Sanders v. JGWPT Holdings, Inc.
| Decision Date | 26 July 2016 |
| Docket Number | No. 14 C 9188,14 C 9188 |
| Parties | VALERIO SANDERS, JANEKA HICKS, KENNETH JENNINGS, and KEVIN RINCK, Plaintiffs, v. JGWPT HOLDINGS, INC., JGWPT HOLDINGS, LLC, J.G. WENTWORTH LLC, PEACHHI, LLC, PEACH HOLDINGS, INC., PEACHTREE FINANCIAL SOLUTIONS, LLC, PEACHTREE SETTLEMENT FUNDING LLC, SETTLEMENT FUNDING, LLC d/b/a PEACHTREE SETTLEMENT FUNDING, BRIAN P. MACK, and THE MACK LAW GROUP, P.C., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
OPINION AND ORDER
Plaintiffs Valerio Sanders, Janeka Hicks, Kenneth Jennings, and Kevin Rinck all were beneficiaries of periodic annuity payments paid to them as part of structured settlement contracts who transferred their rights to annuity payments in exchange for an upfront lump sum from Defendants JGWPT Holdings, Inc., JGWPT Holdings, LLC, J.G. Wentworth, LLC, PeachHI, LLC, Peach Holdings, Inc., Peachtree Financial Solutions, LLC, or Peachtree Settlement Funding LLC (collectively, the "JGWPT Defendants") or Defendant Settlement Funding, LLC d/b/a Peachtree Settlement Funding ("Settlement Funding, LLC"). The exchange took place by way of "factoring" transactions approved by Illinois courts after Defendants Brian P. Mack and The Mack Law Group, P.C. (collectively, the "Mack Defendants") filed petitions for court orders approving the transactions. Plaintiffs allege that Defendants misled them and other unsuspecting individuals into selling their annuity payments for less than they were worth, despite an anti-assignment clause in their structured settlement contracts, and wrongly obtained orders approving the transactions under the provisions of the Illinois Structured Settlement Protection Act ("SSPA"), 215 Ill. Comp. Stat. § 153/1 et seq. In their Second Amended Complaint, Plaintiffs bring federal claims for violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c), conspiracy to violate RICO, 18 U.S.C. § 1962(d), and state law claims for breach of fiduciary duty, tortious interference with contract, civil conspiracy, joint enterprise, conversion, and unjust enrichment.1 The Mack Defendants [63] and JGWPT Defendants [65] have moved to dismiss all claims in the SAC, and Settlement Funding, LLC moves to dismiss the claims of Plaintiffs Janeka Hicks [67].2 The Court grants in part and denies in part Defendants' motions: First, the Court dismisses Plaintiffs' claims with prejudice to the extent Plaintiffs allege that Illinois court orders approving Plaintiffs' factoring transactions are void and to the extent Plaintiffs claims are based on the propriety of thepetitions' venues and disclosures. The Court also dismisses JGWPT Holdings, Inc., JGWPT Holdings, LLC, and Peachtree Settlement Funding, LLC without prejudice to the extent they are alleged to be liable for harms that occurred prior to their incorporation. Further, the Court dismisses Plaintiffs' RICO claims without prejudice because Plaintiffs have not sufficiently alleged predicate acts to support a § 1962(c) or § 1962(d) claim against any Defendant. Finally, the Court dismisses Plaintiffs' unjust enrichment claims with prejudice because Plaintiffs admit they cannot pursue the theory on which the claims rely, dismisses with prejudice Plaintiffs' joint enterprise claims, which are duplicative of Plaintiffs' conspiracy claims, and dismisses Plaintiffs' conversion claims without prejudice to the extent they allege conversion of fees, costs, and attorney's fees associated with petitions for approval of factoring transactions. Because of the nature of the SAC and in the interests of judicial economy, the Court orders Plaintiffs to file a Third Amended Complaint by September 2, 2016, in a manner consistent with the Court's opinion and order.
Plaintiffs were beneficiaries of structured settlement contracts, which provide periodic payments from annuities to satisfy settlement obligations. Such settlement contracts often include a "Qualified Assignment, Release and Pledge Agreement," which conveys tax benefits to the payee—i.e. with such a qualified assignment agreement, the periodic payments received from the structured settlement are "tax-free" for the beneficiary. The settlement contracts and annuitypayment mechanism also provides tax benefits to the entity or entities on the other side of the payments—the payor of the annuity and the entity directing the payments to the payee receive favorable tax treatment on the payments. Because of these tax benefits, many structured settlement agreements contain anti-assignment clauses that prohibit the beneficiaries from transferring or assigning their payments. Plaintiffs' structured settlement agreements contain such anti-assignment provisions.
Defendants in this putative class action are entities engaged in the business of purchasing structured settlement annuity payments, as well as their attorneys. The purchase of deferred payments for an amount discounted to present cash value is known as "factoring"—it often results in the annuity recipient receiving a lump sum payment from the factoring company for far below the long-term value of the annuity. A factoring company may purchase structured settlement payments, but must pay a high tax penalty to the Internal Revenue Service ("IRS") unless the transfer is approved in advance by a state court in what is known as a "qualified" approval order. See 25 U.S.C. § 5891.
Illinois passed the SSPA to regulate the transfer of structured settlement payments. The SSPA requires that an individual seeking to transfer a portion of his or her settlement submit an application to the appropriate circuit court, which must make express findings that the transfer is in the best interest of the payee, that the payee has been advised in writing to seek independent professional advice, which the payee has either received or waived in writing, and that the transfer does not contravene any applicable statute or order of the court or other governmental authority. See generally 215 Ill. Comp. Stat. §§ 153/15 & 152/25.
Plaintiffs claim that Defendants and their lawyers conspired to defraud Plaintiffs and the Illinois courts by engaging in factoring transactions and obtaining orders approving thetransactions even though Defendants knew the anti-assignment clauses in Plaintiffs' settlement agreements made those payments non-transferable. Plaintiffs allege that the JGWPT Defendants and Settlement Funding, LLC4 directly solicited Plaintiffs or marketed themselves to Plaintiffs via television, radio, print advertising and the internet in order to induce Plaintiffs to sell their structured settlement payments in exchange for a deeply discounted lump sum payment. Plaintiffs allege that Defendants assured Plaintiffs that they would guide Plaintiffs' through the court-approval process, and Mack then filed the necessary legal paperwork for the petition to transfer settlement rights. Finally, they allege that the court orders approving their transactions were illegal and void because of the anti-assignment clauses in their structured settlement contracts.
Sanders was the beneficiary of a structured settlement contract that contained a non-assignment clause. When he became an adult, he began receiving calls on his cell phone from one of the JGWPT entities. Settlement Funding, LLC sent him samples of checks to entice him to sell. Sanders contacted a JGWPT entity in order to enter a factoring transaction for a portion of his annuity. In September 2006, Sanders sold future annuity payments totaling $47,101.00 dollars to Settlement Funding, LLC in exchange for a payment of $36,475.92, less legal and processing fees. In April 2007, Sanders sold future annuity payments totaling $74,500.00 to Settlement Funding, LLC in exchange for a payment of $22,253.00, less $2,200.00 in legal and processing fees. In September 2007, Sanders sold future annuity payments totaling $65,500.00 dollars to Settlement Funding, LLC in exchange for a payment of $19,200.00, less legal and processing fees.
Jennings also was the beneficiary of a structured settlement contract that contained a non-assignment clause. In May 2011, he sold Settlement Funding, LLC future annuity payments totaling $360,000 in exchange for a lump sum of $112,200.00, less processing fees.
Similarly, Rinck was the beneficiary of a structured settlement contract that contained a non-assignment clause, along with another non-assignment clause in the qualified assignment agreement set up to pay the settlement's annuity. Rinck contacted an entity known to him as "J.G. Wentworth" to sell a portion of his structured settlement, and J.G. Wentworth Originations, LLC, a Nevada company, purchased annuity payments from him. Rinck started receiving solicitations5 from a company known to him as "Peachtree," who informed him that he could sell his payments to companies other than J.G. Wentworth Originations, LLC, and that it could assist him. In January 2011, Rinck sold future annuity payments totaling $145,000 to Settlement Funding, LLC in exchange for $90,205.10, minus fees and expenses.
Hicks was also the beneficiary of a structured settlement contract that contained a non-assignment clause. In December 2009, she sold a future annuity payment totaling $31,291.00 to Settlement Funding, LLC for $20,797.78, less processing and legal fees. In February 2010, she sold future annuity payments totaling $41,000.00 in exchange for a lump sum payment of $12,134.76, less legal and processing fees. In October 2010, she sold a future annuity payment totaling $10,000.00 for $2,542.14.
Mack and The Mack Law Group, P.C., drafted and filed the petitions requesting that Illinois courts approve all of Plaintiffs' factoring transactions with Settlement Funding, LLC. Plaintiffs allege that while Mack was working for Settlement Funding, LLC, he represented himself to be Plaintiffs' attorneys as well.
A motion to dismiss under Rule 12(b)(6) challenges the...
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