Symetra Life Ins. Co. v. Rapid Settlements, Ltd.
| Decision Date | 23 December 2014 |
| Docket Number | No. 13–20412.,13–20412. |
| Citation | 775 F.3d 242 |
| Parties | SYMETRA LIFE INSURANCE COMPANY; Symetra Assigned Benefits Service Company, Plaintiffs–Appellants Cross–Appellees v. RAPID SETTLEMENTS, LIMITED, Defendant–Appellee Cross–Appellant. Rapid Settlements, Limited, Plaintiff–Appellee Cross–Appellant v. Symetra Life Insurance Company; Symetra Assigned Benefits Service Company, Defendants–Appellants Cross–Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
775 F.3d 242
SYMETRA LIFE INSURANCE COMPANY; Symetra Assigned Benefits Service Company, Plaintiffs–Appellants Cross–Appellees
v.
RAPID SETTLEMENTS, LIMITED, Defendant–Appellee Cross–Appellant.
Rapid Settlements, Limited, Plaintiff–Appellee Cross–Appellant
v.
Symetra Life Insurance Company; Symetra Assigned Benefits Service Company, Defendants–Appellants Cross–Appellees.
No. 13–20412.
United States Court of Appeals, Fifth Circuit.
Dec. 23, 2014.
Byron Kevin Henry, Esq., Gregory William Carboy, Cowles & Thompson, P.C., Dallas, TX, for Plaintiffs–Appellants Cross–Appellees.
John Robert Craddock, Stewart A. Feldman, Feldman Law Firm, L.L.P., Houston, TX, Susan Hatcher Knight, Cypress, TX, for Defendant–Appellee Cross–Appellant.
Appeals from the United States District Court for the Southern District of Texas.
Before STEWART, Chief Judge, and JONES and HIGGINSON, Circuit Judges.
Opinion
EDITH H. JONES, Circuit Judge:
After nine years of litigation and a prior appeal to this court, three house-keeping items are presented in this appeal: attorneys' fees, damages, and the scope of injunctive relief. Appellants Symetra Life Insurance and Symetra Assigned Benefits Service (collectively “Symetra”) appeal the district court's refusal to award attorneys' fees under the Texas and Washington State Structured Settlement Protection Acts (“SSPAs”).1 Rapid Settlements (“Rapid”) cross appeals the district court's award of attorneys' fees as damages for tortious interference and the district court's permanent injunction, arguing that the injunction relies on an erroneous interpretation of the SSPAs.
Regrettably, in view of the interminable proceedings thus far, we must REVERSE and REMAND the district court's denial of statutory attorneys' fees, but we AFFIRM the district court's award of damages and permanent injunctive relief.
BACKGROUND
Symetra and Rapid are participants in the market for structured settlement payments. Structured settlement payments are the result of tort lawsuits. To reduce the cost of settling claims, a tort defendant negotiates to pay the victims a large sum in installments over the victim's lifetime. The tort defendant then assigns the obligation to pay the installments to a company like Symetra Assigned Benefits Service. Following the assignment, Symetra Assigned makes all future payments according to the settlement's terms. To fund the payments, Symetra Assigned buys annuities from Symetra Life Insurance.
A tort victim (called an “annuitant”)2 is not always satisfied with this arrangement—often he would prefer a large one-time payment in lieu of the smaller payments over time. As a result of the gap between the defendant's and victim's preferences, companies like Rapid (called “factors” in the industry) offer to pay the annuitant a lump sum now in exchange for the right to collect the annuitant's future payments. The factor's offer is usually much smaller than the discounted present value of the future payments, but an annuitant may accept the offer anyway, either because he does not understand the transaction or he needs the money. The factor profits by purchasing the future payments for much less than their worth.
“[T]o protect litigants ... from transferring their rights to future periodic payments ... for a lump sum that is inadequate[,]” many states enacted SSPAs. RSL Funding, LLC v. Aegon Structured Settlements, Inc., 384 S.W.3d 405, 408 (Tex.App.2012). Under the Acts, anyone trying to acquire structured settlement payment rights must disclose the amounts
of future payments to be transferred, the discounted present value of those payments, the gross amount to be paid to the payee, the expenses to be deducted from the gross amount, and the net amount the payee is to receive. Tex. Civ. Prac. & Rem.Code § 141.003(1) -(6) ; Wash. Rev.Code § 19.205.020(1) -(6) ; RSL Funding, 384 S.W.3d at 408. Even then, a transfer is effective only if a state court finds that the “transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.” Tex. Civ. Prac. & Rem.Code § 141.004(1) ; Wash. Rev.Code § 19.205.030(1). If a factor fails to comply with these provisions, it is liable for any costs, including attorneys' fees, “arising as a consequence” of its non-compliance. See Tex. Civ. Prac. & Rem.Code § 141.005(2)(B) ; Wash. Rev.Code § 19.205.040(2)(b).
Rapid's systematic violations of the SSPAs are the root of this lawsuit. In the typical case, Rapid would contract with a Symetra annuitant, offering a lump sum in exchange for future payments. Symetra Life Ins. Co. v. Rapid Settlements, Ltd. (Permanent Injunction Opinion ), 599 F.Supp.2d 809, 824 (S.D.Tex.2008). Rapid would then seek state-court approval of the transfer. Id. at 820–21. Often, Symetra would appear in the state-court proceeding to object to the proposed transfer. E.g., id. The state court usually sustained Symetra's objection, holding that the proposed transfer either violated the SSPAs or was not in the annuitant's best interest.3 Id.
After the state courts rejected the transfers, disputes between Rapid and the annuitants inevitably arose. Sometimes the annuitants tried to cancel the contract, which is explicitly permitted under the SSPAs; other times, the annuitants tried to resell the future payments to another factor; and some refused to repay an advance Rapid made in anticipation of gaining state-court approval of the transfer. Permanent Injunction Opinion, 599 F.Supp.2d at 824–25. Rapid's standard contract required arbitration of “[a]ny dispute or disagreement arising under this Agreement of any nature whatsoever including but not limited to those sounding in constitutional, statutory, or common law theories as to the performance of any obligations, the satisfaction of any rights, and/or the enforceability hereof.”Id. at 824 (internal citation and quotation marks omitted). Whatever the circumstances, Rapid invoked the clause to resolve these disputes.
The ensuing arbitrations were a sham—designed to circumvent the SSPAs' exclusive method for transferring future payments. All the arbitrations took place in Houston, Texas, where Rapid is located, regardless of where the customer resided. Permanent Injunction Opinion, 599 F.Supp.2d at 824–25. The (usually unrepresented) annuitants appeared telephonically, in front of Rapid's hand-picked arbitrators. Id. Under the guise of an arbitration award for a breach of contract, Rapid essentially re-offered the terms of the contract: Rapid would pay the annuitant the same lump sum if the annuitant agreed to an arbitration award that transferred the same future payments. Id. The annuitants agreed. Id. Then Rapid drafted an award declaring “that the proposed
transfer satisfies all applicable statutory requirements.” Id. at 825. With award in hand, Rapid ran to state court to convert the award into a judgment. After confirmation, Rapid informed Symetra that it owns the future payments—despite the state court's initial disapproval of the transfer.
Seeing this scheme for what it was—a naked attempt to circumvent the SSPAs—Symetra sued Rapid for tortious interference and violation of the SSPAs. As relief, Symetra asked for a declaration that Rapid's scheme contravened the SSPAs and that all of Rapid's attempted transfers with Symetra annuitants were ineffective. Symetra also sought damages, attorneys' fees, and an injunction preventing Rapid from transferring future payments via arbitration. The district court preliminarily and then permanently enjoined Rapid from conducting sham arbitrations with Symetra annuitants to circumvent the SSPAs. Symetra Life Ins. Co. v. Rapid Settlements, Ltd. (Preliminary Injunction Opinion ), No. H–05–3167, 2007 WL 114497, at *2 (S.D.Tex. Jan. 10, 2007) ; Permanent Injunction Opinion, 599 F.Supp.2d at 847. Symetra then sought summary judgment for attorneys' fees on its SSPA and tortious interference claims. The district court denied Symetra's request for attorneys' fees under the Acts, but awarded it attorneys' fees incurred in a state court litigation as damages for tortious interference. See Symetra Life Ins. Co. v. Nat'l Ass'n of Settlement Purchasers (Attorneys' Fees Opinion ), No. H–05–3167, 2012 WL 5880799, at *1 (S.D.Tex. Nov. 21, 2012). These appeals followed.
DISCUSSION
The parties present three issues on appeal. Symetra argues that the district court should have awarded it attorneys' fees under the SSPAs. Rapid argues that the court wrongfully awarded Symetra fees incurred in Indiana state court as damages for tortious interference. Rapid also contends that the district court's injunction erroneously limited Rapid's ability to get first refusal rights. We will address each issue in turn.
I. Statutory Attorneys' Fees
We first address whether the SSPAs entitle Symetra to attorneys' fees incurred in this litigation. Because the SSPAs require state court approval of proposed transfers, this case implicates two levels of litigation...
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