Protective Life Ins. Co. v. Patel
| Decision Date | 28 October 2022 |
| Docket Number | 20-13289 |
| Parties | PROTECTIVE LIFE INSURANCE COMPANY, Interpleader Plaintiff, v. KIRIT PATEL, SANJAY PATEL, ASHA TAYLOR, DHAVAL TAYLOR, and SHAKRI TAYLOR, Interpleader Defendants. And KIRIT PATEL, SANJAY PATEL, and SHAKRI PATEL, Cross-Plaintiffs, v. ASHA TAYLOR and DHAVAL TAYLOR, Cross-Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
This matter is before the Court on Protective Life Insurance Company's request for attorney's fees incurred in litigation over the proceeds of two insurance policies on the life of Arvindbhai (Andy) G. Patel. Protective Life, the interpleader plaintiff, says that it attempted to negotiate an agreement among the competing parties to allow it to pay the policy proceeds into court and then withdraw from the case. Although the Patel defendants ultimately agreed, the Taylor defendants did not. Protective Life then proceeded with the litigation, eventually moving for the relief it had sought through negotiation. The Court granted the motion and allowed Protective Life to be dismissed from the case after paying the policy proceeds into the Court's Registry. Protective Life seeks attorney's fees based on the Taylor defendants' opposition, which it characterizes as unreasonable. The Court has discretion in interpleader cases to award attorney's fees to the stakeholder as an equitable remedy. Protective Life has shown that it is appropriate for the Court to allow it to recover its costs and attorney's fees in a reasonable amount. The Court therefore, will grant the motion.
I.
Andy Patel's ex-wife and children, Shakri, Kirit, and Sanjay Patel (the Patel defendants), and partner and son, Asha and Dhaval Taylor (the Taylor defendants), all claim to be rightfully entitled to some or all of the proceeds of two insurance policies on Andy's life. Protective Life was obliged to pay out the proceeds from both policies, but due to the dispute among the defendants it could not determine the proper beneficiaries. So Protective Life filed a complaint-in-interpleader on December 14, 2020. It filed a motion to deposit the proceeds into the Court's registry on June 1, 2020. The Court granted the motion in part, and Protective Life deposited $1,143,711.06 in insurance proceeds and interest into the Court's registry on October 7 2021. The deposit relieved Protective Life of any liability with respect to payment of the life insurance proceeds.
Protective Life states that it incurred significant attorney's fees as a result of the defendants' competing claims to the insurance proceeds. At the beginning of the litigation,Protective Life unsuccessfully proposed to the defendants a stipulation to dismiss it from the case after it paid the policy proceeds to court, award it $5,000 in attorney's fees, and have the Court resolve the interpleader defendants' claims. The defendants were slow to respond to this proposal and ultimately refused until May 2021, when the Patel defendants consented to Protective's recovery of fees and dismissal with prejudice. However, the Taylor defendants continued to refuse to accept the proposal, demanding that they would only do so if Protective Life paid them $200,000 and consented to the dismissal of the case without prejudice. Alternatively, the Taylor defendants demanded that Protective Life pay them $175,000 and waive its attorney's fees. They also remained adamant that Protective Life was liable for breach of contract and negligence for mishandling the claims procedure, allegations the Court ultimately determined were without merit. ECF No. 32. Protective Life therefore continued to incur “substantial” fees as it attempted to negotiate with the interpleader defendants, participated in conferences, and sought to be discharged from the action. When Protective Life filed its motion to disburse the funds in June 2021, it requested fees totaling $16,456.75. Protective Life again increased its request in its reply brief and now asks for “$22,141.75, which equates to less than 2% of the insurance proceeds to be deposited with the Court” and “does not account for the total fees expended by Protective.” Supp. Brief, ECF No. 33, PageID.307. Protective Life does not seek to recoup any fees incurred after June 22, 2021.
Protective Life retained two law firms in this matter. Its legal team from the primary firm, Bodman PLC, is comprised mainly of Michelle Thurber Czapski and Alexandra C. Markel. Czapski is chairperson of Bodman's Insurance Practice and Litigation Practice Groups and has 29 years' experience litigating insurance cases. She charged an hourly rate of $490 and billed around 16 hours on the file between December 2020 and June 2021. Markel has four years experience as a lawyer in areas that include insurance litigation. She charged $260 per hour on this matter and billed more than 18 hours. The second firm, Maynard, Cooper & Gale, P.C., “routinely serves as Protective's national counsel.” Third-year associate Mary Caroline Wynn primarily handled the case for Maynard Cooper, billing more than 43 hours since December 2020. Wynn specializes in insurance litigation and charged $202 an hour, below her usual hourly rate. To minimize fees, she says that she performed the majority of the two firms' legal research and briefing. Maynard Cooper shareholder A. Feinberg and staff attorney C. Collins, and Bodman paralegal Matthew Chambers, also billed hours in this matter. However, no one from the Maynard, Cooper firm ever appeared in the case.
The firms itemized their fees as follows:
Description of Services
Hours
Initial file review and drafting the case initiating pleadings; service of process; amendment of complaint.
21.2
Review of responsive pleadings; communications with counsel for interpleader defendants; preparation of stipulation for interpleader.
6.7
Communications with interpleader defendants' counsel regarding stipulation for interpleader; preparation of case management statement.
5.5
Preparation of motion for interpleader deposit, accompanying declaration in support of fee request, and proposed order; preparation for and appearance at status conference; preparation of initial disclosures; further communications regarding stipulation for deposit of proceeds.
46.5
Review of oppositions to motion for interpleader deposit; preparation of reply in support of motion for interpleader deposit; preparation of policy file and responses to interpleader defendants' discovery requests.
28.4
$7,941.60
Total Fees Billed as of July 31, 2021
73.1
Id. at PageID.310. Notably, this chart appears to contain an error, in that the sum of the hours billed for each category of service is 108.3, not 73.1.
As noted above, Protective Life first asked the Court for an attorney's fee award in its June 1, 2021 motion for the deposit of proceeds. The Court granted the motion in part on September 7, 2021, ordering Protective Life to pay the insurance proceeds into the Court's registry but directing it to furnish additional information to substantiate its attorney's fee award request. Protective filed a supplemental brief in support of its request on September 21, 2021, and additional exhibits on October 1, 2021. On October 12, 2021, the Taylor defendants filed a supplemental brief in opposition to Protective's request, to which Protective Life replied.
I.
Although neither Federal Rule of Civil Procedure 22 nor the interpleader statute, 28 U.S.C. § 2361, “contains an express reference to costs or attorney's fees,” “[a] federal court has discretion to award costs and counsel fees to the stakeholder in an interpleader action, whether brought under Rule 22 or the interpleader statute, whenever it is fair and equitable to do so.” 7 Wright, Miller & Kane, Federal Practice and Procedure: Civil § 1719 (3d ed. 2021). A court may award an interpleading party attorney's fees and costs when the party “is (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.” Holmes v. Artists Rights Enf't. Corp. (AREC), 148 Fed.Appx. 252, 259 (6th Cir. 2005) (quoting Septembertide Publ'g v. Stein and Day, 884 F.2d 675 (2d Cir. 1989)). “The only limiting principle is reasonableness, and it is at the discretion of the Court to determine what award is appropriate.” Ibid.
On the other hand, it has been said that “attorneys' fees are not warranted . . . when a stakeholder's interpleader claim arises out of the normal course of business.” In re Mandalay Shores Coop. Hous. Ass'n Inc., 21 F.3d 380, 383-84 (11th Cir. 1994); see also Unum Life Ins. Co. of Am. v. Kelling, 170 F.Supp.2d 792, 795 (M.D. Tenn. 2001) (); Allstate Life Ins. Co. v. Shaw, No. 15-11761, 2016 WL 1640461, at *5-6 (E.D. Mich. Apr. 26, 2016) (collecting cases). The reasons for disallowing attorney's fees (an equitable remedy) include the idea that the task of dealing with competing claims to insurance benefits is a foreseeable risk for insurance companies and an anticipated cost of doing business; an insurance company is an interested stakeholder in a contest over policy proceeds, and the immunity conferred by an interpleader order is remedy enough; and it is inequitable to deplete the policy proceeds, which an interpleader action is intended to preserve and allocate. Kelling, 170 F.Supp.2d at 794-95.
Protective Life argues that $22,141.75 is a reasonable attorney's fee award...
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