SETTLEMENT FUNDING, L.L.C.; PEACHTREE SETTLEMENT FUNDING, L.L.C.; EVELYN E. FRANKLIN, Plaintiffs-Appellants Cross-Appellees
RAPID SETTLEMENTS, LIMITED, RAPID MANAGEMENT CORPORATION; STEWART A. FELDMAN, Defendants-Appellees Cross-Appellants and RSL FUNDING, L.L.C., Defendant-Third Party Plaintiff-Appellee Cross-Appellant
J.G. WENTWORTH S.S.C., L.P.; JGWPT HOLDINGS, L.L.C.; JLL PARTNERS, INCORPORATED; DAVID MILLER; JG WENTWORTH ORIGINATIONS, L.L.C., Third Party Defendants-Cross-Appellees
from the United States District Court for the Southern
District of Texas
JOLLY, SMITH, and PRADO, Circuit Judges.
GRADY JOLLY, Circuit Judge.
dispute arises between two companies in the secondary market
for structured settlement payments: Peachtree and
Rapid. These two companies are in the
business of identifying individuals who are the beneficiaries
of structured settlements, which provide a stream of
payments, much like an annuity, usually over an extended
period of years; once an annuitant is identified, the
companies offer to purchase the stream of payments in return
for a lump sum. Here, Peachtree sued Rapid for tortious
interference with its contracts, alleging that Rapid
"poached" clients whose annuities it had already
contracted to purchase.
district court, relying on a decision by a Texas appellate
court, dismissed Peachtree's tortious interference claims
as a matter of law. Peachtree appeals. Rapid cross-appeals,
arguing for the first time after nearly four years of federal
litigation that there is no federal subject matter
jurisdiction because (1) the removal notice did not
adequately plead the citizenship of the LLC entities that are
parties to this case, and (2) the pleadings did not, on their
face, raise a federal question.
not happy that jurisdiction is a late show-up in this case.
Nevertheless, we hold that the plaintiffs have failed to meet
their burden of establishing either federal question or
federal diversity jurisdiction. In short, the federal courts
have no subject matter jurisdiction over this case. We vacate
the judgment and remand with directions to remand the case to
the state court.
world of purchasing payment rights to structured settlement
agreements, it appears that not all the players wear white
gloves. This characteristic of the business has been noticed
by the State of Texas and several other states. Thus, to
protect recipients of structured settlements from unfair or
abusive offers, many states have enacted Structured
Settlement Protection Acts that require court approval of any
contract to sell the payment rights to a structured
settlement. See, e.g., Tex. Civ. Prac. & Rem.
Code § 141.001 et seq.
crux of this dispute is that Peachtree claims that Rapid has
been interfering with the business relations between it and
its clients. In distilled terms, Peachtree alleges that,
through expensive search and advertising efforts, it finds
"clients"-recipients of structured
settlements-makes them an offer for their payment stream, and
then helps them through the hurdle of court approval of the
transfer agreement. The defendant, Rapid, then peruses the
court filings, directly contacts Peachtree's clients
while the approval request is still pending in court, and
makes the client a more generous offer, causing the client to
either renege on his agreement with Peachtree or demand that
Peachtree increase its offer.
present litigation began in 2006, when Peachtree sued Rapid
in Texas state court alleging, among other things, tortious
interference with a contract between it and Franklin, a New
York resident. Rapid, it alleged, found Franklin through the
court filings and tried to persuade her to breach her
contract with Peachtree by making her a better
offer. The litigation was consolidated
with Peachtree's similar claim against Rapid involving a
Texas resident, Michale Parenti.
2012, some six years into the litigation before the Texas
state court, Rapid asserted new claims against a group of
third-party defendants called the "Wentworth
Rapid alleged, among other things, a
state law civil conspiracy claim. The newly-impleaded
Wentworth Parties promptly removed the entire case to federal
court. They stated that the basis for removal was both
diversity jurisdiction and federal question
jurisdiction. The Wentworth
Parties were later dismissed, and are no longer parties to
the case. Peachtree and Rapid continued to litigate their
tortious interference suit in federal court.
September 2015, the only disputed colorable claims were
Peachtree's tortious interference claims against Rapid
with respect to Franklin and Parenti. On summary judgment,
the district court dismissed
Peachtree's interference claims as a matter of law. The
court relied on a recent decision from a Texas appellate
court, Washington Square Fin., LLC v. RSL Funding,
LLC, 418 S.W.3d 761 (Tex. App.-Houston [14th Dist.]
2013, pet. denied), which held Texas law did not recognize a
tortious interference claim based on a contract that had not
yet been approved pursuant to the Texas Structured Settlement
Protection Act; Peachtree's contracts with Franklin and
Parenti had not been approved at the time Rapid allegedly
made its raid. Peachtree voluntarily dismissed any remaining
claims it had pending, and the district court entered final
judgment. Peachtree timely appeals the judgment.
earlier indicated, for the first time on appeal, after nearly
four years of litigation in the federal district court, Rapid
now makes the argument that there is no federal jurisdiction.
Specifically, it argues that there was neither federal
question jurisdiction nor diversity of ...