Madison - St. Clair Record

Thursday, August 22, 2019

Class action seeks to void court orders transferring structured settlements

By The Madison County Record | Jul 21, 2015


Sangamon County judges broke state law by letting investors exchange current cash for future income from settlements of injury suits, according to Swansea lawyer David Cates.

In a class action complaint at federal court, he seeks to void about 100 Sangamon County orders that transferred assets of structured settlements.

“The law is clear that the courts who granted these qualified orders lacked jurisdiction to do so under Illinois law,” Cates wrote.

An owner of a settlement cannot assign proceeds to others without a court order.

Cates’s client, Kenneth Jennings of Chicago, sold about $666,000 of future income to Washington Square Financial for about $192,000, according to the complaint.

Jennings broke his neck playing football for Simeon High in 1988.

He sued Washington Square and its successor, Imperial Structured Settlements, in St. Clair County chancery court in April.

Jennings seeks compensation for losses as a result of fraudulent transfers, plus punitive damages and attorney fees.

“Hundreds of thousands of dollars’ worth of these purchases were made from individuals who had received deferred payment annuities as a result of having filed or having been the beneficiary of personal injury claims,” Cates wrote for Jennings.

Cates is the son of Fifth District Appellate Court Judge Judy Cates.

Jennings’ suit claims that Imperial induced individuals to sell under fraudulent circumstances.

From 2008 to 2013, Washington Square filed 172 petitions in Sangamon County, quickly dismissing some but obtaining orders in most cases within a week.


Many judges signed the orders.

Jennings' lawsuit further claims that because of their tax free nature, structured settlements contain clauses that prohibit a beneficiary from assigning deferred payments.

Cates wrote that a settlement contract was constructed to provide Jennings $2,250,000 in cash and $8,000 a month, increasing by 3.35 percent each year.

Jennings and the Chicago board of education executed an assignment with Allstate Settlement as assignee and Allstate Life Insurance as annuity issuer, according to the suit. In 2010, Washington Square petitioned the circuit court of Sangamon County for transfer of payment rights.

Cates wrote that lawyer Randy Paswater, who filed the petition, claimed that transfer would not contravene any federal or state statutes.

He wrote that Paswater knew this allegation was false and misleading, yet a judge approved an order allowing Jennings to transfer payments totaling $186,400.27 to Washington Square in exchange for $67,081.67.

Cates wrote that Paswater didn’t tell Jennings the transaction was unlawful.

A second order transferred $185,915.59 in exchange for $49,213.59, and a third order transferred $293,589.86 in exchange for $75,713.48, the suit alleges.

Cates pleads for an injunction to prohibit future transfers.

Imperial removed the action to federal court on July 8, invoking diversity of citizenship as a Florida citizen.

On July 17, Cates moved to remand the action to St. Clair County.

He wrote that federal judges can’t review state court judgments.

“Plaintiff has made only one claim for relief, that the court overturn the transfer orders,” he wrote.

The motion remains pending before District Judge Michael Reagan.

The injury Jennings suffered turned him into a celebrity.

Jesse Jackson visited him in a hospital, Michael Jordan greeted him at a Bulls game, and the White Sox honored him on opening day in 1989.

It also turned him into a plaintiff, claiming coaches shouldn’t have sent him into a game when they knew he had taken pain relievers for days.

His lawyers argued that the pills relaxed his neck muscles, causing the injury.

The online archive of the Chicago Tribune shows he settled the claim in 1995, for $3,950,000 in current value or $14 million in the long run.

Jennings told the Tribune, “It’s not a lot because the expenses involved with taking care of me for the rest of my life are astronomical.

“I’m hoping it will be enough to take care of me.”

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