Barber v. Stanko
| Decision Date | 14 May 2021 |
| Docket Number | No. 754 WDA 2020,No. 684 WDA 2020, No. 702 WDA 2020, No. 753 WDA 2020,684 WDA 2020 |
| Citation | 258 A.3d 438 |
| Parties | Jeffrey BARBER, Administrator of the Estate of Linda Lee Jenkins a/k/a Linda Lee Barber, Deceased, and Zachary Barber, a Minor, by and through His Father and Natural Guardian Jeffrey Barber v. Bruce STANKO, North Hills Pharmacy Services, LLC. Pacercheck, Inc., et al. Appeal of: Michael J. Pickett Jeffrey Barber, Administrator of the Estate of Linda Lee Jenkins, a/k/a Linda Lee Barber, Deceased, and Zachary Barber, a Minor, by and through His Father and Natural Guardian, Jeffrey Barber v. Bruce Stanko; North Hills Pharmacy Services, LLC ; Pacercheck, Inc.; et al. Appeal of: Pinnacle Capital, LLC Jeffrey Barber, Administrator of the Estate of Linda Lee Jenkins a/k/a Linda Lee Barber, Deceased v. Bruce Stanko; North Hills Pharmacy Services, LLC ; Pacercheck, Inc., et al. Appeal of: Sempra Finance, LLC. Jeffrey Barber, Administrator of the Estate of Linda Lee Jenkins a/k/a Linda Lee Barber, Deceased v. Bruce Stanko; North Hills Pharmacy Services, LLC ; Pacercheck, Inc., et al. Appeal of: Habitus Funding |
| Court | Pennsylvania Superior Court |
Mark T. Caloyer, Pittsburgh, for Pickett, appellant.
Daniel M. Taylor Jr., Pittsburgh, for Pinnacle Capital, appellant.
Samuel W. Cortes, Pittsburgh, for Habitus Funding and Sempra Finance, appellant.
Trent A. Echard, Allison Park, for Barber, appellee.
Pinnacle Capital, LLC (Pinnacle), Sempra Finance, LLC (Sempra), Habitus Funding (Habitus) and Michael J. Pickett (Pickett) appeal from the June 22, 2020 order of the Court of Common Pleas of Allegheny County (Allegheny County Orphans’ Court) that effectively denied motions to dissolve an injunction involving a January 31, 2020 order requiring all annuity payments to Zachary Barber (Zachary) provided for in its 2005 Settlement Approval Order be paid into court until allegation of statutory violations, forum shopping and fraud presented in the underlying proceeding had been determined. Pinnacle, Sempra, Habitus and Pickett had purchased, with court approval in Courts of Common Pleas in other counties, payments due from some of those annuities that the Allegheny County Orphans’ Court order required to be paid into court. In separate appeals filed at different docket numbers,1 each party claims that the June 22, 2020 order improperly continued the January 31, 2020 "injunction." Pinnacle and Pickett also contend that the Allegheny County Orphans’ Court abused its discretion by staying all proceeding in this case until the appeal before this court in a coordinated case (Sempra appeal) has been decided. Sempra and Habitus additionally argue that the court lacked subject matter jurisdiction to enter the January 31, 2020 order based on the coordinate jurisdiction rule and the passage of time. Because the appeals are from the same order and include nearly identical issues and briefs, we sua sponte consolidate these matters pursuant to Pa.R.A.P. 513 and address them concurrently.
Because the Allegheny County Orphan's Court was obligated to approve the transfer of structured settlement payment rights created by a 2005 Settlement Approval Order and had continued jurisdiction over it, the January 31, 2020 order was not a preliminary injunction but continued enforcement of that order pending its decision. Moreover, the trial court did not abuse its discretion in staying all proceedings until the appeal involving the same subject matter had been decided. As the June 22, 2020 order, from which this appeal is taken, is neither a final order nor the proper subject of an interlocutory appeal as of right, the appeals are not properly before us and we quash.
While what is before us involves a narrow procedural question involving whether the January 31, 2020 order is a preliminary injunction or an ancillary order continuing the terms of 2005 Settlement Approval Order in place, it is necessary to have an understanding of the requirements that need to be met to transfer payments under the Pennsylvania Structured Settlement Protection Act (SSPA), 40 P.S. §§ 4001 - 4009, as well as a review of the underlying facts.
Structured settlements were rare until a series of IRS rulings in the late 1970s declared that periodic payments in structured settlements would not be subject to federal income tax. Congress effectively codified these administrative rulings with the passage of the Periodic Payment Settlement Act of 1982. See PUBLIC LAW 97-473 —JAN. 14, 1983.2 The passage of this Act incentivized plaintiffs to forgo a lump-sum payment in favor of a structured settlement to provide tort victims with long-term economic security by providing guaranteed income with spendthrift protection.
While structured settlements provided those benefits, payees of structured settlements were precluded from securing a lump-sum payment by cashing in their remaining payments to take care of current needs or wants, real or imagined. Like all things involving substantial sums of money and wants and desires, there developed an industry to allow plaintiffs to "change their minds" and transfer their payments to a factoring company who offered less than the present value of those payments. The practice of structured settlement transfers raised a concern that personal injury claimants are being exploited by factoring companies that take advantage of vulnerable and unsophisticated claimants. See Johnson v. Structured Asset Services, LLC , 148 S.W.3d 711, 728 (Tex.App.2004) ().
On account of these concerns, Congress amended the Internal Revenue Code in 2002 to impose "a tax equal to 40 percent of the factoring discount" upon any person or entity "who acquires directly or indirectly structured settlement payments rights in a structured settlement factoring transaction...." 26 U.S.C. § 5891(a).3 However, a statutory exception to that tax has been created for any transfer of structured settlement payment rights that is approved in advance by a qualified court order. See 26 U.S.C. § 5891(b)(1). To constitute a "qualified order" under Section 5891, the order must expressly find that the proposed transfer does not contravene any federal or state law, regulation or order, and that the sale "is in the best interest of the payee, taking into account the welfare and support of the payee's dependents...." 26 U.S.C. § 5891(b)(2)(A)(i)-(ii). To avoid paying a 40 percent tax on the factoring discount amount, any company wishing to purchase a payee's structured settlement rights must secure a court order concluding that the transfer is in the payee's best interests.
Like almost all states, Pennsylvania has adopted the SSPA to functionally allow the transfer of structured settlement payments. It provides, among other things, that, 40 P.S. § 4003(a)(3).
It has been said that the SSPA places the common pleas court in and "is to ensure that an otherwise financially defenseless and possibly injured individual would receive a regular, sustaining source of income." In re Jacobs , 936 A.2d 1156, 1160 (Pa. Super. 2007).
Requiring a judge to serve as guardian to protect the interests places the judge in unfamiliar territory. Generally, the petition to transfer payment is unopposed with plaintiff-payee wanting to transfer payments so that it can receive payments for what he or she considers in its best interests, whether it is or not, and the factoring company wanting it approved so it can make the most money. That requires the trial judge to make an independent determination of whether the sale is in the best interests of the plaintiff-payee based on economic factors that it is not within its ken and with parties who are not that forthcoming. Moreover, this determination is made even more difficult because the proceedings are non-adversarial, with no factual development and competing positions to inform its judgment as would be the usual. It depends on the forthrightness and good faith of counsel to provide all the information available for the judge to make an informed decision on what is in the best interests of the plaintiff-payee to avoid fraud on the court.
While 40 P.S. § 4003 sets forth several conditions that must be met before a transfer can be approved, other sections are pertinent here. Section 4004 of the SSPA, 40 P.S. § 4004, provides that the petition to transfer structured settlement payments shall be filed where the payee is domiciled; another of those conditions requires that the transfer also must be "expressly approved in writing by ... any court or responsible administrative authority that previously approved the structured settlement." 40 P.S. § 4003(a)(5)(i)(B). This approval is required because they are commonly used to resolve tort claims of minors,...
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