American Family Mut. Ins. Co. v. Roche

• Decision Date: 24 August 1993
• Docket Number: No. 92-C-539.,92-C-539.
• Citation: 830 F. Supp. 1241
• Parties: AMERICAN FAMILY MUTUAL INS. CO., Plaintiff, v. Timothy C. ROCHE, et al., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

830 F. Supp. 1241

AMERICAN FAMILY MUTUAL INS. CO., Plaintiff, v. Timothy C. ROCHE, et al., Defendants.

No. 92-C-539.

United States District Court, E.D. Wisconsin.

August 24, 1993.

Jan M. Schroeder, Peterson, Johnson & Murray, S.C., Milwaukee, WI, for plaintiff.

Robert Steven Wilson, Sycamore, IL, for defendant Roche.

Stephen N. Needham, Lichtsinn & Haensel, Milwaukee, WI, for defendants Rebecca Grimm, Robert Grimm, Estate of Michael R. Grimm, Jr., Kathryn Grimm, & Michael Grimm, Sr.

DECISION AND ORDER

RANDA, District Judge.

This statutory interpleader action comes before the Court on cross-motions for summary judgment and on plaintiff's motion for default judgment against defendant Roche. The summary judgment motions raise issues concerning the proper scope of federal interpleader. Upon review, the Court grants defendants' motion for summary judgment and dismisses the case. Accordingly, plaintiff's motion for default judgment is denied as moot.

FACTUAL BACKGROUND

Taking plaintiff's allegations as true for purposes of this motion, the following facts are assumed. On January 13, 1990, the plaintiff, American Family Mutual Insurance Co. ("American Family"), issued a policy of automobile insurance to the defendant, Timothy C. Roche ("Roche"), which policy included liability coverage. (Complaint at ¶ 8.) On May 7, 1990, American Family sent Roche a statutory notice of termination, notifying Roche that his coverage would terminate on July 13, 1990. (Complaint at ¶ 9.) On or about July 22, 1990, Roche was involved in a car accident with the defendants, Michael R. Grimm, Sr., Rebecca Grimm, Michael R. Grimm, Jr. and Robert Grimm (collectively, "the Grimms"), in the State of Illinois. Michael Jr. died from injuries received in the accident. (Complaint at Ex. C, ¶ 5.) Michael Sr., Robert and Rebecca also suffered injuries in the accident. (Id.)

The Grimms, all Illinois residents, filed a wrongful death and personal injury action against Roche, a Wisconsin resident, in Cook County, Illinois. (Complaint at Ex. C.) American Family, a Wisconsin insurer, is not a party to the Illinois action because Illinois does not have a direct action statute. However, American Family is providing Roche a defense in that matter under a standard reservation of rights. (Complaint at ¶ 18.) That lawsuit is still pending. While it was pending, American Family brought this interpleader action against Roche and the Grimms (including the Grimms' daughter, Kathryn Grimm, who apparently was not involved in the accident), seeking two forms of relief. First, American Family seeks to enjoin any actions by the Grimms or Roche against the proceeds of Roche's policy and to "interplead" all such claims into this action. (Complaint at ¶¶ 14-21.) Second, American Family seeks a declaratory judgment that the policy was not in effect at the time of the accident and therefore American Family has no duty to defend Roche in the Illinois action and no liability under the policy. (Complaint at ¶¶ 22-26.)

The Grimms filed a motion for summary judgment to dismiss this action on grounds of subject matter jurisdiction. They argue that the interpleader statute requires at least two adverse claimants to the fund (the insurance proceeds) who are also diverse to each other. Because the Grimms are the only potential claimants to the fund, and because they all reside in Illinois, the Grimms argue a lack of jurisdiction. American Family filed its own motion for summary judgment, arguing that jurisdiction is proper. American Family argues that both Roche and itself can be considered claimants or potential claimants to the fund, and that each are adverse and diverse to the Grimms.

LEGAL ANALYSIS

"The admirable remedy of interpleader has been in existence for over 600 years." 7 Wright, Miller & Kane, Federal Practice and Procedure, § 1701 at 483 (1986). The remedy developed in the equity courts and is governed by equitable principles. Lummis v. White, 629 F.2d 397, 399 (5th Cir.1980), rev'd on other grounds, Cory v. White, 457 U.S. 85, 102 S.Ct. 2325, 72 L.Ed.2d 694 (1982). "Interpleader enables a person holding a fund to compel persons asserting conflicting claims to that fund to adjudicate their rights to the fund in a single action." Id. Early on, in what is now referred to as the "strict" bill of interpleader, courts applied various "classic" limitations upon the availability of interpleader, greatly restricting its use:

1. The same thing, debt, or duty must be claimed by both or all the parties against whom the relief is demanded; 2. All their adverse titles or claims must be dependent on or be derived from a common source; 3. The person asking the relief—the plaintiff — must not have or claim any interest in the subject-matter; 4. He must have incurred no independent liability to either of the claimants; that is, he must stand perfectly indifferent between them, in the position merely of a stakeholder.

7 Wright, Miller & Kane at 485, quoting 4 Pomeroy, Equity Jurisprudence, (Symons 5th ed.), 1941, § 1322, at 906. Seeking to expand interpleader relief, however, "many courts honored these strictures in name only". Id. One of the significant departures from the classic limitations on interpleader was development of the "bill in the nature of interpleader", which did away with the requirement that the stakeholder be neutral and disinterested:

Under the traditional strict bill of interpleader, the stakeholder did not assert an interest in the fund or contest the extent of the liability. The stakeholder simply brought the money or property into court and was discharged, leaving the rival claimants to litigate their entitlement to the fund. Because the strict bill of interpleader did not afford relief to all stakeholders, courts gradually developed the bill in the nature of interpleader. Through a bill in the nature of interpleader, a stakeholder that asserted an interest in the fund or denied liability to one or more of the claimants called "upon the court to exercise its jurisdiction to guard against the risks of loss from the prosecution in independent suits of rival claims."

Lummis, 629 F.2d at 400. (Citations omitted.)

Another significant development in the history of interpleader was enactment of the first federal interpleader statute in 1917. This first statute basically codified the historical interpleader remedy developed by the equity courts, but expanded federal jurisdiction by including nationwide service of process. 7 Wright, Miller & Kane at 486-87. Subsequent amendments of the statute added the bill in the nature of interpleader, expanded the group of persons eligible to seek interpleader, and abolished the first two of the four "classic" limitations described above. Id. at 487-490. Such is the shape of the statute today. The statute, however, is not the only form of federal interpleader available. Enactment of the statute and its subsequent amendments "left open the question whether the federal courts retained their historic equity jurisdiction over interpleader actions based on general federal question jurisdiction or diversity of citizenship between the plaintiff-stakeholder and the defendant-claimants." Id. at 491. That question was resolved in 1938, when Rule 22 of the Federal Rules of Civil Procedure was promulgated to provide federal interpleader proceedings in those cases which may not meet the requirements of the interpleader statute but which nonetheless meet the general jurisdictional requirements applicable in federal court (i.e., federal question, diversity of citizenship, amount-in-controversy, etc.)¹ Thus, today we have "statutory interpleader" and "rule interpleader". The primary distinction between the two lies in their jurisdictional prerequisites.² Here, jurisdiction is premised on statutory interpleader, the current version of which reads as follows:

§ 1335. Interpleader

(a) The district courts shall have original jurisdiction of any civil action of interpleader or in the nature of interpleader filed by any person, firm, or corporation, association, or society having in his or its custody or possession money or property of the value of $500 or more, or having issued a note, bond, certificate, policy of insurance, or other instrument of value or amount of $500 or more, or providing for the delivery or payment or the loan of money or property of such amount or value, or being under any obligation written or unwritten to the amount of $500 or more, if

(1) Two or more adverse claimants, of diverse citizenship as defined in section 1332 of this title, are claiming or may claim to be entitled to such money or property, or to any one or more of the benefits arising by virtue of any note, bond, certificate, policy or other instrument, or arising by virtue of any such obligation; and if (2) the plaintiff has deposited such money or property or has paid the amount of or the loan or other value of such instrument or the amount due under such obligation into the registry of the court, there to abide the judgment of the court, or has given bond payable to the clerk of the court in such amount and with such surety as the court or judge may deem proper, conditioned upon the compliance by the plaintiff with the future order or judgment of the court with respect to the subject matter of the controversy.

(b) Such an action may be entertained although the titles or claims of the conflicting claimants do not have a common origin, or are not identical, but are adverse to and independent of one another.

28 U.S.C. § 1335. (Emphasis supplied.)

As can be seen from the highlighted sections above, "the interpleader statute ... provides that the district courts have original jurisdiction over civil actions of interpleader brought by any corporation having issued a policy of insurance in the amount of $500.00 or more if two or more adverse claimants of diverse citizenship claim to be entitled to the money and plaintiff has deposited the money in ...