BEAUMONT -- A Texas appeals court has upheld a lower court ruling refusing to dismiss a lawsuit by an incapacitated man who sold his annuity payments to a structured settlement company.
The man’s guardian sued Fairlawn Assets LLC to void the settlement contract, on the grounds of mental incapacity.
The man, identified only as M.H., “has several mental health conditions, has never been able to manage finances or live independently, and has minimal reading skills, poor memory, impaired judgment and is ‘extremely suggestible and easily led,’” according to the May 7 ruling by the Texas Court of Appeals, Ninth District.
In February 2016, M.H. agreed to sell the remaining $216,000 in an annuity to Fairlawn for $93,000. His guardian sued, claiming Fairlawn “purposely misled the presiding judge into believing that M.H. had the mental capacity to knowingly enter into the contract.”
Selling the annuity for a lump-sum payment made M.H. ineligible for Social Security disability and other government need-based benefits, his guardian claimed.
Fairlawn countered that the guardian “could not meet her burden of showing, by clear and specific evidence, a prima facie case for each essential element of her claims,” and sought dismissal of the case. The lower court denied the request and Fairlawn appealed, claiming it is protected from the lawsuit by the Texas Citizens Participation Act (TCPA), which allows litigants to seek dismissal of a legal action that is “based on, relates to or is in response to a party’s exercise of the right of free speech, right to petition or right of association.”
However, the act exempts lawsuits “arising out of an insurance contract.”
Fairlawn claimed the purchase of M.H.’s annuity payments was not an insurance contract. The appeals court disagreed.
“Documents from the Texas Department of Insurance, which were filed with the trial court, indicate that the annuity issuer, Prudential, is a life, health and accident company and is licensed to write accident, health, life and annuity policies,” the appeals court said. “We conclude that the TCPA does not apply.”
Fairlawn Assets, LLC v. Booker, Texas Court of Appeals, 09-19-00306-CV