Wednesday, January 26, 2022

No Forced Arbitration Of Structured Settlement Transfers Of Rights

The Maryland Court of Special Appeals declined to enforce arbitration agreements between lead paint victims who had settled claims and a company that purchased the resulting income stream

Crystal Linton and Dimeca D. Johnson, and other putative class members, had obtained structured settlements, and the resulting stream of payments, after resolving their lead paint exposure claims. Ms. Linton, Ms. Johnson, and the others (“Plaintiffs”) later signed Purchase and Sale Agreements(“Agreements”) that purported to transfer their rights to those income streams to Access Funding LLC and/or affiliated entities (“Access”) in exchange for discounted lump sum cash payments. Ms. Linton and Ms. Johnson filed this action in July 2016, alleging claims of negligence, misrepresentation, fraud, and conspiracy in connection with those Agreements.

The Agreements contained arbitration clauses, and the Defendants filed petitions to compel arbitration in August 2016.

Holding

Compelling arbitration in this case effectively would allow the Defendants to circumvent the court authorization process mandated by the Structured Settlement Protection Act. Put another way, allowing the dispute about the validity of the court’s authorization to be decided by the arbitrator would be the same as allowing Access to avoid the court at the very stage in the process where the General Assembly required the court’s approval. CJ § 5-1102. Indeed, the arbitration clause states expressly that it is not to be used for that purpose: “[t]his arbitration provision cannot be used to bypass state and federal laws requiring court approval of this transaction.” And other courts have held that companies seeking to avoid the statutorily-required court authorization process via arbitration cannot do so.

Judge Nazarian authored the opinion. (Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2022/01/no-forced-arbitration-of-structured-settlement-transfers-of-rights.html

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