State Farm Fire Casualty Co v. Tashire

• Decision Date: 10 April 1967
• Docket Number: No. 391,391
• Citation: 18 L.Ed.2d 270,87 S.Ct. 1199,386 U.S. 523
• Parties: STATE FARM FIRE & CASUALTY CO. et al., Petitioners, v. Kathryn TASHIRE et al
• Court: U.S. Supreme Court

386 U.S. 523

87 S.Ct. 1199

18 L.Ed.2d 270

STATE FARM FIRE & CASUALTY CO. et al., Petitioners,

v Kathryn TASHIRE et al.

No. 391.

Argued Feb. 14 and 15, 1967.

Decided April 10, 1967.

[Syllabus from pages 523-524 intentionally omitted] Otto R. Skopil, Jr., Salem, Or., and John Gordon Gearin, Portland, Or., for petitioners.

Nick Chaivoe and James Griswold, Portland Or., for respondents.

Mr. Justice FORTAS delivered the opinion of the Court.

Early one September morning in 1964, a Greyhound bus proceeding northward through Shasta County, California, collided with a southbound pickup truck. Two of the passengers aboard the bus were killed. Thirty-three others were injured, as were the bus driver, the driver of the truck and its lone passenger. One of the dead and 10 of the injured passengers were Canadians; the rest of the individuals involved were citizens of five American States. The ensuing litigation led to the present case, which raises important questions concerning administration of the interpleader remedy in the federal courts.

The litigation began when four of the injured passengers filed suit in California state courts, seeking damages in excess of $1,000,000. Named as defendants were Greyhound Lines, Inc., a California corporation; Theron Nauta, the bus driver; Ellis Clark, who drove the truck; and Kenneth Glasgow, the passenger in the truck who was apparently its owner as well. Each of the individual defendants was a citizen and resident of Oregon. Before these cases could come to trial and before other suits were filed in California or elsewhere, petitioner State Farm Fire & Casualty Company, an Illinois corporation, brought this action in the nature of interpleader in the United States District Court for the District of Oregon.

In its complaint State Farm asserted that at the time of the Shasta County collision it had in force an insurance policy with respect to Ellis Clark, driver of the truck, providing for bodily injury liability up to $10,000 per person and $20,000 per occurrence and for legal representation of Clark in actions covered by the policy. It asserted that actions already filed in California and others which it anticipated would be filed far exceeded in aggregate damages sought the amount of its maximum liability under the policy. Accordingly, it paid into court the sum of $20,000 and asked the court (1) to require all claimants to establish their claims against Clark and his insurer in this single proceeding and in no other, and (2) to discharge State Farm from all further obligations under its policy—including its duty to defend Clark in lawsuits arising from the accident. Alternatively, State Farm expressed its conviction that the policy issued to Clark excluded from coverage accidents resulting from his operation of a truck which belonged to another and was being used in the business of another. The complaint, therefore, requested that the court decree that the insurer owed no duty to Clark and was not liable on the policy, and it asked the court to refund the $20,000 deposit.

Joined as defendants were Clark, Glasgow, Nauta, Greyhound Lines, and each of the prospective claimants. Jurisdiction was predicated upon 28 U.S.C. § 1335, the federal interpleader statute,¹ and upon general diversity of citizenship, there being diversity between two or more of the claimants to the fund and between State Farm and all of the named defendants.

An order issued, requiring the defendants to show cause why they should not be restrained from filing or prosecuting 'any proceeding in any state or United States Court affecting the property or obligation involved in this interpleader action, and specifically against the plaintiff and the defendant Ellis D. Clark.' Personal service was effected on each of the American defendants, and registered mail was employed to reach the 11 Canadian claimants. Defendants Nauta, Greyhound, and several of the injured passengers responded, contending that the policy did cover this accident and advancing various arguments for the position that interpleader was either impermissible or inappropriate in the present circumstances. Greyhound, however, soon switched sides and moved that the court broaden any injunction to include Nauta and Greyhound among those who could not be sued except within the confines of the interpleader proceeding.

When a temporary injunction along the lines sought by State Farm was issued by the United States District Court for the District of Oregon, the present respondents moved to dismiss the action and, in the alternative, for a change of venue—to the Northern District of California, in which district the collision had occurred. After a hearing, the court declined to dissolve the temporary injunction, but continued the motion for a change of venue. The injunction was later broadened to include the protection sought by Greyhound, but modified to permit the filing—although not the prosecution—of suits. The injunction, therefore, provided that all suits against Clark, State Farm, Greyhound, and Nauta be prosecuted in the interpleader proceeding.

On interlocutory appeal,² the Court of Appeals for the Ninth Circuit reversed. 363 F.2d 7. The court found it unnecessary to reach respondents' contentions relating to service of process and the scope of the injunction, for it concluded that interpleader was not available in the circumstances of this case. It held that in States like Oregon which do not permit 'direct action' suits against insurance companies until judgments are obtained against the insured, the insurance companies may not invoke federal interpleader until the claims against the insured, the alleged tortfeasor, have been reduced to judgment. Until that is done, said the court, claimants with unliquidated tort claims are not 'claimants' within the meaning of § 1335, nor are they '(p) ersons having claims against the plaintiff' within the meaning of Rule 22 of the Federal Rules of Civil Procedure.³ Id at 10. In accord with that view, it directed dissolution of the temporary injunction and dismissal of the action. Because the Court of Appeals' decision on this point conflicts with those of other federal courts,⁴ and concerns a matter of significance to the administration of federal interpleader, we granted certiorari. 385 U.S. 811, 87 S.Ct. 90, 17 L.Ed.2d 52 (1966). Although we reverse the decision of the Court of Appeals upon the jurisdictional question, we direct a substantial modification of the District Court's injunction for reasons which will appear.

I.

Before considering the issues presented by the petition for certiorari, we find it necessary to dispose of a question neither raised by the parties nor passed upon by the courts below. Since the matter concerns our jurisdiction, we raise it on our own motion. Treinies v. Sunshine Mining Co., 308 U.S. 66, 70, 60 S.Ct. 44, 47, 84 L.Ed. 85 (1939). The interpleader statute, 28 U.S.C. § 1335, applies where there are 'Two or more adverse claimants, of diverse citizenship * * *.' This provision has been uniformly construed to require only 'minimal diversity,' that is, diversity of citizenship between two or more claimants, without regard to the circumstance that other rival claimants may be co-citizens.⁵ The language of the statute, the legislative purpose broadly to remedy the problems posed by multiple claimants to a single fund, and the consistent judicial interpretation tacitly accepted by Congress, persuade us that the statute requires no more. There remains, however, the question whether such a statutory construction is consistent with Article III of our Constitution, which extends the federal judicial power to 'Controversies * * * between citizens of different States * * * and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.' In Strawbridge v. Curtiss, 3 Cranch 267, 2 L.Ed. 435 (1806), this Court held that the diversity of citizenship statute required 'complete diversity': where co-citizens appeared on both sides of a dispute jurisdiction was lost. But Chief Justice Marshall there purported to construe only 'The words of the act of congress,' not the Constitution itself.⁶ And in a variety of contexts this Court and the lower courts have concluded that Article III poses no obstacle to the legislative extension of federal jurisdiction, founded on diversity, so long as any two adverse parties are not co-citizens.⁷ Accordingly, we conclude that the present case is properly in the federal courts.

II.

We do not agree with the Court of Appeals that, in the absence of a state law or contractual provision for 'direct action' suits against the insurance company, the company must wait until persons asserting claims against its insured have reduced those claims to judgment before seeking to invoke the benefits of federal interpleader. That may have been a tenable position under the 1926⁸ and 1936 interpleader statutes.⁹ These statutes did not carry forward the language in the 1917 Act authorizing interpleader where adverse claimants 'may claim' benefits as well as where they 'are claiming' them.¹⁰ In 1948, however, in the revision of the Judicial Code, the 'may claim' language was restored.¹¹ Until the decision below, every court confronted by the question has concluded that the 1948 revision removed whatever requirement there might previously have been that the insurance com- pany wait until at least two claimants reduced their claims to judgments. ¹² The commentators are in accord.¹³

Considerations of judicial administration demonstrate the soundness of this view which, in any event, seems compelled by the language of the present statute, which is remedial and to be liberally construed. Were an insurance company required to await reduction of claims to judgment, the first claimant to obtain such a judgment or to negotiate a settlement might appropriate all or a disproportionate slice of the fund before his fellow claimants were able to...