Commercial Union Ins. Co. v. U.S., 91-5391

• Decision Date: 10 August 1993
• Docket Number: No. 91-5391,91-5391
• Citation: 999 F.2d 581
• Parties: COMMERCIAL UNION INSURANCE COMPANY v. UNITED STATES of America, et al. v. William SCOTT, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 581

999 F.2d 581

303 U.S.App.D.C. 33

COMMERCIAL UNION INSURANCE COMPANY v. UNITED STATES of America, et al. v. William SCOTT, Appellant.

No. 91-5391.

United States Court of Appeals District of Columbia Circuit.

Argued May 5, 1993.

Decided Aug. 10, 1993.

Leonard C. Pederson, Jr., argued the cause and filed the brief for appellant.

Robert L. Shapiro, Asst. U.S. Atty., argued the cause for appellees. With him on the brief were J. Ramsy Johnson, U.S. Atty., and John D. Bates, R. Craig Lawrence, and Robert L. Shapiro, Asst. U.S. Attys.

Donald P. Mailberger entered an appearance for Commercial Union Ins. Co.

Before MIKVA, Chief Judge, and EDWARDS and BUCKLEY, Circuit Judges.

BUCKLEY, Circuit Judge:

Commercial Union Insurance Company issued a $25,000 policy to Samir Mohamed Said Ahmed, who negligently injured a Secret Service officer, William Scott. Both Officer Scott and the Federal Government claimed the proceeds of the insurance fund: Officer Scott for his non-medical damages, and the Government for the $18,596 in medical bills it had paid on his behalf. In response to these competing claims, Commercial Union filed a complaint for interpleader in the district court, seeking a declaration on the disposition of the fund.

Although the asserted basis for the district court's jurisdiction is flawed, we nonetheless find that we may assume jurisdiction over the case under 28 U.S.C. § 1653 (1988), which allows for amendment of jurisdictional claims in the appellate court. We further find that the district court erred in holding that the Government's claim had priority over Officer Scott's. As the governing statute, the Federal Medical Care Recovery Act, is silent on the question of priority, we turn to equitable principles governing interpleader, which require that the fund be divided between the claimants on a pro rata basis. We therefore reverse the district court and remand for a determination of each party's share of the fund.

I. BACKGROUND

A. Interpleader

Interpleader allows a party exposed to multiple claims on a single obligation or property to settle the controversy and satisfy his obligation in one proceeding. See Zechariah Chaffee, Jr., The Federal Interpleader Act of 1936: I, 45 Yale L.J. 963, 963 (1936) ("Federal Interpleader Act: I "); see also Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure: Civil 2d § 1702, at 493-97, § 1704, at 500 (1986) ("FP & P"). Where a party in control of contested property, the stakeholder, makes no claim on the property and is willing to release it to the rightful claimant, interpleader allows him "to put the money or other property in dispute into court, withdraw from the proceeding, and leave the claimants to litigate between themselves the ownership of the fund in court." Chaffee, Federal Interpleader Act: I, 45 Yale L.J. at 963.

Interpleader may be brought in federal court under either the Federal Interpleader Act, 28 U.S.C. § 1335 (1988), or under Rule 22 of the Federal Rules of Civil Procedure. Rule interpleader "in no way supersedes or limits" the remedy available under the Act. Fed.R.Civ.P. 22(2).

B. Facts

On May 30, 1987, while Officer William Scott was on duty with the Uniform Division of the Secret Service, Mr. Ahmed, Commercial Union's insured, made an improper left turn and then came to an abrupt stop in front of Officer Scott. In order to avoid a collision, Officer Scott lowered his motorcycle to the pavement; he sustained serious injuries. Mr. Ahmed carried a liability policy with Commercial Union in the amount of $25,000 per injured person.

As Officer Scott was injured while on duty, the United States paid his medical bills, which came to $18,586. By letter dated May 18, 1988, the Secret Service demanded that amount from Commercial Union pursuant to the Federal Medical Care Recovery Act ("FMCRA"), 42 U.S.C. §§ 2651-53 (1988 & Supp. III 1991). In July 1988, Commercial Union offered the fund to Scott in exchange for a full release of Commercial Union and its insured, Mr. Ahmed, who had apparently left the country. Officer Scott later sought to accept Commercial Union's offer on the condition that the settlement check be made out to him and his counsel. In August 1988, the Secret Service again demanded payment for its medical expenses.

In the face of these competing claims, Commercial Union initiated this interpleader against the United States Secret Service and William Scott. The district court ruled for the United States, allowing it to recover the full amount expended on Officer Scott's medical care, and granting only the remainder to Officer Scott. See Commercial Union Ins. Co. v. United States, No. 89-1108, 1991 WL 221613, *2, (D.D.C. Oct. 10, 1991). This appeal followed.

II. ANALYSIS

A. Jurisdiction

Although neither party challenged this court's jurisdiction, "it is well established that a court of appeals must first satisfy itself of its own jurisdiction, sua sponte if necessary...." Citizens for the Abatement of Aircraft Noise, Inc. v. Metropolitan Washington Airports Auth., 917 F.2d 48, 53 (D.C.Cir.1990), aff'd, --- U.S. ----, 111 S.Ct. 2298, 115 L.Ed.2d 236 (1991). We are not satisfied with the jurisdictional grounds alleged by plaintiff Commercial Union, but we find that the jurisdictional claim may in effect be amended to establish federal question jurisdiction.

The central distinction between statutory interpleader and rule interpleader is the basis for a federal court's subject matter jurisdiction under each. See Wright, Miller & Kane, FP & P § 1703, at 498. The Act requires that two or more of the adverse claimants to a contested fund be "of diverse citizenship as defined in section 1332 of this title." 28 U.S.C. § 1335(a)(1); see also Morongo Band of Mission Indians v. California State Bd. of Equalization, 858 F.2d 1376, 1381 (9th Cir.1988). Rule 22, however, "is merely a procedural device; it confers no jurisdiction on the federal courts." Morongo Band, 858 F.2d at 1382. Thus, an interpleader brought under Rule 22 must fall within one of the general statutory grants of federal jurisdiction. Id. This, of course, may include diversity jurisdiction, 28 U.S.C. § 1332; thus, in contrast to section 1335, which focuses on the diversity of the claimant-defendants, Rule 22 (per section 1332) requires diversity between the plaintiff-stakeholder and the claimants. See Wright, Miller & Kane, FP & P § 1710, at 537-39.

Commercial Union's complaint states that it has offices in the State of Maryland and that its principal place of business is Massachusetts; that "Defendant United States of America, Department of the Treasury, United States Secret Service is domiciled in the District of Columbia"; and that Officer Scott is a resident of the State of Maryland. See Complaint for Interpleader and Declaratory Relief at 1-2, Commercial Union Ins. Co. v. United States, No. 89-1108 (D.D.C. Apr. 25, 1989) ("Complaint"). Based on its assertion that the United States is domiciled in the District, Commercial Union advanced two theories in support of subject matter jurisdiction: the Federal Interpleader Act, 28 U.S.C. § 1335, and standard diversity jurisdiction under Rule 22 and 28 U.S.C. § 1332. See Complaint at 1, 2.

It is well established, however, that the United States is not a citizen for diversity purposes and that "U.S. agencies cannot be sued in diversity." General Ry. Signal Co. v. Corcoran, 921 F.2d 700, 703 (7th Cir.1991). In addition to the fact that neither the United States nor its agencies fit any of the categories of parties listed in 28 U.S.C. § 1332(a), the Supreme Court has noted, with respect to the Interstate Commerce Commission and the Railroad Labor Board, that they "are not citizens of any State, but have the same relation to one State as to another." State of Texas v. Interstate Commerce Comm'n, 258 U.S. 158, 160, 42 S.Ct. 261, 262, 66 L.Ed. 531 (1922) (footnote omitted).

In sum, Commercial Union based its claim for jurisdiction on diversity between itself and the Secret Service (under Rule 22), or between the Secret Service and Mr. Scott (under the statute). As the Secret Service does not have citizenship for purposes of establishing diversity, we cannot take jurisdiction on either ground.

Jurisdiction might have been alleged in this case under Rule 22 and 28 U.S.C. § 1331, the federal question doctrine. At first glance, a claim of federal question jurisdiction in an interpleader seemingly runs afoul of the "well-pleaded complaint" rule. An action arises under federal law if that law creates the cause of action; and the Supreme Court has "long and consistently held that the federal law element must appear on the face of plaintiff's well-pleaded complaint," not on speculation as to a defense to plaintiff's claim. Morongo Band, 858 F.2d at 1383 (emphasis in original) (citing Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 9-10, 103 S.Ct. 2841, 2846, 77 L.Ed.2d 420 (1983)). A stakeholder's interpleader claim "is typically one seeking discharge and is difficult to characterize as asserting either federal or state rights." Id.

We join several other circuits, however, in recognizing that interpleader ought to be treated in this regard in the same fashion as a request for a declaratory judgment. See Bell & Beckwith v. United States, 766 F.2d 910, 912-13 (6th Cir.1985); see also Morongo Band, 858 F.2d at 1384; General Ry. Signal Co., 921 F.2d at 706 n. 6. Both interpleader and declaratory judgment actions "enable a defendant to precipitate a plaintiff's suit in order to avoid multiple liability or other inconvenience." Bell & Beckwith, 766 F.2d at 914 (quotation marks and brackets omitted); see also Morongo Band, 858 F.2d at 1384. In such cases, although the plaintiff's claim does not raise a federal question, it may stake the federal court's jurisdiction on "a defense to a claim that would raise a federal question and that defendant could have asserted in a coercive...