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RECOVERY OF A $280,000 SETTLEMENT PURPORTEDLY PAID TO DEFENDANTS BY PLAINTIFF IS BARRED BY THE STRUCTURED SETTLEMENT PROTECTION ACT WHICH REQUIRES COURT APPROVAL PRIOR TO PAYMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the complaint seeking to recover settlement funds ($280,000) purportedly made to the defendants should have been dismissed. The settlement was never approved by a court in violation of the Structured Settlement Protection Act (SSPA) (General Obligations Law 5-1701):

… [D]efendants demonstrated that the complaint fails to state a cause of action, on the ground that the plaintiff’s claims are prohibited by the SSPA. Enacted in 2002, the purpose of the SSPA … was to establish “procedural safeguards for those who sell settlements that are awarded as a result of litigation,” due to a recognition that “[m]any of the people who receive such settlements are being compensated for very serious, debilitating injuries, and have been unfairly taken advantage of in the past by the businesses that purchase their settlements” … . “Under this law, transfers such as the one at issue are prohibited unless approved by a court of competent jurisdiction based upon express findings … that the transfer is in the best interest of the payee and that the discount rate, fees and expenses used to determine the net amount advanced are fair and reasonable” (… General Obligations Law § 5-1706). In circumstances … where payment for a structured settlement transfer is made to the payee prior to the court’s approval of the transfer, whether intentionally or due to a mistaken belief that the transfer had already been approved, a proposed transferee must seek nunc pro tunc approval of the transfer, and such approval is not guaranteed … . Pinnacle Capital, LLC v O’Bleanis, 2023 NY Slip Op 01540, Second Dept 3-22-23

Practice Point: The Structured Settlement Protection Act (General Obligations Law 5-17-1 et seq) requires court approval of structured settlements. If, as here, there was no court approval before plaintiff purportedly paid the funds to defendants, the plaintiff seeking to recover the funds from the defendants may be out of luck.

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