Rapid Settlements, Ltd. v. U.S. Fidelity and Guar.

• Decision Date: 04 December 2009
• Docket Number: Civil No. L-06-2124.
• Citation: 672 F.Supp.2d 714
• Parties: RAPID SETTLEMENTS, LTD., Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY and Lonnie L. Hamm, Defendants.
• Court: U.S. District Court — District of Maryland

Page 714

672 F.Supp.2d 714

RAPID SETTLEMENTS, LTD., Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY and Lonnie L. Hamm, Defendants.

Civil No. L-06-2124.

United States District Court, D. Maryland.

December 4, 2009.

Neal Cormac Baroody, Baroody and Otoole, Baltimore, MD, for Plaintiff.

Joseph Harrison Young, Hogan and Hartson LLP, Neal Cormac Baroody, Baroody and Otoole, Baltimore, MD, for Defendants.

MEMORANDUM

BENSON EVERETT LEGG, Chief Judge.

This is a declaratory judgment request in a statutory interpleader action. The parties seek a determination of to whom a series of workers' compensation payments Lonnie Hamm purportedly transferred to Rapid Settlements, Ltd. under an Order issued by a Louisiana court should rightfully be paid. Specifically, United States Fidelity and Guaranty Company ("USF & G") filed a cross-claim against Rapid Settlements, Ltd. ("Rapid") and filed a third-party complaint against RSL-3B-1L ("RSL") seeking a declaratory judgment that both the Louisiana Order and the transfer agreement between Hamm and Rapid contravene the Maine Workers' Compensation Act, that USF & G is not bound by the Louisiana Order, and that neither USF & G's nor Fidelity & Guaranty Life Insurance Company's ("F & G Life") rights and obligations are affected by the Louisiana Order. USF & G has moved for summary judgment on its cross-claim and third-party complaint. Rapid and RSL have jointly filed a cross-motion for summary judgment. The motions have been fully briefed, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2008). For the reasons stated herein, the Court will, by separate Order, GRANT USF & G's motion for summary judgment and DENY Rapid and RSL's cross-motion for summary judgment.

I. BACKGROUND

In 1986, Lonnie Hamm suffered a job-related back injury. In 1990, Hamm, his employer and his employer's insurance carrier, USF & G, entered into a settlement agreement resolving Hamm's claims for this injury under the Maine `Workers' Compensation Act. The agreement was approved by the Maine Workers' Compensation Commission and provided Hamm with, inter alia, twenty annual payments of $11,500. To fund the payments, USF & G purchased a single premium annuity from F & G Life. USF & G was named owner of the annuity and Hamm was named payee. Hamm began receiving the annual payments.

On July 20, 2004, Hamm agreed to assign to Rapid six annual payments of $11,500 (totaling $69,000) in exchange for a discounted lump sum of $42,000. In Hamm's state of residence, Louisiana, such exchanges require court approval under the Louisiana Structured Settlement Protection Act. Therefore, on September 14 2004, Rapid filed an "Ex Parte Petition for Transfer of Structure Settlement Rights by Rapid Settlements, LTD" in the state district court located in Caddo Parish, Louisiana. In its petition to the Louisiana court, Rapid stated that "[t]his transfer does not involve the transfer of any workers' compensation payment rights, and it does not contravene any applicable statutes or an order of any court or other governmental authority." Paper No. 65, Ex. 2, p. 2-3.

In an Order dated November 3, 2004 (the "Transfer Order"), the Louisiana court granted Rapid's petition. The Transfer Order instructed, inter alia, F & G Life (the annuity issuer) and USF & G (the structured settlement obligor and annuity owner) to "deliver and make payable" to RSL, Rapid's assignee, six annual payments of $11,500 each for the calendar years 2005-2010. The Transfer Order also instructed F & G Life and USF & G to make RSL the designated beneficiary under the annuity. In addition to stating that it did not contravene any applicable law, the Transfer Order also declared that "no person or entity other than Rapid or Transferee shall have the authority, upon written notification to the Annuity Owner, Structured Settlement Obligor, and Annuity Issuer to change the beneficiary for the Assigned Payments." Paper No. 65, Ex. 4, p. 4.

On November 9, 2004, Rapid sent F & G Life and USF & G notice of the transfer. All parties agree, however, that Rapid sent USF & G's notice to the wrong address. USF & G alleges that it did not learn of the ex parte proceeding or the Transfer Order until July 19, 2005. In response to learning of the transfer, USF & G sent F & G Life a letter on May 12, 2006, warning that if F & G Life made payments to Rapid, it would violate its obligations to USF & G as owner of the annuity. Additionally, USF & G contended that Hamm's payment rights were workers' compensation payment rights that could not be assigned under the Maine Workers' Compensation Act. USF & G also argued that the Transfer Order violated the Louisiana Structured Settlement Protection Act which governed the purported transfer.

On August 15, 2006, F & G Life filed a complaint and motion for interpleader in this Court. On September 6, 2006, this Court ordered Hamm, Rapid, and USF & G to interplead and settle among themselves their rights and claims to the disputed annuity payments.¹ This Court also realigned the parties, designating Rapid as the plaintiff for pleading purposes. The 2006, 2007, and 2008 disputed payments have been paid into the registry of this Court.

Rapid moved to dismiss F & G Life's complaint for interpleader on October 18, 2006. On October 20, 2006, USF & G answered the interpleader complaint, cross-claimed against Hamm and Rapid, and served a third-party complaint against RSL. Rapid moved to dismiss USF & G's cross-claim on November 20, 2006. RSL moved to dismiss USF & G's third-party complaint on December 1, 2006. By Memorandum and Order dated September 13, 2007, Rapid's and RSL's motions to dismiss were denied.

On May 8, 2009, USF & G moved for summary judgment on its cross-claim against Rapid and its third-party complaint against RSL. On that same day, Rapid and RSL together filed a cross-motion for summary judgment. These motions for summary judgment are now pending before this Court.²

II. STANDARD OF REVIEW

Both parties have moved for summary judgment. A court may grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir.1987) (recognizing that trial judges have "an affirmative obligation" to prevent factually unsupported claims and defenses from proceeding to trial). Nevertheless, in determining whether there is a genuine issue of material fact, the Court views the facts, and all reasonable inferences to be drawn from them, in the light most favorable to the non-moving party. Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir.1987).

"When both parties file motions for summary judgment ... [a] court applies the same standard of review." McCready v. Standard Ins. Co., 417 F.Supp.2d 684, 695 (D.Md.2006) (citing Taft Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991)). Furthermore, "each motion [will be considered by the court] separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir.2003). In considering each motion individually, the court will view the facts and draw all reasonable inferences in the light most favorable to the party opposing that motion. Id.

III. ANALYSIS

Statutory interpleader under 28 U.S.C. § 1335 involves a two step process. Relevant here is the second step, the determination of the respective rights of the claimants to the funds at stake.³ NYLife Distrib., Inc. v. Adherence Group, Inc., 72 F.3d 371, 375 (3d Cir.1995). This stage may be resolved by summary judgment if there is no genuine issue of material fact. Rhoades v. Casey, 196 F.3d 592, 600 (5th Cir.1999). USF & G requested a declaratory judgment to determine the disposition of payments purportedly transferred to Rapid by the Louisiana court Transfer Order. USF & G moved for summary judgment and Rapid and RSL filed a cross-motion for summary judgment.

The Declaratory Judgment Act, 28 U.S.C. § 2201, gives federal district courts the authority in any "case of actual controversy within its jurisdiction," to "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." Id. District courts have discretion to grant relief "(1) when the jurisdiction will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Aetna Casualty & Surety Co. v. Quarles, 92 F.2d 321, 325 (4th Cir.1937) (internal citation and quotation marks omitted). Declaratory judgment is appropriate in this case to resolve the controversy between the parties, namely, to whom must the annuity payments in question be remitted.

A. Rapid and RSL's Corrected Motion for Summary Judgment

Rapid and RSL contend in their Corrected Memoranda,⁴ Paper Nos. 71 and 72 that they are entitled to summary judgment because Rapid is "the only interested party which has a legitimate claim to the funds paid into the registry of the court." Paper No. 71, p. 5, ¶ 14. They specifically argue that F & G Life has paid over the annuity payments into the registry and has no further interest, that Hamm sold his rights to the payments to Rapid and the Court entered a default judgment against Hamm, both terminating his interest in the funds, and that USF & G has represented to the Court that it has no interest in receiving the funds. Rapid and RSL also point out that Hamm has been paid in full for the payments Rapid purchased from him and that Rapid stands to lose...