Sanders v. JGWPT Holdings, LLC
| Decision Date | 27 September 2017 |
| Docket Number | No. 14 C 9188,14 C 9188 |
| Parties | VALERIO SANDERS, KENNETH JENNINGS AND KEVIN RINCK, Plaintiffs, v. JGWPT HOLDINGS, LLC; J.G. WENTHWORTH LLC; PEACHHI, LLC, PEACH HOLDINGS, INC.; PEACHTREE FINANCIAL SOLUTIONS, LLC; PEACHTREE SETTLEMENT FUNDING LLC; SETTLEMENT FUNDING, LLC D/B/A PEACHTREE SETTLEMENT FUNDING; BRIAN P. MACK; AND THE MACK LAW GROUP, P.C., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
VALERIO SANDERS, KENNETH JENNINGS AND KEVIN RINCK, Plaintiffs,
v.
JGWPT HOLDINGS, LLC; J.G. WENTHWORTH LLC; PEACHHI, LLC,
PEACH HOLDINGS, INC.; PEACHTREE FINANCIAL SOLUTIONS, LLC;
PEACHTREE SETTLEMENT FUNDING LLC; SETTLEMENT FUNDING, LLC D/B/A
PEACHTREE SETTLEMENT FUNDING; BRIAN P. MACK; AND THE MACK LAW GROUP, P.C., Defendants.
No. 14 C 9188
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
September 27, 2017
Judge Sara L. Ellis
OPINION AND ORDER
Plaintiffs Valerio Sanders, Kenneth Jennings, and Kevin Rinck all were beneficiaries of annuity payments paid to them as part of structured settlement contracts, and they sold the rights to those annuity payments to Defendant Settlement Funding, LLC d/b/a Peachtree Settlement Funding ("Settlement Funding") in "factoring" transactions. Plaintiffs believe that Settlement Funding and Defendants JGWPT Holdings, Inc., JGWPT Holdings, LLC, J.G. Wentworth, LLC, PeachHI, LLC, Peach Holdings, Inc., Peachtree Financial Solutions, LLC, and Peachtree Settlement Funding LLC (collectively with Settlement Funding, the "JGWPT Defendants") and Defendants Brian P. Mack and The Mack Law Group, P.C. (collectively, the "Mack Defendants") conspired to cheat Plaintiffs out of money in the factoring transactions. Settlement Funding moves to compel arbitration of Plaintiffs' claims pursuant to arbitration clauses included in the agreements memorializing the factoring transactions [181]. Because the parties do not
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dispute that the arbitration clauses are mandatory and because Plaintiffs fail to establish a defense to arbitration, the Court compels arbitration of Plaintiffs' claims against Settlement Funding. Therefore the Court grants Settlement Funding's motion to compel arbitration and stays Plaintiffs' case against Settlement Funding pending the outcome of the arbitration. Because the Court compels arbitration, the related case of Settlement Funding, LLC v. Sanders, No. 14-6266 (N.D. Ill. filed August 14, 2014), is moot, and the Court dismisses it with prejudice.
Plaintiffs' structured settlement contracts provide periodic payments from annuities to satisfy settlement obligations. Settlement Funding is in the business of purchasing these annuity payments for an amount discounted to present cash value, in a process known as "factoring." Plaintiffs each entered into factoring transactions with Settlement Funding, memorialized in Absolute Assignment and UCC Article 9 Security Agreements (the "Agreements"). Pursuant to the Illinois Structured Settlement Protection Act ("SSPA"), 215 Ill. Comp. Stat. 153/1 et seq., Settlement Funding and Plaintiffs sought court approval orders of each Agreement and factoring transaction. Sanders sold future annuity payments in three Agreements, Jennings sold future annuity payments in two Agreements, and Rinck sold future annuity payments in two Agreements.
Each Agreement contains an arbitration clause that reads:
ARBITRATION Any and all controversies, claims, disputes, rights, interests, suits or causes of action arising out of or relating to this Agreement and the negotiations related thereto, or the breach thereof, shall be settled by binding arbitration administered by the American Arbitration Association. The demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association offices in your state of residence. The arbitration shall be held in the largest city in your state of residence. The arbitration shall be held before a single
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arbitrator selected in accordance with the Commercial Arbitration Rules of the American Arbitration Association in effect at the time that the demand for arbitration is filed. Discovery, specifically including interrogatories, production of documents and depositions shall be at the discretion of the arbitrator and to the extent permitted shall be conducted in accordance with, and governed by the Federal Rules of Civil Procedure.
***
No arbitration arising out of or relating to this Agreement shall include, by consolidation or joinder or in any other manner, an additional person or entity not a party to this Agreement, except by written consent of the parties hereto, containing a specific reference to this Agreement and signed by the entity sought to be joined.
***
The award rendered by the arbitrator shall be final, and judgment entered upon it in accordance with applicable law in any court having jurisdiction thereof. Such arbitrator shall identify the substantially prevailing party and shall include legal fees and expenses for the substantially prevailing party.
This provision does not apply to the extent inconsistent with applicable state law regarding the transfer of structured settlement payments. In such case any disputes between the parties will be governed in accordance with the laws of the domicile state of the payee and the domicile state of the payee is the proper venue to bring any cause of action arising out of a breach of the agreement.
Doc. 169-4, Ex. B at 2 (Sanders Agreement); see also Doc. 169-6, Ex. B at 2 (Sanders Agreement); Doc. 169-8, Ex. B at 2 (Sanders Agreement); Doc. 169-10, Ex. C at 2 (Jennings Agreement); Doc. 169-11 at 12-13 (Jennings Agreement); Doc. 169-13, Ex. A at 2 (Rinck Agreement); Doc. 169-14, Ex. A at 2 (Rinck Agreement).
Believing he had been defrauded out of money in his factoring transactions with Settlement Funding, Sanders filed suit in St. Clair County, Illinois on February 11, 2014 and then
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amended. The JGWPT Defendants removed Sanders' suit to federal district court in the Southern District of Illinois on April 9, 2014.
On May 13, 2014, Settlement Funding filed a motion for extension of time to answer or otherwise plead. Settlement Funding argued that Sanders had included as Defendants entities who had not entered into factoring transactions with Sanders and that Sanders was compromising Settlement Funding's ability to arbitrate disputes arising from Sanders' Agreements. To try to avoid parallel proceedings in arbitration and litigation, Settlement Funding asked the court to defer Settlement Funding's responsive pleading in order to preserve Settlement Funding's right to arbitrate pending the court's ruling on the other JGWPT Defendants' joint motion to dismiss—if the other JGWPT Defendants' motion to dismiss was successful then Settlement Funding would file to compel arbitration; if the other JGWPT Defendants' joint motion to dismiss was unsuccessful, then "Settlement Funding would likely then choose to answer." Doc. 24 at 6. On June 4, 2014, Settlement Funding withdrew its motion for extension of time and filed a motion to compel arbitration. Sanders and new Plaintiffs Jennings, Rinck, Ramon Rosario, and Janeka Hicks then filed a second amended complaint on July 14, 2014.
On August 14, 2014, Settlement Funding filed a petition seeking to arbitrate Sanders, Jennings, and Rinck's claims in the Northern District of Illinois, which was assigned to this Court. In the petition, Settlement Funding alleged that the arbitration clauses in the Agreements required arbitration in Chicago. Settlement Funding then moved on August 15, 2014 to dismiss Sanders, Jennings, and Rinck's claims in the Southern District of Illinois for improper venue based on the arbitration clauses or to transfer Plaintiffs' claims to this District. Settlement Funding also moved to dismiss the claims of Rosario and Hicks, whom Settlement Funding did not believe could arbitrate because they were not bound by similar arbitration clauses. The other
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Defendants also moved to dismiss the second amended complaint. Rosario then voluntarily dismissed his claims on October 8, 2014.
On November 13, 2014, the Southern District of Illinois transferred Sanders, Jennings, Rinck, Rosario, and Hicks' case and second amended complaint to the Northern District of Illinois. The Court then found this case related to the petition for arbitration, and this case was reassigned to the Court. After the Seventh Circuit found that the Rooker-Feldman doctrine did not bar all of Plaintiffs' claims, the Court ruled on the pending motions to dismiss the second amended complaint, dismissing some of Sanders, Jennings, Rinck, and Hicks' claims with prejudice and allowing amendment of other claims.
Sanders, Jennings, and Rinck filed a third amended complaint on September 2, 2016. Hicks did not participate in the third amended complaint and so is no longer a Plaintiff to the suit. Settlement Funding filed a new motion to compel arbitration in response to the third amended complaint, and the other Defendants' filed motions to dismiss, which the Court granted in part and denied in part, ordering the other Defendants to answer the third amended complaint.
Congress passed the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., to codify the federal policy favoring the resolution of disputes through arbitration. Kawasaki Heavy Indus. v. Bombardier Recreational Prods., 660 F.3d 988, 994 (7th Cir. 2011). Section 2 of the FAA states that contractual provisions "to settle by arbitration a controversy thereafter arising out of such contract or transaction" are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Section 3 of the FAA requires courts to stay a proceeding and to compel the arbitration of any matter covered by a valid arbitration agreement. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344, 131 S. Ct.
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1740, 179 L. Ed. 2d 742 (2011). A federal court may compel arbitration where there is (1) a written agreement to arbitrate, (2) a dispute within the scope of the agreement, and (3) a refusal to arbitrate by one of the parties to the agreement. Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005). Agreements mandating arbitration are "valid, irrevocable, and enforceable, save upon such grounds as...
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