Forum Shopping
What is forum shopping?
Forum shopping is the practice of finding a ‘factoring friendly’ county with fewer or easier regulations in order to get a factoring transaction approved. Florida’s Sumter County is the textbook case for this practice. It is often referred to as the ‘rubber stamp’ county for factoring transaction deals due to the ease in which these deals are approved.
Part of what makes forum shopping problematic, especially in so-called ‘rubber stamp’ counties, is that best interest procedures for the annuitants are so frequently bypassed.
Here’s a hypothetical example:
John Doe lives in New York State, where regulations pertaining to factoring a structured settlement result in a lengthy, complicated process. Company X convinces John Doe to factor the structured settlement but doesn’t believe that it will be approved, or worse, doesn’t believe the company will profit as much from a deal due to New York’s more stringent pro-annuitant policies, so the company uses a fake Florida address or corporate front (physical address used by the company) to falsify a domiciliation from the New Yorker into Florida. In doing so, the company can write up the terms of the agreement in ways far more beneficial to them than the annuitant, at worst, or get a deal done that would have otherwise been denied in New York. This bypasses New York’s laws. This is full of potential problems, all of which are explained in more detail below.
Why is forum shopping problematic?
There are three schools of thought to this question, and one school doesn’t see forum shopping as a problem at all, in theory; in practice, however, forum shopping is simply more complicated. The three schools of thought are:
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Forum shopping isn’t unethical; it’s just a way for factoring companies to more conveniently liquidate structured settlements and annuities at the behest of the annuitants using counties in states that have gained a reputation for quick, efficient processing times.
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Forum shopping isn’t unethical if it’s to bypass problematic judges, but it is unethical if a company is going to a ‘rubber stamp’ county for their own benefit.
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Problematic judges? Yes. Some judges will refuse to hear cases for factoring at all, and this is a serious issue for this school of thought. If an annuitant has a legitimate need to factor a structured settlement or annuity but isn’t even given the fairness of a hearing, then forum shopping say, to a neighboring county for the purpose of actually bringing a case before a judge, isn’t viewed as true ‘forum shopping’ in the unethical sense since the purpose isn’t to simply get the transaction done in a ‘rubber stamp’ county but to have a case fairly heard to begin with.
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Forum shopping is unethical because it bypasses the regulations in place to determine whether it is in the best interest of the annuitant to sell all or portions of a structured settlement or annuity for whatever purposes they believe are appropriate. An annuitant shouldn’t bypass laws applicable to them and their state of residence simply because it is easy to do so.
The difficulties arise with intent to forum shop. For those who fall into the second school of thought, the intent is based upon the needs of the annuitant, and in this industry then of course this is regarded as acceptable for many since the purpose is to help annuitants, not use them to help one’s bottom line. The problem tends to be with the intent of the factoring company. If the purpose of the forum shop is to line their own pocket books at the expense of the annuitant, especially when done in a predatory way to bypass procedures meant to protect them, then this is an unacceptable behavior.
If you’re an annuitant who believes you’ve been victimized by forum shopping, especially if your case ended up rubber stamped in Sumter County, Florida, feel free to contact us with relevant details. We can refer you to the relevant professionals that may be able to assist you.
What can be done about it?
Forum shopping is a complicated issue with no clear solution, especially for those who fall into the second school of thought. The purpose of the industry is to help the annuitant, and sometimes there are circumstances that arise that prevent this help from taking place. It can be frustrating for brokers and for their clients.
Ultimately, however, there are two solutions to forum shopping available at the present time:
First, that pressure be brought on the so-called ‘rubber stamp’ counties, through lobbying efforts or by citizen interest groups, to reform, in particular, the domiciliation requirements that are so easily bypassed.
Second, to simply not do business with those companies with reputations for forum shopping. If you’re an annuitant, this can be highly problematic since you likely have no idea who is and who isn’t a forum shopper. This is a fair, but keep this in mind: you now know what forum shopping is, armed with this knowledge, you can determine whether or not to allow a company to attempt it. If you’re approached with this tactic, then you can give the final “Yay” or “Nay.” Your voice matters most here, so make good use of it. Your best alternative is to consult your structured settlement broker, this site, and other industry watchdogs with an eye for the who’s who of forum shoppers. The goal of FactoringEthics.com is to provide you with as much comprehensive information as possible, including testimonials and legal filings, to make the best decision for you and your own situation.