United States District Court, D. Montana, Billings Division
ORDER DISMISSING AND DISCHARGING LIABILITY AGAINST
PLAINTIFF AND DENYING AWARD OF ATTORNEYS' FEES
P. WATTERS, UNITED STATES DISTRICT COURT JUDGE
the Court is Plaintiff Hartford Life and Accident Insurance
Company's motion that it be dismissed and discharged from
this interpleader action, that Defendants be enjoined from
initiating an action against Hartford to recover the
insurance benefits at issue, and for an award of
attorneys' fees in Hartford's favor. (Doc. 23.)
Defendant and Cross-claimant Gary Hill filed a response
agreeing Hartford should be dismissed and discharged of
liability but objecting to an award of attorneys' fees.
(Doc. 30.) Defendant and Cross-claim Defendant Robert Lecou
did not file a response. For the following reasons, the Court
grants the motion in part but denies Hartford an award of
initiated this interpleader action because, due to
conflicting state and federal laws, it could not determine to
whom it should distribute certain life insurance benefits
(the "Plan Benefits") without exposing itself to
litigation risk. (Doc. 1 at ¶ 23.) Hartford makes no
claim for the Plan Benefits, indicates it is willing to pay
the Plan Benefits to whomever the Court designates, and has
deposited the Plan Benefits with the Court. (Id. at
¶¶ 24-26; Doc. 20.) Hartford argues only that it is
entitled to attorneys' fees for initiating the
interpleader action. (Doc. 24 at 8-9.) Hill agrees with
dismissing Hartford but disputes whether Hartford should
receive attorneys' fees. (Doc. 30 at 1.) Lecou did not
respond to Hartford's motion.
interpleader is proper, and the Court has jurisdiction to
preside over it. "The purpose of interpleader is for the
stakeholder to protect itself against the problems posed by
multiple claimants to a single fund." Lee v. W.
Coast Life Ins. Co., 688 F.3d 1004, 1009 (9th Cir. 2012)
(quoting Mack v. Kuckenmeister, 619 F.3d 1010, 1024
(9th Cir. 2010)) (internal quotations removed). An
interpleader action typically involves two stages: first, the
court determines whether the requirements for a rule or
statutory interpleader action are met-that is, whether there
is a single fund at issue and whether there are adverse
claimants to that fund. Fed.R.Civ.P. 22; 28 U.S.C. §
1335. Second, if the interpleader action is proper, the court
then establishes the respective rights of the claimants.
Id. at 1009. Although subject-matter jurisdiction is
rarely established for a Rule 22 interpleader by federal
question under 28 U.S.C. § 1331, federal courts have
jurisdiction to hear interpleader actions brought by
fiduciaries under the Employee Retirement Income Security
Act. Herman Miller, Inc. Ret. Income Plan v.
Magallon, 2008 WL 2620748, at *2 (E.D. Cal. July 2,
2008) (citing Metro Life Ins. Co. v. Price, 501 F.3d
271, 276 (3d. Cir. 2007); Aetna Life Ins. Co. v.
Bayona, 223 F.3d 1030, 1032 (9th Cir. 2000)). Hartford
meets those conditions here: it brings this interpleader
action under ERISA, it has established a single fund at issue
(the Plan Benefits), and it has established multiple adverse
claimants to that fund (Hill and LeCou). Therefore, the
interpleader action is proper, and the Court dismisses
also proper to enjoin the Defendants from initiating any
action against Hartford for the recovery of the Plan
Benefits. Courts may enjoin claimants in an interpleader
action from initiating further actions against the
stakeholder when those pending or threatened proceedings
would "destroy the effectiveness of the interpleader
suit or the enforceability of its judgment." United
States v. Major Oil Corp., 583 F.2d 1152, 1158 (10th
Cir. 1978); see Herman Miller, 2008 WL 2620748, at
*2 (recognizing "an interpleader action would be futile
if claimants were allowed to file separate suits against the
claim holder"). Courts can only wield this injunctive
power if the stakeholder has deposited the fund with the
court. Major Oil Corp., 583 F.2d at 1158 (stating a
district court's in personam jurisdiction
"extends only to the fund deposited with the
court"); see Herman Miller, 2008 WL 2620748, at
*2 (declining to issue an injunction where "neither the
fund nor a bond" had been deposited with the court).
Hartford previously deposited the Plan Benefits with the
Court, and allowing the Defendants to bring a suit against
Hartford to recover the Plan Benefits would "destroy the
effectiveness of the interpleader suit." See Major
Oil Corp., 583 F.2d at 1158. Accordingly, an injunction
preventing the Defendants from initiating such an action is
Hartford and Hill dispute whether Hartford is entitled to
attorneys' fees for bringing the interpleader action.
District courts generally have discretion to award
attorneys' fees to a disinterested stakeholder in an
interpleader action. Abex Corp. v. Ski's Enterprises,
Inc., 748 F.2d 513, 516 (9th Cir. 1984).
that interpleader is a valuable procedural device for
insurance companies faced with competing claims, some courts
outside the Ninth Circuit have denied attorneys' fees
because competing claims are part of the ordinary course of
business for an insurance company. Transamerica Life Ins.
Co. v. Shubin, 2012 WL 2839704, at *8 (E.D. Cal. July
10, 2012), recommendation adopted by 2012 WL 3236578
(E.D. Cal. Aug. 6, 2012). As Hartford points out, the Ninth
Circuit has not barred recovery of fees and costs when the
stakeholder is an insurance company. Id.
Nevertheless, the Court agrees with Hill that the following
reasoning for denying attorneys' fees to an insurance
company stakeholder is apt:
"First, courts have found... that insurance companies
should not be compensated merely because conflicting claims
to the proceeds have arisen during the normal course of
business." [Unum Life Ins. Co. of Am. v.
Kelling, 170 F.Supp.2d 792, 794] (citing [Sun Life
Assur. Co. of Canada v. Thomas, 735 F.Supp. 730, 732];
Prudential v. Baton Rouge, 537 F.Supp. 1147, 1150-51
(M.D. Ga. 1982); Minnesota Mut. Life Ins. Co. v.
Gustafson, 415 F.Supp. 615, 617-19 (N.D. 111. 1976)).
Second, courts have declined to follow the general rule where
the stakeholder is an insurance company, reasoning that
"insurance companies, by definition, are interested
stakeholders and that filing of the interpleader action
immunizes the company from further liability under the
contested policy." Id. (citing
Prudential, 537 F.Supp. at 1150-51; Western Life
Ins. Co. v. Nanney, 290 F.Supp. 687, 688 (E.D. Term.
1968); Cogan v. United States, 659 F.Supp. 353, 354
(S.D.Miss. 1987)). Lastly, "some courts have exempted
insurance companies from the general rule based on the policy
argument that such an award [would] senselessly deplete the
fund that is the subject of the preservation through the
interpleader." Id. at 795 (citing Paul
Revere Life Ins. Co. v. Riddle, 222 F.Supp. 867, 868
(E.D. Term. 1963); Metro. Life Ins. Co. v. Jordan,
221 F.Supp. 842, 844 (W.D. N.C. 1963); Hunter v. Fed.
Life Ins. Co., 111 F.2d 551, 556 (8th Cir. 1940);
Trustees of Directors Guild of Am. Producer Pension
Benefit Plans v. Tise, 234 F.3d 415, 426 (9th Cir.
Allstate Life Ins. Co. v. Shaw, 2016 WL 1640461, at
*6 (E.D. Mich. 2016).
district court determined all three reasons counseled against
an award of attorneys' fees and costs to the insurance
company. The interpleader action at issue fell within the
ordinary course of business for a life insurance company, and
the company was "capable of allocating such costs among
its policyholders." Id. Further, the death
benefits at issue amounted to $25, 000, and the court found
any claim for attorneys' fees "would seriously
deplete the amount available under the terms of the policy to
the rightful beneficiary." Id.
the present action falls within the ordinary course of
business for Hartford. Hartford gains a substantial benefit
from the interpleader action: no liability for distributing
the Plan Benefits. Lastly, the Plan Benefits amount to only
$22, 739.94, and any award of attorneys' fees would
seriously deplete the amount left available to the rightful
beneficiary. Accordingly, the Court will deny Hartford's
request for attorneys' fees and costs.
HEREBY ORDERED that Hartford's Motion to Dismiss and
Discharge Liability and for an Award of Attorneys' Fees
(Doc. 23) is GRANTED in part an
DENIED in part:
Hartford is dismissed and discharged from this interpleader
Defendants Hill and Lecou are enjoined from initiating any
action against Hartford for ...