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discussing the requirements of § 1335, and whether there is diversity of citizenship between the claimants in that case
Summary of this case from Federal Insurance v. Tyco International, Ltd.Opinion
1:03-CV-0029-SEB-VSS
August 28, 2003
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND AND DENYING FEE PETITION ON MOTION TO REMAND
This matter comes before the court on Plaintiff's Motion to Remand for lack of subject matter jurisdiction under the federal interpleader statute, 28 U.S.C. § 1335. Plaintiff Tina Knox ("Knox") argues that Defendant American General Life and Accident Insurance Company ("American General") has not met either of the two prerequisites for proper removal under the interpleader statute, and that she is entitled to an award of attorney fees under 28 U.S.C. § 1447.
Defendant claims that the minimal diversity of citizenship required by the federal interpleader statute exists, but that if jurisdiction is found wanting and the claim is remanded to state court, the court should not award the plaintiff attorney fees.
For the reasons set forth below, the Court GRANTS the plaintiff's Motion to Remand and DENIES the petition for attorney fees.
Factual Background
On November 3, 2000, the Tennessee-based insurer, American General, issued a life insurance policy for Rickey Christian ("Rickey"). The policy provided death benefits of $25,000 with an additional $25,000 in accidental death benefits. Rickey named his wife, Shirley Christian ("Shirley"), as primary beneficiary and two daughters, Tina Knox and Amanda Jones ("Jones"), as secondary beneficiaries.
On January 20, 2002, in Crawfordsville, Indiana, Rickey died as a result of a stab wound inflicted by Shirley. She was charged with murder, voluntary manslaughter and battery with a deadly weapon. On October 20, 2002 Shirley was convicted of aggravated battery, battery with a deadly weapon and reckless homicide and is currently serving a ten year sentence in Indiana.
In early March 2002, Knox applied on behalf of herself and her sister, Amanda, to American General to receive the $50,000 in life insurance proceeds. Her lawyer urged a timely resolution because the family needed the insurance money to pay for Shirley's legal defense. American General then began to receive calls and letters from other parties claiming an interest in the insurance policy proceeds: Linda Puni as the potential guardian or conservator of Amanda Jones's estate; the Bradshaw-Powell Funeral Home which had been promised payment by Shirley; Nicki Smith, claiming to be one of Rickey's three biological children who are owed unpaid child support; and Marie Christian, Rickey's mother, on behalf of the biological children. (Def's Answer and Countercl. at 4).
When American General declined to pay Tina Knox, she brought a breach of contract claim against the insurance company in Tippecanoe Superior Court on October 29, 2002. Prior to the filing, Shirley formally relinquished her rights to the proceeds, assigned her rights to Knox and appointed her Jones's legal guardian. (Pl.'s Compl.). On December 6, 2002, American General removed the case to the United States District Court, Northern District of Indiana, Hammond Division at Lafayette on the basis of statutory interpleader, 28 U.S.C. § 1335.
Together with the notice of removal, the defendant asserted a counterclaim against Knox, and added Linda Puni, Bradshaw-Powell Funeral Home, Nicki Smith, Marie Christian, Shirley and the hypothetical Estate of Rickey Christian ("Estate") as third parties. In the counterclaim, the defendant asked the Court to require the plaintiffs and the third party defendants to answer the interpleader and settle among themselves the claim to $25,000. In addition, the defendant asked for a declaratory judgment pursuant to 28 U.S.C. § 2201 finding that the accidental death rider was void and that it had no duty to pay damages to the counterclaim defendants arising from Rickey's death.
Title 28, Section 2201(a) allows a court with jurisdiction to declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.
On January 6, 2003, Judge Allen Sharp of the Northern District of Indiana conducted a pre-trial conference and ordered the case transferred to this district, finding that the key events in the case occurred in Montgomery County rather than Tippecanoe County.
Legal Issues
In order to grant Plaintiff's motion to remand, we must determine that we lack subject matter jurisdiction over the dispute. If federal jurisdiction is found wanting, removal of the action by the defendant based on 28 U.S.C. § 1441 (a) was improper. Federal subject matter jurisdiction may be based on either diversity of citizenship or a federal question. Brewer v. State Farm Mut. Auto. Ins. Co., 101 F. Supp.2d 737, 739 (S.D. Ind. 2000). The defendant asserts federal jurisdiction under 28 U.S.C. § 1335, the statutory interpleader provision, the basis of which is diversity of citizenship between the claimants. Morango Band of Mission Indians v. California State Bd. of Equalization, 858 F.2d 1376, 1381 (9th Cir. 1988); see also, 7 Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1710 (3d ed. 2001). The jurisdictional amount required in a statutory interpleader action is $500. 28 U.S.C. § 1335 (a).
The purpose of an interpleader action is to protect a stakeholder, typically an insurance company, as in the case at hand, from the vexation of multiple lawsuits over contested funds. 7 Wright Miller, supra, § 1703. In addition, an interpleader action may be appropriately asserted on a counterclaim, as Defendant has done. Humble Oil and Refining Co. v. Copeland, 398 F.2d 364, 368 (4th Cir. 1968); see generally 7 Wright Mille, supra, § 1704, fn. 1.
There are two requirements for establishing federal interpleader jurisdiction. First, at least two adverse claimants to $500 or more in insurance policy proceeds must be of diverse citizenship, even though there may be other claimants of the same citizenship. 28 U.S.C. § 1335(a)(1). Thus, statutory interpleader requires only "minimal diversity" between or among the claimants as opposed to complete diversity. Second, the plaintiff in an interpleader (here American General) is required to deposit the funds at issue with the district court. 28 U.S.C. § 1335(a)(2). Diversity of Citizenship between Adverse Claimants
Section 1335(a)(1) requires "two or more adverse claimants, of diverse citizenship as defined in section 1332 of this title, which claim or may claim to be entitled to such money or property, or to any one or more of the benefits arising by virtue of any note, bond, certificate, policy or other instrument, or arising by virtue of any such obligation."
Section 1335(a)(2) further adds that jurisdiction is possible only "if the plaintiff deposited such money or property or paid the amount of or the loan or other value of such instrument or the amount due under such obligation into the registry of the court, there to abide the judgment of the court, or has given bond payable to the clerk of the court in such amount and with such surety as the court or judge may deem proper, conditioned upon the compliance by the plaintiff with the future order or judgment of the court with respect to the subject matter of the controversy."
To permit interpleader, and in this case to sustain removal by the defendant to federal court, two or more claimants must be "adverse" to one another. 28 U.S.C. § 1335. Currently, there is only one claimant: Knox, the secondary beneficiary of the life insurance policy. American General may, nonetheless, appropriately assert statutory interpleader in anticipation of exposure to multiple liability. Wright Miller, supra § 1707. Based on the inquiries from several individuals in early 2002, the defendant justifiably feared multiple claims against it, as evidenced by its decision to name at least some of those individuals in the counterclaim and associated interpleader. (Def.'s Opp'n to Pl.'s Mot. to Remand at 5). Assuming these parties to be adverse claimants, Section 1335 permits interpleader jurisdiction so long as at least two of them are from different states, thus satisfying the "minimal diversity" requirement of the statute. State Farm Fire Cas. Co. v. Tashire, 386 U.S. 523, 530 (1967).
Accordingly, we now address the citizenship of the following parties: Tina Knox, Shirley Christian, Linda Puni, Nicki Smith, the Estate of Rickey Christian, BradshawPowell Funeral Home, Marie Christian and Rickey Christian's other biological children whose names are not presently known to the Court. (Def.'s Answer to Compl. and Countercl. at 2).
Tina Knox has established by affidavit that she and her minor sibling, Amanda Jones, are citizens of Missouri and claims that their residence has been Missouri since before the date they filed the original complaint. (Pl.'s Mot. to Remand, Ex. 2). Diversity of citizenship is assessed and determined at the time the action is filed.Freeport-McMoran, Inc. v. L.N. Energy, Inc., 498 U.S. 426 (1991). We therefore accept that Knox and Jones are Missouri citizens.
The defendant asserts in its counterclaim that Nicki Smith, Bradshaw-Powell Funeral Home and Marie Christians are also Missouri citizens. Both the existence and the citizenship of "the Estate" and the "other biological children" are unknown at this time, as is the citizenship of Linda Puni.
Defendant further alleges that Shirley is an adverse claimant and a citizen of Indiana. (Def.'s Countercl. ¶ 2). This suffices to create the minimal diversity required by statutory interpleader in that she is the only non-Missouri citizen named by the defendant.
Shirley's residence is largely immaterial, however, given the substantial obstacles to her ability to make a claim on Rickey's life insurance proceeds. First, the common law Slayer's Rule, as well as most slayer's statutes, bars one who has wrongfully caused the death of another from retaining an interest in life insurance proceeds. Second, before Knox filed her claim against American General for payment under policy # 0201139259, Shirley had waived and assigned her rights to any proceeds. (Pl.'s Mot. to Remand, Ex. 1).
The common law Slayer's Rule works to prevent a slayer from profiting from his or her victim through intestate succession, testate succession, or distribution of insurance proceeds. Indiana follows the rule that "a beneficiary forfeits insurance proceeds when he `intentionally and wrongfully' causes the death of the insured." Estate of Foleno v. Estate of Foleno, 772 N.E.2d 490, 495 (Ind.App. 2002); see also Beene v. Gibraltar Indus. Life Ins. Co., 63 N.E.2d 299, 300 (Ind.App. 1945);Stacker v. Mack, 130 N.E.2d 484, 487 (Ind.App 1955).
Plaintiff cites Estate of Foleno for the proposition that a person convicted of the reckless homicide of the insured person is barred from receiving the policy proceeds under the Slayer's Rule. (Pl.'s Reply Br. at 5). Although the case makes no mention of reckless homicide and refers only to convictions for murder and voluntary manslaughter, we conclude that reckless homicide is encompassed in the Slayer's Rule. Reckless homicide is treated as a lesser included offense of voluntary manslaughter. Wright v. State, 658 N.E.2d 563, 567 (Ind. 1995);Brown v. State, 659 N.E.2d 652 (Ind.App. 1995). The mens rea necessary for reckless homicide differs from that of murder, but in the context of the Slayer's Rule, it is undeniably a wrongful and felonious killing.
Ind. Code § 35-42-1-5. Reckless homicide. A person who recklessly kills another human being commits reckless homicide, a Class C felony.
Ind. Code § 35-41-2-2. Culpability. Sec. 2(c) A person who engages in conduct "recklessly" if he engages in the conduct in plain, conscious, and unjustifiable disregard of harm that might result and the disregard involves a substantial deviation from acceptable standards of conduct.
Ind. Code § 35-42-1-1. Murder. A person who: (1) knowingly or intentionally kills another human being.
Plaintiff further alleges that Shirley cannot be considered an adverse claimant for the purposes of interpleader jurisdiction because she has relinquished all rights to the insurance policy proceeds, having assigned them to Knox and Jones, the contingent beneficiaries. (Pl.'s Mot. to Remand, Ex. 1). A valid assignment of rights requires a writing which manifests the assignor's intent to transfer the subject matter clearly and unconditionally to the assignee. L'il Red Barn, Inc. v. Red Barn System, Inc., 322 F. Supp. 98, 106 (N.D. Ind. 1970). We are of the view that the requirements of a valid assignment appear to be satisfied by the September 20, 2002 writing.
Thus, because Shirley is doubly barred from claiming the life insurance proceeds under policy # 0201139259, she is a nominal party whose citizenship is not relevant for the purpose of establishing federal interpleader jurisdiction, without which remand of this cause to state court is required.
There remains one potential diverse and adverse claimant: the Estate. However, the defendant has not based interpleader jurisdiction on the citizenship of the Estate. Moreover, at present there is no Estate. If at some future time it were to be created and were to make a claim to the insurance monies, and if it were an Indiana citizen, then Knox and the Estate would likely be diverse and adverse claimants. The paucity of facts, however, prevents us from reaching a determination of the citizenship of a hypothetical claimant.
Because all current, viable claimants are Missouri citizens, we hold that there is a lack of diversity of citizenship to support the first requirement of federal interpleader jurisdiction.
Failure to Deposit the Amount at Issue with the Clerk of the Court
The interpleader statute explicitly conditions jurisdiction on the stakeholder, American General, having deposited with the registry of the court the money that is subject to multiple claims. 28 U.S.C. § 1335 (a)(2). Without the deposit, we lack jurisdiction over the action. See Miller Miller Auctioneers, Inc. v. G. W. Murphy Industries, Inc., 472 F.2d 893, 895 (10th Cir. 1973); Smith v. Widman Trucking Excavating, Inc., 627 F.2d 792, 798 (7th Cir. 1980).
Plaintiff contends that American General has failed to meet this condition. (Pl.'s Mot. to Remand ¶ 11; Pl's Reply Br. at 6). American General has not responded to this claim of a jurisdictional defect, leading us to assume that it has not yet made the required deposit. However, even though the statute makes it clear that a case may not proceed without the deposit of funds, the deposit is not necessarily required before a determination of whether interpleader lies. General Accident Group v. Gagliardi, 593 F. Supp. 1080, 1087 (D.C. Conn. 1984) (holding, first the court determines whether interpleader lies and if so, orders the stakeholder to pay or deliver the stake into the court). In the event that a stakeholder fails to deposit funds when filing the interpleader action, a court may give the party an opportunity to comply before dismissing interpleader for failure to satisfy a jurisdictional requirement. See generally, 7 Wright Miller, supra, § 1714. American General has clearly stated its willingness to deposit the undisputed $25,000 with the court, (Def.'s Answer and Countercl. ¶ 15), which makes remand of this action to state court on this basis alone inappropriate.
The Award of Attorney Fees
Having determined that remand of this action is required for lack of diversity of citizenship, we move to the issue of whether attorney's fees should be awarded in favor of Plaintiff for the Defendant's wrongful removal.
Title 28, § 1447(c) of the United States Code provides for the discretionary "payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." The Seventh Circuit views the provision not as a sanctions rule but a fee-shifting statute, entitling the district court to make whole the victorious party. Garbie v. DaimlerChrysler Corp., 211 F.3d 407 (7th Cir. 2000). In addition, it is not required that the defendant have petitioned for removal in bad faith. Tenner v. Zurek, 168 F.3d 328, 329-30 (7th Cir. 1999).
American General opposes the motion for fees under the standard that an award of attorney fees is appropriate only where the "the non-removability of the action is obvious" and the removal is found "improvident." (Def.'s Opp'n Br. at 7). Plaintiffs did not plead their citizenship in the original complaint making the non-removability of the breach of contract claim far from obvious. Despite the presumption created by Garbie, the occasions on which fees are awarded are typically those which are not "close calls" and on which the stated grounds for removal are either contrary to the overwhelming authority or without any reasonable basis. Garbie, 211 F.3d at 410; Analytical Surveys, Inc. v. Intercare Health Plans. Inc., 101 F. Supp.2d 727, 736 (S.D. Ind. 2000);Barnes v. Ford Motor Co., 2003 WL 21277209, *5 (S.D. Ind. 2003).
The defendant's removal of this action does not fit the Garbie standard of unreasonableness. We therefore deny Plaintiff's request for attorney fees relating to the Motion to Remand.