Beyond Structured Settlements

Deal Flow Media Webinar

Deal Flow Media publishes reports, and also sponsors webinars and conferences, about specialized financial markets.

Deal Flow Media's markets include:

• Life Settlements
• Private Investments in Public Equity (PIPEs)
• Special Purpose Acquisition Companies (SPACs)
• Reverse Mortgages
• Distressed Debt

On November 29, 2007, Deal Flow Media will enter the structured settlement market by sponsoring its first structured settlement webinar.  Please note the Postcript at the end of this post. Deal Flow Media will be rescheduling and expanding this structured settlement webinar.

In addition to Brett Goetschius, Karen Meyers and Dan Finn, this author will be one of the featured speakers. My topic will be "The Structured Settlement Secondary Market".  Some of the questions my presentation will address:

• What is a structured settlement?   
• What is a structured settlement factoring transaction?
• What are structured settlement payment rights?
• What is the secondary structured settlement market?
• How do the primary and secondary markets interact?
• Why do payees sell structured settlement payment rights?
• What definitions and legal rules apply to this secondary market?
• How large is the structured settlement secondary market?
• Who are the leading secondary market participants - and why are they successful?
• What does an investor in structured settlement payment rights actually purchase?
• What are the business and investment risks?

Additional S2KM online resources about the structured settlement primary and secondary markets:

• Structured Settlements
  • Overview of the Structured Settlement Market
  • History of Structured Settlements
  • Future of Structured Settlements
  • Structured Settlement Transaction Diagram
  • Structured Settlement Public Policy Wiki
  • Structured Settlements and Government Benefits
  • Blog posts featuring Robert Wood's podcasts
    • Structured Attorney Fees
    • Single Claimant 468B Funds
• Structured Settlement Secondary Market
  • Structured Settlement Transfers
  • Settlement Transfer Update
  • Settlement Transfers - Release 39
  • How the Primary Market Views Factoring
  • NSSTA Bylaw Amendments
  • J.G. Wentworth v. Peachtree Settlement Funding
  • Settlement Transfers: Wentworth and Symetra
  • Rapid v. Symetra
  • Review of Robert Wood's article: "Structured Settlements: Factor vs.Commute".
• National Association of Settlement Purchasers (NASP)
  
  • 2007 Annual Meeting
  • 2006 Annual Meeting
  • NASP Wiki

Postcript - added November 28, 2007

• Deal Flow Media has decided to reschedule and expand its structured structured webinar.  Deal Flow Media will announce new dates and details for its expanded webinar on Deal Flow Media's website.   This author will appear as a participant in Deal Flow Media's structured settlement webinars- and will also provide continuing S2KM blog coverage of Deal Flow Media's structured settlement publications.
• S2KM has added corrected links for the following concept maps developed by Dr. Barbara Bowen of Sound Knowledge Strategies.  Each concept map includes embedded submaps and links.
  • Overview of Structured Settlement Markets
• How the Primary Market Views Factoring

For additional information about S2KM's collaboration with Barbara Bowen, see "Web 2.0 for Lawyers Concept Map".

NASP 2007 Annual Meeting - 1

The National Association of Settlement Purchasers (NASP) hosted its 2007 Annual Meeting October 18-19 at the Grand Hyatt in Washington, D.C.   This author was privileged to participate. 

S2KM's reporting about NASP's 2007 Annual Meeting begins with this blog post and this wiki which summarizes NASP's 2007 Educational Program -  a learning conversation about "The Structured Settlement Market". 

For prior S2KM commentary about NASP, see this S2KM blog post.

"Have you no sense of decency, sir?"

When the Bully (aka John Darer) viciously, unfairly, and profanely * attacked David Snyder in a blog post earlier this week, I had two immediate reactions.

First, concerning the Bully, I was reminded of the comments made by attorney Joseph Welch to Senator Joseph McCarthy (the infamous "communist witch hunter") during the 1954 Army-McCarthy Hearings: "...have you no sense of decency, sir, at long last? Have you left no sense of decency?" 

People who have known Dave Snyder during his long and distinguished structured settlement career recognize and appreciate his leadership, courage and continuing contributions.  Dave was one of the first, and most outspoken, champions for the rights of injury victims to select their own structured settlement advisors.  As founder and CEO of the Delta Group of Settlement Companies, Dave continues to be a thoughtful and courteous visionary whose positive legacy to the industry will long outlive his personal participation. 

My second reaction was to contact J.G. Wentworth to request a copy of their periodical "Present Value" to read the article that profiles Dave Snyder.  The article, titled "Leaders Among Us", provides a uniformly positive view of structured settlements.  It also highlights Delta's policy of not participating in factoring transactions.  Anyone who wants to read the article can obtain a copy by contacting John Zepeda at johnz@jgwfunding.com. 

In addition to the Dave Snyder profile, the current Wentworth periodical offers several interesting articles and profiles including one titled "Elder Law Attorneys Pack J.G. Wentworth's Webinars on Medicaid Planning Options." Unlike the Bully's blog posts, these articles provide valuable reading for structured settlement professionals interested in understanding J.G. Wentworth's business success.

* Note: the author substituted the word "profanely" for "obscenely" on June 17, 2007.

NSSTA 2007 Winter Regional Meeting-2

This is the second of three posts covering the National Structured Settlement Trade Association (NSSTA) Winter Regional Meeting.

A prior S2KM blog post "NSSTA's 2007 Winter Regional Meeting-1" summarized:

• Preliminary reports from two NSSTA-sponsored projects:
  
  • NSSTA's Marketing Survey; and
  • Broker Relations Initiative.

• NSSTA's new strategic priority to reclaim the structured settlement brand.

A subsequent S2KM blog post "NSSTA 2007 Winter Regional Meeting-3" will address additional program presentations including the Trust Workshop, NSSTA's "All Things Considered" legal panel, AIG's new "transparent" structured settlement initiative, and non-qualified assignments for installment sales.

This post summarizes NSSTA conference highlights related to factoring (aka the transfer of structured settlement payment rights).

Almost six years following the enactment of IRC section 5891, NSSTA has finally added factoring to its educational agenda.

Five experts addressed factoring issues at NSSTA's 2007 Winter Regional including a three person panel titled "Structured Settlements: A View from the Bench". The panel consisted of a judge (Jane S. Solomon from New York), a plaintiff attorney (Daniel W. Hindert from Salt Lake City) plus a partner from NSSTA's legal counsel (Craig H. Ulman). The panel addressed this question: "How are the state structured settlement protection statutes working in practice?" Each panel expert provided commentary in the context of an actual New York case. Here is a summary:

Judge Jane S. Solomon:

• Prior to enactment of IRC section 5891 and New York's structured settlement protection statute, Judge Solomon heard structured settlement "collection cases" from around the country. The documentation, according to Judge Solomon, was dense and imprecise.

• Since enactment of New York's structured settlement protection statute, according to Judge Solomon, most factoring applications are unopposed. New York's law does not require an appearance by the annuity payee - only an affidavit. The factoring company generally provides the court documentation.

• Judge Solomon summarized recent statistical results indicating she approves approximately 75% of factoring applications while approximately 50% of her denials occur without any hearing.

• Although the New York statute includes a definition for "independent financial advice", Judge Solomon does not believe factoring company attorneys are capable of or appropriate for providing such advice.

• Judge Solomon asks the following questions for every application:

• Can the seller obtain money in any other way?

• How will the seller use the money?

• Have their been any prior transfers?

• How was the money spent?

• Judge Solomon believes most sellers are using their factoring proceeds to pay debts and day to day expenses.

• Judge Solomon offered the following recommendations:

• The annuity payee (structured settlement recipient) should be required to appear in court;

• Prior transfers should be disclosed;

• The judge should be required to initiate notice;

• NSSTA should lobby for changes in state statutes to accomplish these recommendations.

Daniel W. Hindert

• Note: Daniel Hindert (Hindert) is a brother of this blog's author and co-author, with this blog's author and Joseph J. Dehner, of "Structured Settlements and Periodic Payment Judgments".

• Hindert told the conference attendees he has handled one factoring application - at the request  of another plaintiff attorney. Although he accepted his fee from the factoring company, Hindert viewed the seller as his client. He stated it was difficult to look through the paper work to the reality of the transaction.
• One important issue for Hindert: does the transfer contravene any applicable statutes or court orders? Who, Hindert asked, should have the burden of proof for this issue? According to Hindert, attorneys representing factoring companies are not paid enough money to permit thorough investigation and representation.

• Hindert identified special problems with minors' settlements. Although parents are generally concerned about a minor receiving substantial money at age of majority, Hindert recommended that structured settlements for minors include a deferred lump sum at age 18 (in addition to any educational fund) to help deter and/or defer a factoring transaction.

Craig H. Ulman

• Note: Ulman, a partner in the law firm of Hogan & Hartson, and Daniel Hindert are co-authors of a 2005 ABA article titled "Transfers of Structured Settlement Payment Rights: What Judges Should Know About Structured Settlement Protection Acts." 

• Ulman stated that judges in some states (example: Pennsylvania) are considering factoring rules that go "beyond the state statute".

• Ulman recommended that structured settlement stakeholders address factoring at the time of settlement. Depending on the claimant, according to Ulman, that might result in making it easier or more difficult to factor.

• Ulman challenged all structured settlement stakeholders to make the factoring process more efficient.

Two additional experts addressed factoring issues as part of the NSSTA Legal Committee's presentation "All Things Considered".

Mark Alpert - Legal Committee Co-chairperson Mark Alpert addressed "Factoring vs. Commute" which he characterized as a "very sensitive" issue.  Alpert highlighted the following issues identified  by tax expert Robert W. Wood in an article titled "Structured Settlements: Factor vs. Commute" which appeared in the December 25, 2006 issue of "Tax Notes":

• Is a commutation an acceleration by the payee?

• Is the IRC section 130 acceleration test a one-time test or a continuing test?

• If the IRC section 130 acceleration test is a continuing test, does a subsequent acceleration jeopardize the tax treatment of the parties to the structured settlement including the qualified assignee and the claimant?

• Does IRC section 5891 apply to a commutation and/or to the acquisition of structured settlement payment rights by an affiliate of the annuity purchaser?

Peter Vodola - During his presentation titled "Factoring: is it a Rubber Stamp Process", attorney Peter Vodola spoke about recent factoring trends and noted:

• No information repository currently exists for factoring. Most of the available information, according to Vodola, is anecdotal.

• Additional information about factoring is becoming available including judicial opinions, legal articles and blogs.

• Despite greater scrutiny of factoring, according to Vodola, bad business practices continue.

• Echoing comments from plaintiff attorney Daniel Hindert, Vodola pointed to the continuing complexity of factoring - especially the requirement that a factoring transaction not contravene any applicable statutes or court orders.

• Vodola identified several additional factoring issues including:

• Proposed judicial rules in Pennsylvania;

• Factoring life contingent payments; and

• Factoring as one component of the growing secondary market for life insurance products - including investment annuities and life insurance as well as structured settlement annuities.

NSSTA 2007 Winter Regional Meeting-1

"Who Does Your Client Trust?"

That was the theme of the 2007 Winter Regional Meeting of the National Structured Settlement Trade Association (NSSTA) which took place January 24-26, 2007 in Santa Fe, New Mexico.

The answer, from NSSTA's perspective, appears to be a "work in progress."

Keynote speaker Bill Richardson, New Mexico's Governor and Democratic Presidential candidate, set the tone for an introspective NSSTA program with this general advice: "Set aside your ideological differences and bring civility back. Do whatever is necessary to bring people together."

Two preliminary reports from NSSTA-sponsored projects designed to improve the reputation and public image of structured settlements were among the highlights of the NSSTA conference:

• Marketing Study
  • Joseph M. Costello, Chairperson of NSSTA's Marketing Committee, reported the preliminary results of a survey of attorneys involved in structured settlements and structured settlement recipients which is being conducted for NSSTA by the University of Georgia Research Center.
  • The survey's purpose, according to Costello, is "to better understand the perceptions these stakeholders have of structured settlements."
  • The survey is titled: "A Study of the Structured Settlement Process Conducted on behalf of the National Structured Settlement Trade Association". It is directed by Robert E. Hoyt, the Dudley L. Moore, Jr. Chair of Insurance at the Terry College of Business at the University of Georgia.
  • Based upon telephone surveys of 43 attorneys, the results included responses to the following question: "Whom do you prefer to use for purposes of financial planning for your clients?" The results to date:

• Trust company/department - 30%

• Financial planner - 28%

• Structured settlement consultant - 23%

• No response - 19%

• The final survey results, according to Costello, will be reported at the NSSTA 2007 Annual Meeting April 22-25 in Toronto .

• Broker Relations Initiative
  • Lynn Courier, the project facilitator, provided a progress report for the NSSTA-financed Broker Relations Initiative.
  • The project's Mission is to improve the reputation and public image of structured settlements by establishing more effective broker to broker communication and understanding.
  • Courier announced preliminary work product has been completed and emailed to approximately 600 structured settlement brokers. The deadline for comments is February 9, 2007.
  • Courier said she will also present a progress report at the SSP Annual Meeting March 7-8, 2007 in Washington, D.C.

• Courier identified these marketing messages developed by the Broker Relations Initiative:

• The structured settlement industry should reclaim its brand;

• Tell the structured settlement story through people who have benefited;

• Partner with educational institutions;

• Educate the public;

• Develop targeted marketing;

• Explain the importance of the defense broker to plaintiff attorneys.

• Additional recommendations from Courier's progress report:

• Develop acceptable standards of conduct;

• Eliminate negative talk; Expand positive talk;

• Create a structured settlement Seal of Approval;

• Establish a voluntary dispute resolution process;

• Organize a structured settlement broker entity separate from NSSTA with its own governing board and supported financially by the broker community.

A repeated message during the NSSTA meeting was the need to reclaim the structured settlement brand. The alleged usurpers: factoring companies generally and J.G. Wentworth specifically.

In his presentation titled "Reclaiming the Structured Settlement Brand", marketing expert Larry Larsen outlined a framework for a NSSTA public relations strategy combining media coverage and advertising. NSSTA's dilemma, according to Larsen: "We are losing control of our own brand. How do we regain control?"

One possible answer, according to speaker Kathryn Katz: develop a better Internet strategy. In her presentation titled "The Ten Golden Rules of Internet Marketing" Katz described the "New Internet Boom" and recommended strategies for improving search engine results.  For more about Internet strategies, see S2KM's mashup titled "Web 2.0 for Lawyers".  Most of the content, including the embedded concept maps, is also relevant to non-lawyers.

For additional coverage of NSSTA's 2007 Winter Regional Meeting, see:

•  NSSTA 2007 Winter Regional Meeting-2 which summarizes NSSTA presentations by five factoring experts; and
• NSSTA 2007 Winter Regional Meeting-3 which summarizes additional presentations including the Trust Workshop, NSSTA's Legal Panel ("ATC"), AIG's new structured settlement "transparency" initiative, and non-qualified annuities for installment sales.

For prior coverage of NSSTA conferences, see these S2KM blog posts:

• NSSTA 2006 Fall Regional Meeting - S2KM Summary
• NSSTA 2006 Fall Regional Meeting - S2KM Wiki
• NSSTA 2006 Annual Meeting
• NSSTA 2006 Annual Meeting - Take 2
• NSSTA 2006 Winter Regional Meeting
• NSSTA 2005 Fall Regional Meeting
• NSSTA 2005 Annual Meeting - Part One
• NSSTA 2005 Annual Meeting - Part Two

J.G. Wentworth v. Peachtree Settlement Funding

In a case involving the two leading structured settlement factoring companies, J.G. Wentworth and Peachtree Settlement Funding, the United States District Court for the Eastern District of Pennsylvania has ruled that use by Peachtree of Wentworth's trademark through Google's AdWords program and meta tags for Wentworth's website do not violate Sections 32(1) and 43(a) of the Lanham Act.

The websites in question are www.jgwfunding.com and www.jgwentworth.com.

The case (J.G. Wentworth, S.S.C. Limited Partnership v. Settlement Funding LLCE.D.Pa, 2007) is certain to generate debate not just among Internet legal experts but also within the structured settlement industry. It highlights significant disagreements among the courts and the need for better laws defining permissible business practices on the Internet.

The Lanham Act prohibits the use "in commerce" of protected rights "in connection with the sale, offering for sale, distribution, or advertising of any goods or services," or "in connection with any goods or services." 15 U.S.C. Sections 1114(1) and 1125(a)(1).

In reaching its decision: the court:

• Found that Peachtree's participation in Google's AdWords program and Peachtree's incorporation of Wentworth's marks in Peachtree's keyword meta tags did constitute trademark use under the Lanham Act;

• Agreed with Wentworth that "initial interest confusion" is actionable under the Lanham Act;

• Acknowledged, but "respectfully" disagreed with, conflicting authority from other circuits;

• Specifically disagreed with the United States Court of Appeals for the Ninth Circuit and cited its decision in Brookfield Communications, Inc. v. West Coast Entertainment Corp as "a mischaracterization of the operation of internet search engines";

• Reasoned that at no point are potential consumers "taken by a search engine" to Peachtree's  website due to Peachtree's use of Wentworth's trademarks in meta tags;
• Emphasized instead that a link to Peachtree's website "appears on the search results page as one of many choices for the potential consumer to investigate";

• Noted that Wentworth did not allege that Peachtree's advertisements and links incorporate Wentworth's marks in any way discernible to internet users and potential customers;

• Concluded that:
  • "Initial interest protection" is not applicable due to the separate and distinct nature of the links created on any of the search engine results pages in question; and
  • Potential consumers have no opportunity to confuse Peachtree's services, goods, advertisements, links or websites for those of Wentworth.

• Granted Peachtree's motion to dismiss Wentworth's complaint because "no reasonable factfinder could find a likelihood of confusion under the set of facts alleged by plaintiff...".

Judge for yourself. Here is the Google search link for "J.G. Wentworth".