SC chief justice stops certain judges from hearing cases involving settlement sales

Certain judges can no longer hear court cases in which companies seek to purchase structured settlements from accident victims, South Carolina Supreme Court Chief Justice Donald Beatty has ordered.

The order, issued last week and effective immediately, comes in response to a newly published McClatchy investigation that found these judges, called masters-in-equity and special referees, are routinely approving questionable deals that strip vulnerable South Carolinians of their long-term financial futures.

These individuals have received structured settlements, which are financial arrangements that can pay out monthly for decades rather than in a single lump sum. The settlements are often the result of personal injury or wrongful death lawsuits.

South Carolina sellers, who usually lack legal representation and may have received their settlements after suffering traumatic brain injuries, are selling their future payments to private companies, receiving an average of 25 cents on the dollar, according to the newspaper’s investigation.

The cases typically are heard by masters-in-equity and special referees, who sign off on nearly all deals, including ones that do not appear to be in the sellers’ best interest, the investigation found.

Going forward, structured settlement sales in South Carolina will be heard only by circuit court judges, who generally vetted and approved the original structured settlements.

“This is now a one-lane circuit court-only path for these folks trying to break up these long-term vetted and court-approved settlements,” said state Sen. Luke Rankin, R-Horry, a supporter of reforming the lightly regulated companies. “You’re going back before the same court to unwind the clock or prove to the satisfaction of the court that this is not predatory and/or inequitable to the ultimate holder of that future income stream.”

Rankin, a Myrtle Beach attorney who chairs the Senate Judiciary Committee, said Beatty issued the structured settlement order after he shared McClatchy’s findings with the chief justice and asked him to put it on the State Supreme Court’s radar.

“He obviously expressed concern (about the findings) and so this order is certainly in response to the information that was presented to him,” Rankin said.

A spokeswoman for the South Carolina Judicial Branch did not immediately respond to questions about the chief justice’s order, which vacates all pending orders referring structured settlement sales to masters-in-equity and special referees and requires clerks of court to forward lists of such cases to the chief judges in each circuit.

Masters-in-equity are judges appointed by the governor who rule on non-jury matters — most often foreclosure filings and other real estate-related issues — referred to them by circuit courts. Special referees have the same powers as masters-in-equity, but are appointed by administrative law judges rather than the governor, and are not screened by the Judicial Merit Selection Committee.

Structured Settlement Order by Zak Koeske on Scribd

Beatty’s order is likely just the beginning of a broader overhaul of the structured settlement sale process in South Carolina, Rankin predicted.

The Palmetto State is among a minority of states that has not updated its structured settlement protection law since the late 1990s, but that soon could change.

The General Assembly is looking to implement a legislative fix to protect prospective structured settlement sellers from financial exploitation and Rankin said he believes there is widespread support for such a measure.

The Horry County Republican said he plans to prefile a bill in advance of next year’s legislative session that would close loopholes allowing forum shopping – the practice of filing cases in jurisdictions where judges are more likely to approve sales, even if the seller is not a resident – and permitting individuals with mental health issues to execute sales without outside consultation.

McClatchy’s investigation found more than 100 instances in South Carolina of structured settlement factoring companies getting deals approved by judges in counties where sellers didn’t live and uncovered multiple examples of judges signing off on sales by individuals with traumatic brain injuries who hadn’t received independent consultation about their decision.

Judges who approve such questionable deals will now have to answer for them when seeking reappointment, Rankin said.

He said the Judicial Merit Selection Committee, an influential 10-member body that screens candidates for judicial office on which he serves as vice chairman, will henceforth ask judges about their experience and decision-making process when handling structured settlement sales.