Cordero v. Transamerica Annuity Service Corporation

Briefly, this opinion is mentioned to expose readers to a few unusual statues that may touch on a practitioner’s personal injury practice.

Cordero, the plaintiff, was a childhood victim of lead poisoning. He was assigned rights to nearly one million dollars in structured settlement payment. Through six transfer agreements that he lacked the capacity to understand, he assigned his rights to his settlement payments to “factoring companies for pennies on the dollar.” In exchange for a one-time lump sum payment of $268,130, he forfeit his right to the value of $959,834.42, which would have been paid out in monthly installments over 26 years.

Florida’s Structured Settlement Protection Act (“SSPA”) is found under section 627.99296(3)(a). That part of the act provides that a structured settlement payment rights transfer is only effective if the transfer is authorized in advance in a final order by a court of competent jurisdiction. Florida state courts approved the assignments in this case, finding, among other things, that the assignments were in Cordero’s best interest. Only the factoring companies were represented at these hearings.

After burning through the money, Cordero tried to sue about the assignments. Instead of suing the factoring companies or attempting to void the assignments, he sued two companies that issues and funded his monthly payments prior to the assignment. Specifically, he brought a breach of contract claim under New York law, and he also brought a claim for exploitation of a vulnerable adult under Florida’s Adult Protective Services Act (“FAPSA”), section 415.1111, Fla. Stat.

The Southern District of Florida dismissed the claims with prejudice. Cordero appealed, and the Eleventh Circuit submitted a certified question to the New York Court of Appeals. The result of that process was that New York confirmed that there is no cause of action in New York for breach of an implied covenant to object to the assignments.

In regard to the FAPSA claim, to show exploitation, one must alleged the “intent” to deprive the vulnerable adult of his funds, assets, or property, but because the complaint only alleged that the businesses in question “allowed” or “facilitated” the assignment and did not allege that those companies intended to take his assets, there was no proper claim of exploitation.

The basis for dismissing with prejudice as opposed to without prejudice is not clear from the opinion. After all, if the companies in question got to keep some or all of the approximately $700,000 at issue, it does not seem like massaging the language in the complaint to allege that their participation was an “intentional” deprivation would be difficult. In a footnote, the Court stated that the facts of the case “are truly troubling. They describe a situation where it appears an industry is able to systematically victimize individuals who are not in a position to protect themselves.” How opportunity to amend can be denied where the court finds that there is a systematic victimization and all that is required is the allegation of an “intent” to deprive is almost as “truly troubling” as the original victimization. Looking back at the district court’s opinion, the dismissal with prejudice appears to have been granted because the court held that in addition to there being no fiduciary duty by the companies to Mr. Cordero, the agreement required that New York law govern the case, and the FAPSA claim was a Florida claim. But that opinion appears to be incorrect, and the appellate court seems to have subtly rejected it. While the settlement agreement may have to be interpreted under New York law, that would not bar free-standing Florida statutory tort claims that do not arise out of the agreement. In a footnote, the Eleventh Circuit noted that it was free to affirm for any reason supported by the record, even if not relied upon by the district court. (This is what, in Florida, is referred to as the “Tipsy Coachman” doctrine). But the problem is that while the district’s rationale would lead to the conclusion that the Florida claim could never be amended enough to turn it into a New York cause of action, a simple defect in the element of “intent”—especially in light of the court’s comment about a systematic victimization—is 100% something that could be fixed by an amendment to the complaint, making leave to amend appropriate. But the court affirmed the remedy without any further discussion of why the dismissal was with prejudice.