California state appeals court rules strongly in favor of factoring.

In a reversal of the "Tomahawk" cases earlier this year, the California State Appeals Court in Fresno ruled last week in favor of the concept of court approved factoring transactions.

The California Court of Appeals in Fresno issued a surprising opinion on a group of 11 JG Wentworth factoring cases. In 321 Henderson Receivables Origination v. Sioteco, the court reversed the much publicized trial court decisions that had sent shock waves through the factoring and structured settlement worlds.


Among the issues addressed by the court was the effect of contractual anti-assignment provisions on structured settlement factoring. In countermanding the trial court, which had decided that such anti-assignment clauses would render factoring transfers void even if not raised by the insurers, the unanimous panel of appellate judges found that such provision could be waived, and in fact that California public policy is against such provisions and is in fact in favor of court approved factoring.


The Sioteco decision is here.

At the end of this blog post i'll provide a copy of an interview Matt Bracy, general counsel of Settlement Capital, did with Scott Drake on these cases, but I want to take a few moments and reflect on what the structured settlement industry and trade associations are doing by continuing to fight factoring instead of finding ways to work more cooperatively with the factoring groups.

I know this is heresy, but every time I step back and look at the factoring situation and it's perceived threat to structured settlements, I don't see the huge risk that our trade association and others seem to see. I instead see our biggest fundamental risk being the insular and isolated approach we take to every supposed business risk that we face.

As the steady build up of cases and PLR's pile up that basically approve and codify the process of factoring, I'm going to suggest that our industry take some of it's resources and talent away from that fight and apply it to solving the looming capacity issues that face our business and to expand into new markets. I'll address these topics further in interviews this week.

Posted on May 12, 2009 .