010 payment if Shelia McClendon died prior to that date.
- When Shelia McClendon died, her named beneficiary in the annuity contract was Peatrice Jackson who predeceased McClendon.
- Peatrice Jackson's heirs filed a competing claim for the October 15, 2010 payment.
- Although Stone Street alleges Shelia McClendon filed a request to change her annuity beneficiary, neither MetLife nor Travelers had any record of receiving this request.
- Because a discrepancy existed among the documents submitted to MetLife, a concursus proceeding became necessary and appropriate.
- The Louisiana structured settlement protection act did not impact Shelia McClendon's settlement agreement.
- The settlement agreement remained valid even following the transfer agreement.
- The transfer agreement did not change either the settlement agreement or the annuity contract beneficiary designation.
- The settlement agreement and the annuity contract both provide that Peatrice Jackson, the named beneficiary, would receive the future payments in the event of Shelia McClendon's death.
- If Stone Street and Shelia McClendon had followed through on their request to name Stone Street the annuity beneficiary, this declaratory judgment lawsuit would not have been necessary.
- Travelers had no proof that Shelia McClendon made any attempt to initiate a beneficiary change.
- Therefore, material issues of fact existed concerning: 1) who was Shelia McClendon's rightful beneficiary; and 2) who was entitled to the October 15, 2010 payment.
Judgment - Louisiana District Court Judge Kay Bates:
- Dismissed MetLife's concursus with prejudice and costs payable by MetLife.
- Denied Travelers' exception of failure to join indispensable parties with costs payable by Travelers.
- Granted Stone Street's motion for summary judgment with costs payable by MetLife.
- Granted Stone Street's motion to dismiss the other defendants without prejudice.
- Ordered MetLife to remit the October 15, 2010 payment to Stone Street within 15 days of the mailing of the judgment.
Judge Bates' Reasoning
- In the 2007 transfer proceeding, Shelia McClendon and Stone Street were parties, and MetLife and Travelers were properly notified and served with the petition and order.
- Under the Louisiana structured settlement protection act, Shelia McClendon was clearly entitled to sell the October 15, 2010 payment.
- The 2007 transfer order was valid, final, and not subject to appeal as all delays had passed.
- MetLife's claims against Stone Street arose out of the same subject matter as the 2007 transfer proceeding.
- MetLife's issues existed when the 2007 transfer order was signed and neither MetLife nor Travelers objected at that time.
- Therefore, MetLife's concursus is barred by res judicata.
- Neither MetLife, nor Travelers, nor any of the other claimants had any continuing interest in the October 15, 2010 payment.
- Because Stone Street established it was entitled to the October 15, 2010 payment as a matter of law, no genuine issue of material fact remained.
- For a 2009 California appellate case addressing the finality of structured settlement transfer orders, see Henderson v. Ramos reported in "Fresno County Factoring Cases" - Part 1 and Part 2 .
- For S2KM's complete reporting about the structured settlement secondary market, see the structured settlement wiki.
- For a more comprehensive and updated analysis of structured settlement transfers, see Chapter 16 of "Structured Settlements and Periodic Payment Judgements" (S2P2J).