Beyond Structured Settlements

NASP 2009 Annual Meeting - 1

The National Association of Settlement Purchasers (NASP) hosted its 2009 Annual Meeting at the Mandalay Bay Hotel in Las Vegas November 12-13 almost one month following  NSSTA and SSP 2009 Fall meetings at the same location.

In comparison with traditional NSSTA and SSP meetings, the NASP 2009 educational program featured:

• More insightful and comprehensive strategic discussions;
• Broader perspectives from industry experts;
• Better analysis of legal and financial developments;
• Better analysis of structured settlement public policy;
• Better criticism of business standards and practices;
• Better recognition of industry leaders who are contributing to the growth and improvement of structured settlements.

Structured Settlement Wiki - for S2KM reports about prior NASP meetings, see the structured settlement wiki.

This S2KM blog post, the first in a series about the NASP 2009 meeting, highlights the NASP Alexander Hamilton honoree plus educational topics and speakers. Subsequent S2KM posts will summarize and analyze NASP discussions and provide interviews with some of the industry experts who spoke at the NASP meeting.

Alexander Hamilton Award - Van Tran was named 2009 recipient of NASP's Alexander Hamilton award. Van Tran is the California legislator who led the enactment of California SB 510 which amends and improves California's structured settlement protection statute.

NASP 2009 Educational Conference - Topics and participants:

• 2009 Legislative Developments - Matthew Bracy.
• Legal Case Update - Tricia Laborde.
• What Happened in California? - Michael Damore; Carl London; John Shafhi; Matt Eason; Linda Morris; Matt Bracy.
• Transactional Structured Settlement Issues - Tricia Laborde; Ken Barnett; Michael Green; Jim Klohn; David Barfield; Scott Topoloski; Kevin Mack; Joe Siegel.
• Structured Settlement Capital Markets - Jason Sutherland; Burt Kroner; John Ryan; Robin Shapiro; Josh Tobin.
• Structured Settlement Court Practices and Issues - Earl Nesbitt; Judge Edward Burke; Judge Christopher Marshall; Thomas Dixon; Roger Dunaway; Tricia Laborde; Amy Schwartz.
• Factoring and the Structured Settlement Tax Subsidy - Jeremy Babener.
• Structured Settlement Bankruptcies - Bruce Akerly.
• Re-thinking Structured Settlements - Earl Nesbitt; Jeremy Babener; Matthew Bracy; Daniel Hindert; Richard Risk; Andrew Savysky; Robin Shapiro; Michael Upchurch.

For additional information about structured settlements, see:

• "Structured Settlements and Periodic Payment Judgments" (S2P2J) co-authored by Daniel Hindert, Joseph Dehner and Patrick Hindert;
• Wikipedia definitions for:
  • Structured settlement;
  • Structured settlement factoring transaction.

NSSTA 2009 Fall Educational Conference

Meeting at the Mandalay Bay Hotel in Las Vegas on October 15 and 16, the NSSTA 2009 Fall Educational Conference provided a potpourri of perspectives on the central topic of structured settlements.

Although lacking a unifying theme and failing to provide noteworthy handout materials, the conference did offer a general industry overview and did address several important industry developments without encouraging or generating meaningful discussion or detailed inquiry.

The general overview featured structured settlement perspectives from selected industry stakeholders:

• Plaintiff attorneys - Neil Galatz and Jeffrey Mitchell;
• Defense attorney - Steve Jaffe;
• Special needs attorney - James O'Reilly (with NSSTA member Thomas Spratt);
• Life company executive - Joseph Barnet;
• Annuity agents (discussing mediation) - Tony Robinson; Alice Frisbee; Kathleen Osler; and Traci Kaas;
• Attorney and annuity agent (discussing history, myths and opportunities) - Karen Meyers;
• Congresswoman Shelley Berkley.

Industry developments featured:

• NSSTA General Counsel Craig Ulman;
• NSSTA lobbyist Eric Vaughn;
• NSSTA Legal Committee representatives - Peter Vodola; Ilana Hanau; Michael Miller; and Mark Alpert.

The most important industry developments discussed in Las Vegas:

• Warnings from Vaughn and Congresswoman Berkley about anticipated federal tax reform in 2010;
• Vaughn's report that some federal health care reform proposals include tort reform and periodic payment of judgments;
• Ulman's update about the increasingly precarious financial condition of Executive Life of New York;
• Alpert's summary of PLR 121876-08 permitting a tax-free "restructuring" of periodic payments;
• Hanau's summary of the Henderson v. Sioteco case where a California appellate court reversed earlier Fresno County trial court decisions and declared that public policy now supports state court approved factoring transactions.
• Vodola's summary of California's new structured settlement protection statute (SB 510) which includes a detailed definition for "best interest".

From a critical perspective, NSSTA's 2009 Fall Educational Conference represented a series of "missed opportunities".

Missed opportunity #1 - Karen Meyers, who co-developed and annually presents NSSTA's "Certified Structured Settlement Consultant" (CSSC) program, addressed a NSSTA educational program for the first time in several years - and didn't talk about the CSSC program.

Missed opportunity #2 - Meyers spoke instead about structured settlement myths - yet failed to address the most fundamental and controversial NSSTA myths including "squandering injury victims" (see: "Dissipation Studies") and "how structured settlements enable injury victims to live free of reliance on government assistance" (see: "Structured Settlement Credo")

Missed opportunity #3 - NSSTA's educational program failed to acknowledge, respond to, or apparently understand, two recent strategic challenges which question the focus and scope of NSSTA education:

• Internal challenge - Joseph DiGangi's "Settlement Consulting" presentation at the NSSTA 2009 Winter Meeting;
• External challenge - The Society of Settlement Planners (SSP) Registered Settlement Planner Certification Program.

Missed opportunity #4 - related to missed opportunity #3: NSSTA's educational programs continue to ignore the strategic relationship among structured settlements, financial planning and life care planning.

Missed opportunity #5 - although NSSTA's legal committee has successfully expanded the scope of NSSTA's structured settlement legal education (from "Tax Posse" to "All Things Considered"), their programs tend to be repetitive (e.g. "Contracts 101") and fail to translate current legal developments into broader topical presentations.

Suggested future legal committee educational topics:

• What NSSTA members need to know (and tell their clients) about IRC 5891, state protection statutes and structured settlement factoring transactions;
• What NSSTA members need to know (and tell their clients) about IRC 468B qualified settlement funds;
• Comparative business standards and practices for various structured settlement stakeholders and "competitors" - insurance agents; financial securities salespersons; attorneys; trustees.
• Transactional analysis - what does a structured settlement look like in the context of 468B qualified settlement funds; special needs trusts; Medicare set-aside arrangements; and secondary market transfers?
• Integrating annuities with settlement trusts - how do integrated products impact traditional structured settlement planning, documentation and education?

Many structured settlement leaders no longer attend NSSTA educational conferences - especially those leaders who are defining the future of the structured settlement industry. When those industry leaders do attend NSSTA conferences, they attend primarily for networking opportunities or committee meetings - not for the educational programs.

With some exceptions, NSSTA's educational programs are no longer educational. They are mundane, repetitive and suitable primarily for persons new to the industry. Controversial subjects do not appear on the program - or they are circumscribed to avoid controversy. Debate is discouraged. Speakers rarely face tough questions - or provide handout materials.

Perhaps it is time for NSSTA to re-think structured settlements and structured settlement education. What will it take to attract a new generation of structured settlement leaders to join and participate in NSSTA? What will it take to re-engage the industry's best and brightest professionals in NSSTA's educational programs? The NSSTA Fall 2009 educational conference in Las Vegas highlighted those issues without providing any answers.

For prior S2KM reports about NSSTA educational programs, see S2KM's structured settlement wiki.

S2P2J Release 46

Incisive Media has announced the publication of Release 46 for "Structured Settlements and Periodic Payment Judgments" (S2P2J). Co-authored by Daniel Hindert, Joseph Dehner and Patrick Hindert, S2P2J was first published in 1986 and has since been utilized as a textbook for professional certification programs sponsored by both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP).

S2P2J Release 46 Highlights

• New Medicare/Medicaid mandatory reporting rules for insurers and others with full details about the scope of reporting, exclusions and requirements that affect defense attorney obligations and secondary payers in personal injury claim settlements;
• Third Circuit decision affirming addition of "tax offsets" to compensatory damages in an ADA case, with important implications for non-physical injury cases;
• Private Letter Ruling confirming that non-qualified assignment payments are not taxed until the year received;
• Importance of allocating state Medicaid liens and negotiating in advance of settlement with state providers, based on adverse ruling in an Idaho case;
• Up-to-date growth rate figures for medical care expenses and earning for non-farm workers, plus the latest data on structured settlement annuity use;
  
• Factoring company victory in California appeals case concerning right to dismiss cases when trial judges refuse transfer petitions;
• Developments in Australia and the United Kingdom regarding tax-free nature of structured settlement receipts and proper growth rates for periodic payment judgments.

S2P2J Release 47, available March 2010, will introduce Sylvius von Saucken as an S2P2J chapter and subject expert author. von Saucken, a partner in the Garretson Law Firm and Chief Compliance Officer for The Garretson Firm Resolution Group (GFRG), will add his analysis to:

• Chapter 3 - "Financing Alternatives for Structured Settlements";
• Chapter 14 - "Structuring Workers Compensation Claims";
• Chapter 15 - "Government Benefits and Structured Settlements".

S2P2J Release 47 will also feature expanded commentary for:

• Structured settlement public policy;
• Single claimant Qualified Settlement Funds (QSFs); and
• Secondary market developments.

For prior S2KM reports featuring Sylvius von Saucken's analysis of the Deficit Reduction Act of 2005, see the S2KM blog series titled "Inconvenient Questions".

Structured Settlement 2009 Strategic Analysis

S2KM has begun a mid-year 2009 strategic analysis of the structured settlement industry. This analysis includes attending and reporting about 2009 structured settlement professional stakeholder meetings plus continuing conversations with structured settlement industry leaders.

To organize and publish S2KM's findings and analysis, S2KM is developing, and plans to publish and update, a related public wiki titled "Structured Settlements 2009". Here is a preview of this S2KM public wiki home page.

Purposes of S2KM's Structured Settlements 2009 wiki

• Provide S2KM with a dedicated online resource to identify, capture, organize and publish 2009 structured settlement strategic analysis.
• Demonstrate how blogs and wikis can interact to improve strategic analysis and learning.
• Encourage structured settlement knowledge leaders and professional associations to endorse, encourage and participate in strategic industry analysis.
• Help all structured settlement stakeholders to better understand, improve and grow structured settlements.

Table of Contents - includes references to related 2009 conference presentations; subject to continuing wiki updates:

• S2KM primary analytic resources - S2KM blog reporting for:
  • 2009 structured settlement stakeholder meetings - the Table of Contents incorporates and features educational discussions from the following conferences:
    
    • NSSTA 2009 Winter Meeting
    • ASNP 2009 Annual Meeting
    • SSP 2009 Annual Meeting
    • NSSTA 2009 Annual Meeting
  • Structured settlement professional stakeholder association prior year meetings
  • Related topics and knowledge leaders:
    
    • Settlement consulting;
    • Tim Nay Interview.
• S2KM's transitional perspective - structured settlements are undergoing two primary transitions:
  • From claim management to settlement consulting:
    • NSSTA: Settlement Consulting - Joseph DiGangi
    • SSP: Settlement Planning Industry Update - Patrick Hindert.
    • SSP - State of the Art Settlement Planning - Joseph Tombs
    • NSSTA: Looking Forward - Chris Diamantis and Dan Durbin.
  • From historic communication, learning and work processing to Internet-based models:
    • NSSTA:Web 2.0 - Patrick Hindert.
• Public policy - no 2009 stakeholder association discussions.
• Legislation and regulations
  • Existing
    • Federal
      • SSP: Tax Panel - Richard Risk; Sylvius von Saucken; Peter Wayne.
    • State
      • SSP: Judicial Approval of Minors Settlements - Phillip McCrury.
      • NSSTA: Exemptions for Structured Settlement Payments - Craig Ulman.
  • Proposed - no 2009 stakeholder association discussions.
    • Federal
    • State
  • Political strategy
    • NSSTA: Federal Entitlement Programs - Andrew Imparato.
    • NSSTA: Washington Reports - Eric Vaughn.
    • SSP: AAJ Strategy - John Bowman.
    • NSSTA: Federal and State Issues - Len Blonder.
    • NSSTA political speakers:
      • Senator Richard Durbin (D) from Illinois;
      • Senator Charles Grassley (R) from Iowa;
      • Congressman Charles Rangle (D) from New York;
      • Congressman Kendrick Meek (D) from Florida;
      • Congressman James Langevin (D) from Rhode Island;
      • Congressman Joseph Crowley (D) from New York;
      • Congressman Dave Camp (R) from Michigan;
      • Congressman Brian Higgins (D) from New York;
      • Congresswoman Allyson Schwartz (D) from Pennsylvania;
      • Congressman Joseph Courtney (D) from Connecticut;
      • Plus the Chiefs of Staff for four congressmen.
• Case law
  • SSP: Litigation and Legislative Update - Anthony Alfieri.
  • NSSTA: Spencer v. Hartford - Michael Miller.
  • NSSTA: Fresno County Factoring Cases - Illana Hanau.
• Primary and secondary markets
  • NSSTA: Secondary Market Update - Michael Miller and Illana Hanau.
• Government benefits
  • NSSTA: Federal Entitlement Programs - Andrew Imparato.
  • ASNP: Medicare Secondary Payer Compliance - Mark Popolizio.
  • ASNP:Lien Resolution Strategies - William Browning; Mark Popolizio; Sylvius von Saucken.
  • SSP: MMSEA Section 111 - Mark Popolizio.
  • NSSTA: Medicare Panel - Roy Franco; Mark Popolizio; David Korch; Rafael Gonzoles.
  • NSSTA: Medicaid Panel - John McCulloch; Timothy O'Driscoll; Dennis McAndrews
• Structured settlement economics
  • ASNP: Structured Settlement Annuities - Jack Meligan and Michele Whitmore.
  • SSP: Life Insurance Insolvencies - Eric Nordman.
  • NSSTA: Financial Strength Ratings - William Pargeans.
• Structured settlement funding products
  • NSSTA: 468B QSFs - Henry Strong, William Winslow, James Klapps.
  • ASNP: Structured Settlement Annuities - Jack Meligan and Michele Whitmore.
  • ASNP: 468B QSFs - Richard Risk and Jason Lazurus.
  • SSP: Settlement Trusts - Christi Fried.
  • SSP: Settlement Trust Software - David Eichenbaum.
• Transactional analysis
  • ASNP: Anatomy of a SNSP Case - Frank Johns, Kevin Urbatsch, Patrick Hindert.
• Stakeholder associations
  • NSSTA (2), SSP and ASNP 2009 meetings.
• Ethics
  • NSSTA: Business Ethics - Father Oliver Williams.
  • NSSTA: Business Ethics - Mike Jones.
• Standards
  • SSP: Registered Settlement Planner - Joseph Tombs.
• Business models
  • Claim management
    • NSSTA: Plaintiff and Defense Brokers - Ronald Sullivan, James Early, Roger Bernstein, Bruce DeBacher, Michael Goodman.
    • SSP:Structured Settlement Insolvencies - Randy Dyer.
    • SSP: Growing Structured Settlements - Randy Dyer.
    • SSP: In-House Structured Settlement Programs - Kevin Mack.
    • NSSTA: Minnesota Bridge Collapse - Jerry Lothrop.
  • Settlement consulting
    • NSSTA: Settlement Consulting - Joseph DiGangi.
    • ASNP: Integrating SNSP with an Elder law Practice - Tim Nay and Sandy Conley.
    • ASNP: Marketing to the Trial Bar - Frank Johns, Jason Lazurus, Kevin Urbatsch.
    • SSP: State of the Art Settlement Planning - Joseph Tombs.

NSSTA 2009 Annual Meeting - 1

To borrow a baseball analogy from Len Blonder, the National Structured Settlement Trade Association (NSSTA) "hit a home run" (or rather a series of home runs) during its 2009 Annual Meeting in Washington, D.C. April 28-May 1.

Blonder's comments to NSSTA attendees about "federal and state issues", which occurred near the end of an exceptional NSSTA program, served as a belated key note address for the entire NSSTA program.

Blonder was one of three NSSTA past-Presidents, along with Henry Strong and Chris Diamantis, whom NSSTA, and new NSSTA President Daniel Durbin, honored during its meeting.

Blonder, a two-time NSSTA President who continues to co-chair NSSTA's Legislation and Regulation Committee, spoke passionately about baseball and structured settlements. Blonder traced his involvement in structured settlements to the late 1970s when he helped organize a pre-NSSTA political coalition which formulated, and eventually helped to enact, the original structured settlement tax legislation in 1982.

With support from Blonder and its Legislation and Regulation Committee, NSSTA announced and introduced a new "D.C. two-step" political strategy: move one-step backward before moving two or more steps forward.

NSSTA's backward step:

• Re-focus on "protecting, preserving and promoting" structured settlement laws already enacted in the United States Internal Revenue Code and 47 state structured settlement protection statutes;
• Consolidate and transition NSSTA's administrative, financial and political strengths.

NSSTA's forward steps:

• Continue enhanced education about Medicaid and Medicare as cornerstones for growing the structured settlement market;
• Continue to define NSSTA's Internet strategy and online voice.

NSSTA's strengths were displayed during the 2009 Annual Meeting.

• Joseph Ricci, NSSTA's new Executive Director, summarized improvements in NSSTA governance.
• NSSTA announced:
  
  • New NSSTA voting bylaws;
  • Election of new Directors Betty Gregware and Daniel Finn; plus
  • A new NSSTA Channel on YouTube.
• NSSTA's program featured presentations from:
  • NSSTA lobbyist Eric Vaughn;
  • NSSTA marketing consultant Peter Arnold; and
  • NSSTA General Counsel Hogan & Hartson partner Craig Ulman.
• In addition to his "Washington Report" Vaughn organized an impressive delegation of congressional speakers for NSSTA:
  
  • Senator Richard Durbin (D) from Illinois;
  • Senator Charles Grassley (R) from Iowa;
  • Congressman Charles Rangle (D) from New York;
  • Congressman James Langevin (D) from Rhode Island;
  • Congressman Joseph Crowley (D) from New York;
  • Congressman Dave Camp (R) from Michigan;
  • Congressman Brian Higgins (D) from New York;
  • Congresswoman Allyson Schwartz (D) from Pennsylvania;
  • Congressman Joseph Courtney (D) from Connecticut;
  • Plus the Chiefs of Staff for four congressmen.

Among the political speakers, Senator Durbin, uncle of NSSTA President Daniel Durbin, was the most focused on structured settlement issues. Senator Durbin promised to:

• Support IRC sections 104(a)(2) and 130;
• Address structured settlement secondary market advertising as part of his proposed Financial Product Safety Commission.

Ricci, Vaughn and NSSTAPAC Chairman Brad Cantwell complemented NSSTA congressional presentations with a NSSTAPAC status report.

In addition to the congressional speakers, NSSTA's educational program featured exceptional structured settlement and settlement planning presentations:

• Industry Update and Looking Forward - Transitioning NSSTA Presidents Chris Diamantis and Dan Durbin offered their strategic analyses;
• "All Things Considered" - NSSTA's legal committee has upgraded the quality and scope of its educational contributions:
  
  • Michael Miller summarized Spencer v. Hartford;
  • Ilana Hanau spoke about the Fresno County factoring cases;
  • Craig Ulman re-introduced "Exemption of Structured Settlement Payments" as a sales and marketing enhancement to help grow structured settlements.
• Medicare and Medicaid - NSSTA's government benefits committee sponsored two panel discussions.
  
  • Roy Franco, Mark Popolizio, David Korch and Rafael Gonzalez spoke about Medicare and structured settlements;
  • John McCulloch, Timothy O'Driscoll and Dennis Mc Andrews spoke about Medicaid and structured settlements.

• 35W Bridge Collapse - Jerry Lothrop summarized structured settlement results and lessons learned from the Minnesota August 1, 2007 bridge collapse.
• Financial Strength Ratings - William Pargeans of A.M. Best emphasized strong fixed annuity sales trends despite low interest rates;
• Ethics - Mike Jones continued a revitalized NSSTA priority:
  • Asking the NSSTA audience: "why be ethical?" and
  • Challenging the NSSTA audience to identify and support ethical leaders within the structured settlement industry.

Congratulations to NSSTA for an outstanding 2009 annual meeting in Washington, D.C. Future S2KM blog posts will offer commentary.

For S2KM reports about prior NSSTA meetings, see S2KM's structured settlement wiki.

Fresno County Factoring Cases - 3

Continuing a series of Fresno County factoring cases, a California court of appeals has ruled favorably for 321 Henderson Receivables, a J.G. Wentworth affiliate, reversing an earlier opinion of California superior court Judge Alan M. Simpson in 11 factoring cases consolidated for appeal as "Henderson v. Scioteco"

For earlier S2KM reports about the Fresno County factoring cases, see:

• Fresno County Factoring Cases - 1: summary of the Tomahawk and Ramos cases;
• Fresno County Factoring Cases - 2: commentary about the Tomahawk and Ramos cases.

In Henderson v. Scioteco, the California appellate court:

• Reversed the entire consolidated order from the superior court because:
  • "...the superior court has committed multiple prejudicial errors in making its factual findings and in reaching legal conclusions" and
  • "because these errors cannot be separated from valid findings and legal conclusion..."
• Granted Henderson the right to "amend the SSTA petitions at issue to correct any errors prior to any new hearing on the petitions".
• Held that public policy supports state court approved structured factoring transactions.

SSP 2009 Annual Meeting - 1

The Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) hosted sequential annual meetings the week of April 26 in Washington, D.C. This blog post begins S2KM's reporting about those meetings.

SSP's meeting (titled "Securing the Financial Needs of Injury Victims and their Families") was notable for the diversity of attendees, topics and viewpoints. Several NSSTA members were among the attendees as well as settlement planning and secondary market attorneys, annuity and trust providers, primary and secondary market intermediaries, authors, bloggers and law students.

Former NSSTA Executive Director Randy Dyer was a featured SSP speaker. Dyer spoke twice and provided:

• A definitive history of structured settlement insolvencies - annuities and bond trusts.
• An allegorical lesson about how to jump start structured settlement annuity sales.

Kevin Mack, former Director of Travelers' structured settlement program and former Chairman of NSSTA's legal committee, offered insights to "in-house" structured settlement programs. Mack made several recommendations for growing and improving the structured settlement industry including: more plaintiff intermediaries; improved education for judges and plaintiff attorneys; plus mandatory "disclosure" of structured settlement compensation and conflicts of interest.

Joseph Tombs, SSP's new President and Chairman of the Registry of Settlement Planners (RSP) Board of Directors spoke about three topics. Tombs:

• Reported on the status of the RSP program;
• Honored the first 10 RSP graduates;
• Outlined current "state of the art" for settlement planning.

Richard  Risk moderated SSP's settlement planning tax panel headlined by Sylvius von Saucken and Peter Wayne. von Saucken and Wayne responded to a series of Risk's questions addressing qualified settlement funds (QSFs), commutations, estate taxes, punitive damages, non-qualified assignments and sexual battery tax requirements among other issues.

Texas attorney Phillip McCrury surveyed state laws for judicial approval of minors' settlements. Common features in many states: "best interest" test; prohibitions against conflicts of interest; segregated accounts; guardian ad litems; and "reasonableness" of attorney fees.

Mark Popolizio reported on Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA). Popolizio summarized the new CMS NHGP User Guide and addressed reporting triggers, deadlines and issues for "responsible reporting entities" (RREs).

Eric Nordman, Research Director for the NAIC, discussed "life insurance insolvencies". Nordman summarized historic data and warned about future issues including systemic risks and the challenge of defining "transparency".

Christi Fried and David Eichenbaum spoke about settlement trusts and settlement planning software respectively. Tim Nay's presentation about "special needs trusts" outlined relevant laws and added practical advice and perspective.

Anthony Alfieri's "Litigation and Legislative Update" summarized Spencer v. Hartford; the PLR for non-qualified assignments; plus the Fresno County and Rapid Settlement factoring cases among other topics.

John Bowman, Director of Federal Relations for the American Association for Justice (AAJ), discussed how the 2008 elections have impacted AAJ's political priorities. One primary AAJ objective: keep medical malpractice out of anticipated health care reform.

Patrick Hindert, Managing Director of S2KM Limited, offered strategic analysis about the current settlement planning industry.

Congratulations to SSP, and especially Greg Maxwell, Joseph Tombs, Richard Risk and Rhonda Bentzen, for their continuing high education and annual meeting standards.

In subsequent blog posts, S2KM will:

• Summarize the NSSTA 2009 Annual Meeting;
• Analyze and compare the settlement planning and structured settlement industries.

Fresno County Factoring Cases - 2

An earlier S2KM blog post (Fresno County Factoring Cases-1) summarized two recent decisions (Tomahawk and Ramos) by a California Appellate Court. In those decisions, the Appellate Court reversed earlier decisions against 321 Henderson Receivables, a J.G. Wentworth affiliate, by Superior Court Judges in Fresno County, California.

This S2KM blog post provides S2KM's commentary about the Tomahawk and Ramos cases following telephone conversations with legal experts familiar with the cases.

Case issues:

• The Superior Court decisions raise many issues which are identified in S2KM's earlier blog post.
• The California Appellate Court addressed two issues:
  • In Tomahawk and Ramos - Should a structured settlement transfer petitioner in California be permitted to withdraw a transfer petition prior to a final transfer order? The California Appellate Court said "yes".
  • In Ramos - Are settlement transfer orders final? Restated: can one California Superior Court Judge review and overrule a transfer order approved by another California Superior Court Judge? The California Appellate Court said "yes" to the first question and "no" to the second.

Case results:

• Judicially-approved transfers are now "final" in California - and probably not even an issue in other states!
• J.G. Wentworth won important legal victories in Tomahawk and Ramos for:
  • J.G. Wentworth - appeals in Tomahawk and Ramos are possible but not likely. The California Appellate Court has agreed to accelerate Wentworth's 11 related case appeals which are scheduled to be argued in mid-April.
  • The secondary annuity market - a different result in Tomahawk and Ramos could have closed the Fresno County secondary structured settlement market and perhaps the entire California market.
  • The structured settlement industry - all stakeholders depend upon the finality of judicial orders.
• In retrospect, industry experts say the Tomahawk decision was "positive" and "expected".
• The Ramos decision, by comparison, was "positive" but "somewhat unexpected".
• In Ramos, the California Appellate Court:
  • Did more than simply reverse and remand on the narrow basis that Henderson should be allowed to dismiss its own transfer petition;
  • Exercised its discretion to rule on an issue it did not have to decide: the finality of settlement transfer orders.
  • Ruled the Fresno County Superior (trial) Court did not have the right to re-open or overturn prior transfer orders.
  • Ordered the Fresno County Superior Court to publish the appellate opinion (reversing the Superior Court rulings) on its website for at least as long as the widely reported Superior Court rulings were posted.

Bigger Picture

• Final results for the Fresno County factoring cases are still to be determined.
  
• The primary and secondary structured settlement markets both face unprecedented challenges.
  
• Primary market challenges:
  
  • IRC section 468B Qualified Settlement Funds (QSFs);
  • The secondary market defined by IRC section 5891 and the state protection statutes;
  • Successfully integrating structured settlement laws, processes and documentation with Social Security, Medicare and Medicaid;
  • Surviving the current financial crisis without annuity provider insolvencies and/or payment defaults.
    
• Secondary market challenges:
  • Successfully implementing state structured settlement protection statutes - examples of challenges: the Fresno County cases and the Rapid Settlements cases;
  • Surviving the current financial crisis without annuity provider insolvencies and/or payment defaults.
    • Other bloggers (John Darer and Mark Wahlstrom) have previously reported Standard & Poor's recent downgrade of J.G. Wentworth's:
      • Corporate credit rating from CCC to CC; and
        
      • Bondholder's recovery rating from 4 to 6. 
    • DZ Bank, the financing conduit for several mid-sized structured settlement transfer companies, recently announced closure of its U.S. commercial-paper conduit operation.

Amid these challenges, the Tomahawk and Ramos cases represent important and timely industry victories.  As for the future of structured settlements, other commentators have asked the pertinent question more generally: why waste a crisis?

For more detailed information about the secondary structured settlement market, see Chapter 16 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

For prior S2KM reporting about Rapid Settlements, see:

• Pacific Life v. Rapid Settlements
• Rapid v. Symetra
• CNA v. Rapid Settlements

Fresno County Factoring Cases - 1

The California Fifth Appellate District Court of Appeal has reversed highly publicized decisions by two Superior Court judges in Fresno County, California involving 321 Henderson Receivables, an affiliate of J.G. Wentworth, and the California Structured Settlement Transfer Act (SSTA).

The California Appellate Court decided both cases (Henderson v. Tomahawk and Henderson v. Ramos) on narrow grounds.

This S2KM blog post summarizes the appellate decisions.  A subsequent S2KM blog post will provide commentary.

Henderson v. Tomahawk

In Tomahawk, Fresno Superior Court Judge Donald Black had earlier:

• Rejected Henderson's request for a voluntary dismissal of its transfer petition;
• Denied Henderson's transfer petition;
• Concluded:
  • The annuity contract barred transfers and assignments;
  • UCC Article 9 did not apply;
  • Henderson's transfer violated California's usury laws because the transfer was a loan and not a sale;
  • Henderson failed to meet SSTA disclosure requirements;
  • Henderson had referred the structured settlement transferor to a conflicted attorney for advice;
  • California Insurance Code section 10137 bars approval of petitions without independent counsel and therefore rendered "void" Henderson's earlier purchase;
  • Henderson could not recover the funds it had previously expended because of "unclean hands" based upon Henderson's hiring of conflicted counsel;
  • Henderson's lack of candor and the Superior Court's affirmative duties supported Judge Black's independent investigations of other Henderson petitions in prior transfer cases.
• Ordered Henderson to:
  • Attach a copy of the order to any future transfer petitions filed in Fresno County for the next 5 years; and
  • Serve notice to other Fresno County transferors and their insurers;
• Sent a copy of his order to the California State Attorney General and State Bar Association.

On appeal, the California Appellate Court:

• Reversed Judge Black;
• Agreed with Henderson's argument that Judge Black erred when he concluded that Henderson could not voluntarily dismiss its petition;
• Declared Judge Black's prior order void in its entirety;
• Ordered Fresno County's Superior Court to post the appellate decision on its website;
• Declined to address Henderson's arguments addressing the merits of Judge Black's order stating:
  • Any related decision would be advisory; and
  • The Appellate Court had already established an expedited schedule to hear Henderson's other appeals.

• Remanded the case to the Fresno County Superior Court.

Henderson v. Ramos

In Ramos, Fresno County Superior Court Judge Adolfo Corona had earlier:

• Denied a request for dismissal of a structured settlement transfer petition filed by parties named Cerroblanco;
• Dismissed their petition with prejudice;
• Voided a prior approved transfer to Henderson based upon Henderson's purported breach of annuity anti-assignment provisions plus violations of California's SSTA and usury law.

On appeal, Henderson argued Judge Corona erred when he:

• Concluded the Cerroblancos could not voluntarily dismiss their SSTA petition without prejudice;
• Voided Henderson's earlier transfer.

The California Appellate Court agreed with Henderson's first argument without determining whether Judge Corona was correct in his findings and rulings about the petition.

The California Appellate Court also agreed with Henderson's second argument and concluded:

• No authority exists in California to permit one Superior Court Judge to overrule another Superior Court Judge;
• Transfers of structured settlement payment rights with court approval will be enforced by California courts and cannot be attacked as void absent a finding of fraud;
• Disagreement over prior judicial findings does not provide sufficient grounds for any judge to void a final order of another judge.

Similar to Tomahawk, the California Appellate Court remanded the Ramos case to the Fresno Superior Court and ordered the Court to post the appellate decision on its website.

NSSTA 2009 Winter Meeting

"Protect the business model and prepare for the future" was the unstated theme as the National Structured Settlement Trade Association (NSSTA) hosted its 2009 Winter Meeting in Orlando, Florida January 28-30.

From NSSTA's perspective, the structured settlement model depends upon:

• Helping injury victims and improving dispute resolution;
• IRC sections 130 and 104(a)(2);
• Integrating these tax preferences with other government benefits including:
  
  • Social Security;
  • Medicare;
  • Medicaid;
  • Veterans benefits; and
  • Federally-assisted housing.
• Cooperation among defense and plaintiff intermediaries;
• Bi-partisan political support in Washington, D.C.;
• Controlling negative secondary market conduct and publicity;
• Continuing payment performance by all annuity providers.

The challenges facing NSSTA, and the structured settlement industry, include:

• The impact of the financial crisis;
• Anticipated legislative and regulatory changes;
• Identifying new leaders;
• Growing the market;
• Addressing 468B and the secondary market;
• Reconciling claim management and settlement planning;
• Transitioning to Internet-based technologies and business models.

Directly or indirectly, NSSTA's educational program in Orlando addressed all of these issues.

Educational program highlights:

Injury Victims

• Andrew Imparato - Imparato, President and CEO of the American Association for Persons with Disabilities (AAPD), was NSSTA's keynote speaker in Orlando. Imparato praised structured settlements as one possible model for modernizing other federal entitlement programs. NSSTA and AAPD have collaborated previously on legislative initiatives including IRC 5891. NSSTA participated as an event sponsor at the 2008 AAPD Gala Leadership Dinner. Imparato spoke previously at NSSTA's 2007 Fall Meeting. The 2009 AAPD Gala Leadership Dinner is scheduled for March 4 in Washington, D.C.
• Eric Vaughn - NSSTA's lobbyist summarized existing federal consumer protection legislation and highlighted some of the consumer and investment protection legislative proposals and issues now before Congress. Although he anticipates federal reforms, Vaughn did not predict whether the primary or secondary structured settlement markets will end up inside or outside any legislative and regulatory net.

Washington Reports

• Congressman Kendrick Meek - Congress Kendrick B. Meek, a Democrat representing Florida's 17th district, addressed economic challenges facing President Obama and Congress. TARP has not served the purpose Congress intended according to Congressman Meek. He predicted continued economic problems "for at least 15 months" including the structured settlement industry. To be effective legislatively, Congressman Meek recommended NSSTA feature "real stories and real people". Congressman Meek further stated: "now is the time to come together" legislatively to protect and improve the structured settlement industry. Congressman Meek also confirmed his candidacy for the U.S. Senate seat which will be vacated when Florida Republican Mel Martinez retires in 2010.
• Eric Vaughn - Vaughn's summaries of NSSTA's political challenges and strategies highlight every NSSTA meeting. In Orlando, Vaughn discussed lobbying opportunities for structured settlements both in Congress and within the Obama Administration. Vaughn provided his political analysis of current Congressional committees as well as proposed legislation important for structured settlements. Vaughn urged all NSSTA members to attend NSSTA's 2009 Annual Meeting April 29 to May 1 in Washington, D.C.

Plaintiff and Defense Brokers - NSSTA's educational program featured two panels addressing plaintiff and defense structured settlement cooperation.

• James Early and Ronald Sullivan - Early (defense) and Sullivan (plaintiff) agreed on most issues: their collaborative objectives include facilitating settlements and taking care of injury victims; both plaintiff and defense brokers are needed; clients should not be able to dictate whether and how brokers share commissions; most brokers are "good people"; 468B funds should be limited to multi-claimant cases and not utilized to eliminate defense brokers. Their only stated disagreement concerned "approved lists" with Sullivan asking what is wrong with injury victims selecting their own annuity providers?
• Roger Bernstein; Bruce DeBacher; and Michael Goodman - Bernstein (special needs attorney), DeBacher (defense) and Goodman (plaintiff) discussed how each helps to settle cases by adding value. Bernstein deconstructed a sample life care plan and integrated collateral benefits to reach "reasonable" settlement expectations. DeBacher and Goodman explained how to build a settlement in an adversarial context, emphasized the need for early involvement and agreed upon the advantages of having both a plaintiff and defense structured settlement broker. They expressed shared concerns: trust companies using factoring to sell against structured settlements; and the decline in small cases resulting from defendants' de-emphasis of structured settlements.

Settlement Consulting - Joseph DiGangi addressed problems the structured settlement industry faces with its historic "annuity broker" business model. According to DiGangi, these problems include a stagnant market, negative perceptions of roles and value, limited knowledge base and resources as well as a single product offering. DiGangi proposed an alternative "consultant" business model with multiple products and services providing added value. Using a case example, DiGangi constructed a planning solution matching the injury victim's "needs and wants" for which he utilized a structured settlement annuity as the foundation product. For structured settlement professionals who lack the expertise or licensing to offer comprehensive solutions, DiGangi recommended teaming up with other professionals.

IRC Section 468B - With Henry Strong moderating, William Winslow and James Klapps discussed the use of 468B funds in cases involving multiple claimants. Their presentation objectives included helping brokers use 468B to expand their structured settlement business and highlighting errors that brokers and their clients should avoid. The presentation purposely omitted references to controversial single claimant 468B issues as well as technical tax and administrative issues. Instead, Winslow and Klapps provided a general introduction to IRC 468 plus encouragement for uninitiated structured settlement professionals that IRC 468B business opportunities and issues do, in fact, exist.

Note: for persons interested in understanding the single claimant 468B controversy, see: Robert Wood's article titled "Single-Claimant (468B) Qualified Settlement Funds?" and Richard Risk's article titled "A Case for the Urgent Need to Clarify Tax Treatment of a Qualified Settlement Fund Created for a Single Claimant" ". For information about technical 468B tax and administrative issues, see Wood's new book "Qualified Settlement Fund & 468B". For information about structured settlements and 468B funds, see Section 3.08B of "Structured Settlements and Periodic Payment Judgments" (Release 44) written by Daniel Hindert, Joseph Dehner and Patrick Hindert.

The Secondary Market

• As part of the NSSTA Legal Committee's "All Things Considered" presentation, Illana Hanau and Michael Miller spoke about structured settlement secondary market issues. Hanau summarized historic abuses and continuing bad business practices by structured settlement factoring companies. Her examples: In re Wiggins, a 2001 Idaho case involving Peachtree Settlement Funding, and the Fresno County cases involving 321 Henderson (a J.G. Wentworth affiliate). Henderson is appealing the Fresno County cases. Hanau also summarized results from a "random sample" of factoring cases as evidence of bad business practices by factoring companies. Miller summarized other business activities in which some structured settlement companies engage: the secondary market for life insurance; the purchase of taxable annuity products; and litigation funding.
• During his "Business Ethics" discussion, Rev. Oliver Williams asked the audience to identify structured settlement business conduct that has caused "shocked disbelief" among NSSTA members. As one example of such "shocked disbelief", NSSTA attendees identified structured settlement factoring. More specifically, that factoring has dismantled many "permanent" structured settlement case "solutions" and that NSSTA's "proscriptive" political strategy for factoring (IRC 5891and the state protection statutes) has resulted unexpectedly in substantial secondary market growth.

Internet Transition - Patrick Hindert, S2KM's blog author, led a discussion titled "Web 2.0: How to Improve NSSTA's Online Communication. Learning and Collaboration". Hindert introduced and proposed a NSSTA wiki prototype designed to support NSSTA's committee policies and procedures.

For S2KM reports about prior NSSTA meetings as well as other settlement planning professional associations, see S2KM's structured settlement wiki.