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Stevens law Office v. Symetra Assigned Benefits Service Co.

Supreme Court of Vermont

July 7, 2017

Stevens Law Office
Symetra Assigned Benefits Service Company, Symetra Life Insurance Company and Shane Larock

         On Appeal from Superior Court, Lamoille Unit, Civil Division, Thomas Z. Carlson, J.

          Harold B. Stevens of Stevens Law Office, Stowe, for Petitioner-Appellant.

          Symetra Assigned Benefits Service Company and Symetra Life Insurance Company, Pro Ses, Bellevue, Washington, and Shane Larock, Pro Se, Burlington, Respondents-Appellees.

          Reiber, C.J., Skoglund, Robinson, Eaton and Carroll, JJ.

          CARROLL, J.

         ¶ 1. Petitioner Stevens Law Office appeals a trial court decision denying assignment of a future structured settlement payment from a fund administered by Symetra Assigned Benefits Service Company for legal services rendered by petitioner on behalf of beneficiary Shane Larock. We reverse and remand so that the trial court can conduct the best-interest analysis required by statute before determining whether to deny or approve assignment of a structured settlement payment.

         ¶ 2. Shane Larock retained petitioner to represent him in a child in need of care or supervision (CHINS) proceeding which he expected to follow the birth of his daughter in early 2016. As payment, petitioner asked Larock for a $16, 000 nonrefundable retainer which would be paid through assignment of that sum from a $125, 000 structured settlement payment due to Larock in 2022. Under this arrangement, the structured settlement payment issuer, Symetra Assigned Benefits Service Company, would pay petitioner $16, 000 directly when the 2022 periodic payment became due under the original terms of the settlement. Larock agreed to the fee arrangement and the assignment.

         ¶ 3. Petitioner asked the trial court to approve the assignment as required by 9 V.S.A. § 2480dd(a). The trial court held a hearing on the petition and took brief testimony from Larock. Larock expressed an understanding of the purpose of the proposed assignment and described his current circumstances. At the end of the hearing, the trial court asked petitioner to obtain the written opinion of bar counsel regarding the ethics of a nonrefundable retainer. Bar counsel thereafter forwarded recently amended Rule of Professional Conduct 1.5(f), which permits nonrefundable fees earned before provision of any legal services where the client both has notice that the fee is nonrefundable and concerning the scope of the services covered by that fee, and where the fee itself is reasonable. The trial court then issued a written order on October 26, 2016, concluding that it could not find that the fee arrangement was reasonable because, given petitioner's ongoing representation of Larock, such a determination would be speculative.

         ¶ 4. Petitioner filed a motion for reconsideration, which the trial court denied in a written decision on November 10, 2016. The court concluded that petitioner was seeking assignment of Larock's future payment rights as proxy to a collection action for payment and that the Legislature did not intend that transfer of such future payment rights could be used to satisfy creditors. Petitioner now appeals to this Court.

         ¶ 5. On appeal, petitioner argues that the trial court abused its discretion by declining to engage in consideration of whether the fees charged by petitioner were fair and reasonable. Petitioner also argues that the trial court erred when it concluded that the Legislature did not intend transfers of future structured settlement payment rights be used for the payment of debt.

         ¶ 6. Our review is threefold. We will defer to the trial court's factual findings and uphold them unless they are clearly erroneous; we consider the trial court's legal conclusions de novo and will affirm those conclusions if the evidence reasonably supports them. Unifund CCR Partners v. Zimmer, 2016 VT 33, ¶ 10, __Vt.__, 144 A.3d 1045. We review the court's discretionary rulings for abuse of discretion, and such rulings will be upheld unless the court exercised its discretion "for clearly untenable reasons or to a clearly untenable extent." Id. ¶ 15 (quotation omitted).

         ¶ 7. We begin with a brief introduction to structured settlements and the relevant law. Vermont's statute defines a structured settlement as "an arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim." 9 V.S.A. § 2480bb(12). Settlement payments are usually funded by an annuity held by the obligor, the party that is contracted to make the payments. D.W. Hindert & C.H. Ulman, Transfers of Structured Settlement Payment Rights, 44 No. 2 Judges' J. 19, 19 (2005). Juries began to award structured settlements to tort claimants in the middle of the twentieth century, replacing the lump-sum payout model. See A.F. Scales, Against Settlement Factoring? The Market in Tort Claims Has Arrived, 2002 Wis. L. Rev. 859, 863-64 (2002) (citing M&P Stores, Inc. v. Taylor, 326 P.2d 804 (Okla. 1958) as example of early jury award of tort compensation paid in installments rather than in single payment, a model later adopted and expanded in claims on behalf of children born after prenatal Thalidomide exposure). These settlements have been described as a means of ensuring that tort victims do not dissipate settlement proceeds, have some long-term income, and need not rely on public support, while at the same time lessening the financial cost borne by the obligor in a tort claim. See Scales, supra, at 869-74, 882-85.

         ¶ 8. As structured settlements became more prevalent during the late twentieth century, a new industry arose dedicated to trading in future periodic structured settlement payments. In this secondary market, beneficiaries due future payments through a structured settlement- payees-trade some or all of their future-payment rights to a third party in exchange for a discounted presently payable lump sum. Beginning with Illinois in 1997, a perceived need to protect settlement beneficiaries in these transactions, which have come to be called "factoring transactions, " precipitated a wave of state legislation governing this secondary market. Hindert & Ulman, supra, at 20.

         ¶ 9. Transfers of future structured settlement payment rights are governed in Vermont by 9 V.S.A. §§ 2480aa-2480gg, legislation adopted in 2011. See 2011, No. 168 (Adj. Sess.). The purpose ...

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