Laws, Acts, and Legislation

SENATORS Blessing, Robert Gardner, Goodman, Fingerhut, DiDonato, Mallory

A BILL

To amend sections 1309.109 and 3770.07 and to enact sections 3770.10 to 3770.16 of the Revised Code to permit the transfer of a lottery prize award upon the prior approval of a court, to establish procedures for application for such approval, and to require each transferee to obtain a certificate of registration from the Director of Commerce.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 1309.109 and 3770.07 be amended and sections 3770.10, 3770.11, 3770.12, 3770.13, 3770.14, 3770.15, and 3770.16 of the Revised Code be enacted to read as follows:

Sec. 1309.109. (A) Except as otherwise provided in divisions (C) and (D) of this section, this chapter applies to:

(1) A transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;

(2) An agricultural lien;

(3) A sale of accounts, chattel paper, payment intangibles, or promissory notes;

(4) A consignment;

(5) A security interest arising under section 1302.42, 1302.49, division (C) of section 1302.85, or division (E) of section 1310.54 of the Revised Code, as provided in section 1309.110 of the Revised Code; and

(6) A security interest arising under section 1304.20 or 1305.18 of the Revised Code.

(B) The application of this chapter to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this chapter does not apply.

(C) This chapter does not apply to the extent that:

(1) A statute, regulation, or treaty of the United States preempts this chapter; or

(2) The rights of a transferee beneficiary or nominated person under a letter of credit are independent and superior under section 1305.13 of the Revised Code.

(D) This chapter does not apply to:

(1) A landlord's lien, other than an agricultural lien;

(2)(a) A lien, not enumerated in division (D)(2) of this section and other than an agricultural lien, given by statute or other rule of law for services or materials, including any lien created under any provision of Chapter 926., sections 1311.55 to 1311.57, sections 1311.71 to 1311.80, section 1701.66, or Chapter 4585. of the Revised Code;

(b) Notwithstanding division (D)(2)(a) of this section, section 1309.333 of the Revised Code applies with respect to priority of the lien.

(3) An assignment of a claim for wages, salary, or other compensation of an employee;

(4) A sale of accounts, chattel paper, payment intangibles, or promissory notes as part of a sale of the business out of which they arose;

(5) An assignment of accounts, chattel paper, payment intangibles, or promissory notes that is for the purpose of collection only;

(6) An assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract;

(7) An assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness;

(8) A transfer of an interest in or an assignment of a claim under a policy of insurance, other than an assignment by or to a health-care provider of a health-care-insurance receivable and any subsequent assignment of the right to payment, but sections 1309.315 and 1309.322 of the Revised Code apply with respect to proceeds and priorities in proceeds;

(9) An assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral;

(10) A right of recoupment or set-off, but:

(a) Section 1309.340 of the Revised Code applies with respect to the effectiveness of rights of recoupment or set-off against deposit accounts; and

(b) Section 1309.404 of the Revised Code applies with respect to defenses or claims of an account debtor.

(11) The creation or transfer of an interest in or lien on real property, including a lease or rents under a lease, except to the extent that provision is made for:

(a) Liens on real property in sections 1309.203 and 1309.308 of the Revised Code;

(b) Fixtures in section 1309.334 of the Revised Code;

(c) Fixture filings in sections 1309.501, 1309.502, 1309.512, 1309.516, and 1309.519 of the Revised Code; and

(d) Security agreements covering personal and real property in section 1309.604 of the Revised Code.

(12) An assignment of a claim arising in tort, other than a commercial tort claim, but sections 1309.315 and 1309.322 of the Revised Code apply with respect to proceeds and priorities in proceeds;

(13) An assignment of a deposit account in a consumer transaction, but sections 1309.315 and 1309.322 of the Revised Code apply with respect to proceeds and priorities in proceeds; or

(14) A transfer by a government, state, or governmental unit.

(E) The granting of a security interest in all or any part of a lottery prize award by a prize winner for consideration is also subject to sections 3770.10 to 3770.16 of the Revised Code.

Sec. 3770.07. (A)(1) Lottery prize awards shall be claimed by the holder of the winning lottery ticket, or by the executor or administrator, or the trustee of a trust, of the estate of a deceased holder of a winning ticket, in a manner to be determined by the state lottery commission, within one hundred eighty days after the date on which such prize award was announced if the lottery game is an on-line game, and within one hundred eighty days after the close of the game if the lottery game is an instant game. Except as otherwise provided in division (B) of this section, if no valid claim to the prize award is made within the prescribed period, the prize money or the cost of goods and services awarded as prizes, or if such goods or services are resold by the commission, the proceeds from such sale, shall be returned to the state lottery fund and distributed in accordance with section 3770.06 of the Revised Code.

(2) If a person entitled to a prize award is under eighteen years of age, or is under some other legal disability, and the prize money or the cost of goods or services awarded as a prize exceeds one thousand dollars, the director shall order that payment be made to the order of the legal guardian of such winning ticket holder. If the amount of the prize money or the cost of goods or services awarded as a prize is one thousand dollars or less, the director may order that payment be made to the order of the adult member, if any, of such winning ticket holder's family legally responsible for the care of such winning person.

(3) No right of any person to a prize award shall be the subject of a security interest or used as collateral, except as provided in sections 3770.10 to 3770.14 of the Revised Code.

(4) No right of any person to a prize award shall be assignable, or subject to garnishment, attachment, execution, withholding, or deduction, except as follows: as provided in sections 3119.80, 3119.81, 3121.02, 3121.03, and 3123.06 of the Revised Code; when the payment is to be made to the executor or administrator or the trustee of a trust of the estate of a winning ticket holder; when the award of a prize is disputed, any person may be awarded a prize award to which another has claimed title, pursuant to the order of a court of competent jurisdiction; or when the director is to make a payment pursuant to section 3770.071 of the Revised Code; or as provided in sections 3770.10 to 3770.14 of the Revised Code.

The commission shall adopt rules pursuant to section 3770.03 of the Revised Code concerning the payment of prize awards upon the death of a prize winner. Upon the death of a prize winner, the remainder of the prize winner's prize award, to the extent it is not subject to a transfer agreement under sections 3770.10 to 3770.14 of the Revised Code, may be paid to the executor, administrator, or trustee in the form of a discounted lump sum cash settlement.

(5) No lottery prize award shall be awarded to or for any officer or employee of the state lottery commission, any officer or employee of the auditor of state actively coordinating and certifying commission drawings, or any blood relative or spouse of such officer or employee of the commission or auditor of state living as a member of such officer's or employee's household, nor shall any such employee, blood relative, or spouse attempt to claim a lottery prize award.

(6) The director may prohibit vendors to the commission and their employees from being awarded a lottery prize award.

(7) Upon the payment of prize awards pursuant to this section the director and the commission are discharged from all further liability therefor.

(B) The commission may adopt rules governing the disbursement of unclaimed prize awards as all or part of the prize award in a lottery and may, pursuant to those rules, conduct the lottery and disburse any such unclaimed prize awards. Any lottery in which all or any part of the prize award is paid from unclaimed prize awards shall be conducted in accordance with all of the other requirements of this chapter, including, but not limited to, the time and proof requirements for claiming awards and the disposition of unclaimed prize awards when the prescribed period for claiming the award has passed. A prize award or any part of a prize award that is paid from an unclaimed prize award shall not be reapplied toward the satisfaction of the requirement of division (A) of section 3770.06 of the Revised Code that at least fifty per cent of the total revenues from ticket sales be disbursed for monetary prize awards, if such unclaimed prize award was previously applied toward the satisfaction of that requirement. On or before the last day of January and July each year, the commission shall report to the general assembly the gross sales and net profits the commission obtained from the unclaimed prize awards in lotteries conducted pursuant to this division during the preceding two calendar quarters, including the amount of money produced by the games funded by the unclaimed prize awards and the total revenue accruing to the state from the prize award lotteries conducted pursuant to this division.

There is hereby established in the state treasury the unclaimed lottery prizes fund, to which all unclaimed prize awards shall be transferred. Any interest ~~which~~ that accrues on the amounts in the fund shall become a part of the fund and shall be subject to any rules adopted by the commission governing the disbursement of unclaimed prize awards.

Sec. 3770.10. As used in sections 3770.10 to 3770.16 of the Revised Code:

(A) "Court of competent jurisdiction" means the court of common pleas of Franklin county, the court of common pleas of the county in which the prize winner resides, or a federal court having jurisdiction over the lottery prize award.

(B) "Discounted present value" means the present value of the future payments of a lottery prize award that is determined by discounting those payments to the present, using the most recently published applicable federal rate for determining the present value of an annuity as issued by the United States internal revenue service and assuming daily compounding.

(C) "Independent professional advice" means the advice of an attorney, a certified public accountant, an actuary, or any other licensed professional adviser if all of the following apply:

(1) The prize winner has engaged the services of the licensed professional adviser to render advice concerning the legal and other implications of a transfer of the lottery prize award.

(2) The licensed professional adviser is not affiliated in any manner with or compensated in any manner by the transferee of the lottery prize award.

(3) The compensation of the licensed professional adviser is not affected by whether or not a transfer of a lottery prize award occurs.

(D) "Prize winner" means any person that holds the right to receive all or any part of a lottery prize award.

(E) "Transfer" means a grant of a security interest in, or a sale, assignment, pledge, hypothecation, or any other form of alienation or encumbrance of, all or any part of a lottery prize award by a prize winner for consideration.

(F) "Transfer agreement" means the agreement that provides for the transfer of all or any part of a lottery prize award from a prize winner to a transferee.

(G) "Transferee" means a party acquiring or proposing to acquire all or any part of a lottery prize award through a transfer.

Sec. 3770.11. Prior to the date on which a prize winner becomes obligated under a transfer agreement, the transferee shall provide to the prize winner a disclosure statement, in boldface type of the minimum size of fourteen points, setting forth all of the following:

(A) The amounts and due dates of the lottery prize award payments that would be transferred under the transfer agreement;

(B) The aggregate amount of the lottery prize award payments described in division (A) of this section;

(C) The discounted present value of the lottery prize award payments described in division (A) of this section, calculated as of the date the disclosure statement is provided to the prize winner, and the amount of the applicable federal rate used in determining the discounted present value;

(D) The gross amount payable to the prize winner in exchange for or as consideration for the transfer of the lottery prize award payments described in division (A) of this section;

(E) An itemized listing of all brokers' commissions, service charges, application fees, processing fees, closing costs, filing fees, administrative fees, legal fees, notary fees, and other commissions, fees, costs, expenses, and charges payable by the prize winner or deductible from the gross amount otherwise payable to the prize winner as described in division (D) of this section;

(F) The net amount payable to the prize winner after deduction from the gross amount payable to the prize winner as described in division (D) of this section of all commissions, fees, costs, expenses, and charges described in division (E) of this section;

(G) The quotient, expressed as a percentage, obtained by dividing the net amount payable to the prize winner as described in division (F) of this section by the discounted present value of the payments described in division (C) of this section.

Sec. 3770.12. A court of competent jurisdiction may approve a transfer of a lottery prize award only in a final order that is based on the express findings of the court, and the express findings shall include all of the following:

(A) The transferee has provided to the prize winner a disclosure statement that complies with section 3770.11 of the Revised Code, and the prize winner has confirmed the prize winner's receipt of the disclosure statement, as evidenced by the prize winner's notarized signature on a copy of the disclosure statement.

(B) The prize winner has established that the transfer is fair and reasonable and in the best interests of the prize winner.

(C) The prize winner has received independent professional advice regarding the legal and other implications of the transfer.

(D) The transferee has given written notice of the transferee's name, address, and taxpayer identification number to the state lottery commission and has filed a copy of that notice with the court in which the application for approval of the transfer was filed.

(E) The transferee holds a valid certificate of registration issued under section 3770.15 of the Revised Code.

(F) The transfer complies with all applicable requirements of the Revised Code and does not contravene any applicable law.

(G) The transfer does not include or cover the amounts of the lottery prize award that are required to be withheld or deducted pursuant to section 3119.80, 3119.81, 3121.02, 3121.03, 3123.06, 3770.071, or 3770.072 of the Revised Code.

(H) Any amounts described in division (G) of this section that are required to be withheld or deducted, as of the date of the court order, will be offset by the commission first against remaining payments due the prize winner and then against payments due the transferee.

Sec. 3770.13. (A) A person shall file an application under sections 3770.10 to 3770.14 of the Revised Code for the approval in advance of a transfer of a lottery prize award in a court of competent jurisdiction.

(B) The following procedures shall apply to an application for the approval in advance by a court of a transfer of a lottery prize award under division (A) of this section:

(1) Upon the filing of the application, the court shall set a date and time for a hearing on the application and shall notify the transferee of the date, time, and place of the hearing.

(2) Not less than fourteen days prior to the date set by the court for the hearing on an application filed pursuant to this section, the transferee shall file with the court and shall serve on the court and on the state lottery commission, in the manner prescribed in the Rules of Civil Procedure for the service of process, a notice of the proposed transfer and the application for its approval in advance. The notice shall include all of the following:

(a) A copy of the application;

(b) A copy of the transfer agreement;

(c) A copy of the disclosure statement provided by the transferee pursuant to section 3770.11 of the Revised Code and signed by the prize winner pursuant to division (A) of section 3770.12 of the Revised Code;

(d) Notification of the date, time, and place of the hearing on the application.

(3) The commission shall not be required to appear in or be named as a party to a hearing on the application, but may intervene as of right in the proceeding.

(4) At the conclusion of the hearing on an application under this section, the court may grant or deny the approval of the transfer. The court shall enter its order accordingly. If the court grants the approval of the transfer, it shall include in its order all of the express findings specified in section 3770.12 of the Revised Code. If the court denies the approval of the transfer, it shall include in its order the reasons for the denial.

(5) An order of the court made under division (B)(4) of this section is a final and appealable order.

Sec. 3770.14. (A) Upon receipt of a court order issued under section 3770.12 of the Revised Code, the transferee shall provide a certified copy of the court order to the director of the state lottery commission. Not later than ten days after receipt of the certified copy of the court order, the director shall acknowledge to the transferee in writing the commission's intent to comply with the court order in making future payments.

(B) The director shall make payments of the lottery prize award in accordance with the terms specified in the certified copy of the court order. The director may charge a processing fee, in an amount determined by the commission by rule pursuant to section 3770.03 of the Revised Code, to cover any direct or indirect costs associated with making the prize award payments in accordance with the terms specified in the certified copy of the court order.

(C) Upon payment of the lottery prize award pursuant to this section, the director and the commission are discharged from all further liability therefor.

Sec. 3770.15. (A) Before a transferee may enter into a transfer agreement with a prize winner for the transfer of all or any part of a lottery prize award, the transferee shall submit an application for a certificate of registration, along with a registration fee of five hundred dollars, to the director of commerce. The application shall be on a form prescribed by the director and shall set forth all of the following:

(1) The name and business address of the transferee and any of the following that applies:

(a) If the transferee is a general partnership, the names and residence addresses of all of the partners;

(b) If the transferee is a limited partnership that existed prior to July 1, 1994, and that has not registered with the secretary of state pursuant to Chapter 1782. of the Revised Code, the name of the Ohio county in which its certificate of limited partnership or application for registration as a foreign limited partnership is filed;

(c) If the transferee is a limited partnership to which division (A)(1)(b) of this section does not apply, or is a corporation, professional association, limited liability company, or other entity, the form of the entity and the state under the laws of which it was formed.

(2) The general nature of the business conducted by the transferee;

(3) The length of time the transferee has conducted that business;

(4) The signature of the transferee or of an authorized representative of the transferee.

(B) Upon compliance with division (A) of this section, the director shall issue a certificate of registration to the transferee. Each certificate shall remain in force for two years from the date of issuance. After that time, a renewal certificate may be issued upon compliance with division (A) of this section.

(C) Fees collected under this section shall be paid into the state treasury to the credit of the division of administration fund created under section 121.08 of the Revised Code.

Sec. 3770.16. The transfer of all or any part of a lottery prize award under sections 3770.10 to 3770.14 of the Revised Code is also subject to the applicable provisions of Chapter 1309. of the Revised Code.

Section 2. That existing sections 1309.109 and 3770.07 of the Revised Code are hereby repealed.