The Illinois Supreme Court has denied Peachtree Settlement Funding's petition for appeal of the 4th District Illinois Court of Appeals' decision in the Settlement Funding v. Cathy Brenston case.
The earlier Court of Appeals decision held the Illinois state court, which had previously approved transfers requested by Brenston:
- Had a duty to enforce anti-assignment provisions in Brenston's original structured settlement documentation; and
- “[The transfer court] had no authority under the Act to approve” the transfer petitions - even though all of the relevant parties had waived the anti-assignment provisions.
In other words, despite the existence of the Illinois transfer statute, the Appellate decision declared court orders approving assignments to be "void ab initio", as a matter of Illinois law, whenever structured settlement documentation purports to limit assignability.
For additional information about structured settlements and anti-assignment provisions, see S2KM's prior blog post "Anti-Assignment Restrictions".
- Cathy Brenston resolved a medical malpractice case against the University of Illinois Board of Trustees in 2003 with a structured settlement.
- Subsequent to her settlement, Brenston completed multiple factoring transactions with Peachtree Settlement Funding (Peachtree) all of which were approved by Illinois Circuit Courts (Sangamon and Peoria Counties) in accordance with the Illinois transfer statute.
- All transactions were closed and funded. Brenston was paid. The structured settlement obligors and annuity issuers acknowledged and implemented the court orders.
- Brenston filed lawsuits in Cook County in 2011 to void the prior transfer orders arguing anti-assignment clauses in the settlement agreement and the qualified assignment agreements prevented the transfer courts from exercising jurisdiction. The defendants included:
- Peachtree's transfer lawyer
- Brenston's transfer counsel
- The structured settlement obligors and annuity issuers
- The defendant in the original lawsuit
- After Peachtree invoked an arbitration clause, Brenston re-filed the lawsuits in Sangamon and Peoria Counties where Peachtree moved to dismiss the petitions on the grounds that:
- The transfer courts had subject matter jurisdiction to enter the orders;
- Brenston has already received the financial benefits of the orders;
- Brenston provided no reason to vacate said orders; and
- The statute of limitations had expired.
- The trial court granted Peachtree's motions to dismiss and denied Brenston's motions to reconsider and motions for leave to file an amended petition.
- Brenston appealed arguing the Sangamon and Peoria County courts erred in dismissing her petitions where the pleadings sufficiently showed that the orders approving the transfers were obtained by fraud, and therefore void ab initio and subject to challenge at any time.
- An Illinois 5th District panel, sitting for the 4th District Illinois Court of Appeals, agreed with Brenston's argument and issued its decision - even though Peachtree and Brenston had:
- Settled the case prior to the Appellate Court's decision; and
- Filed motions to stay the Appeal.
Appellate Court Holdings
- Brenston's underlying settlement agreement contained an unambiguous, enforceable anti-assignment restriction.
- The transfer court had a duty to enforce that provision and "had no authority" under the Illinois transfer statute to approve the proposed transfers.
- The proposed transfers were improperly filed in Sangamon and Peoria Counties instead of Cook County where Brenston resided.
- Brenston's transfer orders are "void ab initio" because:
- Peachtree did not file all settlement documents with the transfer court.
- Peachtree concealed "by omission" the existence of the anti-assignment provision which "omission was material".
- The conduct of Peachtree and it's attorney amounted to an "affirmative falsehood and a fraud upon the trial court".
Impact of Brenston
- An Amicus curiae brief filed by the National Association of Settlement Purchasers (NASP) states that the Appellate Court decision will render the Illinois transfer statute "a practical nullity".
- "Without the certainty and finality of a court order, there is no viable secondary market," the NASP brief states. "Because every structured settlement contains boilerplate language that purports to limit or restrict assignability, every Illinois court approved transfer could be subject to challenge at any time."
S2KM thanks NASP Executive Director Earl Nesbitt and NASP President Patricia LaBorde for their insights concerning the Brenston case and for granting S2KM permission to utilize materials from Nesbitt's 2013 NASP Annual Conference Litigation Update.
S2KM will continue reporting Brenston case developments including whether and how NASP and the National Structured Settlement Trade Association (NSSTA) will respond.
For S2KM's complete reporting about the structured settlement secondary market, see the structured settlement wiki.