In a rare case of a factoring company dispute making the big time head lines, Monday mornings Washington Post carried a story by reporter Mary Claire Dale outlining a recent US Appeals court slap down of Rapid Settlements.
This involved a notorious case from back in the 1980's, that being the police brutality and excessive force case against the Philadelphia Police brought by the family and survivors of the MOVE groups compound. One of the survivors, Birdie Africa aka Michael Ward, was a 13 year old boy at the time of the incident and suffered injuries that resulted in a structured settlement being awarded him that the story says was about $1000 per month for life with some compounding factor built in.
Apparently in 2005 Ward approached Rapid Settlements to purchase the future payments totalling about $334,000 in exchange for $32,000. The appeals court last Friday killed the deal as Rapid Settlements had failed to obtain state court approval in Pennsylvania as required by State law and statues, which largely conform to the same laws covering most states in the country. As those of us in the settlement industry know, having conforming and consistent laws for factoring is a key part of the compromise reached over the years with the factoring industry in setting up a process by which people are legally allowed to sell future payments, while afforded the protection of court supervision and control to watch out for predatory pricing and poor decision process.
From the reading of the article, Allstate contested Rapid's paper work and use of an arbitration firm to provide "court approval" and to move venue to Texas after state courts rejected the deal, something the article indicates was a common occurence when a state nixed a settlement.
I'll leave it to others to do more digging on this story as I think think the big picture issue is pretty clear, as well as the resulting fall out. The state laws designed to regulate the sale of future payments for injury victims are actually working as intended in most instances and we now have the weight of a US appeals court decision stating that evasion of those laws and regulations are going to be slapped down to protect unwise or uninformed plaintiffs from entering into hasty or foolish deals.
Allstate is to be applauded in this case for pushing this all the way to the US appeals court and getting this decision and good job by the Washington Post to highlight this decision instead of having it relegated to the far back pages of the paper. The vast majority of factoring companies follow the rules and process and NASP and NSSTA have both worked exceptionally hard on judicial education. Over time this educational process bears fruit and you get judges who see a situation for what it is.
This is a win for the good guys in both the structured settlement industry and factoring as the process of state regulation and oversite was strengthen by this decision.