SETTLEMENT FUNDING (PLATT)

The proper discount rate is more elusive. There have been reported cases in which it was held some rates used were not fair and reasonable, with rates of 18.621% (Matter of Settlement Capital Corp., 194 Misc 2d 711 [2003]); 15.591% (Matter of Settlement Capital Corp. [Ballos], 1 Misc 3d 446 [Sup Ct, Queens County 2003]); and 15.46% (Matter of Settlement Funding of N.Y., 195 Misc 2d 721 [2003]) being rejected. Approval by a sister state has been given for 17.964% for a knowledgeable borrower with a strong present cash need, and a preserved future payment (In re Spinelli, 353 NJ Super 459, 803 A2d 172 [2002]). Case law has referenced academic discussion of the concept (Scales, Against Settlement Factoring? The Market in Tort Claims Has Arrived, 2002 Wis L Rev 859 [2002]), but no concrete guideposts. Petitioner has submitted unreported cases in this state with rates of 19.93% (Settlement Funding [Huggins], Sup Ct, Bronx County, June 9, 2003); 20.586% (Settlement Capital [Miller], Sup Ct, St. Lawrence County, May 15, 2003); 19.95% (Settlement Funding [Curkendall], Sup Ct, Chemung County, Apr. 22, 2003); and 19.99% (Settlement Funding [Jordan], Sup Ct, Erie County, Apr. 1, 2003). Concern has been expressed about the ability of the court to even take any action in the face of a prohibition on assignment contained in the annuity contract that names the payee as CNA and the owner as CNA and the annuitant as John Platt. This has been a consideration where there is stated opposition from the annuity issuer in certain cases (see Matter of Emerald Funding Corp. [Brown], Sup Ct, Monroe County, June 4, 2003; Matter of Coggins & Settlement Capital Corp. [Travelers], Sup Ct, Dutchess County, Apr. 17, 2003; Matter of Settlement Capital Corp. [Eaton], Sup Ct, Wyoming County, May 22, 2003; Matter of Ovation Capital [Jackson], Sup Ct, Erie County, July 7, 2003). Language of the agreements in those cases when the prohibition was enforced appears to be a factor as well. Those cases reference the settlement agreement, and in this case, the settlement agreement does not prohibit the assignment, although similar language appears in the annuity contract. Notwithstanding such restrictive language in an annuity contract, one may nevertheless be assigned if the rules of the Act are otherwise satisfied (see Insurance Law § 3212 [d] [4]).

Petitioner has fully complied with the statute. Necessary copies of the documents have been submitted. Proper service on all defined interested parties has been accomplished (General Obligations Law § 5-1705). The advance notice disclosure was timely given and its content is correct (General Obligations Law § 5-1703). The transfer agreement contains the required language and no prohibited terms are apparent (General Obligations Law §§ 5-1708, 1704). The acknowledgment by payee and the disclosure documents, together with the statements by the payee at the hearing, convince the court that proper advice was given and understood (General Obligations Law § 5-1706), and according to the payee, followed.

The payee is gainfully employed and is self-supporting. He has no financial dependents. He is not mentally disabled and does not appear physically incapacitated. He will be able to enjoy over 40 years of life, based on existing mortality tables, and payments are to be made for his lifetime, notwithstanding whether the approval is given to the present transfer. The funds will be used for transportation needs to assist with continued employment, and for housing repairs and payment on some existing debt. There is no evidence of future medical needs. While the payee is not in dire straits, the transfer has been evaluated by the payee, who, in the last analysis, is the owner of the fund. Separate legal advice was given to the payee. The payee has considered alternatives and has researched other potential purchasers and has demonstrated a satisfactory understanding of the process. The intended sale is not done precipitously. There is no evidence of any likely future public dependency. There is, in short, no showing that the proposed transfer is not in the best interests of the payee.

A legal fee of $2,000 and costs of $200 are well within the parameters allowed for document preparation, research, court appearance and argument, and other aspects of the legal work involved in these proceedings. Such a rate is unrelated to the amount in issue. A discount rate determination is the area of this proceeding causing greatest concern. Petitioner argues that the court should adopt a noncase specific approach, primarily basing decisions on the nature of the industry with apparent emphasis on risk as a determinant of the rate selected. Argument is made that the decision should use variables often employed in setting attorney fees. Additionally, petitioner urges that other cases have approved discount rates similar, equal, or higher than the rate here. A discount rate is an elusive concept. It is said to be based on a measure of risk and expected growth of an investment. It has been said to be a combination of time, value of money and transactional risks. It has been referred to on occasion as an expected rate of return on "conservative" investments. Use of a preferred formula in a different setting with federal funds rates and treasury bond rates has been discussed (see Karagiannis v New York State Thruway Auth., 209 AD2d 993 [1994]). Other fact patterns have been examined, but there is no consistent pattern. If anything, the history of the court involvement in this process suggests that each case must surely be decided on its own merits. No universal percent prohibition can be adopted as a judicial standard, given the need for flexibility and the function delegated to the courts to use their discretion. If it appears that there is a pervasive abuse of the process, individual situations will uncover that, or a more limiting legislative standard will likely result. Given the current statute, given the court's ability to see and hear the payee and raise such inquiries as it felt necessary, given the information provided about this industry, the fact pattern here present, and in the absence of any opposition, the court finds this proposed transfer to be fair and reasonable. The finding herein, as it is in other cases presented for comparison, must be limited to its facts and no blanket approval of the discount rate employed here is intended.