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RSL Funding, LLC v. Pippins

Court of Appeals of Texas, Fourteenth District

January 30, 2014

RSL FUNDING, LLC, Appellant
v.
CHAVEZE D. PIPPINS, DANIEL P. MORRIS, DONNA M. O'BRIEN, METROPOLITAN LIFE INSURANCE COMPANY, METLIFE INSURANCE COMPANY OF CONNECTICUT & METLIFE INVESTORS USA INSURANCE CO., Appellees

On Appeal from the County Civil Court at Law No. 4 Harris County, Texas Trial Court Cause No. 994875.

Panel consists of Chief Justice Frost and Justices Jamison and McCally (Frost, C.J., dissenting).

OPINION

Martha Hill Jamison Justice

RSL Funding, LLC brings this interlocutory appeal from the trial court's ordering the stay of arbitration proceedings and denying the stay of related trial proceedings. The underlying dispute concerns rights related to certain annuities issued by Metropolitan Life Insurance Company, MetLife Insurance Company of

Connecticut, and MetLife Investors USA Insurance Co. (collectively, the MetLife parties) to Chavese D. Pippins, Daniel P. Morris, and Donna O'Brien (collectively, the Individuals). The Individuals subsequently executed assignment agreements with RSL concerning their rights in the annuities. While the original investment contracts between the MetLife parties and the Individuals did not contain arbitration clauses, the assignment agreements between the Individuals and RSL did contain such clauses. Claims, counter-claims, and cross-claims were pleaded among the parties to the litigation. When RSL attempted to enforce the arbitration clause and stay the trial proceedings, the trial court denied RSL's motion and instead entered an order staying the arbitration. RSL now complains this was error. We affirm.

Background

Each of the Individuals signed annuity contracts with the MetLife parties and subsequently entered contracts to assign their annuity rights to RSL.[1] The assignment agreements between RSL and the Individuals each contained an arbitration clause stating broadly that any disputes under the agreements would be subject to arbitration if one of the parties so demanded. These clauses stated:

Disputes 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 . . . shall be resolved through demand by any interested party to arbitrate the dispute in accordance with the laws of the State of Texas (including the Federal Arbitration Act which shall be controlling) . . . . The parties hereto agree that the issue of arbitrability shall likewise be decided by the arbitrator, and not by any other person. That is, the question of whether a dispute itself is subject to arbitration shall bedecided solely by the arbitrator and not, for example by any court. In so doing the intent of the parties is to divest any and all courts of jurisdiction in disputes involving the parties, except for the confirmation of the award and enforcement thereof.

The agreements also contained provisions permitting RSL to assign the right to purchase the annuities to a "designated assignee." Each of the Individuals thereafter signed Bills of Sale conveying their annuity rights to RSL Special-IV, Ltd., which was apparently RSL's designated assignee.[2]

When the Metlife parties balked at recognizing RSL or RSL Special-IV's rights as payees, RSL filed a lawsuit on June 20, 2011, in a Harris County court-at-law, naming the MetLife parties and the Individuals as defendants. The procedural history of this relatively simple case is rather lengthy and complex. Because that history is integral to our analysis, we will recount it in some detail.[3]

In its original petition, RSL alleged it received assignments from each of the Individuals of their respective annuity rights, but the MetLife parties refused to redirect the payments to RSL or its assignee. RSL sought a declaratory judgment that the assignments from the Individuals were enforceable and binding on all parties and alleged the MetLife parties breached the respective annuity contracts by not paying the amounts due to RSL or its assignee. RSL attached to its petition affidavits from each of the Individuals stating that they had sold their annuity rights to RSL's assignee, RSL Special-IV.

In an amended petition filed on September 16, RSL alleged that it was a "special servicing agent" for RSL Special-IV and Marla B. Matz, and "[i]n its capacity as plaintiff, [it was] representing the interests of RSL Special-IV, Ltd. and its designee Marla B. Matz. RSL further explained that "[i]n an effort to accommodate MetLife, " which had allegedly asserted that only natural persons could own the annuities, "Marla B. Matz, a natural person, has been designated as the owner of the three annuities by RSL Special-IV, Ltd. and RSL Funding, LLC as special agent for RSL Special-IV, Ltd." RSL further sought a declaration that RSL Special-IV or Matz owned "the Pippins, Morris, and O'Brien annuities" and had the exclusive rights to receive the monthly payments. Also on September 16, RSL moved the court to require the MetLife parties "to deposit annuity funds into the Court's registry funds."[4]

On September 23, the MetLife parties filed a "Counterclaim and Cross-Claim for Interpleader." In this pleading, the MetLife parties requested permission to deposit the annuity payments into the court's registry as the payments became due and sought declaratory judgment concerning which party or parties possessed the right to receive the payments. The MetLife parties designated their pleading as a counterclaim against RSL and as a cross-claim against the Individuals.

On September 27, 2011, RSL filed a motion to compel arbitration against Pippins, alleging that "contrary to his contractual obligation, " "Pippins refused to cooperate . . . and informed RSL that he intended to cancel the transaction and not cooperate with assignment related issues." RSL further accused Pippins of "materially breaching his contracts with RSL" and requested that the trial court enter "an order compelling Pippins to participate in arbitration."[5]

On October 4, the trial court entered an order directing the MetLife parties to deposit into the court's registry all annuity payments they were then holding and deposit future payments when and as they came due. Although the court referenced both RSL's motion to require the MetLife parties to make such deposits and the MetLife parties' own "motion for interpleader relief, " the court stated that it was entering the order to deposit sua sponte. Thereafter, the parties began the discovery process. MetLife and RSL exchanged discovery requests and deposed each others' representative, and the Individuals depositions were either taken or at least noticed.

On November 10, the Individuals filed cross-claims against the MetLife parties, alleging bad faith, breach of fiduciary duty, and breach of contract. On November 28, the Individuals filed a counterclaim against RSL for breach of contract. Specifically, the Individuals alleged that neither RSL nor RSL Special-IV paid the Individuals the lump sums required under their agreements in exchange for the annuity rights conveyed to RSL Special-IV and subsequently Matz. The Individuals further claimed severe financial distress and an inability to pay their own living expenses as a direct result of the breach of the agreements.[6] Because the Individuals claimed damages exceeding the jurisdictional limits of the ...


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