386 U.S. 523 (1967), 391, State Farm Fire & Casualty Co. v. Tashire

Docket Nº:No. 391
Citation:386 U.S. 523, 87 S.Ct. 1199, 18 L.Ed.2d 270
Party Name:State Farm Fire & Casualty Co. v. Tashire
Case Date:April 10, 1967
Court:United States Supreme Court
 
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Page 523

386 U.S. 523 (1967)

87 S.Ct. 1199, 18 L.Ed.2d 270

State Farm Fire & Casualty Co.

v.

Tashire

No. 391

United States Supreme Court

April 10, 1967

Argued February 115, 1967

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

A bus and a truck collided in California resulting in a large number of casualties, including many Canadians and citizens of five States. Four victims brought suits in California state courts for damages exceeding $1,000,000 against the bus and truck drivers and the truck owner (all Oregon citizens), and the bus company, a California corporation. Before these cases were tried or other suits brought, petitioner insurance company, an Illinois corporation, brought this action in the nature of interpleader in the Federal District Court in Oregon against the drivers, the bus company, truck owner, and each prospective claimant, asserting that it had insured the truck driver against bodily injury liability to the extent of $10,000 per person and $20,000 per occurrence. It paid the latter sum into court, and asked that all claims against it and the insured be established only in this single proceeding, and that it be discharged from all further obligations under its policy, including its duty to defend the truck driver in lawsuits arising from the accident. Alternatively, it asked to be relieved of all liability on the policy, claiming that the policy excluded from coverage accidents such as the one involved here, resulting from the insured's operation of a truck owned by and being used in the business of another. Jurisdiction was based on general diversity of citizenship and 28 U.S.C. § 1335, which, inter alia, vests the district courts with jurisdiction in an interpleader action where a corporation has issued an insurance policy if two or more "adverse claimants, of diverse citizenship" claim "or may claim" to be entitled to money or the benefits arising under a policy and if the plaintiff has paid the amount due into the court's registry. An injunction was issued providing that all suits against the insurance company and its insured and (on the bus company's motion) the bus company and its driver be prosecuted in the interpleader proceeding. On interlocutory appeal, the Court of Appeals reversed, holding that, in States like Oregon which do not permit

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"direct action" suits against an insurance company, federal interpleader may not be invoked until the claims against the insured have been reduced to judgment, since persons with unliquidated tort claims are not "claimants" within the meaning of § 1335.

Held:

1. The diversity requirement of 28 U.S.C. § 1335 is satisfied here, and the federal courts have jurisdiction, since that provision requires only "minimal diversity," i.e., diversity of citizenship between two or more claimants, without regard to the circumstance that other rival claimants may be co-citizens, and "minimal diversity" is permissible under Article III of the Constitution. Pp. 530-531.

2. Section 1335 authorizes interpleader where adverse claimants "may claim" benefits, and petitioner insurance company need not wait until claimants against the insured have reduced their claims to judgment before seeking to invoke the benefits of the interpleader statute. Pp. 531-533.

3. An injunction barring the prosecution of suits against the insurance company and the alleged tortfeasors outside the confines of the interpleader proceeding was not authorized by 28 U.S.C. § 2361, the scope of the litigation being vastly more extensive than the deposited proceeds of the insurance policy which constituted the "fund." Pp. 533-537.

(a) This is not a case where the effect of the interpleader is to confine the litigation to a single forum and proceeding, as where rival claims are limited to the fund itself. P. 534.

(b) The fortuitous circumstance that one of the prospective defendants happens to be insured should not limit the other plaintiffs to the forum selected by the insurance company. Pp. 534-535.

(c) The insurance company's interest, which is confined to its $20,000 fund, is fully vindicated when the court restrains claimants from seeking to enforce against the insurance company any judgment obtained against the insured except in the interpleader proceeding itself. The District Court had no power in that proceeding to control claimants' lawsuits against the insured or other alleged tortfeasors. P. 535.

(d) Interpleader was never intended to serve as a "bill of peace" and solve all the problems of multi-party litigation arising out of a mass tort. Pp. 535-536.

363 F.2d 7, reversed and remanded.

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FORTAS, J., lead opinion

MR. JUSTICE FORTAS delivered the opinion of the Court.

Early one September morning in 1964, a Greyhound bus proceeding northward [87 S.Ct. 1201] through Shasta County, California, collided with a south-bound pickup truck. Two of the passengers aboard the bus were killed. Thirty-three others were injured, as were the bus driver, the driver of the truck, and its lone passenger. One of the dead and 10 of the injured passengers were Canadians; the rest of the individuals involved were citizens of five American States. The ensuing litigation led to the present case, which raises important questions concerning administration of the interpleader remedy in the federal courts.

The litigation began when four of the injured passengers filed suit in California state courts, seeking damages in excess of $1,000,000. Named as defendants were Greyhound Lines, Inc., a California corporation; Theron Nauta, the bus driver; Ellis Clark, who drove the truck, and Kenneth Glasgow, the passenger in the truck, who was apparently its owner as well. Each of the individual defendants was a citizen and resident of Oregon. Before these cases could come to trial and before other suits were filed in California or elsewhere, petitioner State Farm Fire & Casualty Company, an Illinois corporation, brought this action in the nature of interpleader in the United States District Court for the District of Oregon.

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In its complaint, State Farm asserted that, at the time of the Shasta County collision, it had in force an insurance policy with respect to Ellis Clark, driver of the truck, providing for bodily injury liability up to $10,000 per person and $20,000 per occurrence, and for legal representation of Clark in actions covered by the policy. It asserted that actions already filed in California and others which it anticipated would be filed far exceeded in aggregate damages sought the amount of its maximum liability under the policy. Accordingly, it paid into court the sum of $20,000 and asked the court (1) to require all claimants to establish their claims against Clark and his insurer in this single proceeding and in no other, and (2) to discharge State Farm from all further obligations under its policy -- including its duty to defend Clark in lawsuits arising from the accident. Alternatively, State Farm expressed its conviction that the policy issued to Clark excluded from coverage accidents resulting from his operation of a truck which belonged to another and was being used in the business of another. The complaint, therefore, requested that the court decree that the insurer owed no duty to Clark and was not liable on the policy, and it asked the court to refund the $20,000 deposit.

Joined as defendants were Clark, Glasgow, Nauta, Greyhound Lines, and each of the prospective claimants. Jurisdiction was predicated upon 28 U.S.C. § 1335, the federal interpleader statute,1 and upon general diversity

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of citizenship, there being diversity between two or more of the claimants to the fund and between State Farm and all of the named defendants.

An order issued requiring the defendants to show cause why they should [87 S.Ct. 1202] not be restrained from filing or prosecuting

any proceeding in any state or United States Court affecting the property or obligation involved in this interpleader action, and specifically against the plaintiff and the defendant Ellis D. Clark.

Personal service was effected on each of the American defendants, and registered mail was employed to reach the 11 Canadian claimants. Defendants Nauta, Greyhound, and several of the injured passengers responded, contending that the policy did cover this accident and advancing various arguments for the position that interpleader was either impermissible or inappropriate in the present circumstances. Greyhound, however, soon switched sides and moved that the court broaden any injunction to include Nauta and Greyhound among those who could not be sued except within the confines of the interpleader proceeding.

When a temporary injunction along the lines sought by State Farm was issued by the United States District Court for the District of Oregon, the present respondents moved to dismiss the action and, in the alternative, for a change of venue -- to the Northern District of California, in which district the collision had occurred. After a hearing, the court declined to dissolve the temporary injunction, but continued the motion for a change of venue. The injunction was later broadened to include the protection sought by Greyhound, but modified to

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permit the filing -- although not the prosecution -- of suits. The injunction, therefore, provided that all suits against Clark, State Farm, Greyhound, and Nauta be prosecuted in the interpleader proceeding.

On interlocutory appeal,2 the Court of Appeals for the Ninth Circuit reversed. 363 F.2d 7. The court found it unnecessary to reach respondents' contentions relating to service of process and the scope of the injunction, for it concluded that interpleader was not available in the...

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