The class action lawsuit, Thondukolam v. Corteva, Inc., was filed in the United States District Court for the Northern District of California, case number 3:19-cv-03857-SK.

The proposed class includes more than 100,000 people, including retirees and beneficiaries in the pension plan. Edward Stone Law PC is working with Beasley Allen, Kantor & Kantor, and Sinclair Law Firm, to represent the retirees.

In 2015, the 217-year-old DuPont merged with Dow Chemical to create DowDuPont. In 2019, the new corporate entity split into three new companies Corteva, DuPont and Dow. Corteva is a combination of DuPont and Dow agriculture businesses. Through this scheme, DuPont and Dow shifted all liability for the DuPont U.S. pension, which has covered DuPont employees in America since 1904, to the newly created Corteva. The liability of the DuPont U.S. Pension plan is approximately $19 billion.

Plaintiffs argue that Corteva, which solely focuses on agriscience business, understates its liabilities including income fluctuations due to weather, global trade, and other factors beyond the company’s control. Additionally, the agriscience business involves the manufacture of chemicals already subject to large-scale litigation, the liability for which was also transferred to Corteva. Other corporate spin transactions of DuPont have also come under scrutiny. Plaintiffs also contend that under Corteva the pension plan is underfunded and uses overly optimistic estimates. Now that Corteva, Dow, and DuPont are three separate companies, Corteva can file for bankruptcy and discharge its responsibility to fund the promised pensions, leaving retirees to receive pennies on the dollar. Neither DuPont nor Dow will be affected by such a bankruptcy.

“Because of the Defendants’ actions, the plan, which was already in a downward funding spiral, is now left with an empty shell company as a plan sponsor, linked to a newly formed company that is also saddled with all of the environmental and agricultural liabilities of the historical Dow/DuPont companies. This completely separated the new, stable Dow and DuPont companies from any repercussions should the pension fail. The Defendants have attempted to avoid a legally required $6 billion funding obligation to the plan and thereby breached their fiduciary duties to the Plan as well as violated ERISA’s employee protective purpose. This lawsuit will correct this misconduct by the plan sponsors.” said W. Daniel “Dee” Miles, head of Beasley Allen’s Consumer Fraud Section.

Here at Edward Stone Law, we get phone calls every day from people who feel they have been taken advantage of by factoring companies when selling their structured settlement payments.

One of the most common things we hear is that sellers have been told it is legal to go to another state and sell their payments. The courts in some states, like New York, Maryland, and Pennsylvania look very carefully at transfer petitions. Factoring companies don’t like this because they make a big profit when they buy a seller’s payments.

This practice of a factoring company moving a seller from one state to another in order to buy their structured settlement payments is called “forum shopping.” Factoring companies are telling sellers it is legal to do this.  It is not.  The transfer petition must be brought in a court in the state in which the seller lives or is domiciled.

Every state except New Hampshire has a Structured Settlement Protection Act that sets forth the requirements a factoring company must follow in filing a transfer petition. The factoring company must comply with those laws, and a Federal statute, 26 U.S.C. Section 5891.  Section 5891 imposes an excise tax on a factoring transaction that does not qualify for exemption under the conditions specified in Section 5891(b).

If you are a seller who was victimized by a factoring company that filed a transfer petition in a state that you did not reside in, please contact Edward Stone Law by email at eddie@edwardstonelaw.com or by phone at (203) 504-8425.

Forum shopping in the transfer of structured settlement payment rights transfer is not legal.

26 U.S.C. Section 5891 imposes a 40% excise tax on any structured settlement transfer that does not qualify for one of the exemptions set forth in Section 5891(b).

In order to qualify for one of the exemptions, a transfer petition must be brought in the state that the seller is domiciled in, if that state has a Structured Settlement Protection Act.  The only state that does not have a Structured Settlement Protection Act is New Hampshire.

The Internal Revenue Service has published an “Excise Tax on Structured Settlement Factoring Transactions Audit Technique Guide” that states “Structured settlement factoring companies may sometimes be trying to avoid an unfavorable SSPA or an unfavorable forum in the payee’s home state. For example, if a factoring company seeks to acquire structured settlement payment rights from a payee domiciled in North Carolina (which limits the discounts and fees that factoring companies can charge), the factoring company may seek to have its transaction approved under the SSPA, and in the courts, of another state. If that occurs, the resulting order is not a qualified order for purposes of section 5891(b), and the factoring company is liable for the excise tax. ”

If you are a seller who was victimized by a factoring company that filed a transfer petition in a state that you did not reside in, please contact Edward Stone Law by email at eddie@edwardstonelaw.com or by phone at (203) 504-8425.

A factoring company may only file a transfer petition in the seller’s state of residence or domicile. If a factoring company causes a transfer petition to be filed in a state other than the state where the seller lives, then the factoring company is not complying with applicable State and Federal laws.

Edward Stone Law has been advised of many situations where a factoring company told a seller that it is legal to file a transfer petition in another state. It is not. Every state except New Hampshire has a Structured Settlement Protection Act that sets forth the requirements a factoring company must follow in filing a transfer petition. The factoring company must comply with those laws, and a Federal statute, 26 U.S.C. Section 5891.  Section 5891 imposes an excise tax on a factoring transaction that does not qualify for exemption under the conditions specified in Section 5891(b).

If you have been a victim of forum shopping, contact us now via email at eddie@edwardstonelaw.com or by phone at (203) 504-8425.

#BlackLivesMatter

This is no time to be silent. To be silent is to be complicit.

Edward Stone Law stands in solidarity with the Black community in support of the fight to end racial injustice.

In the words of Martin Luther King, Jr., “Injustice anywhere is a threat to justice everywhere.”

#BlackLivesMatter

In a recent decision issued by the U.S. District Court for the Northern District of Georgia – Atlanta Division, the Court found that an insurance policy taken out on the life of Kelly Douglas Couch and issued by Jackson National Life Insurance Company was void ab initio as “an illegal human life wager.” In a lengthy, 24-page opinion, the Court made a variety of factual findings in reaching its conclusion that the life policy was void.  Relying upon Clements v. Terrell,  167 Ga. 237 (1928), the Court concluded that the “focus of this Court’s inquiry is Mr. Couch’s intent at the time of his procurement of the Policy.” The Court concluded that Jackson National Life Insurance Company had met its burden of proof, and held that based on a “preponderance of the evidence, that Mr. Couch intended to enter into a wagering contract at the time he procured the Policy. As such, the Policy is void ab initio as an unlawful wagering contract under Georgia law.” You can read the Court’s full opinion here.

Trevor Langkamp was the recipient of one of the dreaded notices from the New York Liquidation Bureau in December, 2011 telling him that his annuity benefits from Executive Life Insurance Company of New York would be cut. The liquidation of Executive Life Insurance Company of New York (ELNY) was finalized in April, 2012 and despite the best efforts of Edward Stone Law, reductions in annuity benefits took effect on August 8, 2013.

Langkamp was injured in a fire when he was just 17 months old at a U.S. Army facility, and Langkamp’s parents sued the United States.  In 1984 Langkamp and the United States settled their lawsuit.  The U.S. purchased two Executive Life annuities to provide a lifetime of periodic payments to Langkamp. In 2013, with the ELNY liquidation finalized, Langkamp’s periodic payments were cut by more than 40%. Langkamp filed suit against the U.S. in the Court of Claims in 2015, seeking to hold the United States liable for his shortfall.  He lost at the trial level, with the court dismissing his claims and holding that “the government has not unequivocally agreed to guarantee the monthly and periodic lump-sum payments required under the [settlement] agreement.” On appeal, the U.S. Court of Appeals for the Federal Circuit determined that the trial court had erred in holding that the U.S. had no continuing liability for Langkamp’s periodic payments, and remanded the case to the Court of Claims for proceedings consistent with its opinion.  Looks like Mr. Langkamp will be one of the few Executive Life shortfall victims to recover his shortfall from the United States.

Bethesda, Maryland based Lockheed Martin Corp. transferred $1.9 Billion in pension obligations for 20,000 US retirees to a subsidiary of MetLife, Metropolitan Tower Life Insurance Co. Lockheed Martin has done at least two previous pension risk transfers to insurance companies.  In January 2019, Lockheed Martin transferred $1.8 Billion in pension obligations to Prudential and also transferred $800 million to Athene Annuity & Life Co. in an annuity “buy-in” impacting approximately 9,000 Lockheed retirees.  For more on “buy-in” transfers, click here to see a previous post by Edward Stone Law. Lockheed Martin contributed $5 Billion to its pension plan during 2018, and $1 Billion in 2019.

On December 18, 2019, Voya Financial, Inc. and Resolution Life Group Holdings Ltd. announced the terms of an agreement where Voya sold substantially all of its in-force life business, including its pension risk transfer liabilities for $1.250 Billion, which included cash of $902 Million, and retained surplus notes of $123 Million. Resolution Life will assume responsibility for the administration of all acquired business. This deal is expected to close in late 2020.

What is the difference between a pension risk transfer via an annuity “buy-in” or “buy-out?”

With an annuity “buy-in” a plan sponsor purchases one or more group annuity contracts to cover pension obligations with the plan sponsor remaining responsible for making payment to the plan participants.

With an annuity “buy-out” the defined benefit plan sponsor transfers all of its pension liabilities to an insurance company by purchasing a group annuity contract and terminates its defined benefit plan.  A variation on the annuity “buy-out” is the “lift-out” where the plan sponsor purchases an annuity contract to cover the benefits of certain retirees, but other retirees remain covered by the pension plan and the plan is not terminated.

In August 2019, the LIMRA Secure Retirement Institute reported that “buy-ins” totaled more than $880 million in the second quarter of 2019.  “Buy-outs” for the same period  surpassed $4.7 billion.

Pension risk transfer facts for 2019:

First Quarter 2019:

  • 78 “Buy-out” group annuity contracts purchased by Plan Sponsors
  • “Buy-out” purchases surpassed $4.7 Billion

Second Quarter 2019:

  • 112 “Buy-out” group annuity contracts purchased by Plan Sponsors
  • “Buy-out” purchases were $4.166 Billion
  • “Buy-in” purchases were $880 Million. This represented the 5th consecutive quarter with the sale of at least one “buy-in” contract

Third Quarter 2019:

  • 111 “Buy-out” group annuity contracts purchased by Plan Sponsors
  • “Buy-out” purchases were $7.732 Billion
  • “Buy-in” purchases were $0

We will update this Blog Post as we sort through the facts and figures of 2019, and receive updated figures for the fourth quarter.