Pat Hindert and John Darer have both written about legislation proposed in West Virginia that would radically alter the current law there, as well as depart from the national model act and standards used in most states. As identified by Hindert, the proposed law, HB 4380, has three essential elements:

• Mandating that a guardian ad litem be appointed for every prospective seller
• Changing the standard for approval from “best interests” to requiring clear and convincing evidence that the transfer is to avoid a financial hardship (and is in the seller’s best interest), and
• Imposing a rate cap for discount rates equal to the average mortgage rate for 20 year mortgages (the average rate is thought to be around 6%, but the state Banking Commissioner has indicated that they do not track that and don’t want to).

Contrary to John Darer’s position, in my opinion none of these would be good for tort victims. In fact, each prong of this proposed new law effectively shuts the courthouse doors on tort victims who will never have their chance to sell structured settlement payments when they need to. They are also just bad public policy. ALL sellers would have to have a guardian ad litem appointed, irrespective of their sophistication or understanding. For the non-lawyers who read this, a guardian ad litem is a court appointed person, usually a lawyer, who is supposed to essentially act as that person’s parent in the matter before the court. (“A guardian ad litem is a special guardian appointed by the court in which a particular litigation is pending to represent an infant, ward or unborn person in that particular litigation…” Black’s Law Dictionary, 6^th Ed.). How insulting to tort victims. Does being a tort victim mean you are not capable of making your own decisions? Or is it because you are a structured settlement recipient? What does that imply about structured settlement recipients? Sure, some tort victims are truly not capable of making financial decisions, and the courts of West Virginia, like courts everywhere, already have the inherent power to appoint guardians ad litem in those cases. But should it be mandatory for all sellers, irrespective of their individual status?

Only sellers needing money to avoid “financial hardship” would be able to sell future payments under the proposal. This is vastly different from the common “best interest” standard, and again would restrict which West Virginians would be able to even make it into the courtroom to tell their story. Is getting a new prosthetic leg “avoiding a financial hardship”? Probably not. How about being able to attend college or a trade school. Again, most likely not. Should structured settlement recipients be able to sell their asset, future payments, to do these things. Maybe. But under the proposed law, they would never get to make that case, under any circumstances.

The “rate cap” is probably the most clear evidence of what this bill is really about. If the rate is capped at 6%, then the structured settlement factoring market in West Virginia is closed. Period. All funding companies in this business must borrow money to use in funding. 6% is far below the rate at which we can borrow, so each transaction would start at a loss, and just get worse. Don’t forget, we would also need to pay the guardian ad litem, and the attorney bringing the action, not to mention covering our overhead, and making a reasonable profit. Under this proposal, we would never get to this level of analysis, because a large “Closed for Business” sign would be hung at the West Virginia border. Customers like “Mr. Smith” (real person, real West Virginian, fake name for this article), a retired Veteran, would not have been able to sell some of his future payments to buy an oxygen machine to help him breathe.

What is this bill really about? Delegate Walters, the key sponsor and a structured settlement broker, has made it very clear that this is really about putting the factoring companies out of business in West Virginia. His bill would do just that. If that is the goal, then let’s debate that issue directly and not dress it up in all this costuming, pretending to be “consumer protection”. But, if the factoring companies are out of business in West Virginia, then West Virginians with structured settlements are out of luck when they experience a life change, not anticipated at the settlement table. They will no longer enjoy the same financial freedom and flexibility as their neighbors in Virginia, Ohio or Pennsylvania.

HB 4380 is bad law and bad policy, and everyone, including the NSSTA and Mr. Darer, should oppose it.

We are pleased to feature this article by Michael Green, Esq., of Philadelphia. Mike is an accomplished attorney who represents many factoring companies in Pennsylvania and New Jersey. You can reach Mike at 215-972-5520, or via email at mgreen@michaelgreenlaw.com. For more information, visit Mike's website, www.michaelgreenlaw.com.

My name is Mike Green. I am outside counsel to several factoring companies. This is my first time posting to a blog so, please, be gentle.

Anyway, to follow up on Matt Bracy’s previous post about court approval, I thought I’d give my “outside counsel” perspective about court approval, what happens and how everyone can be prepared to face the judge at the hearing and what everyone can do to best present the transfer.

In most states (including PA and NJ, where I practice), an individual must appear in court and convince the judge that the proposed transfer is in that individual’s best interests.

While I can’t comment on procedures in each state, I can try to address generally what will happen. As the title of this post suggests, it’s important to be prepared for a structured settlement hearing.

Prior to the hearing, a document will have been filed with the court. It will vary by name from state to state but will likely set forth the terms of the agreement and it may attach the sale agreement between the parties and the Disclosure Statement as exhibits.

After filing, the matter is generally assigned to a judge. Judges’ procedures often vary widely. Some judges schedule each structured settlement transfer hearing they receive separately. Some judges schedule all structured settlement transfers on the same date and time. Some judges lump these transactions in with a variety of other matters and tell everyone to get there at the same time. Some judges run on time. Some do not. It is often difficult to know how matters will proceed until everyone is in the courtroom.

I generally like to meet with my clients’ customers outside the assigned courtroom about a half hour before the scheduled hearing. We go over the paperwork, address any issues which may have come up and prepare for the questions that I or the judge will ask at the hearing.

Sometimes people will ask me “What do I say?” or “What do I need to tell the judge to get this approved?”

First, there’s no magic thing to say (other than the truth, of course).

Second, it’s important to remember that the judge is king (or queen) in these transactions. One way to help prove to the judge this is in your best interest is to be prepared – if you intend to use a lump sum to pay off higher interest credit card bills, bring them to court. If you intend to use the lump sum as a down payment on a house and you are pre-approved assuming you get the lump sum, bring that documentation. If you have other needs or if you have other circumstances which might appear odd to the judge, be ready to address them.

Judges differ in their approach to hearing the transfers. Some judges ask questions. Some judges have the attorneys ask questions. Some judges permit the attorney and the individual seeking to make the transfer to sit at the same table. Some do not. Some judges require the individual to give testimony from the witness chair. Some do not.

That said, while there are many differences between judges and their procedures at these hearings, certain things remain the same. Judges take their responsibilities seriously. While you may not think that a judge should be able to stop a grown man or woman from entering an arms length financial transaction with someone else, state legislatures around the country have required that a judge approve the transfer of any structured settlement payment rights. Since that is the law, people who are serious about entering into these transactions and who want these transfers approved should act accordingly. Judges are much more likely to approve structured settlement transfers when they see that the law’s requirements have been met and the seller is prepared and serious about the transaction.