Trinity Settlement Services, LLC v. Texas State Securities Board
2013 Tex. App. LEXIS 9487
| Tex. App. | 2013Background
- Trinity Settlement Services, LLC (Trinity) proposed selling fractional "participations" in life-insurance policy proceeds (viatical settlements) and sought a declaratory judgment that such instruments are not "securities" under the Texas Securities Act (TSA).
- The Texas State Securities Board (TSSB) sued Retirement Value, LLC (RV) alleging RV sold unregistered securities via a "Re-Sale Life Insurance Policy Program." Trinity is not a party to that enforcement action.
- Trinity sued TSSB and Commissioner John Morgan (official capacity), seeking (a) a declaration that TSSB acted without statutory authority in the RV enforcement suit and (b) a declaration that Trinity’s proposed participations are not securities under the TSA.
- The TSSB filed a plea to the jurisdiction urging ripeness, advisory-opinion, and sovereign-immunity defects; Trinity argued TSSB engaged in ad hoc rulemaking and relied on TSSB statements in other enforcement actions.
- The trial court granted the plea to the jurisdiction; the court of appeals affirmed, holding Trinity failed to invoke jurisdiction under the APA (no cognizable agency "rule") and under the UDJA (no justiciable controversy; claims unripe and seeking an advisory opinion).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Trinity may challenge TSSB action under APA §2001.038 as an agency "rule" | Trinity contends TSSB’s filings/announcements in enforcement cases amount to ad hoc rules of general applicability and thus are challengeable under the APA | TSSB argues its pleadings and enforcement adjudications are case-specific and not "rules" under the APA; no formal rulemaking occurred | Court held TSSB statements in RV and AGAP proceedings were adjudications limited to specific parties/facts, not APA "rules;" APA jurisdiction therefore not invoked |
| Whether Trinity’s UDJA claim seeking declaration that TSSB acted without authority in RV suit is justiciable | Trinity seeks declaratory relief that TSSB acted beyond statutory authority in RV enforcement, affecting Trinity’s business | TSSB/Morgan argue the requested declaration would be an advisory opinion about rights of a non-party (RV) and sovereign immunity bars UDJA relief against the state | Court held claim seeks an impermissible advisory opinion about rights/status of a party not before the court and thus is not justiciable |
| Whether Trinity’s request for declaration that its proposed participations are not "securities" is ripe | Trinity argues pre-enforcement declaratory relief is warranted because TSSB’s enforcement posture chilled its business | TSSB argues no enforcement has been threatened against Trinity; whether an instrument is a security is fact-specific and contingent on Trinity’s future structure/actions | Court held claim unripe: dispute is hypothetical and fact-dependent; no imminent enforcement, so UDJA jurisdiction lacking |
| Whether sovereign immunity bars Trinity’s UDJA/AP A claims | Trinity contends APA §2001.038 waives immunity for rule challenges; seeks relief against Commissioner in official capacity | TSSB says APA only applies to challenges to actual agency "rules;" UDJA does not waive immunity for declarations about statutory rights vis-à-vis the state | Court held sovereign immunity bars Trinity’s UDJA claims against the TSSB and, because APA jurisdiction was not established, sovereign immunity prevents relief under APA as well |
Key Cases Cited
- Searsy v. Commercial Trading Corp., 560 S.W.2d 637 (Tex. 1977) (test for investment contract: common enterprise and profits from efforts of others)
- Life Partners, Inc. v. Securities & Exchange Comm’n., 87 F.3d 536 (D.C. Cir. 1996) (viatical-transaction analysis focused on managerial efforts vs. mortality)
- Mutual Benefits Corp. v. Securities & Exchange Comm’n., 408 F.3d 737 (11th Cir. 2005) (analysis of viatical investments and investment-contract questions)
- Railroad Comm’n v. WBD Oil & Gas Co., 104 S.W.3d 69 (Tex. 2003) (adjudicative statements resolving individual rights are not APA "rules")
- Combs v. Entertainment Publ’ns., Inc., 292 S.W.3d 712 (Tex. App.—Austin 2009) (discussing APA jurisdiction for rule challenges and limits)
- El Paso Hosp. Dist. v. Texas Health & Human Servs. Comm’n., 247 S.W.3d 709 (Tex. 2008) (statement of general applicability under APA requires public-impact rule)
- Brooks v. Northglen Ass’n., 141 S.W.3d 158 (Tex. 2004) (UDJA requires a justiciable controversy affecting parties before the court)
- Heinrich v. El Paso County, 284 S.W.3d 366 (Tex. 2009) (limits on declaratory relief against the state and ultra vires framework)