California Court Denies Transfer of Workers’ Compensation Payments

The Superior Court of Los Angeles County, California issued an order on December 20, 2012, denying a petition seeking court approval for the transfer to factoring company Fortress Funding LLC of a payee’s rights to payments under a workers’ compensation settlement.  In the matter styled In Re Rudy Andrade, No. BS139876, Superior Court Judge Amy D. Hogue held that the issuer of the annuity that funded the settlement payments was an interested party with standing to appear and oppose the petition, and that, based on the arguments in the annuity issuer’s opposition, the petition was denied.

In its opposition, the annuity issuer argued, among other things, that:

• The California structured settlement transfer act, Cal. Ins. Code § 10134 et seq., under which the petition was brought, did not apply to transfers of workers’ compensation payments.
• The proposed transfer contravened the California Labor Code § 4900 prohibiting assignment of workers’ compensation payments.
• The proposed transfer would be contrary to California common law, as the compromise and release agreement signed by the payee expressly prohibited assignment of the payments.
• The proposed transfer would be contrary to a prior order of the Workers’ Compensation Appeals Board of the State of California, which approved the underlying workers’ compensation compromise and release agreement that expressly prohibited assignment of the payments.
• The factoring transaction involved a transfer with an effective annual discount rate of 13.48%, and did not appear to be in the payee’s best interest.
• The payee had no rights to the annuity that funded the workers’ compensation payments, and could not lawfully assign the annuity payments.

The annuity issuer was represented in this matter by Michael J. Miller and Elizabeth L. McLachlan of Drinker Biddle & Reath. 

If you have any questions regarding this matter, or if we can be of any assistance in resolving other pending issues, please do not hesitate to contact one of the lawyers listed above.