Jpmorgan Chase Bank, N.A. v. Neu

• Decision Date: 24 May 2017
• Docket Number: Civil Action No. 17-3475
• Parties: JPMORGAN CHASE BANK, N.A., Plaintiff, v. RICHARD W. NEU, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

JPMORGAN CHASE BANK, N.A., Plaintiff, v. RICHARD W. NEU, et al., Defendants.

Civil Action No. 17-3475

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

May 24, 2017

NOT FOR PUBLICATION

OPINION

John Michael Vazquez, U.S.D.J.

This matter comes before the Court on the Order to Show Cause for Interpleader Relief filed by Plaintiff JPMorgan Chase Bank, N.A. ("Chase"). Chase seeks an order (1) directing it to place the funds at issue into the Federal Registry, (2) discharging Chase from all further liability with respect to the funds, (3) enjoining two underlying state court proceedings, (4) preventing Defendants from instituting any other proceeding that may affect the funds and (5) for an award of attorneys' fees and costs. D.E. 3. Defendant Amy Neu does not object to Chase's application for interpleader relief. D.E. 11.¹ Defendants Richard Neu, Warren Dean and the entity Defendants² filed a brief in opposition arguing, among other things, that this Court lacks subjectmatter jurisdiction.³ D.E. 13. The Court reviewed the parties' submissions in support and opposition and heard oral argument on the matter. For the reasons discussed below, Plaintiff's application is GRANTED in part.⁴ The Court directs Chase to deposit the Funds at issue into the Federal Registry, enjoins two underlying state court proceedings, and orders that Defendants cannot institute any other proceeding that may affect the funds. The Court will address the remaining portions of Plaintiff's application at a later date.

I. BACKGROUND

Richard Neu is the operational trustee of the Neu Trusts, which are the beneficial owners of the remaining entity Defendants. Compl. ¶¶ 30, 32, D.E. 1. In other words, the Neu Trusts control the entity Defendants, and the entity Defendants have the funds at issue. The entityDefendants maintain twenty-one bank accounts at Chase, which as of May 9, 2017, collectively held more than $14 million. Id. ¶ 26. Amy Neu was an officer of at least some of the entity Defendants and through her position was the authorized signatory of the Chase accounts. Id. ¶ 31. Amy is the daughter of Richard.

On April 6, 2017, Richard removed Amy from her positions with the entity Defendants and sought to revoke her signature authority over the Chase accounts. Id. ¶ 32. In response, Amy filed petitions in the Surrogate's Court of the State of New York seeking to remove Richard as trustee of the Neu Trusts and be appointed as Interim Trustee (the "New York Proceedings") on April 12, 2017.⁵ Id. ¶ 33. The same day, Amy notified Chase of the New York Proceedings, informing Chase that if it followed any of Richard's directions "you do so at your own peril." Id. ¶ 34. Due to the existence of the dispute concerning control of the Neu Trusts, Chase froze all twenty-one accounts on April 18, 2017. Id. ¶ 35.

On April 24, 2017, Richard commenced an action against Chase⁶ in the Superior Court of New Jersey, Chancery Division, compelling it to lift the freeze on the accounts and to recognize the persons designated by the Company Defendants as the persons with signature power with respect to the Chase accounts (the "New Jersey Action"). Id. ¶¶ 37-38. The court in the New Jersey Action enter a temporary restraining order (the "TRO") on April 28, 2017, ordering that Richard had sole authority over the funds. The TRO also enjoined Chase from maintaining acomplete freeze on the accounts, and required Chase to allow the Company to make payments "in the ordinary course of business." Id. ¶ 42. Richard, however, was prohibited from paying "extraordinary expenses, transfers or payment not part of the company's ordinary day[-]to[-]day operations." Id. The TRO does not require Chase to monitor the accounts to determine whether specific transactions are in the ordinary course of business but also does not immunize Chase from liability. Id. ¶ 44.

On May 8, 2017, Richard requested that Chase transfer $10 million from one Chase account into another account. Chase was concerned that the requested transfer was not consistent with the TRO in the New Jersey Action. Id. ¶ 46. On May 15, 2017, Chase filed this matter for interpleader relief pursuant to 28 U.S.C. § 1335 and sought an injunction pursuant to 28 U.S.C. § 2361.

II. LEGAL STANDARD

Interpleader may occur through the federal interpleader standard, 28 U.S.C. § 1335, or pursuant to Federal Rule of Civil Procedure 22. See Metro. Life Ins. Co. v. Price, 501 F.3d 271, 275 (3d Cir. 2007). Because Chase brought this action pursuant to Section 1335, the Court will only address statutory impleader. Section 1335 grants federal district courts with original jurisdiction over an interpleader action when there is "minimal diversity" between two or more adverse claimants, as defined by 28 U.S.C. § 1332, and if the amount in controversy is $500 or more. Id.; see also 28 U.S.C. § 1335(a). It also requires the plaintiff to deposit the funds at issue into the court's registry. 28 U.S.C. § 1335(a). If these requirements are satisfied, a court has subject matter jurisdiction over the interpleader action.

In addition, Section 2361 authorizes district courts to enter preliminary and permanent injunctions restraining claimants from instituting or prosecuting legal proceedings in state orfederal courts that could affect the res at issue in an interpleader action. 28 U.S.C. § 2361. Courts have "extensive discretion under Section 2361 with regard to the issuance and the scope of the order." Orseck, P.A. v. Servicios Legales De Mesoamerica S. De R.L., 699 F. Supp. 2d 1344, 1351 (S.D. Fla. 2010) (quoting 7 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1717 (3d ed. 2009)). "Section 2361 enables a party meeting the requirements of Section 1335 to obtain a restraining order without following the procedures set forth in [Federal Rule of Civil Procedure] 65, which normally governs the issuance of injunctive relief." N.Y. Life Ins. Co. v. Apostolidis, 841 F. Supp. 2d 711, 720 (E.D.N.Y. 2012); see also Fed. R. Civ. P. 65(e)(2) ("These rules do not modify . . . 28 U.S.C. § 2361, which relates to preliminary injunctions in actions of interpleader or in the nature of interpleader.").

"The equitable remedy of interpleader allows 'a person holding property to join in a single suit two or more persons asserting claims to that property.'" Metro. Life Ins. Co., 501 F.3d at 275 (quoting NYLife Distrib., Inc. v. Adherence Grp., 72 F.3d 371, 372 n.1 (3d Cir. 1995)). Interpleader allows the party holding the property at issue, or the stakeholder, to file suit, deposit the property with the court, withdraw from the proceeding, and allow the parties with the competing claims to litigate the underlying dispute. Id.

An interpleader action usually proceeds in two stages. At the first stage, "the court determines whether the interpleader complaint was properly brought and whether to discharge the stakeholder from further liability to the claimants." Prudential Ins. Co. of Am. v. Hovis, 553 F.3d 258, 262 (3d Cir. 2009). The court determines the respective rights of the claimants to the interpleaded funds at the second stage. Id. Ultimately, interpleader "relieves the stakeholder from determining at his peril the merits of the competing claims and shields him from the prospect ofmultiple liability; [and] gives the claimant who ultimately prevails ready access to the disputed fund." NYLife Distrib., Inc., 72 F.3d at 374.

III. ANALYSIS

The parties do not dispute that the amount in controversy and diversity requirements are satisfied here.⁷ Richard, however, contends that the requirements for statutory interpleader are not met because there are not two adverse claimants. Specifically, Richard argues that there is no dispute that all the funds in the Chase accounts belong to the entity Defendants; "[n]one of the other defendants or any other person claims to be entitled to these funds." Richard's Br. at 6, D.E. 13. As a result, the Court does not have subject matter under Section 1335, according to Richard. Id. at 6-8. Chase counters that because there are competing claims regarding control over the funds, the adverse claimant requirement is satisfied. Chase's Reply at 3, D.E. 16.

The federal interpleader statute "is remedial and [should] be liberally construed." State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 533 (1967); see also NYLife Distrib., Inc., 72 F.3d at 381 ("[I]t has long been recognized that the interpleader statute is remedial, aimed at assisting a party who fears the vexation of defending multiple claims to a fund or property under his control by providing him the opportunity to satisfy his obligation in a single proceeding."). As a result, the adverse claimant requirement is satisfied when the defendants in an interpleader action dispute who control the funds at issue. For example, in Bank of America, N.A. v. Jericho Baptist Church Ministries, Inc., the underlying dispute addressed whether the original board or a later-formed board controlled church assets. No. PX 15-2953, 2016 WL 4721257, at *1 (D. Md. Sept. 9, 2016).The two boards were involved in a "vigorous legal feud," which resulted in numerous lawsuits that were filed to "determine fully and finally which entity rightfully govern[ed] the Church." Id. at *2. The Bank of America, which held the funds at issue, filed an interpleader action in response to the competing claims from the two boards. Id. at *2. The court in Jericho Baptist concluded that Bank of America's interpleader action was proper. Id. at *4. Similarly, in National Bank of Detroit v. Shelden, the "principal question" presented in the interpleader litigation involved a determination of who were the present trustees of the trust. 730 F.2d 421, 421-22 (6th Cir. 1984); see also Paskenta Band of Nomlaki Indians v. Crosby, No. 15-538, 2017 WL 385922, at *3 (E.D. Cal. Jan. 24, 2017) (granting interpleader relief regarding which of two competing tribal councils had authority over interpleaded accounts).

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