Wells Fargo Bank, N.A. v. Krenzen Auto Inc.

• Decision Date: 23 February 2021
• Docket Number: 19-CV-5329 (PKC) (RER)
• Parties: WELLS FARGO BANK, N.A., Plaintiff, v. KRENZEN AUTO INC. and DENIELLE MITCHELL, Defendants.
• Court: U.S. District Court — Eastern District of New York

WELLS FARGO BANK, N.A., Plaintiff, v. KRENZEN AUTO INC. and DENIELLE MITCHELL, Defendants.

19-CV-5329 (PKC) (RER)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

February 23, 2021

MEMORANDUM & ORDER

PAMELA K. CHEN, United States District Judge:

Plaintiff Wells Fargo Bank, N.A. ("Wells Fargo") brought this interpleader action pursuant to 28 U.S.C. §§ 1335 and 2361, seeking to deposit $17,754.28 of disputed funds with the Court. (See generally Complaint ("Compl."), Dkt. 1.) Entries of default having been issued against Defendants Krenzen Auto Inc. ("Krenzen") and Denielle Mitchell (Dkts. 14, 18), Wells Fargo now moves for interpleader deposit and default judgment (Dkts. 19, 22). For the reasons set forth below, the Court grants Wells Fargo's motions.

BACKGROUND¹

Wells Fargo is a South Dakota-based² national banking association with which both Defendants have accounts. (Compl., Dkt. 1, ¶¶ 1, 4, 10, 11.) Defendant Krenzen is a Delawarecorporation with its principal place of business in Minnesota. (Id. ¶ 6.) Defendant Mitchell is a resident and citizen of New York. (Id. ¶ 5.) On July 16, 2019, Mitchell's Wells Fargo Everyday Checking Account (the "Mitchell Account") received a wire transfer of $17,940 from Krenzen's Wells Fargo Choice 4 Commercial Checking Account (the "Krenzen Account"). (Id. ¶¶ 10-12.) Wells Fargo subsequently received a request from Krenzen to recall the wire on the basis of fraud. (Id. ¶ 13.) Following that request, Wells Fargo restrained the remaining wire proceeds of $17,754.28³ in the Mitchell Account. (Id. ¶ 14.) Due to Krenzen's recall request and Mitchell's refusal to allow Wells Fargo to debit the Mitchell Account and return the restrained funds back to Krenzen, there is a dispute regarding who, as between Mitchell and Krenzen, is entitled to the funds. (See id. ¶¶ 15-16.)

Wells Fargo filed the instant action on September 18, 2019, seeking to interplead the disputed funds into the Court Registry to allow Mitchell and Krenzen to make their respective claims for the funds, and discharge Wells Fargo from any liability to either Defendant in connection with the disputed funds. (See generally Compl., Dkt. 1.) Wells Fargo filed an Affidavit of Service confirming that a true copy of, inter alia, the Summons, Complaint, and Civil Cover Sheet were served on Defendant Krenzen on September 25, 2019 (Dkt. 9) and an Affidavit ofService confirming the same as to service on Defendant Mitchell on January 13, 2020 (Dkt. 15). The applicable time limit for answering or otherwise responding to the Complaint has expired for both Defendants, and the Clerk of Court entered certificates of default as to Defendant Krenzen on December 30, 2019 (Dkt. 14) and Defendant Mitchell on February 11, 2020 (Dkt. 18). Wells Fargo moved for interpleader deposit (Dkt. 19) and default judgment (Dkt. 22) on March 13, 2020, and submitted a statement of attorney's fees on December 23, 2020 (Dkt. 26).

DISCUSSION

I. Interpleader

"[I]nterpleader is designed to 'protect stakeholders from undue harassment in the face of multiple claims against the same fund, and to relieve the stakeholder from assessing which claim among many has merit.'" Fidelity Brokerage Servs., LLC v. Bank of China, 192 F. Supp. 2d 173, 177 (S.D.N.Y. 2002) (citing Wash. Elec. Coop. v. Paterson, Walke & Pratt, P.C., 985 F.2d 677, 679 (2d Cir. 1993)). "An interpleader complaint generally involves a two-stage inquiry. The first stage requires the stakeholder to demonstrate that the requirements for interpleader have been met and that it is entitled to a discharge. The second stage determines the adverse claims between the claimants." Seldon Clean Water Prod. (Asia) L.P. v. Taran, No. 18-CV-4853 (BMC), 2019 WL 1118043, at *2 (E.D.N.Y. Mar. 11, 2019) (citing New York Life Ins. Co. v. Connecticut Development Authority, 700 F.2d 91 (2d Cir. 1983)).

Wells Fargo invokes statutory interpleader jurisdiction pursuant to 28 U.S.C. §§ 1335 and 2361. Statutory interpleader pursuant to 28 U.S.C. § 1335 has three jurisdictional requirements: "1) the amount in controversy must be $500 or more; 2) the two or more adverse claimants claiming entitlement to the amount in controversy must be of diverse citizenship; and 3) the plaintiff must deposit either the amount at issue, or an appropriate bond, with the court." Madison Stock Transfer, 368 F. Supp. 3d at 484 (quoting Hartford Life Ins. Co. v. Simonee, No. 14-CV-7520 (SJF) (ARL), 2015 WL 8490998, at *2 (E.D.N.Y. Dec. 10, 2015)); see also United States v. Barry Fischer Law Firm, LLC, No. 10-CV-7997 (TPG), 2011 WL 31545, at *3 (S.D.N.Y. Jan. 5, 2011) ("The party who must satisfy these [statutory interpleader jurisdictional] requirements . . . is the party who files the interpleader complaint, not any particular party making a claim on the fund[.]"); New York Life Ins. Co. v. Apostolidis, 841 F. Supp. 2d 711, 716 (E.D.N.Y. 2012).

This action satisfies these three requirements. First, the amount in controversy is $17,754.28, which exceeds $500. Second, Wells Fargo alleges that Krenzen is a citizen of Delaware with its principal place of business in Minnesota, and Mitchell is a citizen of New York; these adverse claimants are diverse from each other. Wells Fargo, on the other hand, "is a neutral party that takes no position as to the proper disbursement of the proceeds of the bond, against which there are multiple and competing claims." Great Am. Ins. Co. v. Gold Coast Exp. Inc., No. 12-CV-4847 (DRH) (ARL), 2015 WL 1039770, at *3 (E.D.N.Y. Mar. 10, 2015). And third, Wells Fargo seeks to deposit the disputed funds with the Court. (See Notice of Interpleader Motion, Dkt. 19.) This Court thus has jurisdiction pursuant to 28 U.S.C. § 1335.

"Once subject matter jurisdiction is established, the first-stage inquiry asks only if [P]laintiff may be exposed to double or multiple liability." Seldon Clean Water Prod. (Asia) L.P., 2019 WL 1118043, at *2 (alteration, internal quotation, and citation omitted). Here, Wells Fargo could be subject to competing claims by Krenzen and Mitchell to the funds, and therefore could be subject to double liability. The Court thus grants Wells Fargo's request to be dismissed from this action, and to be awarded reasonable attorney's fees and costs. See Marcus v. Dufour, 796 F. Supp. 2d 386, 390 (E.D.N.Y. 2011) ("Generally, once an interpleader plaintiff has satisfied the jurisdictional requirements of an interpleader claim, the Court will discharge the plaintiff from liability and dismiss [it] from the case." (citations omitted)).

Although the first stage in the interpleader complaint has been satisfied, the Court cannot proceed to the second stage and analyze the merits of the competing claims to the disputed funds because neither claimant has appeared in this action; hence, Wells Fargo's motion for default judgment (Dkt. 22). Under Federal Rule of Civil Procedure ("Rule") 55(a), the procedure for default judgment against a party who "fail[s] to plead or otherwise defend" in a matter includes two steps: "first, the entry of a default, and second, the entry of a default judgment." City of New York v. Mickalis Pawn Shop, 645 F.3d 114, 128 (2d Cir. 2011) (quotation omitted). "The first step, entry of a default, formalizes a judicial recognition that a defendant has, through its failure to defend the action, admitted liability to the plaintiff." Id. "[A] party's default is deemed to constitute a concession of all well[-]pleaded allegations of liability." United States v. DiPaolo, 466 F. Supp. 2d 476, 482 (S.D.N.Y. 2006) (quotation omitted).

"The second step, entry of a default judgment, converts the defendant's admission of liability into a final judgment that terminates the litigation and awards the plaintiff any relief to which the Court decides it is entitled, to the extent permitted by [Rule] 54(c)."⁴ Mickalis, 645 F.3d at 128. "[T]he decision to grant a motion for a default judgment lies in the sound discretion of the trial court." O'Callaghan v. Sifre, 242 F.R.D. 69, 73 (S.D.N.Y. 2007). Default judgments "track[] the ancient common law axiom that a default is an admission of all well-pleaded allegations against the defaulting party." Vt. Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004).

As discussed above, Wells Fargo has sufficiently pled an interpleader action pursuant to 28 U.S.C. § 1335. In an interpleader action, the failure of a claimant defendant "to answer the interpleader complaint and assert a claim to the res can be viewed as forfeiting any claim of entitlement that might have been asserted." Metro. Life Ins. Co. v. Little, No. 13-CV-1059 (BMC), 2013 WL 4495684, at *2 (E.D.N.Y. Aug. 17, 2013) (citations omitted); see also Great Am. Ins. Co. v. Gold Coast Exp. Inc., No. 12-CV-4847 (DRH) (ARL), 2015 WL 1039770, at *3 (E.D.N.Y. Mar. 10, 2015) ("[T]here can be no question that the defaulting defendants have forfeited any claim to the proceeds.").

Normally, "[i]f all but one named interpleader defendant defaulted, the remaining defendant would be entitled to the fund." Metro. Life Ins. Co., 2013 WL 4495684, at *2 (alteration omitted) (quoting Nationwide Mut. Fire Ins. Co. v. Eason, 736 F.2d 130, 133 n. 4 (4th Cir. 1984)). Here, however, neither interpleader Defendant has made an appearance in this action, despite being properly served, and certificates of default have been granted as to both. Thus, both Defendants Krenzen and Mitchell have forfeited any claims to the disputed funds, and default judgment is entered against both of them. Furthermore, as Wells Fargo has satisfied the requirements for interpleader deposit and will be discharged, no party remains associated with this action and the case is now closed. However, the Court grants Defendants leave to move to reopen the case within ninety (90) days.

II. Attorney's Fees

In general, a reasonable award of attorney's fees and costs in an interpleader action is appropriate where the court finds that the interpleader plai...