Cozen O’Connor: Third Circuit Reverses Summary Judgment In Favor of Secondary Market Buyers on Breach of Contract Claim [Alert]

Third Circuit Reverses Summary Judgment In Favor of Secondary Market Buyers on Breach of Contract Claim

Alert

December 4, 2018

In yet another warning to buyers of structured settlement payment rights on the secondary market, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s order for summary judgment in favor of individuals on their breach of contract claim against the seller of the payment rights, after the transfer order assigning the rights to the payments to a factoring company was vacated. Wall v. Corona Capital, LLC, 2018 WL 6133390 (3rd Cir. 2018)

By way of background, Kenneth Stevens was the payee on a structured settlement he obtained after settling a personal injury case. In a proceeding under the Florida Structured Settlement Protection Act, Stevens’ payments were transferred to Corona Capital, LLC (Corona). Corona sold the payments to defendant Altium Group LLC (Altium), which then sold the payments to Robert and Linda Wall (the Walls). Two years later, Stevens challenged the original transfer of the annuity payments in Florida state court contending that he did not receive notice of the transfer and had not signed the transfer papers, claiming that his wife had forged his signature. The Florida court vacated the transfer order, directing the annuity issuer to stop making payments to the Walls and instead to make the payments to Stevens’ attorney.

The Walls then filed suit against Altium in Pennsylvania state court asserting breach of contract and unjust enrichment claims. The parties filed cross-motions for summary judgment on the breach of contract claims. The District Court granted summary judgment against Altium in favor of the Walls on their breach of contract claim because the Walls had not received the payments that Altium sold them pursuant to the terms of the contract.

On appeal, the Third Circuit reversed, finding that Altium satisfied its obligation under the contract by delivering to the Walls the rights to the payments and that Altium did not guarantee “title” to the “annuity.” The Court of Appeals remanded the case to the District Court for further proceedings on the Walls’ unjust enrichment claim.

In light of the increasing number of cases seeking to void transfer orders, the Wall case is one further illustration of why recycled payment streams present serious risks to investors.

Click here to review a copy of the Third Circuit’s opinion.


Authors

Stephen R. Harris

Member

sharris@cozen.com

(215) 665-4121

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Cozen O’Connor’s Life Insurance & Annuities attorneys are available to provide counsel and guidance on the issues discussed in this Alert.