Disability Law

Pacific Life v. Rapid Settlements

By Patrick Hindert

The Second Circuit Court of Appeals yesterday rejected Rapid Settlement's claim that the Federal Arbitration Act supersedes the New York Structured Settlement Protection Act.

In the case titled "Pacific Life Insurance Company v. Rapid Settlements, Ltd.", Confederation Life Insurance and Annuity Company joined Pacific Life as a Plaintiff-Appellee. Joyce Allen was the structured structured settlement recipient who attempted to transfer payment rights.

The Summary Order from three Second Circuit judges unanimously affirmed a January 5, 2007 order of the United States District Court for the Western District of New York:

• Declaring "void and unenforceable" a purported assignment to Rapid of structured settlement payment rights;
• Declaring "void and unenforceable" an arbitration award purporting to effectuate the assignment;
• Enjoining Rapid from taking any further legal action "in any forum" to recover the structured settlement annuity payments.

In its appeal, Rapid argued:

• Rapid's earlier arbitration award in Texas was valid and enforceable under the Federal Arbitration Act; and
• The Full Faith and Credit Clause in Article IV of the United States Constitution required the New York District Court "to give preclusive effect to a Texas state court judgment confirming the arbitration award".

The Second Circuit Court of Appeals rejected Rapid's argument "for substantially the reasons stated by the District Court in its order". The Court's Order noted the following as "undisputed" when the purported assignment occurred:

• Allen was a resident of New York; and
• The New York Settlement Protection Act accordingly was applicable.

For a summary of the District Court decision, see Drinker Biddle's September 2007 Structured Settlement Update.

Stephen Harris, the Drinker Biddle law partner who represented Pacific and Confederation in the Second Circuit appeal, predicts the case result will become "important judicial precedent" in other Rapid cases now pending in the Third and Fifth U.S. Circuit Courts of Appeal.

For prior S2KM reporting about Rapid Settlements, see:

• Rapid v. Symetra
• CNA v. Rapid Settlements

For more detailed information about structured settlement transfers, see updated Chapter 16 in Release 45 of "Structured Settlements and Periodic Payment Judgments".

Full post as published by Beyond Structured Settlements on February 11, 2009 (boomark / email).