September 8, 2005
Digest: A judge may not advise an applicant in a structured settlement buyout matter that better terms may be obtained from a specific company, but must determine whether the transfer is in the best interest of the payee and that the payee has been advised by the transferee to seek independent professional advice.
Rule: General Obligations Law 5-1706; 22 NYCRR 100.2(C)(1); Opinion 97-16 (Vol. XV).
A judge who has received an application by a plaintiff to approve a buyout of a structured settlement, has concluded that the buyout company’s offer of 50% or less of the present value of the settlement to be “unconscionable.” Apparently, another buyout company learned of the application and contacted the judge with a substantially greater offer.
In light of those circumstances, the judge inquires as to the propriety of sending such applications out for review to another buyout company and, if it is represented that the plaintiff could get more money from another company, may the judge inform the plaintiff, and either provide plaintiff with the name of the company or direct the company to the plaintiff.
Section 100.2(C)(1) of the Rules Governing Judicial Conduct provides that a judge “shall not lend the prestige of judicial office to advance private interests of the judge or others.” 22 NYCRR 100.2(C)(1). In applying that provision this Committee has said that a judge may not recommend a private business in its bid to obtain work. Opinion 97-16 (Vol. XV). A direct recommendation of a particular buyout company to a plaintiff before the judge would then appear to violate this rule. However, judicial review of buyout applications is governed by General Obligations Law 5-1706 which requires the reviewing judge to determine whether the transfer would be “in the best interest of the payee” and whether the payee has received independent professional advice regarding the matter.
While it is not the province of this Committee to construe the legal import of or the extent of review authority given a judge by this statute, it does require the judge to expressly determine that the plaintiff has been advised to seek professional advice and that the transfer is in plaintiff’s best interest. Advising a plaintiff that a particular offer or transfer is not in his/her best interest, creates a judicial duty imposed upon the judge by the buyout statute (should the judge reach that conclusion). Further, that requirement, as well as ascertaining whether the payee has been advised “to seek independent professional advice regarding the transfer” (G.O.L. 5-1706 [c]), and the other provisions of section 5-1706, should be the determinants of the judge’s actions.