Pennsylvania Court Scolds Firm Paying Advances on Settlements

By | March 11, 2009

A federal appeals court, ruling in a case linked to the 1985 MOVE bombing in Philadelphia, blasted a Texas company that offers lump-sum advances to plaintiffs who settle lawsuits.

The settlement stemmed from a lawsuit filed against the city for allowing its police officers to drop a bomb on the inner city compound of the anti-establishment group MOVE. Birdie Africa, then 13, was one of only two people to survive the bombing, which killed his mother and 10 others.

Africa and his father, Andino Ward, settled their lawsuit with the city in 1991 for $840,000 plus lifelong, escalating monthly payments that started at $1,000 each. In 2005, Ward agreed to sign over an estimated $334,000 of his future payments in exchange for about $32,000 upfront from a Houston company, Rapid Settlements.

Last week, a federal appeals court nixed the deal because no state court had signed off on it, as required by law in at least 43 states, including Pennsylvania. The laws were designed to prevent abusive practices by such firms, which are known as “factoring” companies, U.S. Circuit Judge Joseph F. Weis Jr. wrote.

Weis said Rapid Settlement has frequently tried to evade the consumer safeguard by sending cases to a Texas arbitration group when state courts reject them. A judge in Montgomery County, where Ward lives, had rejected his deal, according to the ruling.

“We are one of the many courts to face Rapid Settlements’ transparent attempts to use this arbitration scheme to evade the legislatures’ intentions to protect the recipients of structured settlement payments,” Weis wrote. The cases frequently involve the same arbitrator, he said.

Allstate Settlements Corp., a unit of the insurer Allstate Corp., oversaw the monthly payments and filed suit against Rapid Settlements and Ward, arguing that the deal did not follow state law and was therefore invalid. Allstate won a similar case against Rapid Settlements last month in the 2nd U.S. Circuit Court of Appeals. Allstate lawyer Stephen R. Harris declined to comment on the 3rd Circuit’s ruling.

Houston lawyer Stewart A. Feldman, who is listed as the principal owner of Rapid Settlements, called arbitration appropriate, efficient and cost-effective and said Allstate had a business interest in challenging the arbitrator’s decision.

“The fact that the Pennsylvania courts declined to give all deference mandated by the U.S. Supreme Court to the decision of a neutral third party arbitrator should be a matter of great concern to businesses throughout the country,” Feldman said.

Bryan Coleman, the Houston arbitrator who approved the Ward deal, told The Associated Press that he had not known a state court rejected it. He said he had handled only about three Rapid Settlements cases, and does not otherwise know Feldman.

“I think the entire industry of people purchasing structured settlements is an unfortunate thing,” said Coleman, who said he nonetheless is required to review such cases.

Ward, 54, did not return a message left Monday at a number listed for him.

At the time of the 1991 settlement with the city, he was described as an executive for a television production company. He later left the job to care for his son, according to a later interview. Ward said he been searching for his son for years before the bombing, apparently unaware the child was living in the MOVE compound with his mother.

MOVE, whose members took the last name Africa, was a militant back-to-nature group that rejected government authority and repeatedly clashed with police and neighbors. City police, who had an officer killed in a 1978 standoff with the group, were serving warrants on several MOVE members on May 13, 1985, when the group hunkered down in its row house compound. Police bombed a rooftop bunker, sparking a fire that destroyed 61 row houses and killed seven MOVE members and four of their children.

A phone number for Ward’s son, who changed his name from Birdie Africa to Michael Moses Ward in 1986, could not be located Monday.

In a 2005 interview, Michael Ward said he was a trucker, was living in New Jersey and was divorced with two children. He said he had not gotten rich from the settlement, which in part compensated him for serious burns he suffered.

On the Net:

The ruling is available here

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