Allstate Life Insurance Company v. Rapid Settlements, Ltd. United States District Court for the Southern District of Mississippi (No. 06-00629, 2007 WL 2745806, September 20, 2007)

In this declaratory judgment action, Allstate Life Insurance Company, the annuity owner and issuer, sought declaratory and injunctive relief against Rapid Settlements, Ltd., a factoring company, in connection with the factoring company’s attempts to enforce a transfer agreement, arbitration award and judgment confi rming the arbitration award. According to the complaint, the factoring company and the claimants executed a transfer agreement that purported to assign to the factoring company the right to certain structured settlement payments in exchange for a lump sum. A state court in Mississippi denied the factoring company’s petition to approve the transfer agreement. Following the denial of its petition, the factoring company commenced arbitration proceedings against the claimants and obtained an arbitration award, which purported to approve the transfer agreement. The factoring company obtained a judgment confi rming the arbitration award in Harris County, Texas. The factoring company then moved for an enforcement order, seeking to enforce the confi rmation judgment against the annuity owner and issuer, that were not parties to the arbitration proceedings or the proceedings to confi rm the arbitration award.

The district court granted summary judgment in favor of the annuity owner and issuer, declaring that “the arbitration award is void as to [the annuity owner and issuer].” 2007 WL2745806, at *5. In rejecting the factoring company’s argument that the structured settlement acts did not apply because the arbitration award was an involuntary damages award for breach of contract, the court explained that the arbitration “was not a mere involuntary damages award – it was a transfer.” Id. at 3. The court further explained that the annuity owner and issuer have interests that are distinguishable from the claimants’ interests, and thus the annuity owner and issuer are not bound by the arbitration award. See id. at 5. In addition to declaring the arbitration award void as to the annuity owner and issuer, the court granted the annuity owner and issuer’s request for injunctive relief with respect to its duty to transfer the periodic payments at issue to the factoring company. Finally, the court invited the annuity owner and issuer to submit additional briefi ngs to enjoin the factoring company, in the future, from seeking to effectuate transfers involving the annuity owner and issuer without complying with the applicable structured settlement protection acts. Id. The annuity owner and issuer were represented by Stephen Harris, Katherine Villanueva and Nicole Lazarz of Drinker Biddle & Reath LLP.