Case Number: BS160634 Hearing Date: May 05, 2016 Dept: 34

SUBJECT: Petition for approval of transfer of structured settlement payment rights

Moving Party: Petitioner CBC Settlment Funding LLC (“petitioner”)

Resp. Party: Underlying plaintiffs Francisco Linares and Edwin Linares

The petition is DENIED.

BACKGROUND:

Petitioner submitted this petition on 2/18/16. The payee, Francisco Linares (“Payee”), was the recipient of structured settlement payments. Payee entered into an agreement to transfer a structured settlement payment totaling $37,800.00. In exchange, payee will receive $20,000.00 from petitioner.

ANALYSIS:

Payee has agreed to transfer $37,800.00 (monthly payments in the amount of $300.00 from 3/1/16 through 8/1/26) in exchange for $20,000.00.

Petitioner provides a declaration from the payee. Payee is not married and has two dependents. (Linares Decl., ¶¶ 3, 4.) Payee is currently employed and earns $1,200.00 per month. (Id., ¶ 6.) The settlement was not intended to cover future medical care or treatment. (Id., ¶ 8.) Payee has not previously attempted to transfer the settlement payments. (Id., ¶¶ 9, 17.) Payee wishes to use the money from the transfer to pay off auto debt and strengthen his credit score. (Id., ¶ 10.) Prior to entering into the transaction, payee requested that the beneficiary under the annuity be changed to his personal estate. (Id., ¶ 11.) Payee waives the advice of an independent advisor. (Id., ¶ 13.)

The disclosure statement appears to comply with the content requirements of section 10136(b). (See Exh. 5.) The transfer agreement appears to comply with the requirements of section 10136(c). (See Exh. 4.) Petitioner complies with section 10139 because petitioner has submitted a proof of service on the Attorney General. The petition does not appear to violate any statutes.

In response to the petition, former attorneys of record for the plaintiffs in the underlying action, which included payee Linares, filed declarations expressing concern about the transfer. Attorney Robert W. Finnerty states that the purpose of the settlement was to provide payee with a stream of income, and worries that his giving up over $14,000.00 “seems somewhat predatory.” (Finnerty Declaration.) Finnerty states that payee did not speak English at the time of his representation. (Ibid.)

Attorney Delores Yarnall describes the underlying action which pertained to payee’s wife’s death as the result of a vehicle accident. (See Yarnall Decl., ¶¶ 2, 4-5.) Yarnall declares that payee’s son, Edwin Linares, was born prematurely because of the accident and suffered permanent injury and was a plaintiff for the wrongful death of his mother. (Id., ¶ 4.) Yarnall declares that the case was settled for payee and Edwin, and payee chose to take his settlement as an annuity. (Id., ¶ 5.) Yarnall is concerned about the effort to dissolve the annuity. (Id., ¶ 6.) Yarnall does not believe that payee speaks, reads, or writes English, yet payee’s declaration filed herein is entirely in English. (Id., ¶¶ 7, 8.)

According to Yarnell: “Most critically, of course, the declaration that was filed by CBC Settlement Funding, LLC, and purportedly signed by MR. LINARES, allegedly in support of the subject Petition, is entirely in English. MR. LINARES clearly did not write his own declaration, and does not state that he did so. By its terms, this declaration waives or otherwise relinquishes important rights belonging to MR. LINARES. But on its face it reveals that he has received no advice of counsel or any other professional regarding those rights. Further, nowhere does the declaration state that the declaration was even translated into Spanish for him. The declaration refers to the underlying auto loan. There is
no evidence that it was translated into Spanish, either. It may not even be a valid consumer contract. Similarly, the declaration refers to, the “settlement,” apparently of a collection account, and the declaration does not reveal that any such settlement was translated into Spanish, either. For all of these agreements and/or documents, further, there is no evidence that Mr. Linares has even had anyone explain any of that to him, in his own language, or otherwise.” (Id., ¶ 8.)

Yarnall worries that payee could not have understood the declaration. As stated by Yarnell: “Further, I am informed and believed that, though MR. LINARES was a kind, good, and diligent person and father, he had little formal education and little experience in business dealings From my experience I did not form the belief that he was a sophisticated consumer by any means. When I represented MR. LINARES, he struggled with literary tasks, even in Spanish. In my opinion, there is no way that MR. LINARES could understand the content of his declaration filed by CBC in support of its Petition absent a full translation into Spanish and absent much explanation in Spanish to help him understand its ramifications. My opinion is supported, further, by the fact that apparently CBC Settlement Funding, LLC has a debt it is attempting to collect that involves a car loan to MR. LINARES that carried a 27% interest rate, and the “settlement” it seems to have with him, and that it seeks to fund through its subject Petition, apparently intends to charge him a 14% interest rate. Both rates are extremely high by any standard. Though the declaration claims that the settlement would benefit MR. LINARES, because it asserts that it will improve his credit to help him buy a house, it is very unlikely that this is accurate, for various reasons, and certainly it is unlikely that Mr. LINARES will be able to purchase a home on his income and absent the income from the annuity.” (Id., ¶ 9.)

The Court notes that CBC Settlement Funding, LLC is using a discount rate of 14.32%. (See Exh. 4 to Petition.) In other words, if payee could receive a loan for $20,000 at less than 14.32%, it would be in his interest to get the loan rather than enter into this structured settlement payment.

Mr. Linares was not represented by counsel in this matter. Further, there is no indication that payee Linares negotiated the 14.32% discount rate, or that CBC Settlement Funding, LLC would not be willing to increase the payout to payee if Linares had been represented by counsel in these negotiations.

The Court would be interested in hearing from CBC Settlement Funding, LLC how it determined to use a discount rate of 14.32%, what discount rate it (or its competitors) have used in similar cases, and whether it would negotiate further with payee to lower the discount rate.

For the above reasons, the court is concerned whether the transfer of payment rights is in payee’s best interest. (See Insurance Code § 10139.5(a)(1).)

Petitioner’s petition is DENIED pending further clarification of the issues presented above.