Saucier v. Aviva Life and Annuity Company
Filing
67
ORDER denying Counter-Defendants RSL Funding, LLC, and RSL-5B-IL, Ltd.'s request to compel arbitration, and directing parties to show cause why interpled funds should not be disbursed. Signed by District Judge Halil S. Ozerden on 11/4/2013. (ENW)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
BENNY RAY SAUCIER
§
§
§
v.
§
§
AVIVA LIFE AND ANNUITY COMPANY §
§
v.
§
§
BENNY RAY SAUCIER,
§
RSL FUNDING, LLC, and
§
RSL-5B-IL, LTD.
§
PLAINTIFF
Civil No. 1:10CV429-HSO-JMR
DEFENDANT/
COUNTER-PLAINTIFF
COUNTER-DEFENDANTS
MEMORANDUM OPINION AND ORDER DENYING COUNTERDEFENDANTS RSL FUNDING, LLC, AND RSL-5B-IL, LTD.’S REQUEST TO
COMPEL ARBITRATION, AND DIRECTING PARTIES TO SHOW CAUSE
WHY INTERPLED FUNDS SHOULD NOT BE DISBURSED
This matter is before the Court on remand from the United States Court of
Appeals for the Fifth Circuit to “determine in the first instance whether any issues
or claims decided by the state court are entitled to preclusive effect” and to
“determine whether RSL is entitled to compel arbitration under 9 U.S.C. § 3.” Op.
[50] at 11. Plaintiff Benny Ray Saucier and Counter-Defendants RSL Funding,
LLC, and RSL-5B-IL, Ltd., have filed Memorandum Briefs [56], [57], Responses
[58], [59], and Replies [62], [63], in support of their respective positions on these
issues. The Court, having considered the pleadings on file, the briefs and
arguments of the parties, and relevant legal authorities, finds that the RSL entities
are precluded from compelling arbitration and that their request to do so should be
denied. The Court further finds that, in accordance with Federal Rule of Civil
Procedure 56(f)(3), because it appears that there may be no genuine dispute of
material fact surrounding the issue of entitlement to the interpled funds in the
registry of the Court such that summary judgment in Plaintiff Benny Ray Saucier’s
favor may be warranted, the parties will be directed to show cause within 20 days of
entry of this Order why such funds should not be disbursed to Plaintiff Benny Ray
Saucier.
I. FACTS AND PROCEDURAL HISTORY
A.
Factual Background
This case stems from a dispute over entitlement to the proceeds of a
structured settlement annuity funded by Commercial Union Insurance Company for
the benefit of Plaintiff Benny Ray Saucier [“Plaintiff” or “Saucier”] and held by
Defendant Aviva Life and Annuity Company [“Aviva”]. Compl. [1-1] at ¶¶ 1, 5;
Aviva’s Countercl. [4] at 1. Saucier alleges in the Complaint that two lump sum
payments are owed him under the annuity contract. He maintains that
$150,000.00 was payable to him on August 30, 2010, and that he is due to receive
another $200,000.00 payment on August 30, 2015. Compl. [1-1] at ¶ 5.
Saucier originally entered into a transfer agreement with Woodbridge
Investments LLC [“Woodbridge”] to sell the two remaining payments to
Woodbridge. After the Chancery Court of Harrison County, Mississippi, First
Judicial District, approved this transfer under the Mississippi Structured
Settlement Protection Act, Miss. Code § 11-57-11, et seq. [“MSSPA”], Woodbridge
was unable to pay the consideration approved in the transfer order. In the Matter of
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Transfer of Structured Settlement Payment Rights by Benny Ray Saucier, No. 2011CA-01036-COA, 2013 WL 1197889, at *1–*2 (Miss. Ct. App. 2013) [“In re Saucier”].
Woodbridge then referred Saucier to RSL Funding LLC and RSL-5B-IL Ltd.
[collectively, “RSL”].
In early 2009, Saucier entered into an amended transfer agreement with
RSL, such that RSL would receive the two remaining payments from Aviva in
exchange for the payment of $212,000.00. Id. On February 6, 2009, the Harrison
County Chancery Court entered an Order granting RSL’s motion for entry of an
amended transfer order. Chancery Court Order [62-2] at 4–5. On March 12, 2009,
the Chancery Court entered an Amended Order Approving of Transfer of Structured
Settlement Rights which authorized RSL’s purchase of Saucier’s annuity pursuant
to the MSSPA. Chancery Court Am. Order [62-3] at 3–5; see also Compl. [1-1] at ¶¶
7-8; In re Saucier, 2013 WL 1197889, at *3.
B.
The State Court Litigation
On June 11, 2009, Saucier filed a motion to set aside the Chancery Court’s
Amended Order Approving of Transfer, which the Chancery Court granted in an
Order dated September 8, 2009. Compl. [1-1] at ¶ 8; Chancery Court Order [62-4]
at 1; In re Saucier, 2013 WL 1197889, at *4. In setting aside the transfer, the
Chancery Court found that RSL had failed to comply with the provisions of the
MSSPA and that RSL did not give Saucier notice of the hearing on RSL’s motion for
entry of an amended transfer order. Chancery Court Order [62-4] at 1; In re
Saucier, 2013 WL 1197889, at *4. Saucier and RSL have been embroiled in
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litigation regarding ownership of the annuity payments ever since. Compl. [1-1] at
¶¶ 7–15. While this state court litigation was ongoing, on July 12, 2010, Saucier
requested that Aviva remit the $150,00.00 payment due on August 30, 2010. Id. at
¶ 15. According to Saucier, Aviva would not release the funds because of the then
pending appeal of the Chancery Court order. Id.
In an opinion entered on March 26, 2013, the Court of Appeals of Mississippi
affirmed the June 17, 2011, order of the Chancery Court which denied RSL’s
attempt to stay the Chancery Court proceedings to refer the matter to arbitration
and granted a permanent injunction prohibiting arbitration. In re Saucier, 2013
WL 1197889, at *7. A more detailed account of the highly complicated procedural
history of this litigation in the state courts is available in the Mississippi Court of
Appeals’ opinion in In re Saucier, 2013 WL 1197889, at *1–*7.
C.
Federal Court Proceedings
The parties have also appeared before this Court multiple times in litigation
related to the annuity payments. In addition to the case currently before the Court,
RSL filed a complaint [1] for interpleader, discharge, injunction, and attorney’s fees
on May 11, 2009, in RSL Funding, LLC, and RSL-5B-IL v. Benny Ray Saucier,
1:09cv300-HSO-JMR (S.D. Miss.). The Court sua sponte dismissed this matter on
January 27, 2010, for lack of jurisdiction. RSL then filed a complaint [1] in RSL
Funding, LLC, and RSL-5B-IL v. Benny Ray Saucier and Internal Revenue Serv.,
1:10cv145-LG-RHW (S.D. Miss.), for interpleader, discharge, injunction, and other
relief on March 31, 2010. The matter was sua sponte dismissed without prejudice
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on November 1, 2010, pursuant to Federal Rule of Civil Procedure 4(m) for failure
to serve the defendants within 120 days of filing the complaint.
Saucier initiated the present litigation by filing a Complaint against Aviva in
the Chancery Court of Harrison County, Mississippi, First Judicial District, on or
about August 16, 2010, seeking a declaration of the rights of the parties. Compl. [11] at ¶¶ 15–16. Aviva removed the case to this Court on August 27, 2010, invoking
diversity jurisdiction, pursuant to 28 U.S.C. § 1332. Notice of Removal, at p. 2.
Saucier originally sought interest payments, attorney fees, and costs arising out of
Aviva’s alleged failure to timely comply with the annuity contract, and an award of
“punitive or other damages, whether contractual or extra-contractual, arising out of
or relating to [Aviva’s] failure to timely tender to Saucier the August 30, 2010,
disbursement under the annuity contract in question . . . .” Id.
On August 30, 2010, Aviva filed an Answer and Counterclaim for
Interpleader [4], and a Motion for Interpleader [5]. Aviva sought to interplead the
$150,000.00 payment into the registry of this Court for adjudication of the
inconsistent claims to the funds, pursuant to 28 U.S.C. § 1335(a)(2), and to join RSL
Funding, LLC, and RSL-5B-IL, Ltd., as interpleader Counter-Defendants, pursuant
to Federal Rule of Civil Procedure 19. Mot. for Interpleader, at p. 5.
Saucier filed a Motion [9] to Remand this action to state court. Saucier did
not disagree that diversity jurisdiction existed, nor did he oppose Aviva’s effort to
interplead the August 30, 2010, structured settlement disbursement. Instead, he
contended that the funds should be interpled into the registry of the Chancery
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Court. Resp. to Mot. to Interplead, at p. 2. On September 24, 2010, Saucier filed an
“Evidentiary Stipulation” in which he “stipulate[d] that he is not seeking monetary
damages from defendant, Aviva,” and that “he will not assert any claims of liability
or pursue litigation against Aviva regarding his structured settlement annuity in
the amount of $350,000.00, which is held by Aviva, so long as Aviva agrees to
disburse the annuity payments as directed by valid court order.” Stip. [15] at 1.
“The only remaining dispute exist[s] between Saucier and RSL regarding ownership
of the future annuity payments.” Pl.’s Mem. [56] at 2.
On November 18, 2010, the Court entered an Order [19] denying Saucier’s
Motion to Remand; granting in part and denying in part Aviva’s Motion for Leave to
Interplead, for Permission to Deposit Disputed Sums into the Court’s Registry, and
to Join Necessary Parties as Interpleader Counterclaim Defendants; and staying
the case pending resolution of the state court proceedings. Order [19], at pp. 12-13.
The Order also directed the Clerk of Court to add RSL Funding, LLC, and
RSL-5B-IL, Ltd., as Counter-Defendants in this case, and further directed Aviva to
serve Counter-Defendants RSL Funding, LLC, and RSL-5B-IL, Ltd., with process
and a copy of the Order [19]. Order [19], at p. 12.
This Court later reconsidered its ruling denying Saucier’s Motion to Remand
[9], and in an Order [43] entered on June 27, 2011, determined that it should
abstain from hearing this matter. The Court granted Saucier’s Motion to Remand
and remanded the case to Chancery Court for further proceedings. Order [43] at
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8–9. The Court’s Order directed the Clerk to refund the annuity proceeds tendered
into the registry of the Court to Aviva. Id. at 9.
RSL appealed the Court’s Orders [19], [33], [43], on grounds that they denied
RSL’s “multiple attempts to compel arbitration after the Court stayed the case but
before the Court signed the remand order.” Notice of Appeal [45] at 1; Am. Notice of
Appeal [46] at 2. In an opinion issued on November 16, 2012, the United States
Court of Appeals for the Fifth Circuit reversed and remanded this Court’s judgment.
On remand, the Fifth Circuit directed this Court to “determine in the first instance
whether any issues or claims decided by the state court are entitled to preclusive
effect” and to “determine whether RSL is entitled to compel arbitration under 9
U.S.C. § 3.” Op. [50] at 11. Aviva subsequently filed a Motion [64] for leave to
deposit the interpled sums back into the Court’s registry. The Court granted [65]
Aviva’s Motion, and Aviva deposited $150,000.00 of the annuity funds into the
Court’s registry on September 9, 2013. Receipt [66] at 1.
II. DISCUSSION
Pursuant to the mandate of the Fifth Circuit, this Court must first determine
whether any issues or claims decided by the state courts are entitled to preclusive
effect. The issues in this case are Saucier’s and RSL’s claims to the interpled
annuity funds and RSL’s attempt to compel Saucier to arbitrate those claims.
Saucier maintains that RSL is collaterally estopped from compelling him to
arbitrate the claims in this case. Pl.’s Mem. [56] at 10–13. Alternatively, Saucier
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argues that no valid agreement to arbitrate exists between him and RSL, such that
he should not be compelled to arbitrate. Id. at 13–23.
RSL presents a number of arguments in support of its position that the state
court rulings do not enjoy preclusive effect and that this matter should be referred
to arbitration. RSL contends that the state courts decided an unripe issue of
arbitrability, that the Chancery Court identified an arbitrable issue, that the
Chancery Court never rendered a “final judgment,” that RSL and Saucier agreed to
arbitrate all of their disputes, and that an arbitrator should resolve in the first
instance the preclusive effect of the state court rulings as well as arbitrability.
RSL’s Mem. [57] at 2–16.
A.
Whether an Arbitrator or the Court Should Determine the Preclusive Effect
of the State Court Decisions
RSL maintains that because the parties agreed to arbitrate the question of
arbitrability, this matter should be referred to arbitration so that an arbitrator can
determine “gateway procedural issues” such as the preclusive effect of the state
court rulings. RSL’s Mem. [57] at 10. RSL cites New Orleans S.S. Ass’n v. Gen.
Longshore Workers, 626 F.2d 455 (5th Cir. 1980), for the proposition that “[t]he
Fifth Circuit holds that issue preclusion is a matter for the arbitrator to determine,
absent the arbitration agreement’s providing that the defense of res judicata is not
subject to arbitration.” RSL’s Mem. [57] at 10 (citing New Orleans S.S. Ass’n, 626
F.2d at 468). The question posed in New Orleans S.S. Ass’n was whether an
arbitration award could be given an effect akin to res judicata or stare decisis with
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regard to future disputes that might arise between the parties. New Orleans S.S.
Ass’n, 626 F.2d at 468. The Fifth Circuit held that, if the parties could not agree,
such a question would be a proper subject for arbitration. Id.
New Orleans S.S. Ass’n is distinguishable from the present case. This
dispute does not present the Court with the question of the preclusive effect of a
prior arbitration award. This matter has not been previously submitted to
arbitration. Rather, this Court must resolve whether earlier state court decisions
which denied RSL’s motion to stay state court proceedings and refer the dispute
with Saucier to arbitration are entitled to preclusive effect. See In re Saucier, 2013
WL 1197889, at *12. RSL cites no binding authority directing that an arbitrator
should decide the preclusive effect of earlier state court rulings under the
circumstances of this case, and the Fifth Circuit has specifically instructed this
Court to address the issue of preclusion on remand. Op. [50] at 11. RSL’s
arguments on this point are not persuasive.1
B.
Whether the State Court Decision is Entitled to Preclusive Effect
1.
Applicable Law
“The Full Faith and Credit Act, 28 U.S.C. § 1738, requires federal courts to
give the same preclusive effect to state court judgments that those judgments would
receive in the courts of the state from which the judgments emerged.” Capital City
The Court also notes that, in addition to denying RSL’s motion to compel
arbitration, the Chancery Court granted a permanent injunction prohibiting RSL from
pursuing arbitration proceedings with Saucier based on its finding that RSL’s efforts to
enforce the underlying arbitration clause violated state law. In re Saucier, 2013 WL
1197889, at *7.
1
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Ins. Co. v. Hurst, 632 F.3d 898, 903 (5th Cir. 2011) (citation omitted). Because
Saucier seeks to estop RSL from compelling arbitration in this case based upon an
earlier Mississippi state court judgment, this Court must apply Mississippi
preclusion law.2 See id.; Duffy & McGovern Accommodation Servs. v. QCI Marine
Offshore, Inc., 448 F.3d 825, 828 (5th Cir. 2006).
2.
Whether RSL is Collaterally Estopped from Compelling Arbitration
Saucier argues that the doctrine of collateral estoppel operates to bar RSL
from compelling arbitration. Pl.’s Mem. [56] at 11–13. Under Mississippi law,
“[c]ollateral estoppel precludes parties from relitigating issues that are actually
litigated, determined by, and essential to the judgment in a former action, even
though a different cause of action is the subject of the subsequent action.” Rest. of
Hattiesburg, LLC v. Hotel & Rest. Supply, Inc., 84 So. 3d 32, 45 (Miss. Ct. App.
2012); see also Dunaway v. W.H. Hopper & Assocs., Inc., 422 So. 2d 749, 751 (Miss.
1982). “The doctrine of collateral estoppel serves a dual purpose. It protects
litigants from the burden of relitigating an identical issue with the same party or
his privy. It promotes judicial economy by preventing needless litigation.” Mayor
Application of federal common law would lead to the same conclusion. Under
federal law, collateral estoppel applies to bar litigation of an issue previously decided in
another proceeding by a court of competent jurisdiction when four conditions are met: (1)
the issue under consideration is identical to that litigated in the prior action; (2) the issue
was fully and vigorously litigated in the prior action; (3) the issue was necessary to support
the judgment in the prior case; and (4) there is no special circumstance that would make it
unfair to apply the doctrine. Copeland v. Merrill Lynch & Co., 47 F.3d 1415, 1421–22 (5th
Cir. 1995).
2
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and Board of Aldermen, City of Ocean Springs v. Homebuilders Association of
Mississippi, Inc., 932 So. 2d 44, 59 (Miss. 2006).
a.
Is There a Final Judgment?
For collateral estoppel to apply, “there must be a final judgment adjudicated
on the merits.” Rodgers v. Moore, 101 So. 3d 189, 195 (Miss. Ct. App. 2012)
(citations omitted). Of relevance here are two orders: (1) a July 17, 2011, Order [565] from the Chancery Court of Harrison County which denied RSL’s motion to stay
court proceedings and refer proceeding to arbitration and granted Saucier’s motion
for a permanent injunction prohibiting arbitration; and (2) a March 26, 2013,
opinion of the Mississippi Court of Appeals which affirmed the July 17, 2011, Order
of the Chancery Court. In determining the preclusive effect of these rulings, this
Court must first consider whether they qualify as final judgments under Mississippi
law. See, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 637 F.2d 391,
399 (5th Cir. 1981).
To assess the finality of an order ruling on a motion to compel arbitration,
the Mississippi Supreme Court has adopted “the procedure of the Federal
Arbitration Act and follow[s] the lead of other jurisdictions.” Tupelo Auto Sales,
Ltd. v. Scott, 844 So. 2d 1167, 1170 (Miss. 2003). Mississippi courts treat an order
denying a motion to compel arbitration as a final judgment for appellate purposes
on that legal issue and permit an appeal of such a ruling. Id.; see also 9 U.S.C. § 16.
In addition, “[a] decision by the Court of Appeals is a final decision which is not
reviewable by the Supreme Court except on writ of certiorari.” Miss. R. App. P.
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17(a). Based on the foregoing authorities and the record, the Court concludes that
the July 17, 2011, Order [56-5] of the Chancery Court and the March 26, 2013,
opinion of the Mississippi Court of Appeals constitute final judgments for purposes
of collateral estoppel. See Miss. R. Civ. P. 54(a) (“‘Judgment’ as used in these rules
includes a final decree and any order from which an appeal lies.”).
The Mississippi Supreme Court has held that
pendency of an appeal does not alter the collateral estoppel or res judicata
effect of an otherwise final judgment. Only after being reversed by [the
Mississippi Supreme] Court will the judgment lose its collateral estoppel
or res judicata effect.
Gollot v. State, 646 So. 2d 1297, 1302 (Miss. 1994) (citing Smith v. Malouf, 597 So.
2d 1299, 1301–02 (Miss. 1992); Miss. R. Civ. P. 60(b)).
While the timely filing of a petition for a writ of certiorari stays the issuance of the
mandate of the Court of Appeals, Miss. R. App. P. 17(j), unless and until they are
reversed by the Mississippi Supreme Court, the two Orders at issue here remain
final judgments for collateral estoppel purposes, see Gollot, 646 So. 2d at 1302.
b.
Preclusive Effect of the Prior State Court Rulings
Based upon the substance of the two state court rulings at issue here, the
parties currently before the Court have previously litigated the issue of
arbitrability. While strict identity of parties is not necessary for collateral estoppel
to apply if it can be shown that a nonparty stands in privity with a party in the
prior action, EMC Mortg. Corp. v. Carmichael, 17 So. 3d 1087, 1091 (Miss. 2009)
(citation omitted), strict identity of the parties exists in this case. The RSL entities
seeking to compel arbitration in this Court are the same RSL entities that litigated
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the arbitration issue in the state court proceedings, and Saucier opposed it in those
proceedings.
RSL sought to compel arbitration pursuant to the same three arbitration
provisions under which it now seeks to compel arbitration in this Court—a January
27, 2009, amended transfer agreement; a January 27, 2009, application; and a
January 29, 2009, promissory note. Compare In re Saucier, 2013 WL 1197889, at
*10, with RSL’s Mem. [57] at 7–8, and RSL’s Resp. [59] at 1–4. The Chancery Court
resolved the arbitrability issue against RSL by rejecting RSL’s attempt to compel
arbitration, and the Mississippi Court of Appeals affirmed the lower court’s
judgment. In re Saucier, 2013 WL 1197889, at *12. The resolution of that issue
was essential to those earlier judgments. The essential elements necessary for
application of collateral estoppel are therefore present. See Dunaway, 422 So. 2d at
751. For the foregoing reasons and based on the facts and circumstances presented
here, the Court finds that collateral estoppel applies such that RSL is precluded
from seeking to compel arbitration in this forum. See id. RSL’s request to compel
arbitration will be denied.
C.
Remaining Issues Before The Court
The only remaining claims before this Court are Saucier’s and RSL’s
competing claims to the $150,000.00 annuity payment which have been interpled by
Aviva. See Aviva’s Countercls. for Interpleader [4], [20]; Pl.’s Stip. [15] at 1; Receipt
[66] at 1. The $150,000.00 represents the lump sum annuity payment which was
due Saucier on August 30, 2010. Aviva’s Countercl. for Interpleader [20] at 2. RSL
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maintains that this Court is vested “with jurisdiction to adjudicate the competing
claims to the funds asserted by RSL and Saucier.” RSL’s Reply [62] at 7.
Underlying the decisions of the Chancery Court and the Mississippi Court of
Appeals on the arbitration issue was their conclusion that the amended transfer
agreement between Saucier and RSL was not “effective” pursuant to Mississippi
Code § 11-57-7. In re Saucier, 2013 WL 1197889, at *11. Thus, there has been no
approval of any transfer of Saucier’s structured settlement payment rights under
Mississippi Code § 11-57-7. Without such approval, RSL cannot encumber those
rights. See Miss. Code §§ 11-57-7 and 11-57-3(r).
Federal Rule of Civil Procedure 56(f)(3) provides that “[a]fter giving notice
and a reasonable time to respond, the court may . . . consider summary judgment on
its own after identifying for the parties material facts that may not be genuinely in
dispute.” Fed. R. Civ. P. 56(f)(3). Pursuant to Rule 56(f)(3), the Court gives notice
that it appears that there may be no genuine dispute of material fact with respect to
Saucier’s entitlement to the $150,000.00 held in the registry of the Court and that
Saucier may be entitled to judgment as a matter of law on his claim to the funds.
The Court will afford the parties an opportunity to respond in accordance with Rule
56(f)(3) and show cause why summary judgment should not be granted in Saucier’s
favor and the interpled funds disbursed to him and why this matter should not then
be fully and finally dismissed.
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III. CONCLUSION
For the reasons stated herein, RSL’s request to compel arbitration will be
denied, and the parties will be directed to show cause why summary judgment
should not be granted in Saucier’s favor and the interpled funds disbursed to him
and why this matter should not be fully and finally dismissed pursuant to Federal
Rule of Civil Procedure 56(f)(3).
IT IS, THEREFORE, ORDERED AND ADJUDGED, that due to the
preclusive effect of the prior Orders of the Chancery Court and the Mississippi
Court of Appeals, the request to compel arbitration advanced by CounterDefendants RSL Funding, LLC, and RSL-5B-IL, Ltd., is DENIED.
IT IS, FURTHER, ORDERED AND ADJUDGED that, the parties are
directed to show cause in writing within 20 days of entry of this Memorandum
Opinion and Order why summary judgment should not be granted in Plaintiff
Benny Ray Saucier’s favor pursuant to Federal Rule of Civil Procedure 56(f)(3), why
the $150,000.00 deposited in the registry of this Court should not be disbursed to
him, and why this matter should not be fully and finally dismissed.
SO ORDERED AND ADJUDGED, this the 4th day of November, 2013.
s/ Halil Suleyman Ozerden
HALIL SULEYMAN OZERDEN
UNITED STATES DISTRICT JUDGE
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