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F iled 12 M arch 2C hris D an ie l - D isH arr is C o un tyE D 1 0 1 J 0 1 6 15 8 86 6B y: dau nshae n . w

IN THE DISTRICT COURT OF

CAUSE NO. 2006-23366

EVEL YN E. FRANKLIN, SIMMIE

BERNARD KING, SETTLEMENT

FUNDING, LLC, and PEACHTREE

SETTLEMENT FUNDING, LLC

v.

RAPID SETTLEMENTS, LTD.,

RAPID MANAGEMENT CORP.,

RSL FUNDING, LLC, and

STEWART A. FELDMAN

HARRISCOUNTY,TEXAS

113th JUDICIAL DISTRICT

PLAINTIFFS' RESPONSE TO RSL FUNDING, LLC'SMOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiffs, Settlement Funding, LLC, Peachtree Settlement Funding, LLC

(collectively, "Settlement Funding, LLC" or "Settlement Funding"), Evelyn E. Franklin,

and Simmie Bernard King, subject to their Motion for Continuance, hereby respond to

the Motion for Partial Summary Judgment (the "MSJ") filed by Defendant RSL Funding,

LLC ("RSL"), which motion includes both a traditional motion for summary and a no-

evidence motion for summary judgment, and state the following in support:

I. MOTION FOR CONTINUANCE

The only issue ripe for summary judgment is Settlement Funding's tortious-

interference claim. See generally Settlement Funding, LLC's Supplement to Traditional

Partial Mot. Summ. J., filed Feb. 17,2012. To be sure, RSL's MSJ on Plaintiffs' claims

for alter ego and other claims is premature. The Court should therefore continue RSL's

MSJ to the extent it involves claims other than Settlement Funding's tortious-

interference claim. See TEX.R. CIV.P. §§ 166a(g), 251, 252.

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After failing to produce responsive documents for over a year, RSL filed its MSJ on

October 21,2011. Shortly thereafter, Settlement Funding requested a continuance, which

the Court granted because RSL' s motion was premature. Although RSL is still shirking

its discovery obligations, it insists on hearing its MSJ on March 9, 2012, before RSL has

complied with its discovery obligations.

RSL is still withholding documents and refusing to produce responsive documents

without a protective order, including non-privileged, non-confidential documents not

otherwise immune from discovery. Settlement Funding has been actively pursuing

discovery against RSL of non-confidential, relevant documents, yet after a year of

obstreperous posturing, RSL has only produced one annuitant file, two pay stubs, and one

employment agreement. Likewise, Rapid continues to withhold fmancial records relevant

to the subject matter of the pending action, to date producing only a limited number of

bank statements from January 2008 to April 2009, a balance sheet and a statement of

income dated March 2010, and a general ledger with no underlying support or data. This

is a wholly insufficient production.

Since RSL filed its MSJ on October 21, 2011, Settlement Funding has done the

following to obtain documents in support of its claims:

1. On November 15,2011, after continued failures by RSL and Defendant

Rapid Settlements, Ltd. ("Rapid") to produce documents, Settlement

Funding sought out records directly from both Green Bank, N.A.

("Green Bank"), one of Defendants' banks, and Kaminski and

Company, PC ("Kaminski"), Defendants' CPA. Settlement Funding also

requested records from Green Bank and Kaminski related to certain

entities and individuals closely affiliated with Defendants, which upon

information and belief are each controlled by Defendant Stewart A.

Feldman ("Feldman") to pursue his unethical business practices. On

December 2, 2011, Defendants moved to quash the subpoenas to Green

Bank and Kaminski, and Settlement Funding has still not received any

Green Bank or Kaminski documents to date.

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2. On November 30, 2011, Settlement Funding moved to compel

documents from RSL. Even though the Court ordered RSL to produce

responsive documents, to date RSL has produced no additional

documents. Settlement Funding, on the other hand, produced a number

of documents on March 2, 2012 that are responsive to RSL's and

Rapid's requests.

3. On November 30, 2011, Settlement Funding moved to compeldepositions and documents from Rapid. On December 14, 2011, the

Court ordered that these depositions and documents be produced. See

Order Granting Peachtree's Mot. Compel Deps., attached as Exhibit A.I

4. On January 13, 2012, Settlement Funding sought third-party documents

from both Defendant Rapid Management Corp. ("Rapid Management"),

Rapid's general partner, and Capstone Associated Services, Ltd.

("Capstone"), a Feldman controlled affiliate that shared, inter alia,office space, personnel, and supplies with Rapid and that may have

received the fraudulent transfer from Rapid. On January 20, 2012,

Defendants moved to quash the Rapid Management and Capstonesubpoenas, and to date Settlement Funding has still not received any

Rapid Management or Capstone documents.

5. Settlement Funding deposed Rapid's record custodian the morning of

January 31,2012 and Rapid's accounting department later that day and

the afternoon of February 6, 2012. Feldman, who was the corporate

representative for both depositions, was not adequately prepared, had

little knowledge of the facts, and failed to produce any documents prior

to the depositions. Feldman claimed that Rapid's documents are now in

the possession of one or more of its inside creditors-A.M. Y. Property

& Casualty Insurance Corporation ("AMY"), FinServ Casualty Corp.("FinServ"), and the Feldman Law Firm. See Rapid R. Custodian Dep.,

Jan. 31, 2012, attached as Exhibit B, at 53:22-56:9; see also Dec. 13,

2008 Agreement, attached as Exhibit C.

6. On February 14,2012, Settlement Funding moved to compel third-party

documents from Green Bank, Kaminski, Rapid Management, and

Capstone. Defendants aggressively opposed this request, and the Court

did not have an opportunity to rule on the motion because the Court first

had to rule on each of Rapid's 75 discovery requests served on

Settlement Funding, most of which the Court denied.

Despite all of these efforts, Settlement Funding has not received one additional

document since October 21, 2011 because Defendants have continually tried to evade

all discovery in this case. Defendants cannot be allowed to benefit from their continued

1 Pursuant to T.R.C.P 166(a)(d), Settlement Funding hereby notifies the court and parties of its intent to use

the unfiled discovery attached as exhibits to this Response.

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failure to comply with discovery. Settlement Funding should be given additional time to

obtain pending discovery, which is all adamantly opposed to by Defendants, and to play

Defendants' game by taking the extraordinarily slow and exceedingly costly effort of

serving individual subpoenas on third parties and Feldman's insider affiliates.

Settlement Funding will be prejudiced if the Court does not grant Plaintiffs' Motion

for Continuance. Indeed, Settlement Funding has already been prejudiced by Defendants'

failure to produce documents or allow third parties to produce documents. Pursuant to

Rule 166a(g) of the Texas Rules of Civil Procedure, want of discovery is grounds for a

continuance. See TEX. R. Cry. P. § 166a(g). Good cause exists for the continuance,

granting the continuance is in the interest of judicial economy, and the continuance is not

sought for delay only, but so that justice may be done. Settlement Funding's requested

continuance should therefore be granted. This Motion for Continuance is verified by the

Affidavit of Christopher David Johnsen, attached as Exhibit D.

II. RESPONSE TO RSL'S TRADITIONAL

MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiffs' claims against RSL for tortious interference, fraudulent transfer, and

piercing the corporate veil should not be summarily dismissed. There are at the very least

fact issues in support of Plaintiffs' claims for fraudulent transfer and piercing the

corporate veil. Moreover, RSL has been stonewalling discovery concerning these claims,

and Plaintiffs are entitled to further discovery before there is a ruling on the merits.

With respect to Plaintiffs' claim for tortious interference, the Fourteenth Court of

Appeals has foreclosed Defendants' argument that there can be no cause of action for

tortious interference with a transfer agreement until the underlying transfer is approved

by a court. See Settlement Funding, LLC's Supplement to Traditional Partial Mot. Summ.

J., filed Feb. 17, 2012, at 4-6. The Court should therefore deny RSL's request for

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summary judgment on the tortious-interference claim and grant Settlement Funding's

Traditional Partial Motion for Summary Judgment, filed on October 22,2010.

A. THE COURT SHOULD DENY RSL's SUMMARY JUDGMENT ON PLAINTIFFS' CLAIM

FOR TORTIOUS INTERFERENCE

RSL's entire case for summary dismissal of the tortious-interference claim hinges

on the assertion that RSL is somehow authorized by the Texas Structured Settlement

Protection Act (the "Texas SSPA") to make competing offers to annuitants after there is

already a transfer agreement in place between those annuitants and RSL's competitors.

However, such conduct is contrary to both the Texas SSPA and to Texas common law.

To be sure, Texas law condemns tortious interference with a competitor's contracts.

Because RSL is not above the law, the Court must reject RSL's specious assertion and

require it to compete through legal means and to answer for its failure to do so.

1. Settlement Funding Stated a Valid Cause of Action for Tortious

Interference

RSL's main argument for summary dismissal of the tortious-interference claim is

that no enforceable contract was formed between Settlement Funding and Mr. Parenti. As

addressed more fully in Settlement Funding, LLC's Supplement to Traditional Partial

Motion for Summary Judgment, this issue has already been decided in Settlement

Funding's favor by the Fourteenth Court of Appeals.

As a result of its opinion remanding the temporary injunction against Defendants

for determination of a more limited scope, the Fourteenth Court of Appeals has

foreclosed RSL's argument that there can be no cause of action for tortious interference

with a transfer agreement until the underlying transfer is approved by a court. Id. at 4-6.

Consistent with applicable law and Peachtree's briefmg, it is now the law of the case that

Settlement Funding pleaded a cause of action for tortious interference with existing

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contract. Id at 5-6. Because the Court of Appeals foreclosed RSL's argument that no

enforceable contract was formed, the Court should deny RSL' s motion for summary

judgment on the tortious-interference claim.

2. Settlement Funding's Tortious-Interference Claim Is Not Barred by

Collateral Estoppel

Settlement Funding has not taken any inconsistent positions and is not barred by

collateral estoppel, as RSL claims. See Peachtree's Resp. to and Mot. to Strike Rapid's

Sur-Reply and Letter to Ct., filed June 15, 2011, at 3-5. RSL attempts to make its

collateral-estoppel argument based on arguments raised by Settlement Funding years ago

concerning Rapid's sham arbitration scheme contained within its atypical form of transfer

agreement. Unlike Settlement Funding's agreements, however, the existence of Rapid's

agreements were expressly conditioned on court approval, and therefore adjudication of

Plaintiffs' claims for tortious interference does not involve the same facts that were

litigated in the King and Maxwell matters. Id at 3. The terms of the RapidJKing and

RapidlMaxwell transfer agreements are not identical to the terms of the Settlement

FundinglParenti transfer agreement. Indeed, they are functionally and substantively very

different and therefore collateral estoppel cannot apply to the interpretation of these

agreements. Id.

Settlement Funding took the position, and continues to take the position, that the

purported transfer agreement between Rapid and King dated March 28, 2005 was invalid.

See RapidlKing Agreement, attached as Exhibit E. Settlement Funding also took the

position, and continues to take the position, that the purported transfer agreement

between Rapid and Maxwell dated July 13, 2003 was invalid. See Rapid/Maxwell

Agreement, attached as Exhibit F. These positions taken by Settlement Funding in earlier

proceedings are not inconsistent with the arguments made by Settlement Funding today

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m favor of its agreement with Mr. Parenti. This is true because the RapidlKing

Agreement and the RapidIMaxwell Agreement are facially different from the transfer

agreement between Settlement Funding and Mr. Parenti.

The explicit language appearing on the very first page of both the RapidlKing

Agreement and the RapidIMaxwell Agreement provides that the agreement itself is

subject to court approval: "This Transfer Agreement is subject to court approval." See Ex.

E, RapidlKing Agreement, at 1; Ex. F, RapidIMaxwell Agreement, at 1. The RapidlKing

and RapidIMaxwell Agreements do not require court approval as a condition precedent to

the transfer; instead, they require court approval as a condition precedent to the transfer

agreement. The plain language provides that the agreement itself does not exist without

court approval, and RSL admits such. See Tran Dep., attached as Exhibit G, at 101:17-

23 (stating the language means that "the transfer agreement is subject to court approval");

Paredes Dep., attached as Exhibit H, at 66:24-67:14 (stating that the language means

that "in order for the transfer agreement to be legally binding and enforceable, a Court

order is necessary").

Compare this language with the language provided in the Settlement

FundinglParenti Agreement, which states that court approval is a "condition[] precedent

to Assignee's obligation to pay [Mr. Parenti] the Assignment Price .... " See Settlement

FundinglParenti Agreement, attached as Exhibit I, at ~ D. The terms of the Settlement

FundinglParenti Agreement clearly provide that court approval is a condition precedent to

the obligation to make payment to Mr. Parenti, but no language in the Settlement

FundinglParenti Agreement requires court approval as a condition precedent to the

existence of the agreement itself, as in the RapidlKing and RapidIMaxwell Agreements.

The Settlement FundinglParenti Agreement exists by its own terms and is subject to

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interference, even prior to court approval of the transfer. Court approval was merely a

condition precedent to the obligation to make payment to Mr. Parenti.

Settlement Funding has not taken any inconsistent positions in these matters. See

Peachtree's Resp. to and Mot. to Strike Rapid's Sur-Reply and Letter to Ct., filed June

15,2011, at 3-5. The language in the RapidlKing and RapidlMaxwell Agreements has a

legal effect on the existence of the contract itself, whereas the language in the Transfer

Agreement has no such effect. fd. at 5. Collateral estoppel therefore does not apply

because the facts to be litigated are not identical. Id.

Moreover, Rapid committed fraud in its efforts to enforce its Franklin, King, and

Maxwell contracts because Rapid sought to bypass the judicial process through its hand-

picked arbitrators. Rapid took the position in Franklin, King, and Maxwell that a transfer

agreement can be interfered with, and Settlement Funding agrees that valid, pending

agreements can be interfered with to the extent that the contract has not already been

denied during the approvalprocess and there is nofraud or other misconduct involved.

The facts with respect to the Parentis and similarly situated annuitants are radically

different from those present in the Franklin, King, and Maxwell situations. Settlement

Funding's tortious-interference claim is therefore not barred by collateral estoppel.

3. RSL Was Not Legally Justified in Interfering with the Settlement

Funding/Parenti Transfer Agreement

RSL next claims that it was legally justified in interfering with the Settlement

FundinglParenti Agreement because RSL allegedly acted under color of law and because

it is in the best interest of the petitioning annuitant to receive purportedly better offers in

exchange for the transfer. However, the purpose of the Texas SSPA is to ensure the

annuitant's decision to transfer future payments is informed and voluntary. Contrary to

what RSL suggests, the Texas legislature never intended for the Texas SSPA to subject

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funding companies to tortious interference once their transfer agreements had been

entered into and filed for court approval of the transfer. In fact, Texas case law

specifically establishes that there is no legal justification for interfering with a transfer

agreement. Inany event, RSL' s arguments are but a pretext, as RSL did not act under any

reasonable interpretation of the law and its conduct was in bad faith.

As more fully briefed in Settlement Funding, LLC's Supplement to Traditional

Partial Motion for Summary Judgment, RSL's alleged justification defense fails because

there is no public policy in Texas that favors interfering with transfer agreements and

because RSL was not acting in good faith under color of law. See Settlement Funding,

LLC's Supplement to Traditional Partial Mot. Summ. J., filed Feb. 17, 2012, at 8-13.

Moreover, RSL cannot rely on giving allegedly truthful information as justification for

interfering with the Settlement FundinglParenti Agreement.

RSL claims that it is justified because it allegedly only gave truthful information to

Mr. Parenti, citing Section 772(a) of the Restatement (Second) of Torts in support.' RSL

misses the mark, as Section 772(a) applies to those in a fiduciary or agency relationship

that are not acting with malice or personal interest. RSL was clearly acting in its own

personal interest, as it sought to obtain a transfer from Mr. Parenti. The two cases cited

by RSL are distinguishable and do not apply to the present matter.

In Robles v. Consolo Graphics, Inc., 965 S.W.2d 552 (Tex. App.-Houston [14th

Dist.] 1997, pet. denied), the court held that ''the disclosure of truthful information could

2 Section 772 provides:

One who intentionally causes a third person not to perform a contract or not to enter into

a prospective contractual relation with another does not interfere improperly with the

other's contractual relation by giving the third person

(a) truthful information, or

(b) honest advice within the scope of a request for advice.

Restatement 2d Torts § 772.

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not constitute improper interference with business relations." 965 S.W.2d at 561

(emphasis added). That is a different cause of action altogether, however. Notably,

although the case also involved a claim for tortious interference with an existing contract,

the court did not apply the justification defense thereto, instead holding that the court had

properly dismissed that claim because the contract at issue was contrary to law and

therefore could not be interfered with.

Moreover, in that case, the defendant was not a competitor who was willfully and

intentionally seeking to interfere with a contract. Indeed, no competitors were involved in

that case. The defendant-who had a commission-based services agreement with the

plaintiff-simply gave truthful information to its contractor about the fact that the

contractor was paying double commissions to the plaintiff for the same services. Both the

defendant and the third party decided not to continue using plaintiff s services. By

contrast, here, RSL intentionally and willfully interfered with the contract of a competitor

by making Mr. Parenti an offer and by wrongly informing him that he could cancel his

transfer agreement with Settlement Funding.

Tarle to n S ta te U niv . v. Rosiere, 867 S.W.2d 948, 953 (Tex. App.-Eastland 1993,

writ dism'd), also dealt with a claim of tortious interference with a business relation and

not with a claim of tortious interference with a contract. In that case, the plaintiff had

been denied tenure at the university where he was employed. He sued alleging, among

other things, that the vice president of student services (Johnson) had tortiously interfered

with his tenure because he had informed the president of the university about the

plaintiff's behavior at a school function. The court held that Johnson had not engaged in

tortious interference with a business relationship because "[1]iability for tortious

interference can only be had against third parties," and Johnson was merely an agent of

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the university and not a third party. The court also found that Johnson's acts were

justified as a matter of law, because as vice president of student services, he had an

interest in the university's public relations and was therefore justified in informing the

president about plaintiffs public behavior. Here, however, RSL was not an agent of Mr.

Parenti and had no duty or justification in either approaching Mr. Parenti or in making

him an offer to induce him into cancelling his transfer agreement with Settlement

Funding.

In sum, the cases cited by RSL do not support its position, and in any event, RSL

did not give any allegedly "truthful information" to Mr. Parenti about a present fact nor

did it give him any advice (much less honest) within the scope of a request by Mr.

Parenti. What RSL did was actively seek Mr. Parenti in order to make him an offer for a

future contract, with the sole intent of inducing him to cancel his existing one with

Settlement Funding. RSL' s justification defense therefore fails.

4. Settlement Funding Was Damaged by RSL's Tortious Interferences

Defendants' actions are not only harming Settlement Funding, but the annuitants

such as Maxwell, Franklin, King, and Parenti that the Texas SSPA is designed to protect.

Defendants' interferences have made Settlement Funding'S performance more

burdensome. Namely, Settlement Funding has been forced to hire the undersigned

counsel and spend significant resources rebutting Defendants' attempts to interfere with

Settlement Funding's contracts. This includes litigation in numerous forums, including

Harris County, Texas and Herkimer County, New York.

Referring specifically to the Settlement Funding/Parenti Agreement, RSL told the

Parentis that it could offer them substantially more money than Settlement Funding. See

Nicola Parenti Dep., attached as Exhibit J, at 13:14-20, 14:11-13; Michale Parenti Dep.,

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attached as Exhibit K, at 21:13-23, 22:7-9. Based on RSL's contact, Mr. Parenti

indicated he would terminate his transfer agreement with Settlement Funding and instead

enter into a contract with RSL. Gregory Aff., attached as Exhibit L, at ~ 4. This was a

result of RSL's acts of tortious interference, which caused Settlement Funding damages.

See id.; see also TI Hr'g Tr., attached asExhibit M, at 49:6-18.

The damages resulting from Defendants' disruption of Settlement Funding's

business and from the loss of Settlement Funding's goodwill are extremely difficult to

calculate. See id. at 45:12-15,46:12-17, 75:9-14. Settlement Funding spends significant

amounts of money and time developing its customer list and customer relationships, and

Defendants' interferences have damaged Settlement Funding's goodwill with its

customers. See id . at 25:12-25, 44:18-45:15, 46:18-20, 49:11-18, 50:18-25, 75:9-23;

see also Ex. J, Nicola Parenti Dep., at 9:10-15. Defendants' interferences are also

damaging Settlement Funding's business, as it must spend time, money, and attorneys'

fees policing Defendants' conduct to protect its customers. See Ex. M, TI Hr'g Tr., at

35:11-36:3, 41:18-20, 42:20-22, 43:10-18, 47:20-48:12. Settlement Funding is in the

business of funding structured settlement payment purchases, not protecting its customers

from Defendants' tortious interferences.

Finally, Defendants' contention that Mr. Parenti could cancel the Agreement prior

to court approval without penalty is a red herring, as his ability to cancel his transfer

agreement with Settlement Funding relates solely to Settlement Funding's right to sue

Mr. Parenti for breach of contract and cancelling "without penalty" can only occur within

three days of executing the contract. Mr. Parenti's ability to cancel the Settlement

FundingIParenti Agreement without penalty has no relation to Settlement Funding'S

claim of tortious interference against Defendants. The Settlement FundinglParenti

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Agreement was subject to interference, and Defendants were not justified in interfering

with that agreement.

In fact, even contracts that are voidable or terminable at will may be the subject of

tortious interference. As stated in Sterner v. Marathon Oil Co.:

We have held that the unenforceability of a contract is no defense to an

action for tortious interference with its performance. A promise may be a

valid and subsisting contract even though it is voidable. Thus third persons

are not free to interfere tortiously with performance of the contract before

it is avoided. A similar situation exists with regard to contracts terminable

at will. Until terminated, the contract is valid and subsisting, and third

persons are not free to tortiously interfere with it."

767 S.W.2d 686, 689 (Tex. 1989) (citations omitted ); see also Marathon Oil Co. v.

Sterner,745 S.W.2d 420,422 (Tex. App.-Houston [14th Dist.] 1988), affd inpart and

rev'd on other grounds, 767 S.W.2d 686, 689 (Tex. 1989) ("[T]he supreme court settled

the issue when it held in Clements ... that the unenforceability of a contract is no defense

to an action for tortious interference with its performance. Although the specific question

in Clements concerned the enforceability of a contract that did not comply with the

statute of frauds, there is no reason why the announced rule would not apply to a contract

terminable at will. Accordingly, we so hold.").

This means that even a contract which can be terminated or declared void at any

time-and therefore involves a level of speculation as to whether its terms will be

actually enforced-may be the target of tortious interference; until such a contract is

actually terminated or rendered void, the parties thereto are entitled to be free from

interference from third parties as a matter oflaw.

5. RSL's Attempt to Somehow Prejudice Settlement Funding by

Injecting a Non-party into the Litigation Lacks Merits

RSL contends that Settlement Funding has unclean hands because a J.G. Wentworth

entity, a non-party, allegedly engages in the same tortious conduct for which Settlement

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Funding is seeking relief against RSL. Not only is this allegation irrelevant because it is

against a separate non-party, but it is also baseless. Settlement Funding is a Peachtree

company with, for example, Peachtree contracts and Peachtree origination platforms and

methods. See Cairo Aff., attached as Exhibit N, at 6. Settlement Funding does not do

business as or operate as J.O. Wentworth. Id. at 7. Regardless, upon information and

belief, non-party J.O. Wentworth does not search courthouse records to locate and

interfere with Defendants' existing contracts. Nor is there any evidence to the contrary.

For the foregoing reasons, the Court should deny RSL's request for summary judgment

on the tortious-interference claim and grant Settlement Funding's Traditional Partial

Motion for Summary Judgment, filed October 22,2010.

B. THE COURT SHOULD DENY RSL SUMMARY JUDGMENT ON PLAINTIFFS' CLAIM

FOR FRAUDULENT TRANSFER

The Court should also deny RSL's request for summary judgment on the

fraudulent-transfer claim. RSL claims that it is entitled to summary judgment on

Plaintiffs' fraudulent-transfer claim because RSL was never a debtor of Plaintiffs. RSL

misunderstands the Texas Uniform Fraudulent Transfer Act ("TUFTA"), which allows a

present or a future creditor to recover assets from the transferee.

Under Section 24.009 of TUFTA, "judgment may be entered against: (1) the first

transferee of the asset or the person for whose benefit the transfer was made; or (2) any

subsequent transferee other than a good faith transferee who took for value or from any

subsequent transferee." TEX.Bus. & COM.CODE§ 24.009(b). It is undisputed that Rapid

is a debtor of Settlement Funding, and therefore Settlement Funding may recover from

RSL if it is a subsequent transferee. See Oct. 14, 2008 Final J., attached as Exhibit 0;

Oct. 19, 2009 Final J., attached as Exhibit P; Feb. 22, 2010 Order, attached as

Exhibit Q; Oct. 5, 2010 Amended Final r, attached as Exhibit R; Nov. 1, 2010 Order

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Granting Plaintiffs' Mot. Sanctions, attached as Exhibit S; Nov. 10,2010 Order Granting

Plaintiffs' Mot. Sanctions, attached as Exhibit T; May 31, 2011 Order Granting

Plaintiffs' Motion Comply Ct. Orders, attached as Exhibit U; Aug. 19, 2011 Order

Granting Plaintiffs' Mot. Sanctions, attached as Exhibit V. Thus, Settlement Funding's

fraudulent-transfer claim should not be summarily dismissed.

With respect to RSL's claim that it never received a transfer from Rapid, the record

reflects otherwise. For example, Tuan Tran, operations manager for both Rapid and RSL,

stated that after Rapid wound down its operations, RSL used Rapid's database of

customer names to conduct business. Ex. G, Tran Dep., at 120:11-121 :5. Moreover, Mr.

Tran and Rapid's other forme! employees worked for RSL immediately after Rapid

wound down its operations, and none of them changed offices or received new

equipment. Id. at 31:25-33:15. Indeed, RSL is merely an acronym for Rapid (Rapid

Settlements, Ltd.). Rapid wound down its operations to avoid judgments and then passed

the baton to RSL, which used at least the same customer database, assets, equipment, and

employees as Rapid to conduct Feldman's operations. Because RSL received a transfer

from Rapid, summary judgment should not be granted on Plaintiffs' fraudulent-transfer

claim. See Flores v . Robinson Roofing & Constr. Co., Inc., 161 S.W.3d 750, 758 (Tex.

App.-Fort Worth 2005, pet. denied) (holding that material fact issues precluded

summary judgment in favor of defendant who resumed operations of defunct company of

which defendant shared common owners and controllers).

C. THE COURT SHOULD DENY RSL SUMMARY JUDGMENT ON PLAINTIFFS' CLAIMS

FOR PIERCING THE CORPORATE VEIL AND SINGLE BUSINESS ENTERPRISE

The Court should also deny RSL's request for summary judgment on Plaintiffs'

claims for piercing the corporate veil and single business enterprise. RSL first claims that

Plaintiffs' claim for piercing the corporate veil should be dismissed because there is no

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underlying cause of action creating liability. This is untrue. First of all, Settlement

Funding has numerous judgments against Rapid that are unpaid and outstanding. See Exs.

O-V. Settlement Funding maintains that RSL, Rapid's successor in interest, is liable for

these judgments because RSL is merely the alter ego of Rapid. Second, Plaintiffs have

valid causes of action against RSL for tortious interference and fraudulent transfer.

RSL also claims that Settlement Funding cannot pierce the corporate veil of Rapid

because Rapid is a limited partnership. RSL, however, overlooks that Settlement Funding

is seeking to pierce the veil of Rapid Management, Rapid's general partner which RSL

admits is liable as a matter of law for Rapid's debts and obligations. See PIs.' Second

Supplemental Pet, filed Feb. 17, 2012; RSL's MSJ at 29. Rapid Management is a

corporation of which RSL cannot argue the doctrine of piercing the corporate veil is

inapplicable. See Bus. Orgs. Inquiry for Rapid Management nJk/a Liquidating Marketing

Management Corp., attached as Exhibit w.

Finally, RSL argues that Plaintiffs' claim for single business enterprise should be

summarily dismissed because it has allegedly been rejected by the Texas Supreme Court

in SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444 (Tex. 2008). RSL

miscites SSP Partners, which merely stands for the proposition that single business

enterprise cannot be used without injustice and inequity such as fraud, evasion of existing

obligations, or circumvention of statutes. Id. at 455-456. SSP Partners clarified the cause

of action for single business enterprise; it did not abolish it as RSL claims. See Fazio v .

Cypress/GR Houston 1 , L.P., No. 01-09-00728-CV, 2012 WL 159929, *18 (Tex. App.-

Houston [1st Dist.] Jan. 19, 2012) (analyzing the single-business-enterprise theory post

clarification in SSP Partners). Accordingly, the Court should dismiss neither Plaintiffs'

claims for single business enterprise nor piercing the corporate veil.

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III. RESPONSE TO RSL'S NO-EVIDENCE

MOTION FOR PARTIAL SUMMARY JUDGMENT

RSL hopes to win its no-evidence motion for summary judgment based on

Defendants' efforts to avoid their discovery obligations. After a year of obstreperous

posturing, RSL has only produced one annuitant file, two pay stubs, and one employment

agreement. Moreover, consistent with the numerous sanction orders previously entered

against it, Rapid is withholding documents and/or using its shell game to hide documents,

which Rapid claims are now in the possession of one or more of its inside creditors-

AMY, FinServ, and the Feldman Law Firm. See Ex. B, Rapid Record Custodian Dep., at

53:22-56:9; see also Ex. C, Dec. 13, 2008 Agreement. For this reason, Settlement

Funding has had to seek discovery from third parties and play Defendants' game by

taking the extraordinarily slow and exceedingly costly effort of serving individual

subpoenas on Feldman's insider affiliates. For these reasons alone, RSL's MSJ is

premature and should be denied.

However, even if the Court finds that there has been an adequate time for discovery,

and that RSL should be rewarded for its failure to comply with its discovery obligations.

RSL's MSJ should be -denied because there is at least a scintilla of evidence supporting

Settlement Funding's claims.

A. THERE Is EVIDENCE TO SUPPORT PLAINTIFFS' CLAIM FOR TORTIOUS

INTERFERENCE

The Court should deny RSL's no-evidence motion on Plaintiffs' tortious-

interference claim, the elements of which are: (1) an existing contract subject to

interference; (2) a willful and intentional interference with the contract; (3) the

interference proximately caused plaintiffs injury; and (4) actual damage or loss has

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occurred. Graham v. Mary Kay Inc., 25 S.W.3d 749, 753 (Tex. App.-Houston [14th

Dist.] 2000, pet. denied).

On July 5, 2010, Settlement Funding entered into a transfer agreement with Mr.

Parenti, a then existing customer. See Ex. I, Settlement Funding/Parenti Agreement; see

also Ex. K, Michale Parenti Dep., at 18:~9; Parenti Deps. Pl.'s Ex. 3, attached as

Exhibit X. RSL admits to willfully and intentionally interfering with this agreement. See

Kelly Aff., attached as Exhibit Y, at ~~ 1-2 (admitting to knowing of the Settlement

Funding/Parenti Agreement prior to contacting the Parentis); Feldman Aff., attached as

Exhibit Z, at ~~ 1, 2, 4, ~9 (admitting that RSL searched court records to identify and

interfere with the Settlement Funding/Parenti Agreement).

Referring specifically to the Settlement Funding/Parenti Agreement, RSL told the

Parentis that it could offer them substantially more money than Settlement Funding. See

Ex. J, Nicola Parenti Dep., at 13:14-20, 14:11-13; Ex. K, Michale Parenti Dep., at

21:13-23,22:7-9. Based on RSL's contact, Mr. Parenti indicated he would terminate his

transfer agreement with Settlement Funding and instead enter into a contract with RSL.

Ex. L, Gregory Aff., at ~ 4. This was a result ofRSL's acts oftortious interference, which

caused Settlement Funding damages, including disruption of Settlement Funding's

business and loss of Settlement Funding's goodwill. See id.; see also Ex. M, TI Hr'g Tr.,

at 25:12-25,35:11-36:3,41:18-20,42:20-22, 43:10-18, 44:18-45:15, 46:18-20, 47:20-

48:12, 49:6-18, 49:11-18, 50:18-25, 75:9-23; see also Ex. J, Nicola Parenti Dep., at

9:10-15. There is not only a scintilla of evidence, but definitive evidence supporting

Settlement Funding's tortious-interference claim.

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B. THERE Is EVIDENCE TO SUPPORT PLAINTIFFS' CLAIM FOR FRAUDULENT

TRANSFER

Likewise, there is evidence supporting Plaintiffs' fraudulent-transfer claim. TUFTA

provides creditors various means to recover for a fraudulent transfer. Among these, the

creditor can show that the debtor made the transfer with an intent to defraud the creditor.

See TEX.Bus. & COM.CODE§ 24.005(a)(l). Intent can be shown by, inter alia, a transfer

of substantially all the debtor's assets and/or a transfer to an insider. On December 13,

2008, Rapid allegedly transferred all of its tangible and intangible property to one or

more of its Feldman inside creditors-AMY, FinServ, and the Feldman Law Firm. See

Ex. C, Dec. 13, 2008 Agreement. Feldman signed on behalf of all parties to the

December 13, 2008 Agreement, except for FinServ for which his wife signed. Id . at 3.

Because Feldman controls Rapid's creditors, they are insiders under TUFTA. See TEX.

Bus. & COM. CODE § 24.002(7). Even though Rapid claims that its inside creditors

received all of its property, RSL ultimately received and is the end user of such property.

Mr. Tran, operations manager for both Rapid and RSL, stated that after Rapid

wound down its operations, RSL used Rapid's database of customer names to conduct

business. Ex. G, Tran Dep. at 120:11-121:5. Moreover, Mr. Tran and Rapid's other

former employees worked for RSL immediately after Rapid wound down its operations,

and none of them changed offices or received new equipment. Id. at 31:25-33: 15. Indeed,

RSL is merely an acronym for Rapid (Rapid Settlements, Ltd.). Rapid wound down its

operations to avoid judgments and then passed the baton to RSL, which used at least the

same customer database, assets, equipment, and employees as Rapid to conduct

Feldman's operations. Because RSL received a transfer from Rapid, summary judgment

should not be granted on Plaintiffs' fraudulent-transfer claim. See Flores, 161 S.W.3d at

758 (holding that material fact issues precluded summary judgment in favor of defendant

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who resumed operations of defunct company of which defendant shared common owners

and controllers).

TUFT A also provides other ways for Settlement Funding to recover the fraudulent

transfer made by Rapid. See TEx. Bus. & COM.CODE§§ 24.005(2), 24.006. Inparticular,

Sections 24.006(a) and 24.006(b) involve an insolvent debtor, and Rapid admits that it

was insolvent when it allegedly made the transfer to its Feldman inside creditors in

December 13, 2008. See Ex. C, Dec. 13, 2008 Agreement, at 1 ("Material breaches

include delinquency in payments due Creditors, material adverse changes in Rapid's

business, unsatisfied judgments against Rapid and the intended phase-out or suspension

of Rapid's business, among other breaches."). Thus, because there is at least a scintilla of

evidence supporting Plaintiffs' claims, RSL's MSJ should be denied.

C. THERE Is EVIDENCE TO SUPPORT PLAINTIFFS' CLAIM FOR PIERCING THE

CORPORATE VEIL

The Court should also deny RSL' s no-evidence motion on Plaintiffs' claim for

piercing the corporate veil. Under the theory of alter ego, courts disregard the corporate

form and pierce the corporate veil "when there is such unity between the corporation and

the individual that the corporation ceases to be separate and when holding only the

corporation liable would promote injustice." Mancorp, Inc. v . Culpepper, 836 S.W.2d

844,845 (Tex. App.-Houston [1st Dist.] 1992, no writ). One example of injustice to be

avoided "is that of leaving the plaintiff with an uncollectible judgment against the

corporation while allowing its alter ego to go free," id. at 846, and Texas courts have

consistently pierced the veil where owners of a company hinder the company's ability to

pay its debts by, for example, starting a new business with the same shareholders. See,

e.g., Klein v . Sporting Goods, Inc., 772 S.W.2d 173, 176-177 (Tex. App.-Houston [14th

Dist.] 1989, writ denied) (shareholder liable for company debts when he incorporated

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new business to continue business of foreclosed company; foreclosure sale was merely

attempt to avoid creditors).

In our case, Settlement Funding has obtained numerous judgments against Rapid,

which may go uncollected if the Court allows RSL, and ultimately Feldman himself, to

go free. See Exs. Os-V. To thwart Settlement Funding's ability to collect these judgments,

Feldman had his inside creditors-AMY, FinServ, and the Feldman Law Firm-

foreclose on all of Rapid's tangible and intangible personal property. See Ex. C, Dec. 13,

2008 Agreement. In fact, the Feldman Law Firm, Rapid's counsel in this litigation, was

Rapid's largest creditor with a receivable from Rapid of over eight million dollars, and

Feldman himself signed the December 13, 2008 Agreement on behalf of each of the

interested parties, except for FinServ, which was signed by his wife. See Dec. 13, 2009

Balance Sheet of Rapid, attached as Exhibit AA; Ex. C, Dec. 13,2008 Agreement, at 3.

Feldman then started RSL, which is an acronym for Rapid (Rapid Settlements,

Ltd.), to carry on Rapid's and Feldman's business. RSL took over not only Rapid's

employees, assets, and equipment, but Rapid's database of customer names. Ex. G, Tran

Dep., at 31:25-33:15, 120:11-121:5. Indeed, the change in guard was so abrupt that for

some time after RSL assumed Rapid's offices, Rapid kept its name on the. front door

along with RSL's name. See photo taken during seizure at Rapid's offices, attached as

Exhibit BB. Feldman and his wife, of course, are the managers and directors of RSL. See

Bus. Orgs. Inquiry for RSL, attached as Exhibit ce. This is a textbook example of alter

ego in Texas, which is supported by ample evidence, and therefore the Court should deny

RSL'sMSJ.

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IV. CONCLUSION

Because RSL' s MSJ on Plaintiffs' claims for alter ego and other claims is

premature, the Court should continue RSL's MSJ to the extent it involves claims other

than Settlement Funding's tortious-interference claim, which should be decided in

Settlement Funding's favor. Should the Court wish to hear RSL's MSJ on claims other

than Settlement Funding's tortious-interference claim, the Court should deny RSL's MSJ

in its entirety.

Respectfully submitted,

GREEN B ERG TRAUR IG , L .L .P .

By: lsi L. Bradley HancockL. Bradley Hancock

State Bar No. 00798238

Christopher David Johnsen

State Bar No. 24072169

1000 Louisiana, Suite 1700

Houston, Texas 77002

713-374-3500 - Telephone

713-754-7528 - Facsimile

ATTORNEYSFORPLAINTIFFS,EVELYNE.

FRANKLIN,SIMMIEBERNARDKING,SETTLEMENTUNDING,LLC, AND

PEACHTREESETTLEMENTUNDING,LLC

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CERTIFICATE OF SERVICE

I certify that a true and correct copy of the foregoing was forwarded by hand

delivery to all counsel of record inaccordance with the Texas Rules of Civil Procedure on

the 2nd day of March, 2012.

Stewart A. Feldman

John R. CraddockTHE FELDMAN LAW FIRM, LLP

Two Post Oak Central

1980 Post Oak Blvd., Ste. 1900

Houston, TX 77056

Mike Choyke

WRIGHT & CLOSE, LLPThree Riverway, Ste. 600

Houston, TX 77056

/s/ Christopher David Johnsen

Christopher David Johnsen

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