Petitioner 321 Henderson Receivables Origination, LLC is seeking approval of a transfer of structured settlement payment rights from respondent Alex Walker, payee of periodic payments to be made or guaranteed by Metropolitan Life Insurance Company and Metropolitan Tower Life Insurance Company a/k/a MetLife Tower Resource Group, Inc. Only Petitioner and Alex Walker have appeared on the Petition.

With an Infants Compromise Order For A Structured Settlement dated January 12, 2005, Hon. Paul A. Victor, Supreme Court, Bronx County, approved settlement of Mr. Walker's action [*2]for damages for personal injury - - namely, lead paint poisoning - - commenced on his behalf by his mother and natural guardian, Sharon Walker, against the City of New York. Of the $650,000 to be paid by the City, $216,666.66 would be paid to the plaintiffs' counsel for their fee, $13,333.34 would be deposited in a bank account, and the balance of $420,000 would be used for the purchase of the structured settlement annuity that is the subject of this proceeding. As described in the Order, the annuity would provide, "future periodic payments, . . . ; all of which total . . . $2,478,349.50 based on [Mr. Walker's] normal life expectancy of 79.75 years; . . . which said sum shall include guaranteed payments (i.e. payments that are payable regardless of whether the plaintiff is alive) which total . . . $689, 653.23 in the event that plaintiff does not survive to full life expectancy."

Petitioner proposes to acquire guaranteed periodic payments totaling $292,464.87, representing monthly payments of $1,281.57 each, increasing at 3% annually, beginning January 1, 2008 and ending December 1, 2022. After payment of a "compliance and administrative fee" of $750 and a "filing and related expenses fee" of $1,500, Mr. Walker would receive $95,500. The amount to be paid would represent 48.40% of the discounted present value, i.e., $197,303.34, and an effective annual discount rate of 18.15%.

Mr. Walker is now 20 years old, single, with no children. He does not hold regular, full-time employment, but earns $15,000 annually from miscellaneous jobs, such as landscaping and maintenance. He plans to use the proceeds of the transfer to purchase a building in which he will live and to open a pizza shop. No details are provided as to either of these intended purchases.

Mr. Walker states that he has procured independent professional advice regarding the proposed transfer, evidenced by a letter to Petitioner from attorney Stephen R. Chesley, Esq. Counsel states that he has met with Mr. Walker, and is satisfied that Mr. Walker "understands the nature and terms of such transaction."

The Structured Settlement Protection Act requires judicial approval of a transfer of structured settlement payment rights. (See General Obligations Law § § 5-1705, 5-1706.) For present purposes, a transfer may be authorized only upon express findings, among other things, that:

"the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable. Provided the court makes the findings as outlined in this subdivision, there is no requirement for the court to find that an applicant is suffering from a hardship to approve the transfer of structured settlement payments under this subdivision." (General Obligations Law § 5-1706 [b].)

The statute "assume[s] . . . that the payee's decision, even if freely entered into, is not always one a reasonable person might make, and the court is in effect asked to protect an individual from himself or herself." (Matter of 321 Henderson Receivables LP [De Mallie], 2 Misc 3d 463, 464 [Sup Ct, Monroe County 2003]; but see Matter of Settlement Funding of NY, [*3]LLC [Platt], 2 Misc 3d 872, 876 [Sup Ct, Lewis County 2003] ["when the court is given discretion without a limiting definition, this court assumes it can be applied selectively, but not necessarily restrictively, and surely not in a paternalistic sense when adult, competent litigants are involved."].)

There is, as yet, no appellate authority applying the Act. Lower courts are in agreement, however, that the "best interest" standard is to be applied on a case-by-case basis with attention to several factors: the payee's physical age and level of maturity, and physical and mental capacity; the payee's ability to earn a living and to provide for his or her dependants; the payee's intended use of the proceeds of the transfer; the need for medical or other professional treatment; whether the payee is suffering from a hardship; whether the payee has obtained independent legal and financial advice about the consequences of the transfer, and whether he or she demonstrates an appreciation of them. (See Matter of Symetra Assigned Benefits Serv. Co. [Mc Guire], 13 Misc 3d 1208 [A], 2006 NY Slip Op 51732 [U], * 2 [Sup Ct, Suffolk County]; Matter of Settlement Capital Corp. [Yates], 12 Misc 3d 1198 [A], 2006 NY Slip Op 51616 [U], * 6 [Sup Ct, Kings County]; Matter of Settlement Funding of NY, LLC [Ocasio], 11 Misc 3d 1061 [A], 2006 NY Slip Op 50332 [U], * 1 [Sup Ct, Bronx County]; Matter of Rapid Settlements, Ltd. [Phillips], 6 Misc 3d 1030 [A], 2004 NY Slip Op 51844 [U], * 1 [Sup Ct, Cortland County]; Matter of Barr v Hartford Life Ins. Co., 4 Misc 3d 1021 [A], 2004 NY Slip Op 50980 [U], * 1 [Sup Ct, Nassau County]; Matter of Settlement Funding of NY, LLC [Platt], 2 Misc 3d at 876; Matter of Settlement Capital Corp. [Ballos], 1 Misc 3d 446, 455 [Sup Ct, Queens County 2003].)

Before the statute was amended in 2004 to add the proviso that "there is no requirement for the court to find that [a payee] is suffering from a hardship to approve the transfer" (see General Obligations Law § 5-1706 [b]), courts appeared to differ on the importance of hardship or "dire straits." (Compare Matter of 321 Henderson Receivables LP [De Mallie], 2 Misc 3d at 467, with Matter of Settlement Funding of NY, LLC [Platt], 2 Misc 3d at 876.) The legislative history of the 2004 amendment states:

" An adult who has not been adjudicated incompetent or incapable of handling his or her own affairs is generally capable of determining what is in their own best interests with regard to their property and affairs, including their structured settlement payment rights, without having to demonstrate or prove "hardship," provided the consumer has been afforded the admonitions to consult with counsel, the rights of cancellation, and the disclosures required by the 2002 Act' (Assembly Mem in Support of L 2004, ch 480, 2004 McKinney's Session Laws of NY, at 1968)." (Matter of 321 Henderson Receivables, L.P. [Lemanski], 13 Misc 3d 526, 528-29 [Sup Ct, Erie County 2006].)

Nonetheless, the existence of hardship, such as a looming foreclosure on the family home or the need for life-sustaining medical treatment, "weighs heavily in favor of determining that a transfer of structured settlement rights is in the best interest of the payee." (See Matter of Settlement Capital Corp. [Yates], 2006 NY Slip Op 51616 [U], * 3- * 4; see also Settlement Funding of New York, LLC [Brown], 11 Misc 3d 1059 [A], 2006 NY Slip Op 50286 [U], * 4 [*4][Sup Ct, Bronx County].) Hardship, or its absence, also affects the "interplay between the best interest standard and the fair and reasonable standard" (see Matter of Barr v Hartford Life Ins. Co., 2004 NY Slip Op 50980 [U], at * 2.) "The more pressing the need, the more reasonable it may be for a payee to obtain immediate cash at a steep discount." (Id. [quoting Matter of 321 Henderson Receivables, LP [De Mallie], 2 Misc 3d at 465]; see also Matter of Settlement Corp. [Yates], 2006 NY Slip Op 51616 [U], at * 5.)

The Court notes that venue for a special proceeding for approval of a transfer of structured settlement payment rights is "in the supreme court of the county in which the payee resides; or . . . in any court which approved the structured settlement agreement." (See General Obligations Law § 5-1705 [b].) Justice Victor's Order provides that neither Mr. Walker "nor his guardian, nor any payee may sell, assign, pledge, transfer or encumber the annuity benefits . . . or take any other action to defeat or impair the intent of this Court to provide to [Mr. Walker], the payments [pursuant to the annuity], absent a further order of the Court."

In light of the statutory venue provision and the substantive restrictions on judicial approval of transfer of structured settlement payment rights, as will be discussed, this Court does not read the Order as requiring that the proceeding be moved to Bronx County, so that Justice Victor might consider the Petition. It may be that a court rule would be advisable, encouraging the transfer of proceedings to the judge who signed the infant compromise order, if the judge is available, or that, even in the absence of a court rule, a transfer might be made in the exercise of discretion.

Here, in light of the Court's ultimate disposition of the Petition, a transfer will not be considered. The Court has taken seriously, however, Justice Victor's stated "intent to . . . provide to [Mr. Walker], the payments" specified in the Order. Indeed, as one court has stated, after review of the then-existing caselaw under the Structured Settlement Protection Act:

"The payment structure in all of these cases was determined by either judicial process, subject to articles 50-a and 50-b of the CPLR, or by negotiations in which the payee's interests were represented. As such, it was presumed to be the best compensation for the payee's injuries at the time of the verdict or settlement. To overcome this presumptive validity, the court rules that there must be a showing, by clear and convincing evidence, of an unforeseeable change in circumstances that would justify the sale of rights to future payments. While such a standard cannot be described with absolute precision, it should resemble the one employed by courts in applications to modify child support on the basis of changed circumstances." (Matter of 321 Henderson Receivables LP [De Mallie], 2 Misc 3d at 467-68; see also Settlement Funding of New York, LLC [Brown], 2006 NY Slip Op 50286 [U], at * 4.)

Whether or not a "presumption" or a heightened evidentiary standard should be established for review of all petitions for approval of a transfer of structured settlement payment rights, where the rights have their genesis in an infant compromise order, only the most careful and deliberate application of the statutory "best interest" standard is appropriate. After all, the judge who approved the compromise and the structure was required to apply a similar "best [*5]interest" standard, informed by the knowledge and judgment of the infant's guardian, and by the additional information and documentation concerning the status of the infant in light of the injuries claimed. (See Edionwe v Hussain, 7 AD3d 751 [2d Dept 2004]; Barretta v NBKL Corp., 288 AD2d 539 [2d Dept 2002]; Roman v Bermudez, 15 Misc 3d 321 [Sup Ct, Bronx County 2007]; Olivier v Drenis Realty LLC, 13 Misc 3d 1236 [A], 2006 NY Slip Op 52140 [U] [Sup Ct, Kings County]; Glenn v Jones, 8 Misc 3d 799 [Sup Ct, Nassau County 2005].)

Surprisingly, and with few exceptions, the many published opinions in proceedings pursuant to the Structured Settlement Protection Act do not state the origin of the structured payments. Few identify the origin as an infant compromise order. (See Matter of 321 Henderson Receivables Origination LLC [Roman], 15 Misc 3d 1135 [A], 2007 NY Slip Op 50982 [U] [Sup Ct, Bronx County]; Matter of Settlement Capital Corp. [Yates], 2006 NY Slip Op 51616 [U]; Matter of 321 Henderson Receivables, LP [Martinez], 11 Misc 3d 892 [Sup Ct, New York County 2006]; Matter of Settlement Funding of NY, LLC [Solivan], 2005 NY Slip Op 50946 [U]; Matter of Rapid Settlements, Ltd. [Phillips], 2004 NY Slip Op 51844 [U].)

Nor do the opinions describe the reasons that led to the adoption of structured payments in the first place. The one exception found by this Court noted only that a structure was adopted because "it was determined to be in [the infant's] best interest to structure the award so that he would receive lifetime payments, insuring his financial stability and providing him with money to achieve his desired goal of paying for college and graduate school." (See Settlement Funding of NY, LLC v Brown, 11 Misc 3d 1059 [A], 2006 NY Slip Op 50286 [U], * 2 [Sup Ct, Bronx County 2006].)

The Court is aware of only two proceedings that addressed structured settlements in lead paint poisoning cases. In one, that circumstance was simply noted. (See Matter of Structured Asset Funding, LLC [Taylor], 14 Misc 3d 1230 [A], 2007 NY Slip Op 50221 [U], * 1 [Sup Ct, Bronx County].) As to the other, the court states that "[t]he lead poisoning had left [the infant] with limited abilities," but does not describe how, if at all, that circumstance affected the determination on the petition. (See Matter of 321 Henderson Receivables, L.P. [Martinez], 11 Misc 3d at 896.)

Here, the affidavit of Mr. Walker's mother in support of the infant compromise order stated that he was first diagnosed with lead poisoning when he was 11 years old; he was 17 at the time of the settlement. She stated that "[l]ead poisoning requires continuous medical care and monitoring"; that the infant "has diminution in learning capacity attributable to lead poisoning"; that "[a] claim was made that the infant's earning capacity was diminished as a result of his lead poisoning"; and that the infant's "prognosis is guarded because of potential future problems associated with early childhood lead poisoning."

The mother's affidavit and the affirmation of counsel identify aspects of the mother's and the infant's personal histories in explaining the determination to settle the action rather than proceed to trial. The factors will not be repeated here in the interests of Mr. Walker's and his mother's privacy. Although to some those factors might argue against granting the instant [*6]petition, others might conclude that the opportunity to overcome the consequences of one's personal history and life circumstances is itself a reason to the contrary. As difficult as these assessments might be for experts, they are most daunting to judges without any particular training or experience to make them. For present purposes, those additional factors are deemed neutral.

Except as might be implied from the specifics of her affidavit already described, Mr. Walker's mother did not detail her reasons for recommending a structured settlement, rather than a single payment. She did state that the structure would "maximize the amount of money" her son would receive, that "the monthly payments for his lifetime will insure that his basic needs are met," and that she believed that the settlement was in her son's best interests. The attorney's affirmation suggested tax benefits; that the structure "would secure the funds should the child desire to go to college or some other school to learn an occupation;" and that "[t]here is less chance of the money being dissipated in a structured settlement as opposed to an all cash settlement."

On the first return date for the pending Petition, the Court requested that Petitioner's counsel obtain copies of the documents submitted on the infant compromise order, which was promptly done. The Court also suggested that it would benefit from the current judgment of Mr. Walker's mother, who is apparently available but not in good health. She did not appear with Mr. Walker on the adjourned return date, and Mr. Walker declined the Court's offer of a further adjournment so that he might arrange for her appearance or testimony in other form.

Other than Mr. Walker himself, whose assessment of his own best interest must be deemed compromised by the very injury that was the basis of the settlement, Mr. Walker's mother appears to be the person in the best position to make that assessment - - certainly in a better position than this Court. Three years ago, when Mr. Walker was already 17 years old, his mother determined that it was in his best interest to structure the settlement she obtained for him. There is nothing in the record on this Petition that shows that she has had a change of mind or heart, and no change of circumstance has been brought to the Court's attention.

Whether or not framed in terms of "presumption" or "clear and convincing evidence," and at the risk of a possible charge that the Court is avoiding its own responsibility to assess Mr. Walker's "best interest," the Court will defer to the informed judgment of Mr. Walker's mother and the judge who reviewed and approved the compromise, as yet of recent vintage and not shown to be otherwise undermined by any change in circumstance.

The Petition is denied and dismissed.

July 8, 2008____________________

Jack M. Battaglia

Justice, Supreme Court