Protective Life Ins. Co. v. Kridner

• Decision Date: 27 March 2013
• Docket Number: Civil No. 12-582 (JRT/JJG)
• Parties: PROTECTIVE LIFE INSURANCE COMPANY, Plaintiff, v. SHEILA I. KRIDNER, KAREN M. ROBERTS, LISA A. CURTIS, and CYNTHIA L. GOERGEN, Defendants.
• Court: U.S. District Court — District of Minnesota

PROTECTIVE LIFE INSURANCE COMPANY, Plaintiff, v. SHEILA I. KRIDNER, KAREN M. ROBERTS, LISA A. CURTIS and CYNTHIA L. GOERGEN, Defendants.

Civil No. 12-582 (JRT/JJG)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

DATED: March 27, 2013

MEMORANDUM OPINION AND

ORDER ON ATTORNEYS' FEES

AND COSTS

Andrew J. Budish and James M. Jorissen, LEONARD, O'BRIEN, SPENCER, GALE & SAYER, LTD., 100 South Fifth Street, Suite 2500, Minneapolis, MN 55402, for plaintiff.

Lauris A. Heyerdahl, Melissa Linn Hagstrum, and Paul R. Smith, LARKIN HOFFMAN DALY & LINDGREN LTD., 7900 Xerxes Avenue South, Suite 1500, Minneapolis, MN 55431, for defendant Sheila I. Kridner.

Glenn P. Bruder, MITCHELL BRUDER & JOHNSON, 5001 American Boulevard West, Suite 670, Bloomington, MN 55437, for defendants Karen M. Roberts, Lisa A. Curtis, and Cynthia L. Goergen.¹

In March 2012, Plaintiff Protective Life Insurance Company ("Protective Life") filed an interpleader action against Defendants, the ex-wife and daughters of Protective Life's insured, regarding the proceeds of a life insurance policy. Protective Lifedeposited the policy's proceeds with the Court and has been discharged of liability for the funds. Protective Life now seeks attorneys' fees and costs in the amount of $10,665 to be paid out of the life insurance policy's proceeds. Because some of the fees requested by Protective Life are unreasonable, the Court will award Protective Life $6,573.05 in reasonable attorneys' fees and costs to be paid out of the policy's proceeds previously deposited with the Court.

BACKGROUND

I. THE POLICY

This case arises out of competing claims to the proceeds of a $105,000 life insurance policy ("the Policy") issued by United Investors Life ("United Investors")² to Thomas Kridner on May 28, 1983. (Compl. ¶ 10, Mar. 6, 2012, Docket No. 1.) The Policy named "Sheila I. Kridner, spouse" as the sole beneficiary. (Id.) Thomas and Sheila Kridner ("Kridner") divorced in Idaho on April 23, 1986, but the beneficiary listing on the Policy was never changed. (Aff. of Lauris A. Heyerdahl, Ex. A, Aug. 3, 2012, Docket No. 38; Compl. ¶ 13.)

Thomas Kridner died in California on July 29, 2011. (Heyerdahl Aff., Ex. C; Compl. ¶ 12.) On August 29, 2011, Kridner submitted a claim to United Investors for the Policy's proceeds. (Compl. ¶ 14, Ex. B.) On the claim form, Kridner indicated that she was Thomas Kridner's "wife." (Id., Ex B.) On November 18, 2011, Thomas Kridner'sdaughters - Karen Roberts, Lisa Curtis, and Cynthia Goergen (collectively, "the Daughters") - submitted a claim to United Investors, each declaring entitlement to one-third of the Policy's proceeds. (Id. ¶ 15, Ex. C.)

On February 9, 2012, Protective Life wrote a letter to Kridner and the Daughters requesting that the claimants attempt to reach an agreement as to the distribution of the proceeds. (Id., Ex. D.) In the letter, counsel for Protective Life stated "[i]f you cannot reach an agreement between yourselves as to how the policy proceeds should be paid, my client will have no choice but to interplead the policy proceeds into court." (Id., Ex. D at 1.) Kridner and the Daughters were unable to reach such an agreement. (Id., Exs. E-F.) Kridner claimed entitlement to the Policy's proceeds as its named beneficiary, (id., Ex. E), and the Daughters claimed rights to the policy because they believed California probate law prevented any non-probate transfers of their father's assets to Kridner, his former spouse, (id., Ex. F.) Protective Life wrote a letter to the Daughters' counsel on March 2, 2012, stating that the California law relied on by the Daughters in support of their claim to the Policy's proceeds "has no applicability to the life insurance policy insuring Mr. Kridner." (Second Aff. of Andrew J. Budish, Ex. A, Aug. 17, 2012, Docket No. 40.)

II. PROCEDURAL HISTORY

On March 6, 2012, Protective Life commenced an interpleader action pursuant to 28 U.S.C. § 1335(a), asking the Court to adjudicate the correct beneficiary of the Policy's proceeds. (Compl.)

Protective Life claims that, after filing the complaint, it attempted to work with counsel for both Kridner and the Daughters to obtain a stipulation to deposit the funds into the Court. (Aff. of James M. Jorissen ¶ 2, July 20, 2012, Docket No. 34.) Kridner did not stipulate to the deposit of funds, but instead filed an answer and a counterclaim against Protective Life, alleging that Protective Life breached the Policy by not paying the Policy's proceeds to Kridner. (Answer & Countercl., Apr. 26, 2012, Docket No. 5.) On May 4, 2012, counsel for Kridner offered to dismiss Kridner's counterclaim and stipulate to Protective Life's dismissal upon deposit of the funds with the Court. (Heyerdahl Aff., Ex. F.) Protective Life responded with a proposed stipulation, to which Kridner's counsel apparently never agreed. (Second Budish Aff., Ex. B.)

On May 17, 2012, Protective Life brought a motion to dismiss Kridner's counterclaim and also brought a motion to deposit funds with the Court. (Mot. to Dismiss, May 17, 2012, Docket No. 16; Mot. to Deposit Funds, May 17, 2012, Docket No. 19.) None of the Defendants opposed the motion to deposit funds, and the Court granted the motion on May 30, 2012. (Order, May 30, 2012, Docket No. 24.) The Court also ordered that Protective Life could "apply to this Court to seek reimbursement of its attorneys' fees and costs incurred in this action and to recover the same from the funds deposited into the registry of Court." (Id. at 2.) Protective Life deposited $107,649.45 with the Court on June 4, 2012, and was thereby "discharged from any further liability with respect to, affecting, or in any way arising out the Policy." (Id.; Receipt, June 4, 2012, Docket No. 26.)

On June 26, 2012, the Court granted Protective Life's unopposed motion to dismiss, and dismissed Kridner's counterclaim with prejudice. (Order, June 26, 2012, Docket No. 29.) Judgment was entered regarding Kridner's counterclaim the same day. (J., June 26, 2012, Docket No. 30.)

Protective Life submitted an affidavit that it has incurred $10,665 in attorneys' fees and costs in this action, and now requests that the Court award those fees to be paid out of the Policy's proceeds.³ (Jorissen Aff. ¶¶ 4-5.) Protective Life also submitted invoices itemizing most of the requested fees. (First Aff. of Andrew J. Budish ¶ 2, Ex. A, July 20, 2012, Docket No. 35.)

ANALYSIS

I. ALLOWANCE OF ATTORNEYS' FEES AND COSTS

"Interpleader is a procedural device that allows a party holding money or property, concededly belonging to another, to join in a single suit two or more parties asserting mutually exclusive claims to the fund. In this way the stakeholder is freed from the threat of multiple liability." Wittry v. Nw. Mut. Life Ins. Co., 727 F. Supp. 498, 499-500 (D. Minn. 1989). "[A] disinterested stakeholder who is threatened with multiple liabilityand who interpleads the claimants" should ordinarily not bear the expenses it incurs in bringing the action, and "is entitled to attorneys['] fees." Equitable Life Assurance Soc'y of U.S. v. Miller, 229 F. Supp. 1018, 1020 (D. Minn. 1964); see Hunter v. Fed. Life Ins. Co., 111 F.2d 551, 557 (8th Cir. 1940).⁴ The rationale for allowing fees to be recovered in an interpleader action "is that it would be inequitable to make the disinterested stakeholder bear the expense of guarding against vexatious and multiple litigation and the interpleader action benefits the claimants by facilitating an early determination regarding ownership of the claimed funds." Allianz Life Ins. v. Agorio, 852 F. Supp. 2d 1163, 1168 (N.D. Cal. 2012).⁵

"To recoup attorneys' fees and costs, a court must find (1) a disinterested stakeholder, (2) who has conceded liability, (3) has deposited the disputed funds into court, and (4) has sought a discharge from liability." Landmark Chems., SA v. Merrill Lynch & Co., 234 F.R.D. 62, 63 (S.D.N.Y. 2005) (citing Septembertide Publ'g, B.V. v.Stein & Day, Inc., 884 F.2d 675, 683 (2d Cir. 1989)). Here it is undisputed that Protective Life meets these requirements. Protective Life is a disinterested stakeholder in the Policy's proceeds and has conceded its liability to pay the funds to one of the claimants. (See Mot. to Deposit Funds at 2.) Additionally, Protective Life has deposited the funds and the Court has discharged Protective Life "from any further liability with respect to, affecting, or in any way arising out of the Policy." (Order at 2, May 30, 2012, Docket No. 24.)

Kridner, however, argues that attorneys' fees should not be awarded in this case because the Daughters' claims to the Policy's proceeds were frivolous, and therefore Protective Life could have resolved the competing claims without filing an interpleader action. In this case, the Court previously determined that an interpleader action was appropriate when it granted Protective Life's motion to deposit funds, which explicitly indicated that interpleader was sought because "Protective has received adverse, conflicting claims to [the Policy's proceeds]." (Mot. to Deposit Funds at 2.) Therefore the Court has already concluded that there were competing claims to the funds sufficient to maintain an interpleader at the time Protective Life filed the action. (Order, May 30, 2012, Docket No. 24.) Where "all parties have already consented to the principal sum of money being deposited in the court registry[,]" this means, by definition "that there is a dispute over the interpleaded funds" sufficient for the Court to exercise jurisdiction over the interpleader action. Irwin v. Principal Life Ins. Co., 404 F. Supp. 2d 1271, 1279(D. Kan. 2005).⁶ Kridner's argument about the merits of the Daughters' claims therefore goes to the propriety of an interpleader action in the first instance, and not to whether the interpleading plaintiff is entitled to attorney fees. See id. ("[The claimant] suggests that there is no bona fide dispute between the parties for the insurance proceeds, as she is clearly...