RSL Funding, LLC v. J.G. Wentworth Originations, LLC

Filing 63

ORDER VACATING 59 Memorandum and Recommendation; DENYING 52 JG Wentworth Originations, LLCs Motion for Summary Judgment; DENYING 53 RSL Funding, LLCs Motion for Partial Summary Judgment at this time without prejudice. JG Wentworth Originations, LLC, is ORDERED to file a brief and supporting evidence of the citizenship of each of its members by April 7, 2017. (Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
RSL FUNDING, LLC,
Plaintiff,
v.
JG WENTWORTH ORIGINATIONS, LLC,
Defendant.

§
§
§
§
§
§
§
§
§

CIVIL ACTION H-12-1872

ORDER
On March 22, 2017, the United States Court of Appeals for the Fifth Circuit issued an
opinion in Settlement Funding, L.L.C. v. Rapid Settlements, No. 16-20109, slip op. (5th Cir. Mar.
22, 2017), in which both the plaintiff and the defendant in this case were parties. In the case before
the Fifth Circuit, Settlement Funding, LLC, Peachtree Settlement Funding, LLC, and an individual
annuitant sued Rapid Settlements, Limited, Rapid Management Corporation, RSL Funding, LLC,
and Stewart A. Feldman in state court, alleging tortious interference with a contract and other claims.
See id. at 2 n.1; id. at 3. The case and a similar suit were consolidated. See id. at 4.
In 2012, six years after the state case was originally filed, the defendants asserted new claims
against JG Wentworth SSC LP, JGWPT Holdings, LLC, JLL Partners, Inc., David Miller, and JG
Wentworth Originations, LLC (collectively the “Wentworth Entities”). See id. & n.5. The
Wentworth Entities, which were related to the plaintiff entities, removed the action on the basis of
both diversity jurisdiction and federal question jurisdiction. Id. at 4. The Wentworth Entities were
subsequently dismissed. Id. The district court granted summary judgment against the plaintiffs on
the merits, and the plaintiffs appealed. See id. at 5. On appeal, the defendants raised, for the first
time, the argument that the district court did not have subject matter jurisdiction. See id.

The Fifth Circuit examined both of the Wentworth Entities’ bases for federal jurisdiction.
See id. at 5-11. The Fifth Circuit found neither diversity nor federal-question jurisdiction and
vacated the district court’s opinion, remanding the case with directions to remand it to state court.
See id. at 11. Of particular importance to the case presently before this court, the Fifth Circuit noted
that “the removal notice failed to allege complete diversity because it did not adequately allege the
citizenship of every party; that is, it failed to allege the citizenship of each member of the many LLCand partnership-litigants” as required. Id. at 8–9 (stating that the removing party “must specifically
allege the citizenship of every member of every LLC or partnership involved in a litigation”). On
appeal, the plaintiffs were unable to meet their burden of establishing complete diversity at the time
of removal, even admitting that they did not know the citizenship of every member of at least three
of the indirect member entities of both Settlement Funding, LLC, and Peachtree Settlement Funding,
LLC. See id. at 10 n.13; id. at 11.
The Fifth Circuit’s decision raises this court’s concern that subject matter jurisdiction may
also be lacking in the instant action. Here, JG Wentworth Originations, LLC, removed this action
on June 22, 2012,1 solely on the basis of diversity jurisdiction. Dkt. 1. In support, JG Wentworth
Originations, LLC, represented that it was “a Nevada limited liability company” with its principal
place of business and citizenship in Pennsylvania, but did not allege the citizenship of each of its
members. Id. at 4.

1

The Wentworth Entities removed Settlement Funding, L.L.C. v. Rapid Settlements, in mid2012. See Settlement Funding LLC v. RSL Funding, LLC, No. H-12-2044, 2014 WL 12537144, at
*3 (S.D. Tex. June 20, 2014) (stating that the Wentworth Entities removed the action after they were
first added to the lawsuit in June 2012).
2

The court finds it appropriate to allow JG Wentworth Originations, LLC, the opportunity to
demonstrate complete diversity by establishing the foreign citizenship of all of its members at the
time of removal of this case. Because this court’s jurisdictional authority is in doubt, the court
cannot issue any decision on the merits of the case at this time.
Therefore, the court VACATES the Magistrate Judge’s Memorandum and Recommendation
(Dkt. 59) and DENIES JG Wentworth Originations, LLC’s Motion for Summary Judgment
(Dkt. 52) and RSL Funding, LLC’s Motion for Partial Summary Judgment (Dkt. 53) at this time
without prejudice. If JG Wentworth Originations, LLC, establishes that this court can exercise
subject matter jurisdiction over this case, the court will reconsider the parties’ motions for summary
judgment. JG Wentworth Originations, LLC, is ORDERED to file a brief and supporting evidence
of the citizenship of each of its members by April 7, 2017.
Signed at Houston, Texas on March 24, 2017.

Gray H. Miller
United States District Judge

3