On July 6, Judge Matthew P. Sabaugh, Circuit Court Judge for the Sixteenth Judicial Circuit, state of Michigan, entered a well-reasoned opinion and order that denied a third-party factoring company’s attempt to purchase structured settlement payment rights that originated from a Longshore and Harbor Workers’ Compensation Act (LHWCA) settlement. The owner and issuer of the funding annuity, represented by Sandra Jones and Louise Bonner of Faegre Drinker Biddle & Reath, opposed the factoring company’s attempt. This was the first time the issue had been litigated in Michigan state court, although other courts throughout the United States had juggled and decided the issue previously. The latest opinion and order, albeit a state court decision, should assist annuity owners and issuers when enforcing the premise that LHWCA are simply not to be factored—in Michigan and throughout the United States.

Factoring companies seek to purchase structured settlement payment rights from payees for steep discounts. Here, the structured settlement payments unequivocally arose from an injury that occurred while the initial payee, Jeremy Schultheis, was working as a laborer on a dredging operation in Michigan. Schultheis had since died, and his widow was looking to sell the remaining structured settlement payments awarded to Schultheis to a factoring company for a present-day lump sum. The widow was represented by her own counsel and raised that she had little need for periodic payments when a lump sum would better suit her life now that her husband had passed. The widow Schultheis’ position was certainly sympathetic.