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Finserv Casualty Corp. v. Symetra Life Insurance Co.

United States Court of Appeals, Fifth Circuit

October 29, 2019

FINSERV CASUALTY CORPORATION; A.M.Y. PROPERTY & CASUALTY INSURANCE CORPORATION, Plaintiffs - Appellees
v.
SYMETRA LIFE INSURANCE COMPANY; SYMETRA ASSIGNED BENEFITS SERVICE COMPANY, Defendants - Appellants FINSERV CASUALTY CORPORATION; A.M.Y. PROPERTY & CASUALTY INSURANCE CORPORATION, Plaintiffs - Appellees
v.
SYMETRA LIFE INSURANCE COMPANY; SYMETRA ASSIGNED BENEFITS SERVICE COMPANY, Defendants - Appellants

          Appeals from the United States District Court for the Southern District of Texas

          Before SMITH, DENNIS, and HAYNES, Circuit Judges.

          HAYNES, CIRCUIT JUDGE:

         Symetra Life Insurance Co. and Symetra Assigned Benefits Service Co. (collectively, "Symetra") appeal a jury verdict in favor of appellees FinServ Casualty Corp. ("FinServ") and A.M.Y. Property & Casualty Insurance Corp. ("A.M.Y."). We REVERSE the district court's judgment and REMAND with instruction to RENDER judgment as a matter of law for Symetra.

         I. Background

         The parties operate in the structured-settlement market.[1] Symetra is an issuer and obligor of annuity contracts, meaning it acquires money to make annuity payments to tort victims with structured settlements. Non-parties Rapid Settlements, Ltd. ("Rapid") and RSL-3B-IL, Ltd. ("RSL-3B") purchase structured settlements from such victims for a discounted lump sum.[2] To fund their business, Rapid and RSL-3B obtained secured loans from FinServ and A.M.Y., which are casualty insurance companies.[3]

         These entities have been litigating against each other for nearly two decades. The present consolidated cases involve structured settlement payments Symetra owed to two individuals, Ana Meza and Patrick Reihs. Symetra owed $25, 000 to Meza and $60, 000 to Reihs. RSL-3B acquired the rights to the Meza and Reihs payments from those individuals in 2004 and 2005, respectively, with Rapid acting as broker. Both payments were subject to security interests held by FinServ and A.M.Y. in all of Rapid and RSL-3B's then-owned and after-acquired property.[4] UCC-1 financing statements were filed with the Texas Secretary of State in 2004 and 2008 disclosing FinServ's and A.M.Y.'s rights in Rapid's and RSL-3B's property.

         Symetra has obtained several judgments against RSL-3B and Rapid. In 2006 and 2008, Washington courts awarded $39, 287.04 in attorney fees and costs to Symetra from Rapid due to Rapid's violations of the Washington Structured Settlement Protection Act ("SSPA"), Wash. Rev. Code Ann. §§ 19.205.010-.901, and an unsuccessful appeal from that judgment. In re Rapid Settlements, Ltd. (Rapid II), 271 P.3d 925, 927-28 (Wash.Ct.App. 2012); Rapid Settlements, Ltd. v. Symetra Life Ins. Co. (Rapid I), 139 P.3d 411, 412, 414 (Wash.Ct.App. 2006). Symetra was granted a right to offset the Reihs payment with the attorney-fee award in 2010. Rapid II, 271 P.3d at 929, 931 (affirming the trial court's grant of the right to offset). As a result of separate litigation concerning Rapid's circumvention of the Washington and Texas SSPAs, a Texas federal district court directed Rapid to pay Symetra $901, 297.63 in fees and costs in 2015. Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. H-05-3167, 2015 WL 6739022, at *1 (S.D. Tex. Nov. 4, 2015). Finally, in 2013, a Washington state court awarded Symetra a substantial amount in sanctions when RSL-3B violated a temporary restraining order enjoining it from collaterally attacking the offset order from Rapid II. In re Rapid Settlements, Ltd. (Rapid III), 359 P.3d 823, 830, 835-40 (Wash.Ct.App. 2015) (affirming in part the trial court's award of sanctions).

         In 2012, FinServ and A.M.Y. notified Symetra via letter that they claimed security interests in the Reihs payment. Symetra then notified RSL- 3B that it would offset the Reihs and Meza payments pursuant to the offset order from Rapid II and the sanctions judgment from Rapid III, respectively. In all, Symetra offset $83, 543.77, including the entire Meza payment and all but $1, 456.23 of the Reihs payment.

         RSL-3B filed suit in Texas state court to challenge Symetra's offsets, and the case was removed to the Southern District of Texas. FinServ and A.M.Y. joined as plaintiffs based on their stated security interests, claiming that the rights to payment arising from their security interests were not subject to Symetra's offset rights. The court granted summary judgment against all RSL-3B's claims, leaving only claims by FinServ and A.M.Y.[5] Symetra moved for summary judgment against FinServ and A.M.Y., arguing that they had failed to provide timely notice of their security interests. The district court denied the motion, stating in relevant part that "there [were] fact issues relevant to whether Symetra received notification of [the] assignments of the disputed payments [to FinServ and A.M.Y.] prior to the accrual of Symetra's offsetting claims." The court also denied Symetra's subsequent motion for a judgment as a matter of law.

         The case went to a jury, which found that Symetra had received notice that RSL-3B had assigned the Meza and Reihs payments by 2005, well before its offsetting claims accrued. Therefore, the district court ruled that Symetra could not assert its rights to offset against assignees FinServ and A.M.Y. Symetra filed a renewed motion for judgment as a matter of law, arguing that, if the law were properly applied, no reasonable jury could find that Symetra had notice of assignment in 2005. The district court denied the motion. Symetra also moved for a new trial, arguing that the notice finding was unsupported by the evidence. That motion was likewise denied. Symetra timely appealed.

         II. Standard of Review

         "We review the denial of a motion for judgment as a matter of law de novo but apply the same legal standard as the district court." OneBeacon Ins. Co. v. T. Wade Welch & Assocs., 841 F.3d 669, 675 (5th Cir. 2016). We will reverse the district court "if the legal conclusions implied from the jury's verdict cannot in law be supported by [the jury's factual] findings." Id. at 676 (quoting Am. Home Assurance Co. v. United Space All., LLC, 378 F.3d 482, 488 (5th Cir. 2004)). Notice is generally "an inference of fact." Exxon Corp. v. Raetzer, 533 S.W.2d 842, 846 (Tex. Civ. App.-Corpus Christi 1976, writ ref'd n.r.e.). Notice "becomes a question of law only when there is no room for ordinary minds to differ as to the proper conclusion to be drawn from the evidence." BarclaysAmerican/Bus. Credit, Inc. v. E & E Enters., Inc., 697 S.W.2d 694, 700 (Tex. App.-Dallas 1985, no writ). The issue here is not the jury's construction of the facts, to which great deference would be owed, but rather the district court's construction of the law of "notice," which is reviewed de novo. United States v. Posada Carriles, 541 F.3d 344, 353 (5th Cir. 2008) ("[W]e review de novo the district court's interpretation of the law."); Pendarvis v. Ormet Corp., 135 F.3d 1036, 1038 (5th Cir. 1998) ("We review the district court's construction of state law de novo."); see Palmco Corp. v. Am. Airlines, Inc., 983 F.2d 681, 685 (5th Cir. 1993) ("[T]he issue [of notice for breach of contract] is a matter of law based upon the undisputed facts of this case.").

         III. ...


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