In Structured Settlements, Plaintiffs Need Their Own Brokers: Mark Wahlstrom, Structured Settlements Expert

The demise of Executive Life Insurance Company of New York (ELNY) and subsequent related litigation provide several lessons, perhaps most importantly that plaintiffs in structured settlement transactions need to have their own brokers. That takeaway and others are discussed in this report by attorney Mark Wahlstrom of Scottsdale, AZ.

Mark Wahlstrom

Mark Wahlstrom

ELNY, a subsidiary of First Executive Corporation, was taken into receivership in the early 1990s and managed by the New York Liquidation Board. It was liquidated rather suddenly two years ago (discussed extensively by Wahlstrom in this earlier report). Most people who had ELNY contracts received 100% of their funding, but a small group (estimates range from 895 to 1,500) found their benefits reduced from 10% to as much as 50%.

The frustrations associated with all of this led to a class action lawsuit, Westrope v. Ringler Associates Inc. (discussed extensively in this previous report). What makes this case important, Wahlstrom points out, is the position taken by the defendants that they were brokers for the settling defendants and owed no fiduciary duty to any plaintiffs. This is significant because, for perhaps the past ten years, brokers have tried to maintain that they can represent both parties to a structured settlement agreement. “What [this case] shows is that, when push comes to shove, the defense brokers rightly work for the defense interests.” Plaintiffs who don’t retain their own experts are at risk.

The other big issue here is Andrew Cuomo’s decision of how and when to liquidate ELNY and what was going on in the New York Liquidation Bureau. An online publication, Inside Sources, carried an unflattering article about the liquidation. Wahlstrom thinks the article is a little “over the top,” but the point is that there is now some outside interest in what went on and what liability there should be for the losses caused to structured settlement shortfalls. Wahlstrom points out that, even after the economic losses in 2008, most structured settlements were unaffected, and beneficiaries have been getting paid.

The problem, Wahlstrom opines, is the secrecy that has so often shrouded the whole structured settlement industry and obscured how the process works. The secrecy and confidentiality here will not be pretty to see. The structured settlement industry needs to get ahead of this and hold honest and open discussions about what happened and how things work. Everyone involved needs to be protected.

Mark Wahlstrom, President of Wahlstrom & Associates, founded of one of the nation's first plaintiff only structured settlement firms in 1983 and is a renowned specialist in settlement planning, structured settlement annuities, structured legal fees, and the administration of large, complex multi-claimant settlements using qualified settlement funds and trusts. He has also become widely known over the last decade for his innovative development of an online broadcast platform, Sequence Media Group, upon which he has produced hundreds of hours of shows for The Legal Broadcast Network, and The Settlement Channel, with the content being of interest to attorneys, paralegals, judges and settlement professionals all over the United States. The Legal Broadcast Network is a featured network of the Sequence Media Group.

Tampa Couple Wins Harassment Lawsuit Against Bank of America for $1Million+

Nelson and Joyce Coniglio of Tampa, Florida were tired of receiving a flood of automated phone calls (over 700) from the Bank of America after they fell behind in the mortgage payments in 2009. They got a lawyer, filed a lawsuit against the Bank, and they recently got a judgment of $1,051,000 against the bank. Their lawyer, Billy Howard, discusses the case.

William Peerce Howard

William Peerce Howard

The award is unprecedented. Howard explains that “every illegal call is worth $1,500.” It may sound too good to be true, but it’s the federal law. A debtor has the right to ask a creditor stop calling. The Coniglios wrote letters asking the bank to stop, but the calls continued.

The judge in this case did what other judges are doing, Howard says, and that is holding banks liable for violating the federal law regarding harassing phone calls. Howard points out that it is also illegal for creditors to make robocalls to cell phones, and each of those calls carries a $500 fine. Even if someonehas given permission originally for such robocalls, the permission may be revoked at any time. “You don’t need to use any magic words to do it.”

The bank’s claim is that the bank was trying to help the Coniglios avoid foreclosure. But Howard says that the best way to have helped his clients would have been to stop the calls.

The bank has several options at this point. They can write collection letters, and it can file a lawsuit to collect the debt. Howard opines that a lot of American consumers don’t really understand that they have rights or how to enforce those rights.

William Peerce Howard is a member of Morgan & Morgan. Mr. Howard was born and raised in Florida. From an early age he has been active in politics, beginning with Bob Graham's campaign for Governor. Upon graduation from law school, Howard opened his own practice, focused on consumer protection law, and obtained a million dollar verdict in a complex civil theft trial. In 2008, Howard obtained a punitive damage jury verdict against a national debt collector, one of the few such awards in the country. . The Legal Broadcast Network is a featured network of the Sequence Media Group.

Class action against structured settlement brokers in the matter of ELNY liquidation moves forward

In a decision dated 12/5/14 in US District of Oregon, in the case of Marie Westrope and Reggie Kelly v Ringler Associates Inc, Paul Hoffman, and DOES 1-100, for the first time in my professional life I saw a court dismiss the arguments of defense brokers regarding no statutory or fiduciary duty of care to plaintiffs and instead determine that, under Oregon law, the defense structured settlement brokers owed plaintiffs a special duty of care under a third party beneficiary theory. 


A full copy of the the decision is available here, or you can search under Case No. 3:14-cv-00604-ST, USDC, Oregon, Portland Division, Magistrate Judge Janice M. Stewart. 

What does this all mean for plaintiffs in the Executive Life of New York litigation, a case which seeks' class status in 26 states and where it is alleged that Ringler Associates brokers sold ELNY contracts using qualified assignments, which exposed plaintiffs to excessive financial risk and which relieved defendants of liability to fund payments in the event of an insolvency, a situation which in fact is occurred in 2013?

What is stunning about this to me is that for the first time in decades we had a major annuity brokerage firm arguing passionately that when they are working on a structured settlement, they are in fact working specifically on behalf of the defendants and "that defendants (Ringler) owed no fiduciary duty to plaintiffs as their broker", a finding the court agreed with factually and which should be a reminder to trial lawyers all over the country that just because a defense broker says he is working for you, when pressed in court they will vehemently deny that they have ANY duty to you or your injured client what so ever.

Instead of fiduciary standards of care, the Court this time found that Oregon law provided a level of care responsibility for the broker to be held to. The annuity, while purchased and funded by the defendants, was an " annuity intended to benefit plaintiffs and the broker signed both applications". ( emphasis added by the court). This status as benefits intended for plaintiffs thus demanded a heightened duty of care from defendants and the exercise reasonable care in the procuring of structured settlement annuities. As such, the negligence claim asserted by the plaintiffs survived under Oregon law due to their status as third party beneficiaries. Again, what this means is that a standard of care was recognized by the court in this decision that prevented the standard industry defense that their client is the defendant and they have no duty to the plaintiff. This is an argument plaintiff experts have been pointing out to trial lawyers for decades as to why they must engage their own experts to protect their clients in a structured settlement negotiation.

Not all the news was bad for the defense, as the court found that Ringler did NOT have a continuing duty to inform plaintiffs over time of ELNY's declining financial condition, as there was no way the contracts could be surrendered or replaced after issuance. However, I do find it interesting that no one raised the issue that a robust secondary market for the sale of ELNY contracts existed for much of the later part of the 1990's and early 2000's based on the fact it was protected income under the supervision of the NYLB at that time. Possibly that will be pled again at a future date, or more likely, the plain language prohibiting surrender and commutation will be sufficient to win this argument every time for defense brokers. 

Also, another clear win was on the statutory issue of whether or not brokers have liability for contracts written on behalf of beneficiaries in states where Executive Life of NY was not approved for sale. The court found clearly that was a violation of statutory law and allowed it to go forward as part of the case and complaint as well. 

I will cover this case again later this week in a video commentary, but suffice it to say that ELNY class action litigation was not killed in motions to dismiss and now will move to a district judge, with objections due Monday, December 22, 2014, and with responses due with in 14 days after that. 

The bottom line here is that the mythology that defense brokers working for defendants will be able to safely hide behind the "no fiduciary duty" argument in perpetuity, has for the first time been exposed. Whether the magistrate judge's ruling and thinking on this carries forward to US District Court and to trial remains to be seen. However, I will state again the key point for trial lawyers, and that is you need to get your own advisor and stop using defense brokers if you want to make sure that if something like this ever occurs again, that they don't immediately dive for cover behind the kind of arguments which were made in this case so far.

Our profession has come a long, long way since the early to mid 1980's when these contracts were sold, but one area we need to further bolster is greater clarity on who actually has a duty to protect the future of the plaintiff as it is abundantly clear that defense broker argue that they have no such duty in cases such as this. 

This commentary was originally posted on The Settlement Channel by Mark Wahlstrom, an affiliated channel of The Legal Broadcast Network.