In re Rapid Settlements, Ltd's

• Citation: 189 Wash.App. 584,359 P.3d 823
• Decision Date: 18 August 2015
• Docket Number: No. 31435–9–III.,31435–9–III.
• Parties: In the Matter of RAPID SETTLEMENTS, LTD 'S Application for Approval of Transfer of Structured Settlement Payment Rights.
• Court: Court of Appeals of Washington

189 Wash.App. 584

359 P.3d 823

In the Matter of RAPID SETTLEMENTS, LTD 'S Application for Approval of Transfer of Structured Settlement Payment Rights.

No. 31435–9–III.

Court of Appeals of Washington, Division 3.

Aug. 18, 2015.

As Amended on Denial of Rehearing Oct. 29, 2015.

George E. Telquist and Nicholas Andrew Ashjian, Telquist Ziobro McMillen PLLC, Richland, WA, E. John Gorman, The Feldman Law Firm, LLP, Houston, TX, for Appellant.

Medora Marisseau, Jacque Elizabeth St. Romain and James Derek Little, Karr Tuttle Campbell, Seattle, WA, for Respondent.

Opinion

SIDDOWAY, C.J.

¶ 1 Symetra Life Insurance Company and Symetra Assigned Benefit Services Company (Symetra) obtained an antisuit temporary restraining order (TRO) enjoining RSL–3B–IL, Ltd. (3B) from collaterally attacking Symetra's final Washington order against 3B in Texas courts. When 3B violated the TRO, Symetra filed a motion for contempt against 3B and its Texas lawyer, John Gorman.

¶ 2 As a result of removal of the Washington action to federal court, its remand, and a continuance, Symetra's motion for contempt was not heard by the Benton County court for four months. By that time, 3B's collateral attack on Symetra's final order had been removed by Symetra to federal district court in Texas.

¶ 3 The superior court found 3B and Mr. Gorman in contempt, ordered Mr. Gorman to pay a one-time forfeiture of $1,000 and ruled that to purge themselves of the contempt charge, 3B and Mr. Gorman must strike all pending motions in the “Harris County, Texas, action” and agree not to take further action in that case as long as they were subject to a Benton County court injunction. Clerk's Papers (CP) at 526. The court also awarded Symetra substantial attorney fees and costs. 3B and Mr. Gorman appeal, arguing that the forfeiture amount and fees and costs awarded are punitive sanctions that could not be imposed in a civil contempt proceeding and, for the first time on appeal, that the purge condition was not possible to perform and was therefore invalid.

¶ 4 We conclude that only part of Symetra's fees and costs were properly awarded. But where 3B and Mr. Gorman committed clear acts of contempt and failed in the trial court to assert and support what they now contend was their inability to perform the purge condition, the relief ordered by the court was largely proper. We reverse the award of loss and costs, remand for further review and recalculation by the court, and otherwise affirm.

FACTS AND PROCEDURAL BACKGROUND

¶ 5 Symetra and 3B are both engaged in businesses involving structured settlements. As explained in a legislative report on what became Washington's Structured Settlement Protection Act (SSPA), chapter 19.205 RCW:

In the settlement of large tort claims, damages are often paid by a defendant to a plaintiff in the form of a structured settlement. In its simplest form, a structured settlement typically involves the initial payment of a lump sum, followed by a series of subsequent smaller payments that are made at specified intervals over a period of years (an annuity).

... Structured settlements are usually paid by an insurance company (the obligor), that obtains a benefit by paying off the obligation in installments over a long period of time, rather than as a single lump sum. The recipient of the structured settlement proceeds (the payee) can benefit as well, since the annuity payments are not subject to federal income tax and the receipt of payments over the long term can provide financial security.

Final Bill Rep. on Engrossed H.B. 1347, at 1, 57th Leg., Reg. Sess. (Wash. 2001). The legislature enacted the SSPA after it became common for injured persons to be offered discounted payments in exchange for their entitlements under a structured settlement, by companies that hoped to profit from the investment. The SSPA reflected the legislature's concern that payees not be permitted to sell annuity rights until a court had reviewed the proposed transfer for adequate disclosure and determined that a transfer was in the best interest of the injured person, taking into account the welfare and support of his or her dependents. See RCW 19.205.030 (requiring court or agency approval).

¶ 6 Symetra is engaged in the business of assuming the obligation to pay a tort liability and then fulfilling it through structured settlement payments. 3B and at least one of its affiliates, Rapid Settlements, Ltd. (RSL)¹ are engaged in the business of buying injured persons' future payment rights at a discount.

¶ 7 In July 2004, a structured settlement payee agreed to sell a future payment due him from Symetra to RSL. As the investor, RSL was required by the SSPA to seek approval of the transfer in superior court. Symetra opposed RSL's application as violating requirements of the SSPA. The court agreed, dismissed RSL's application, and awarded Symetra its reasonable attorney fees and costs under RCW 19.205.040(2)(b).² RSL unsuccessfully appealed the award of fees to the Court of Appeals and unsuccessfully sought review by our Supreme Court. Rapid Settlements, Ltd. v. Symetra Life Ins. Co., 134 Wash.App. 329, 332, 139 P.3d 411 (2006), review denied, 160 Wash.2d 1015, 161 P.3d 1027, (2007). Additional fees and costs were awarded to Symetra at both levels of appeal. In 2008, the King County Superior Court entered an amended judgment of $39,287.04 against RSL reflecting the cumulative fees and costs.

¶ 8 Symetra unsuccessfully attempted to collect the judgment in both Washington and Texas. Efforts to collect in Washington proved unsuccessful because only RSL's affiliates, not RSL, maintain bank accounts in Washington. Symetra's efforts to collect the judgment in Texas were met with RSL's response to post-judgment discovery that it owned no property, even in its home state.

¶ 9 In a then unrelated proceeding, RSL had applied in Benton County in November 2004 for approval of a transfer agreement under which Nicholas Reihs would sell a future payment from Symetra (payable in September 2012) in exchange for a discounted payment. Over Symetra's objection, the court approved the transfer. Although RSL's transfer application listed itself as the transferee, the order approving the transfer stated that the designated beneficiary had been changed to 3B.

¶ 10 Five years after the court order approving transfer of the Reihs payment but before it came due, Symetra moved to modify the order to allow it to apply the amount otherwise payable to 3B to its King County judgment against RSL. Over the objection of 3B, which was allowed to intervene, the superior court found that 3B was the alter ego of RSL and modified the transfer order to recognize a right of setoff in Symetra, 3B appealed. We affirmed the superior court's modified order in February 2012. In re Rapid Settlements, Ltd., 166 Wash.App. at 696, 271 P.3d 925.

¶ 11 3B then revived an action it had commenced in Texas two years earlier (shortly after Symetra asked the Benton County court to authorize setoff) in which it challenged Symetra's ability to collect its judgment through a setoff taking place in Washington. At Symetra's request, the Texas court had stayed the action—“abated” it, in Texas terms—pending disposition of 3B's appeal in Washington.

¶ 12 Following our decision on the appeal, John Craddock, one of Mr. Gorman's law partners, wrote Symetra's lawyers, stating that 3B continued to assert a right to receive the upcoming September 2012 Reihs payment and that two creditors, FinServ Casualty Corporation and A.M.Y. Property & Casualty Corporation, asserted prior secured interests in the payment. On August 9, Mr. Craddock notified Symetra's lawyers that 3B would move to vacate the abatement order in the Texas action and would seek an order requiring Symetra to deposit the September Reihs payment in the Texas court. Symetra responded by moving the Benton County court on August 10 to issue an antisuit TRO in the Reihs transfer action.

¶ 13 On August 14 and 15, 3B filed an amended petition in the Texas action naming FinServ and A.M.Y. as additional plaintiffs. FinServ and A.M.Y. purported to join in 3B's motion to vacate the stay and reinstate the Texas case to the active docket. Mr. Craddock, Mr. Gorman, and their law firm submitted all materials filed with the Texas court as “Counsel for Plaintiffs.” CP at 1492, 1517. Both motions were eventually set for an August 24 hearing date.

¶ 14 On August 17, the Benton County court heard Symetra's motion for a TRO. Based on findings that 3B's Texas action was “an attempt to undermine this Court's 2010 Order in this matter,” and “an attempt to undermine this Court's jurisdiction over the structured settlement payment,” the court issued a TRO enjoining 3B, in relevant part, from taking further action “in Harris County District Court Case No. 2010–41653” and to strike any and all pending motions in that case. CP at 119. The order set a hearing on Symetra's request for a permanent injunction for the afternoon of August 31.

¶ 15 3B's chief executive officer was personally served with the TRO on August 20. The following day, Symetra filed an emergency motion asking the Texas court to cancel the impending Texas hearings based on the TRO's dictate that 3B strike pending motions and take no further action in the Texas case. Despite 3B's having been served with the TRO, it did not strike its motions; instead, Mr. Craddock filed a brief in opposition to Symetra's motion on August 22, on behalf of “[a]ll three plaintiffs.” CP at 170. While the brief argued that “[n]othing can stop FinServ and A.M.Y. from moving forward in this [Texas] Court” because the TRO did not apply to them, the order of abatement had not been lifted and as of August 22, FinServ and A.M.Y. were not parties to the Texas action. CP at 170–71.

¶ 16 A hearing on Symetra's motion was held before the Texas court on August 23. Mr. Gorman appeared on behalf of 3B and argued that—contrary to this court's decision on appeal—the offset order had been obtained without...