Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 1 of 31

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1 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 1 of 31 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION RSL FUNDING, LLC, Plaintiff, v. JERRY M. GREEN Defendant. Civil Action No. 4:13-cv INTERVENORS TRANSAMERICA LIFE INSURANCE COMPANY S AND TRANSAMERICA ANNUITY SERVICE CORPORATION S MOTION FOR SANCTIONS UNDER RULE 11

2 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 2 of 31 TABLE OF CONTENTS TABLE OF CONTENTS... i TABLE OF AUTHORITIES... ii INDEX OF EXHIBITS... v NATURE AND STATE OF PROCEEDINGS... 1 STATEMENT OF THE ISSUES TO BE RULED UPON... 1 SUMMARY OF THE ARGUMENT... 2 I. FACTUAL BACKGROUND... 3 A. While litigating in Florida, RSL secretly went shopping for a new forum in Texas, without revealing the pending litigation to this court B. RSL is using arbitration to evade the court approval process required by the SSPA, which is exactly what its predecessor, Rapid Settlements, Ltd. is permanently enjoined from doing C. RSL s entire complaint against Jerry Green is a fraud: Stewart Feldman already knew of medical information RSL claims was not disclosed D. The Second and Third Awards built on the faulty foundation of the First E. RSL s failure to disclose relevant information rendered the 2011 SSPA confirmation order (upon which the awards are based) void ab initio F. RSL moved to hold Transamerica in contempt for violating the arbitration awards, while simultaneously arguing Transamerica lacked standing to intervene II. ARGUMENT AND AUTHORITIES A. RSL and its counsel violated Rule B. Sanctions should compensate Transamerica and be sufficient to deter future conduct. 20 III. CONCLUSION PRAYER i

3 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 3 of 31 TABLE OF AUTHORITIES Cases Allstate Life Insurance Company v. Rapid Settlement, Ltd., No. 3:06CV629, 2007 WL (S.D. Miss. September 20, 2007) Allstate Settlement Corp. v. Rapid Settlements, Ltd., CIV.A , 2007 WL (E.D. Pa. May 8, 2007) aff d, 559 F.3d 164 (3d Cir. 2009) Baulch v. Johns, 70 F.3d 813, 817 (5th Cir. 1995) Fidelity and Guar. Life Ins. Co. v. Lucille Harrod, No. Civ. CCB , 2007 WL (U.S.D.C. Maryland Sept. 27, 2007) Fidelity Guar. Life Ins. Co. v. Harrod, No. CCB , 2008 WL (Maryland Dist. Ct., April 15, 2008) FinServ Cas. Corp. v. Settlement Funding, LLC, 724 F.Supp.2d 662, 665 (S.D. Tex. 2010).. 7, 13 In re Pikula, No. C , 2005 WL , at *2 3 (Minn.Dist.Ct. Nov.3, 2007) In re Transfer of Structured Settlement Payment Rights ex rel. Saucier, Nos. 130 So (Miss. Ct. App., 2013) In re: Rapid Settlements, Ltd. v. BHG, 202 S.W.3d 456, (Tex. App. Beaumont, 2006), pet denied, 2007 Tex. Lexis 416 (Tex. May 4, 2007) In re: Rapid Settlements, Ltd., No CV, 2007 WL (Tex. App. Houston [14th Dist.], Mar. 29, 2007) Pacific Life. Ins. Co. v. Rapid Settlements, Ltd., No. 06-CV6554L, 2007 WL , *3 (W.D. New York, Sept. 5, 2007) R&Q Reinsurance Co. v. Rapid Settlements, Ltd., No CIV, 2007 WL (S.D. Fla., August 13, 2007) Rapid Settlements, Ltd. v. Dickerson, 941 So. 2d 1275, 1277 (Fla. Dist. Ct. App. 2006) Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701 (Tex. App. Houston [1st Dist.] 2009, no pet.)... 7, 8, 13, 21 Rapid Settlements, Ltd. v. Safeco Nat'l Life Ins. Co., No. CV , 2005 WL , at *2 (Conn.Super.Ct. Jan.4, 2005) ii

4 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 4 of 31 Rapid Settlements, Ltd. v. Symetra Life Ins. Co., 234 S.W.3d 788, (Tex. App. Tyler 2007, no pet.) Rapid Settlements, Ltd. v. Symetra Life Ins. Co., No. E040289, 2007 WL , at *4 8 (Cal.Ct.App. June 1, 2007) Rentz v. Dynasty Apparel Indus., 556 F.3d 389, 395 (6 th Cir. 2009) RSL Funding, LLC v. Aegon Structured Settlements, Inc., 384 S.W.3d 405 (Tex. App. Eastland, 2012, pet. denied)... 7, 21 Settlement Funding LLC v. RSL Funding, LLC, No. H , 2014 WL (S.D. Tex, April 15, Symetra Life Ins. Co. v. National Ass n of Settlement Purchasers, No. H , 2012 WL (S.D. Tex, Nov. 21, 2012) Symetra Life Ins. Co. v. Rapid Settlements Ltd., 2007 WL , *25-26 (S.D. Tex. Jan. 10, 2007) Symetra Life Ins. Co. v. Rapid Settlements, Ltd., 599 F.Supp.2d 809 (S.D. Tex. 2008)... 7, 13 Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. H , 2007 WL (S.D. Tex., June 4, 2007) Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. H , 2011 WL (S.D. Tex., Oct. 11, 2011) Symetra Life Insurance Company v. Rapid Settlements, Ltd., 2007 WL (S.D. Tex. Jan. 20, 2007)... 7 Symetra Life Insurance Company v. Rapid Settlements, Ltd., 2007 WL (S.D. Tex. June 4, 2007)... 7 Transamerica Occidental Life Ins. Co. v. Rapid Settlements, Ltd., 284 S.W.3d 385, 391 (Tex. App. Houston [1st Dist.] 2008, no pet.) Wesolek v. Layton, No. H , 2014 WL (S.D.Tex., March 14, 2014)... 12, 14 Wilder v. Bernstein, 965 F.2d 1196, 1204 (2nd Cir. 1992) Windsor Thomas Grp. v. Parker, 782 So.2d 478, (Fla.Dist.Ct.App.2001) Statutes FLA. STAT , 19 iii

5 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 5 of 31 Rules FED. R. CIV. P , 21 iv

6 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 6 of 31 INDEX OF EXHIBITS Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit G: Exhibit H: Exhibit I: Exhibit J: Florida Order Admitting John Gorman Pro Hac Vice RSL s Motion for Entry of Default Judgment Rapid Settlements, Ltd. v. Symetra Life Ins. Co., No. E040289, 2007 WL , at *4 8 (Cal.Ct.App. June 1, 2007) In re Pikula, No. C , 2005 WL , at *2 3 (Minn.Dist.Ct. Nov.3, 2007) Rapid Settlements, Ltd. v. Safeco Nat'l Life Ins. Co., No. CV , 2005 WL , at *2 (Conn.Super.Ct. Jan.4, 2005) Wesolek v. Layton, No. H , 2014 WL (S.D.Tex., March 14, 2014) Correspondence dated August 8, 2014, from David Pybus to Stewart Feldman regarding Motion for Sanctions under Rule 11. Settlement Funding LLC v. RSL Funding, LLC, No. H , 2014 WL (S.D. Tex, April 15, 2014) Exhibit K: Symetra Life Ins. Co. v. National Ass n of Settlement Purchasers, No. H , 2012 WL (S.D. Tex, Nov. 21, 2012) Exhibit L: Exhibit M: Exhibit N: Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. H , 2007 WL (S.D. Tex., June 4, 2007) In re Transfer of Structured Settlement Payment Rights ex rel. Saucier, Nos. 130 So (Miss. Ct. App., 2013) Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. H , 2011 WL (S.D. Tex., Oct. 11, 2011) v

7 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 7 of 31 Exhibit O: Fidelity Guar. Life Ins. Co. v. Harrod, No. CCB , 2008 WL (Maryland Dist. Ct., April 15, 2008) vi

8 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 8 of 31 NATURE AND STATE OF PROCEEDINGS This case involves requests by Plaintiff RSL Funding, LLC ( RSL ) for confirmation of two arbitration awards involving the transfer of structured settlement annuity payments. With this motion, Transamerica requests the court award Transamerica its attorney s fees and costs under Rule 11. By separate motion filed July 3, 2014, Transamerica has asked this court to deny confirmation of and vacate arbitration awards obtained by Plaintiff RSL Funding, LLC ( RSL ). The court initially confirmed those awards, but then set aside the judgments confirming them on the motion of Transamerica, which the court permitted to intervene. The court gave RSL a deadline of February 6, 2014 to state whether it intended to pursue this case, in light of the effect of the Rooker-Feldman doctrine, but RSL did not respond to the court s order. 1 Instead, RSL filed an appeal with the Fifth Circuit. That appeal is pending. Transamerica has filed a motion to dismiss the appeal for want of jurisdiction, on the ground that an appeal is premature, since RSL s request for confirmation of the awards remains pending. STATEMENT OF THE ISSUES TO BE RULED UPON This motion presents the following issues: 1. Should the court award Transamerica sanctions under Rule 11 against RSL, its counsel Stewart Feldman, and the Feldman Law Firm, because they sought to confirm arbitration awards that violate public policy, using what they knew to be a bad address for Jerry Green, without serving Transamerica, and without informing this court of pending litigation in Florida on the same issues, and because they sought to hold Transamerica and their counsel in contempt? 2. If so, what is the appropriate form and level of sanction? 1 See D.E

9 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 9 of 31 SUMMARY OF THE ARGUMENT RSL filed this case to avoid pending litigation in Florida, where it had already asked the court to approve an arbitration award against Jerry Green that reduced the sales price of his $82,500 annuity from $20,000 to $3,500. When RSL perceived the court might rule against it, RSL initiated another arbitration even though the Florida court had refused to stay its proceedings to permit more arbitration. RSL obtained a second award by default, with findings based on Green s alleged refusal to comply with the first award, even though it had not been confirmed, and even though the transfers of such annuities including the price must be approved by a court, not an arbitrator. In fact, the second award simply reiterated the first, with the addition of attorney s fees. RSL then came to this court, using what it knew was a bad address for Green (which it also used in the arbitration), to confirm the second award. In all of this, RSL kept the parties and both courts in the dark about its scheme to use the second award to bypass the Florida litigation. After RSL s scheme initially succeeded, it went back for more, obtaining a third award that included a wish list of findings, this time against Transamerica, which never agreed to arbitrate. RSL filed a motion to confirm that award, again without serving Transamerica, and again without revealing the motion pending in the Florida court to confirm the original award or that the Florida court had ordered Transamerica to deposit the annuity funds with it, pending its decision on the transfer. All the awards violate public policy, because they effectively approve transfers that must be approved by a court, not an arbitrator. And they purport to bind Transamerica, ordering it to place funds on deposit in this court, despite the conflicting order from the Florida court, and even though Transamerica never agreed to arbitrate. 2

10 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 10 of 31 Rule 11 allows sanctions when pleadings are filed for an improper purpose. This entire case including RSL s pending motion for contempt against Transamerica and its counsel brims with improper purpose: forum-shopping, evading the law on transfers of settlement annuities, harassment of Jerry Green, Transamerica, and its counsel, and needless increase of cost. RSL and its counsel are not innocent offenders. This case is par for the course: RSL s counsel Stewart Feldman owns and manages both RSL and its predecessor, Rapid Settlements, Ltd., which have repeatedly tried to misuse arbitration to evade the law on transfers of structured settlements. Eventually, its actions resulted not only in fee awards in more than one case, but also in an injunction by Judge Rosenthal, who even held Rapid Settlements in contempt. Mr. Feldman formed RSL not long after that injunction. The sanctions by this court should be large enough to bring a stop to his schemes. I. FACTUAL BACKGROUND A. While litigating in Florida, RSL secretly went shopping for a new forum in Texas, without revealing the pending litigation to this court. RSL filed this case while a Florida action was already pending between all parties. 2 In the Florida action, RSL had asked the Florida court to approve a transfer of structured settlement annuity payments by Jerry Green. 3 Mr. Green s agreement to arbitrate was in connection with his transfer of structured settlement payments to RSL. Such a transfer including any related 2 RSL was represented in Florida by John Gorman, from Stewart Feldman s firm. See the order admitting him pro hac vice, attached as Exhibit A. 3 See D.E at Ex. D: RSL s Application for Court Approval of Transfer of Structured Settlement Payment Rights. As noted by the court in a later order, RSL did not reveal to the Florida court that the payments were not assignable. See D.E

11 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 11 of 31 agreement to arbitrate is ineffective without court approval, as required by Florida s Structured Settlement Protection Act (the SSPA ). 4 When a dispute arose between Green and RSL, the Florida court ordered them to arbitrate. RSL eventually asked the Florida court to confirm the resulting award (the First Award ), which purported to reduce the court-approved transfer price that RSL would have to pay to Mr. Green by more than 80%, from $20,000 to $3,500, even though such transfers are not valid without a court finding that the transfer including the price is in the best interest of the payee. 5 When Green and Transamerica opposed the request for confirmation, RSL persuaded the Florida court to order Transamerica to deposit the annuity payments into the registry of the Florida court, pending resolution of the issues. 6 RSL then initiated further arbitration proceedings (this time without a court order), in which RSL accused Green of repudiating the First Award by opposing its confirmation. 7 At the same time, RSL asked the Florida court to stay the litigation to permit arbitration. 8 On June 4 See FLA. STAT See D.E See FLA. STAT Unabashedly, the First Award specifically states at J: An amendment of the prior transfer order is unnecessary because such assigned payments remain the same and only the purchase price has changed through the arbitration proceeding which had been approved and ordered by the Florida court in a final court order. See D.E. 1-2 (emphasis added). Thus, the award expressly attempts to circumvent the SSPA s requirement that a court find the transfer to be in the payee s best interest. See FLA. STAT (3)(i) (requiring that the transfer be in the payee s best interest ). 6 See D.E See D.E See D.E

12 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 12 of 31 18, 2013, the Florida court heard evidence on whether to confirm the First Award, including alleged misrepresentations by RSL, and denied the stay request by RSL. 9 Despite the Florida court s denial of its request, RSL went ahead with the second arbitration, obtaining a default award against Green for approximately $66,000 (the Second Award ). 10 Other than awarding attorney s fees against Green merely for asserting his rights in the Florida action, the Second Award reiterated and incorporated the First Award which RSL was already seeking to have confirmed in the Florida litigation. RSL then filed this proceeding in Houston even though Green resides in Florida seeking to have this court confirm the Second Award and stay all litigation between the parties. 11 RSL did not reveal to this court that it was already seeking to have the First Award confirmed in the Florida case, or that the Florida court had denied its request to stay the litigation. RSL also kept the proceedings in this court a secret: It did not inform the Florida court, it did not include Transamerica as a party, and it deliberately served Green at an old address. 12 RSL then initiated a third arbitration, obtaining another default award (the Third Award ) with a self-serving wish list of findings against Transamerica, including that it was 9 See D.E. 16-4, Transcript of Proceedings dated June 18, 2013 (Florida), at page 16, lines See D.E See D.E. 1, 3, and 8. RSL claimed Jerry Green had sufficient contacts to permit jurisdiction in Texas and service through the Secretary of State, but Transamerica believes RSL lacks any basis for this statement. See Jerry Green s letter to the court, dated August 28, 2013 (D.E. 12). 12 In its Petition (filed July 12, 2013; see D.E. 1), RSL listed addresses for Jerry Green on Lenczyk Drive and Cesery Boulevard, in Jacksonville, Florida. RSL continued to use those addresses in connection with filings on July 16 (Motion to Confirm Arbitration Award; see D.E. 3) and July 26 (Motions to Compel and Motion to Stay; see D.E. 4), even though RSL knew those addresses were no longer valid. See RSL s Motion for Entry of Default Judgment, filed in the second arbitration on July 2, See Exhibit B. Attachments to that Motion show RSL already had a forwarding address on Overlook Drive that it did not use when it filed this case. 5

13 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 13 of 31 acting in concert with Green. 13 RSL does not dispute Transamerica never agreed to arbitrate with it and even argues that because Transamerica did not agree to arbitrate, Transamerica cannot complain about the arbitration award which purports to bind it. The Third Award purports to require Transamerica to deposit the annuity payments in the registry of this court, despite the Florida court order entered three months before the arbitration, which required the money be paid to its registry. RSL asked this court to confirm the Third Award, again without serving Transamerica, and again without revealing to this court that it was already seeking confirmation of the First Award in the Florida court, or that the Florida court had denied its motion to stay the proceedings to permit further arbitration. 14 Although this court initially entered judgments confirming the awards, it later set the judgments aside, 15 after the Florida court set aside its order confirming the transfer and after Transamerica intervened and filed a motion to set aside the judgments. 16 In its order setting aside the judgments, this court stated that [i]n light of the Florida court s recent ruling, it does not appear that RSL has a viable arbitration award to confirm. 17 The court also ordered RSL to advise whether it intends to pursue this matter, and if so, the legal basis for doing so in light of the Rooker-Feldman doctrine. 18 RSL did not comply with that order. Instead, RSL appealed to 13 See D.E See D.E See D.E See D.E. 60 and D.E See D.E Id. 6

14 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 14 of 31 the Fifth Circuit, even though no final judgment has been entered. Transamerica s motion to dismiss the appeal for lack of jurisdiction is currently pending in the Fifth Circuit. B. RSL is using arbitration to evade the court approval process required by the SSPA, which is exactly what its predecessor, Rapid Settlements, Ltd. is permanently enjoined from doing. RSL is a factoring company managed by Mr. Feldman, RSL s attorney of record in this matter. This court has prior experience with Mr. Feldman, in connection with both RSL and its predecessor Rapid Settlements, Ltd. ( Rapid Settlements ). 19 As this court previously noted, RSL and Rapid Settlements are closely related. 20 They operate in the same or neighboring suites and all are managed by Mr. Feldman, 21 who is RSL s CEO. 22 In late , RSL took over certain of the assets of Rapid Settlements. 23 This occurred shortly after Judge Rosenthal entered a permanent injunction against Rapid Settlements for its illegal practice of using arbitration to circumvent the judicial-approval requirement of state structured settlement protection acts. 24 Rapid Settlements has been ordered to pay fees for that same practice See FinServ Cas. Corp. v. Settlement Funding, LLC, 724 F.Supp.2d 662, 665 (S.D. Tex. 2010). 20 Id. at Id. at See D.E. 1-1 and 1-2 (Transfer Agreement at page 7; Addendum at page 2). 23 See FinServ Casualty Corp., 724 F.Supp.2d at 666) ). 24 See Symetra Life Ins. Co. v. Rapid Settlements, Ltd., 599 F.Supp.2d 809 (S.D. Tex. 2008) (entering permanent injunction). Rapid Settlements was previously also temporarily enjoined. See D.E Symetra Life Insurance Company v. Rapid Settlements, Ltd., 2007 WL (S.D. Tex. Jan. 20, 2007) (temporarily enjoining Rapid Settlements from using arbitration to avoid the court approval process) and D.E. 50-8: Symetra Life Insurance Company v. Rapid Settlements, Ltd., 2007 WL (S.D. Tex. June 4, 2007) (holding Rapid Settlements in contempt for violating the temporary injunction). 25 See Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701 (Tex. App. Houston [1st Dist.] 2009, no pet.); See RSL Funding, LLC v. Aegon Structured Settlements, Inc., 384 S.W.3d 405 (Tex. App. Eastland, 2012, pet. denied). 7

15 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 15 of 31 As noted above, the Second Award incorporates and reiterates the First Award, which purported to change the price to be paid by RSL to Jerry Green, even though only a court can make the required finding that the price is in the best interest of the payee. By filing this action, Stewart Feldman was using arbitration to evade the SSPA and using RSL to evade the injunction entered by Judge Rosenthal against Rapid. C. RSL s entire complaint against Jerry Green is a fraud: Stewart Feldman already knew of medical information RSL claims was not disclosed. RSL claims Mr. Green has AIDS and that he failed to disclose that until sometime in 2011, and that RSL was not otherwise aware of it. 26 But Mr. Feldman knew of Mr. Green s condition at least by In a proceeding culminating in 2009, Rapid Settlements with Mr. Feldman as its lawyer attempted to obtain approval of transfers of Mr. Green s structured settlement payment rights. 27 In that proceeding, Mr. Feldman and Rapid Settlements learned Mr. Green was eligible for HIV/AIDS benefits. 28 Although a small detail in RSL s large web of deception, it is at the heart of RSL s claim against Jerry Green. RSL repeatedly uses that claim to further its interests, such as trying to invoke arbitration against Transamerica in December 2013 (in which RSL accused Transamerica of encouraging Mr. Green to cover up his medical condition) See D.E (Arbitration Demand dated 12/11/13). 27 See Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701 (Tex. App. Houston [1st Dist.] 2009, no pet.) (listing Mr. Feldman among the counsel for Rapid Settlements). 28 See D.E , which was filed in the prior litigation with Rapid Settlements, Ltd., in In particular, see the attachments as part of Exhibit B to D.E See Id. In response to RSL s attempt to arbitrate, this court granted Transamerica s application and entered a TRO against RSL. See D.E. 56 and 62 (orders entering and extending the TRO). 8

16 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 16 of 31 D. The Second and Third Awards built on the faulty foundation of the First. RSL obtained the Second and Third Awards in July and September Like the First Award, they inappropriately altered the terms of the transfer agreement and purported to effect a transfer of Mr. Green s structured settlement payment rights that were not approved under the SSPA, either by changing the price for the transfer or by ordering payment of the annuity amounts into the registry of this court. 31 Also, although the Florida court originally approved the transfer as reflected in the Transfer Agreement, RSL did not submit the Addendum to the court in connection with its application for approval of the transfer. Yet the Addendum (which requires Mr. Green to allow and cooperate in medical underwriting ) is implicitly referenced in the Second Award which finds that Green materially breached his contractual duty of cooperating with the medical underwriting process. 32 It also states Green waived his defense to the effect of the Addendum because not raised in the first arbitration. 33 The Third Award included adverse findings against Transamerica even attempting to bind Transamerica to damage awards against Mr. Green. It is undisputed Transamerica did not agree to arbitrate. 30 See D.E and The First Award (January 9, 2012) purported to reduce the $20,000 Assignment Price of the Transfer Agreement between RSL and Mr. Green to $3,500. The Second Award (July 11, 2013), obtained by default, summarily awarded $65,000 in damages to RSL from Mr. Green for his alleged breach of the unapproved Transfer Agreement and Addendum and unconfirmed arbitration award of January 9, The Third Award (September 13, 2013), also obtained by default, stated that RSL had sustained further damage of $39,500 in attorney fees, found Transamerica in privity and in concert with Mr. Green, and purported to prohibit Transamerica from taking any actions it determines necessary to protect its interests relating to the subject matter of this suit, including in the pending Florida action. It also orders Mr. Green, and through him, Transamerica, to deposit the annuity proceeds in the registry of this court. 32 See D.E. 4-8, at page Id. at page 3. 9

17 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 17 of 31 E. RSL s failure to disclose relevant information rendered the 2011 SSPA confirmation order (upon which the awards are based) void ab initio. Ultimately, in December 2013, the Florida court dismissed the case and found its April 2011 order confirming the transfer to be void ab initio because RSL failed to disclose an antiassignment provision in the underlying settlement agreement. 34 The court stated the aggressive attempts of [RSL] to force arbitration have resulted in a legal nullity, and that such arbitration results are impotent and without substance and absurd. 35 In determining the order void ab initio, the Florida court cited a prior case involving Rapid Settlements, RSL s predecessor, in which a court denied approval of a transfer order because of a non-assignment provision in the underlying settlement agreement. 36 RSL was well aware the Florida court lacked authority to approve the transfer agreement (and that the underlying transfer order was void ab initio) because of the undisclosed anti-assignment language in Mr. Green s settlement agreement. 37 Information on RSL s website confirms RSL fully understood that any transferrable rights stem from the settlement agreement: 34 See D.E. 45-1, at See D.E. 45-1, at 3, See D.E. 45-1, at 2 (quoting the anti-assignment language prohibiting assignment or transfer of payments) (citing Rapid Settlements, Ltd. v. Dickerson, 941 So. 2d 1275, 1277 (Fla. Dist. Ct. App. 2006)). 37 Many other courts have also rejected Rapid's transfers based on the anti-assignment clauses. See Exhibit C, Rapid Settlements, Ltd. v. Symetra Life Ins. Co., No. E040289, 2007 WL , at *4 8 (Cal.Ct.App. June 1, 2007) (reversing a settlement approval because it conflicted with Symetra's antiassignment provisions and rejecting Rapid's preemption argument); See Exhibit D, In re Pikula, No. C , 2005 WL , at *2 3 (Minn.Dist.Ct. Nov.3, 2007) (voiding a Rapid transfer after Symetra objected that the antiassignment provision barred the transfer); See Exhibit E, Rapid Settlements, Ltd. v. Safeco Nat'l Life Ins. Co., No. CV , 2005 WL , at *2 (Conn.Super.Ct. Jan.4, 2005) (voiding a Rapid transfer based on an antiassignment provision). Courts enforced such antiassignment clauses even before states passed the Acts. See, e.g., Windsor Thomas Grp. v. Parker, 782 So.2d 478, (Fla.Dist.Ct.App.2001). 10

18 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 18 of 31 The annuity itself is not assignable because you do not own the annuity. The life insurance company, or a subsidiary thereof, that issued the annuity, typically owns it. Therefore, since you do not own the annuity, you cannot assign it. What you do own, and therefore can assign, is the right to receive periodic payments due under the release and settlement agreement. That is an absolute property right you have under the settlement agreement - it is your right to receive the periodic payments that you may assign in exchange for a lump sum payment. 38 RSL also concedes the payee might not have the right to sell the payments: When a person is awarded with a structured settlement payment scheme, there are certain rules and conditions that are involved. Even if the claimant has the right to claim the settlement in the agreed settlement payment schedule, it is still important to determine whether that right includes the right to sell the structured settlement. 39 F. RSL moved to hold Transamerica in contempt for violating the arbitration awards, while simultaneously arguing Transamerica lacked standing to intervene. RSL waited to notify Transamerica of the default arbitration awards until October 2013 after this court confirmed them in two separate Judgments. When Transamerica moved to intervene, RSL opposed the motion with a 34 page response, in which it argued Transamerica lacked standing because it was not a party to the arbitration and lacked any valid interest in the arbitrable dispute. 40 Two days later, RSL asked this Court to hold Transamerica and its counsel in contempt for violating the arbitration awards See (emphasis added). A copy of that portion of the website is attached as Exhibit F. 39 See (emphasis added). A copy of that portion of the website is attached as Exhibit G. 40 See D.E. 33, at page 2 (note pages are unnumbered). 41 See D.E

19 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 19 of 31 RSL s motion for contempt remains pending. It sends a clear message: RSL will stop at nothing to attempt to punish Transamerica for interfering with RSL s methods of securing payment rights. Transamerica s response sets forth in detail why that motion is both frivolous and vexatious. 42 II. ARGUMENT AND AUTHORITIES A. RSL and its counsel violated Rule 11. Transamerica seeks an award of sanctions against RSL and its counsel Stewart Feldman and the Feldman Law Firm under Federal Rule of Civil Procedure They multiplied proceedings and acted without proper motive, in bad faith, or with reckless disregard of a duty owed to the court as shown above and specifically identified below. 44 Mr. Feldman signed every pleading filed in this matter on behalf of RSL. Every facet of this litigation is patently meritless, and RSL s counsel wrongfully continues this confirmation action, despite an opportunity to withdraw it. 45 Multiple other courts have condemned the practice of RSL and its predecessor Rapid Settlements of using arbitration to circumvent the SSPA 46 and/or to bind the obligor or issuer 42 See D.E See Wilder v. Bernstein, 965 F.2d 1196, 1204 (2nd Cir. 1992). 44 See Exhibit H- Wesolek v. Layton, No. H , 2014 WL , *9 (S.D.Tex., March 14, 2014), (citing Baulch v. Johns, 70 F.3d 813, 817 (5th Cir. 1995)). 45 See generally, Wesolek v. Layton, No. H , 2014 WL , *7 (S.D.Tex., March 14, 2014). Transamerica afforded RSL and Mr. Feldman with a copy of this motion and the opportunity to withdraw their allegations 21 days before filing this motion, as required by Rule 11. See Exhibit I. 46 See e.g., D.E. 50-1, Fidelity and Guar. Life Ins. Co. v. Lucille Harrod, No. Civ. CCB , 2007 WL (U.S.D.C. Maryland Sept. 27, 2007) (stating Rapid points to no cases and I have found none in which it has been successful in using arbitration proceedings to circumvent state statutes which require court approval for transfers of settlement payments and awarding sanctions against Rapid and its counsel); see e.g. D.E. 50-2, Allstate 12

20 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 20 of 31 through arbitration. 47 A number of the cited cases also awarded sanctions. As noted above, a court in the Southern District permanently enjoined Rapid Settlements from attempting to use arbitration to circumvent requirements of state structured settlement protection acts. 48 It was after that date RSL took over the assets of Rapid Settlements 49 and began following in its footsteps. Both entities are managed by Mr. Feldman. 50 Life Insurance Company v. Rapid Settlement, Ltd., No. 3:06CV629, 2007 WL (S.D. Miss. September 20, 2007) (finding the arbitrator s damage award a transfer and thus void for failure to obtain court approval as required under the Mississippi SSPA); D.E. 50-3, Pacific Life. Ins. Co. v. Rapid Settlements, Ltd., No. 06-CV6554L, 2007 WL , *3 (W.D. New York, Sept. 5, 2007) (finding the transfer agreement and arbitrator s damage award void for failure to obtain court approval as required by statute); D.E. 50-4, R&Q Reinsurance Co. v. Rapid Settlements, Ltd., No CIV, 2007 WL (S.D. Fla., August 13, 2007) (stating Rapid may not use the arbitration process to circumvent the statutory requirements for transferring structured settlement payment rights. This Court holds that enforcing the arbitration award would violate the applicable Florida Protection Act, and therefore the award is unenforceable against Plaintiff ); D.E. 50-5, Allstate Settlement Corp. v. Rapid Settlements, Ltd., CIV.A , 2007 WL (E.D. Pa. May 8, 2007) aff d, 559 F.3d 164 (3d Cir. 2009) (finding arbitration award an invalid attempt to circumvent the state statute requiring court approval of transfer agreements); Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701, 705 (Tex. App. Houston [1st Dist.] 2009, no pet.); D.E 50-6, In re: Rapid Settlements, Ltd., No CV, 2007 WL (Tex. App. Houston [14th Dist.], Mar. 29, 2007) ( Rapid Settlements may not avoid mandatory state statues designed to protect the beneficiaries of structured settlements by resorting to arbitration. In re: Rapid Settlements, Ltd. v. BHG, 202 S.W.3d 456, (Tex. App. Beaumont, 2006), pet denied, 2007 Tex. Lexis 416 (Tex. May 4, 2007) ( The only arbitration provision produced in these proceedings is the one contained in the transfer agreement.because the agreement is not effective until the trial court approves the transfer in a final order, and it is undisputed that no such order exists, there is no agreement to arbitrate. ); Rapid Settlements, Ltd. v. Symetra Life Ins. Co., 234 S.W.3d 788, (Tex. App. Tyler 2007, no pet.) (stating that [a]n arbitration award and final judgment confirming that award cannot substitute for the court approval of a transfer required by the [Structured Settlement Protection Act] ). 47 See, e.g., D.E. 44-2, Symetra Life Ins. Co. v. Rapid Settlements Ltd., 2007 WL , *25-26 (S.D. Tex. Jan. 10, 2007); Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701, 705 (Tex. App. Houston [1st Dist.] 2009, no pet.); Transamerica Occidental Life Ins. Co. v. Rapid Settlements, Ltd., 284 S.W.3d 385, 391 (Tex. App. Houston [1st Dist.] 2008, no pet.). 48 See Symetra Life Ins. Co. v. Rapid Settlements, Ltd., 599 F.Supp.2d 809 (S.D. Tex. 2008) (entering permanent injunction). 49 See FinServ Cas. Corp. v. Settlement Funding, LLC, 724 F.Supp.2d at Id.. 13

21 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 21 of 31 Given all of the information available to RSL s counsel at the time it filed this action, and given the information learned during this action, RSL s counsel Stewart Feldman unreasonably multiplied these proceedings to confirm arbitration awards, and this confirmation action suffers from the same deficiencies recognized by numerous courts analyzing similar facts involving RSL and/or Rapid Settlements. 51 As to vexatiousness, RSL s counsel vehemently opposed Transamerica s intervention and motions to set aside the awards and attempted to arbitrate against Transamerica, all without basis in law. RSL s counsel acted without merit in filing this action and opposing Transamerica at every turn. The massive body of prior law against Rapid Settlements (and RSL s own knowledge) put Mr. Feldman on notice of the deficiencies in this confirmation proceeding. This is not a matter in which Mr. Feldman merely failed to conduct a reasonable inquiry into the legal basis for this action, including RSL s opposition to Transamerica s intervention and motions to set aside and RSL s motion for contempt and attempt to arbitrate. 52 Transamerica asks this court to order RSL, Stewart Feldman, and the Feldman Law Firm to pay to Transamerica its attorneys fees and reasonable expenses incurred in this matter. Because sanctions under Rule 11 apply to particular filings, Transamerica requests sanctions be imposed in relation to all filings by RSL in opposition to the relief sought by Transamerica in this matter, including RSL s opposition to Transamerica s motion to intervene 51 See generally Wesolek v. Layton, No. H , 2014 WL , *8 (S.D.Tex., March 14, 2014) (stating that reassertion of claims suffering from prior noted deficiencies was unreasonable). 52 See generally Wesolek v. Layton, No. H , 2014 WL , *8 (S.D.Tex., March 14, 2014). 14

22 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 22 of 31 and Rule 59 and 60 motions, RSL s motion to hold Transamerica and its counsel in contempt, and RSL s pending applications to confirm arbitration awards in response to which Transamerica s motion for summary judgment is pending. 53 Transamerica requests sanctions under Rule 11 against RSL, its counsel Stewart Feldman and/or the Feldman Law Firm because they, by maintaining this action and opposing Transamerica at every turn, advocate a position lacking basis in law as discussed in this motion and for the improper purposes of harassing and causing Transamerica undue expense, in addition to forum-shopping while hiding the facts from this court. A court may impose sanctions on a party, its attorney, or a law firm for presenting a pleading, written motion or other paper whether by signing, filing, submitting or later advocating it for an improper purpose, such as to harass or cause unnecessary delay or expense. 54 Also, a court may impose sanctions on a party, an attorney, or a law firm for presenting a pleading, written motion, or other paper that includes any of the following: (1) claims, defenses, or other legal contentions not warranted by existing law or by a good-faith argument for extending, modifying, or reversing existing law or for establishing new law, (2) factual contentions that do not have, or are unlikely to have, evidentiary support after a reasonable opportunity for further investigation or discovery, or (3) denials of factual contentions unwarranted by the evidence See D.E. 3, 13, 33, 37, and FED. R. CIV. P. 11(b)(1), (c)(1). 55 FED. R. CIV. P. 11(b)(2)-(b)(4), (c)(1). 15

23 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 23 of 31 RSL s filings in this action violate Rule 11 for those reasons shown herein and in Transamerica s separately filed motion for summary judgment which Transamerica adopts and incorporates as though fully set forth herein: D.E. Document Type Basis for Sanctions 1 and 3 Original Petition for Confirmation of [Second] Arbitration Award and Motion to Confirm [Second] Arbitration Award [incorporating the First Arbitration Award] Signed by Stewart Feldman (July 12, 2013; July 16, 2013, respectively). The petition and motion ask this court to confirm the Second Award surreptitiously obtained by RSL using bad addresses for Jerry Green. The Second Award incorporates and is based upon the unconfirmed First Award and the unapproved Addendum. Both the First and Second Awards violate the SSPA by reducing the assignment price from $20,000 to $3,500 (in the First Award), and the Second Award awards RSL $66,000 in damages from Mr. Green for his alleged breach of the Transfer Agreement, unapproved Addendum and unconfirmed First Award (Second Award). However, the Florida court did not find the reduced payment price to be in Mr. Green s best interest or approve the reduction, and the Florida court recently stated it would not do so and that the outcome of the arbitrations are an absurd result and a legal nullity. 56 In the petition, motion and awards, RSL disingenuously claim it was damaged by Mr. Green s alleged 2011 misrepresentations of health issues that were actually already known to Mr. Feldman. This claim relates to language only found in the unapproved Addendum upon which the arbitrator s damage awards are based all in violation of the SSPA and without any support in law. The petition and motion ask this court to confirm awards in contravention of existing law and not warranted by a good faith argument for extending, modifying or reversing existing 56 See D.E. 45-1, at 4. 16

24 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 24 of 31 D.E. Document Type Basis for Sanctions 13 Motion to Confirm [Third] Arbitration Award law. On December , the underlying approval order for the Transfer Agreement was determined void ab initio. 57 As this court recognized, the factual and legal predicates for confirming the awards have been vacated. 58 Signed by Stewart Feldman (September 16, 2013). The motion seeks to have the Third Award confirmed, even though RSL obtained the Third Award by default, without notice to or an agreement to arbitrate with Transamerica. In the motion and Third Award, RSL again disingenuously claims it was damaged by Mr. Green s alleged 2011 misrepresentations of health issues that were actually known to Mr. Feldman. The motion claims that Mr. Green materially breached his contractual duty of cooperation with the medical underwriting process, which refers to language in the unapproved Addendum. 59 The Third Award incorporates and builds upon the First and Second Awards and states that RSL had sustained further damage of $39,500 in attorney s fees plus costs and expenses. Without notice to Transamerica, it found Transamerica in privity and in concert with Mr. Green, and purported to prohibit Transamerica from taking any actions it determines necessary to protect its interests relating to the subject matter of this suit, including in the pending Florida action. The Third Award also orders Mr. Green, and through him, Transamerica, to deposit the annuity proceeds in the registry of this court, although a separate order remained pending in the Florida court requiring the same funds be transferred into its registry pending payment by RSL (which obligation RSL failed to fulfill). 57 See D.E See D.E See D.E

25 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 25 of 31 D.E. Document Type Basis for Sanctions 33 Response to [Transamerica s] Motion to Intervene The motion thus asks this court to confirm awards in contravention of existing law and not warranted by a good faith argument for extending, modifying or reversing existing law. Courts have consistently ruled against RSL and/or its predecessor for attempting to bind entities such as Transamerica through arbitration, 60 and for controverting state structured settlement protection acts by using arbitration to effect the transfer of payment rights. 61 In December 2013, the underlying approval order for the Transfer Agreement was determined void ab initio. 62 As this court recognized, the factual and legal predicates for confirming the awards have been vacated. 63 Signed by Stewart Feldman (December 7, 2013). RSL vehemently opposed Transamerica s intervention, disingenuously claiming among other things that Transamerica lacks the requisite interest in the proceedings yet maintaining that Transamerica was bound by this court s judgments. It is undisputed the transfer of Jerry Green s annuity payments is subject to the SSPA, which provides obligor and issuers like Transamerica are interested parties entitled to file objections. Further, in its response, RSL admits that Transamerica opposed confirmation of the First Award in the Florida court. 64 By doing so, RSL concedes Transamerica has an interest in this action (which seeks to confirm the First Award through the Second Award) and presents an argument not 60 See fn See fn See D.E See D.E See D.E. 33, at page

26 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 26 of 31 D.E. Document Type Basis for Sanctions 37 Motion for Contempt, Request for Show Cause Hearing, and Request for Order Directing Funds to be Deposited into the Court s Registry warranted by existing law as Transamerica is an interested party under the SSPA. 65 RSL s statement also shows that it intentionally, and in bad faith, neglected to include Transamerica in this proceeding to confirm the First Award which it incorporated into the Second Award. Signed by Stewart Feldman (December 9, 2013). The motion sought to hold Transamerica and its counsel in contempt of violating this court s orders confirming the arbitration awards which awards were obtained without notice to or an agreement to arbitrate with Transamerica. The judgments confirming the awards were thus unenforceable against Transamerica. Transamerica adopts and incorporates its response, found at D.E. 50, as though fully set forth herein. As shown in Transamerica s response, and by objective circumstances surrounding this matter, RSL filed its motion for contempt with improper motive to harass and/or cause Transamerica undue expense and hardship. RSL s counsel, first by ghost-writing the awards and quietly initiating this action while the matter in Florida remained pending, purposely subjected Transamerica to conflicting orders by having two different courts ordering payment by the same funds into their registries, which falls in line with RSL s many other wanton actions such as its aggressive attempts to force arbitration as recognized by the Florida court. 66 RSL s counsel failed to properly serve the judgments upon Transamerica and thus violated due process rights. Further, the factual and legal predicates for the awards were found to be void ab initio See FLA. STAT See D.E. 45-1, at 4 (stating that the aggressive attempts of the petition [RSL] to force arbitration have resulted in a legal nullity ). 67 See D.E

27 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 27 of 31 D.E. Document Type Basis for Sanctions 52 RSL s Response to Transamerica s Rule 59/60 Motions Signed by Stewart Feldman (January 6, 2014). RSL persisted in maintaining that the judgments should stand despite conceding that Transamerica was affected by the judgments (RSL even filed a motion for contempt claiming Transamerica violated the judgments) and conceding it never served Transamerica with notice of this case until after the judgments were entered. Further, several weeks before RSL filed this Response, the Florida court determined that the underlying approval order for the Transfer Agreement was void ab initio. 68 As this court recognized, the factual and legal predicates for confirming the awards were vacated. 69 Thus, RSL s opposition to Transamerica s Rule 59/60 motion thus lacked factual and legal basis. B. Sanctions should compensate Transamerica and be sufficient to deter future conduct. RSL s filings have cost Transamerica a significant amount of fees and costs. Transamerica requests that those fees and costs be awarded. Monetary sanctions paid to the opposing party are appropriate under unusual circumstances, when deterrence is ineffective. 70 If the court concurs in such an award, Transamerica will provide proof of the amounts it has incurred. Previous awards of fees have proved ineffective to deter Stewart Feldman s violations of the SSPA and his misuse of arbitration. Courts are naturally reticent to award sanctions, on the presumption that the behavior is out of the ordinary. Here, that is not the case. Transamerica has twice obtained fees from RSL or its affiliates for violations of the SSPA, one of which involved 68 See D.E See D.E See Rentz v. Dynasty Apparel Indus., 556 F.3d 389, 395 (6 th Cir. 2009). 20

28 Case 4:13-cv Document 83 Filed in TXSD on 09/03/14 Page 28 of 31 Mr. Feldman s use of arbitration to bypass the court-approval requirement of a transfer by Jerry Green. 71 RSL and its affiliate Rapid Settlement have been sanctioned or faced possible sanctions in a number of other cases. 72 The court should strike RSL s above referenced pleadings, impose monetary sanctions against RSL, its counsel Stewart Feldman and/or the Feldman Law Firm, award Transamerica its attorneys fees and expenses and/or dismiss this action if not otherwise dismissed in relation to Transamerica s motion for summary judgment. The requested sanctions should be in an amount and form sufficient to deter repetition of the sanctionable conduct. 73 Transamerica also suggests that the court consider the possibility that an award of Transamerica s fees and costs will not deter RSL Funding or its counsel, who owns RSL Funding and profits from the purchase of annuity payments. For Mr. Feldman and his companies, the stakes are higher than an award of an opposing parties fees. Transamerica encourages the court to consider other forms of sanctions that would serve as a real deterrent. 71 See Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701 (Tex. App. Houston [1st Dist.] 2009, no pet.); See RSL Funding, LLC v. Aegon Structured Settlements, Inc., 384 S.W.3d 405 (Tex. App. Eastland, 2012, pet. denied). 72 A nationwide Westlaw search for cases involving Rapid Settlement or RSL Funding produces 40 cases, six of which involve sanctions or possible sanctions against Rapid Settlements or RSL Funding. See Exhibit J, Settlement Funding LLC v. RSL Funding, LLC, No. H , 2014 WL (S.D. Tex, April 15, 2014; Exhibit K, Symetra Life Ins. Co. v. National Ass n of Settlement Purchasers, No. H , 2012 WL (S.D. Tex, Nov. 21, 2012); Exhibit L, Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. H , 2007 WL (S.D. Tex., June 4, 2007); Exhibit M, In re Transfer of Structured Settlement Payment Rights ex rel. Saucier, Nos. 130 So (Miss. Ct. App., 2013); Exhibit N, Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. H , 2011 WL (S.D. Tex., Oct. 11, 2011); Exhibit O, Fidelity Guar. Life Ins. Co. v. Harrod, No. CCB , 2008 WL (Maryland Dist. Ct., April 15, 2008). 73 FED. R. CIV. P. 11(c)(4). 21