United States District Court, S.D. Texas, Houston Division
A.M.Y. Property & Casualty Insurance Corporation, et al., Plaintiffs,
Insurance Company of North America, et al., Defendants.
MEMORANDUM OPINION AND ORDER
H. MILLER, UNITED STATES DISTRICT JUDGE.
before the court is a memorandum and recommendation
(“M&R”) filed by Magistrate Judge Nancy
Johnson. Dkt. 36. The Magistrate Judge considered defendant
Insurance Company of America's (“INA”) motion
to dismiss (Dkt. 5) and defendants Symetra Life Insurance
Company (“Symetra Life”) and Symetra Assigned
Benefits Service Company's (“SABSCO”)
(collectively, “Symetra Defendants”) motion to
dismiss (Dkt. 28). Id. Plaintiffs A.M.Y. Property
& Casualty Insurance Corporation (“AMY”) and
RSL-3B-IL, Limited Partnership (“3B”)
(collectively, “Plaintiffs”) objected to the
M&R. Dkt. 38. Symetra Defendants also objected. Dkt. 37.
INA did not object. Having considered the M&R, complaint,
motions, responses, replies, objections, and other relevant
materials in the record, the court is of the opinion that
Symetra Defendants' objections should be OVERRULED and
Plaintiffs' objections should be SUSTAINED IN PART and
OVERRULED IN PART.
case arises from a series of business transactions following
the settlement of three independent lawsuits. Dkt. 1 at 3, 7-8.
INA is the obligor under a settlement agreement with Jodie
Koehler. Id. at 3. SABSCO is the obligor under
settlement agreements with Thomas Purcell and Janice Scott.
Id. at 7, 8. To fund their obligations, INA and
SABSCO purchased annuity contracts from Symetra Life.
Id. at 3, 7, 8. Then, Rapid Settlements, Ltd.
(“Rapid”) entered into three separate factoring
agreements with Koehler, Purcell, and Scott. Id. at
4, 7, 8. 3B became the assignee of Rapid's rights.
Id. at 4.
Settlements and Factoring Agreements
1989, INA entered into a settlement agreement with Koehler.
Id. at 3. The settlement agreement provided for an
immediate payment and periodic payments to Koehler over a
span of nearly twenty-seven years. Dkt. 1-1 at 3. INA, per
the agreement, purchased an annuity contract from Symetra
Life to fund its liability for the periodic-payment portion
of the settlement. Id. at 4. Pennsylvania law
governed the settlement agreement. Id. at 7
December 2003, Koehler transferred and assigned to Rapid one
periodic payment under the settlement agreement in the amount
of $153, 500 due on August 4, 2016. Dkt. 1-3 at 1. Koehler
granted Rapid all of Koehler's “right, title, and
interest (including all benefits and rights relating thereto)
in and to the [a]ssigned [p]ayment(s).” Id.
The transfer agreement also provided Rapid with an
irrevocable power of attorney to enforce Koehler's rights
under the settlement agreement to obtain the benefit of the
transfer agreement, a security interest in the assigned
payment, the right to file financing statements, and a lien
on all of Koehler's periodic payments. Id. at 4.
Koehler and Rapid agreed that the agreement would “be
binding upon and [would] inure to the benefit of the parties
[t]hereto and their respective successors, heirs, legal
representatives[, ] and permitted assigns.”
Id. at 5. Rapid could assign its rights under the
agreement. Id. at 6. Texas law governed the transfer
agreement. Id. at 5.
order to secure the required court approval of the transfer,
Rapid, 3B, INA, and Symetra Life entered into a written
stipulation. Dkt. 1 at 4. The stipulation provided that: (1)
all of Koehler's rights in the assigned payment were
assigned to Rapid and/or 3B; (2) INA and Symetra Life agreed
to abide by the stipulation and not to oppose the court
petition to approve the transfer; (3) INA agreed to direct
Symetra Life to forward the assigned payment to 3B as
Rapid's assignee; (4) Symetra Life agreed to make the
assigned payment according to the terms of the stipulation;
and (5) in the event that Rapid or 3B further assigned the
transferred payment, neither INA nor Symetra Life would be
obligated to redirect the payment to any person or entity
other than 3B. Dkt. 1-4 at 3. The stipulation also contained
a release clause inuring to the benefit of INA and Symetra
Life. Id. at 4-5. Pennsylvania law governed the
stipulation. Id. at 6.
September 13, 2004, the Court of Common Pleas of Montgomery
County, Pennsylvania, entered an order transferring
Koehler's payment of $153, 500 due on August 4, 2016, to
Rapid and/or 3B. Dkt. 1 at 6. The order repeated many of the
stipulation's provisions, providing that: (1) all of
Koehler's rights in the assigned payments were assigned
to Rapid and/or 3B; (2) at the direction of INA, Symetra Life
would forward the assigned payment to 3B; and (3) neither INA
nor Symetra Life would be obligated to redirect the payment
or any portion thereof to any other person or entity should
the payment be further assigned. Dkt. 1-5 at 3. It also
contained a similar release clause as the stipulation.
Id. at 5-6. In a letter dated October 12, 2004, INA
directed Symetra Life to forward the Koehler payment to 3B.
and Scott also entered into factoring agreements. Dkt. 1 at
7-8. On February 23, 2004, the Superior Court of New Jersey,
Middlesex County, entered an order directing Symetra Life to
make certain payments to Rapid that were previously due to
Purcell. Id. at 8. On March 1, 2007, the Civil
County Court of Harris County, Texas, entered an order
directing Symetra Life to make certain payments to Rapid that
were previously due to Scott. Id. at 7.
in 2003, a series of assignments and financing transactions
moved the rights to the payments among various entities. In
2003, AMY made a loan to 3B that included “security
agreements and [Uniform Commercial Code
(“UCC”)]-1 and UCC-3 financing statements
covering the Koehler, Scott, and Purcell [a]ssigned
[p]ayments.” Id. at 8. 3B “represented
and warranted its right to grant the security interest in the
covered collateral[, ] which consisted of ‘all personal
property' ‘now owned' or ‘hereafter
acquired.'” Id. at 9.
2004, 3B obtained a loan from Amegy Bank, NA
(“Amegy”) and pledged a security interest in the
Koehler, Scott, and Purcell payments. Id. at 10.
“The original Amegy loan and security interest went
through various extensions, restructures, and assignments
involving different lenders, ultimately being assigned to
Green Bank, NA and to IberiaBank.” Id. The
bank “lenders maintained a continuous lien against the
Koehler, Scott, and Purcell [a]ssigned [p]ayments as noticed
and disclosed by UCC-1 financing statements and
2008, FinServ Casualty Corp. (“FinServ”) entered
into a participation agreement with AMY involving the loan to
3B. Id. at 9. “Thereafter, the loan was split
into two loans with a separate loan for FinServ, which has
been modified, amended[, ] and extended . . . with attendant
security agreements and UCC-1 filings.” Id.
Then, in April 2012, 3B “transferred and assigned its
ownership interest in the Koehler, Scott, and Purcell
[a]ssigned [p]ayments to RSL 2012-1, LP (“[RSL
2012]").” Id. 3B notified Symetra
Defendants of the assignment, but remained RSL 2012's
custodial agent for the purposes of receiving and
administering the payments. Id.
February 2016, “the banks assigned the lien and related
portion of [3B's] loan obligation to [AMY] and FinServ,
” including the security interest in the Koehler,
Scott, and Purcell assigned payments. Id. at 10. In
March 2016, AMY and FinServ foreclosed on their interests in
the Koehler, Scott, and Purcell payments and purchased the
payments at a public auction. Id. As of January 1,
2017, AMY and FinServ merged, leaving AMY as the successor
organization. Id. at 9 n.2.
in July 2016, Symetra Defendants notified AMY that they were
executing on a judgment in their favor against Rapid by
applying an offset to the $20, 000 Scott payment due on July
15, 2016, and to the $153, 500 Koehler payment due on August
4, 2016. Id. at 11. On December 28, 2016, Stewart
Feldman, in his role as chief executive officer of RSL
Funding, LLC, sent a demand letter to INA regarding the
Koehler payment. Dkt. 1-17. “Another demand letter was
sent on March 27, 2017[, ] demanding payment of the sums
outstanding.” Dkt. 1 at 11.
sued INA, SABSCO, and Symetra Life alleging breach of
contract, conversion, and wrongful offset. Dkt. 1. In their