Opinion
No. 4:01-CV-1777 CAS
May 30, 2003
MEMORANDUM AND ORDER
This interpleader action is before the Court on plaintiff Essex Insurance Company's ("Essex") motion for discharge and for attorney's fees and costs. The government has responded, opposing only the request for attorney's fees and costs. For the following reasons, the Court will grant Essex's motion for dismissal and deny its motion for attorney's fees and costs.
I. BACKGROUND
Defendant John McManus d/b/a Jay Hydraulics Electric Co. ("McManus") purchased a policy of insurance (policy number 1AH4335) from Essex to provide coverage for property located at 1434 Broadway in St. Louis, Missouri. The policy provided coverage for the property in the amount of $80,000.00 and additional coverage for debris removal in the amount of $5,000.00. On or about November 12, 1997 the property sustained loss, damage, and loss of use due to fire.
As a result of the loss, the following persons or entities have asserted a claim or are believed to have a claim to the proceeds: (1) John McManus; (2) the Internal Revenue Service; (3) the City of St. Louis; and (4) Adjusters Incorporated for the People d/b/a Adjusters, Inc. Essex asserts it is ready, willing and able to pay the maximum sum under the policy, but defendants have been and continue to assert conflicting claims to the proceeds.
As a result, Essex filed this interpleader action, naming the above as defendants, and depositing the proceeds of the policy, $85,000.00, into the Court's registry. Defendant McManus has consented to the waiver of service and filed its answer. The remaining defendants have been served and have filed their answers. Essex is a neutral stakeholder who does not assert any claim to the proceeds of the policy.
The City of St. Louis has since disclaimed any interest in the funds and has been dismissed from this action with prejudice.
In support of its motion, Essex asserts no claims have been filed by any of the defendants for any amounts in excess of the funds deposited with the court. Essex further asserts that it brought this action in a good faith effort to avoid duplicate liability and the defense of multiple claims by the potential claimants named as defendants, that the defendants have raised no objections to its use of interpleader, and that each remaining defendant has in fact asserted an interest in the funds deposited.
The government has responded, agreeing to the discharge, but opposing Essex's request for attorney's fees and costs. The government argues that an award of attorney's fees and costs would reduce the amount that the government will recover under its prior claim based on a federal tax lien under 26 U.S.C. § 6321 and 6322. The government explains that here the interpleaded funds total $85,000.00, that the government has filed a claim for $85,762.35 based on the aforementioned tax liens, and that this claim has priority over Essex's claim for attorney's fees and costs. Essex did not filed a reply. Neither John McManus or Adjusters, Inc. filed a response to plaintiffs motion.
II. DISCUSSION
The purpose of an interpleader action is to shield a disinterested stakeholder from the costs of having to defend against multiple suits, and from the risk of multiple liability or inconsistent obligations when several claimants assert rights to a single stake. See Dakota Livestock Co. v. Keim, 552 F.2d 1302, 1306-07 (8th Cir. 1977). Where a stakeholder is disinterested and has deposited the stake into the Court registry, the Court may dismiss it from the interpleader action, leaving the claimants to prosecute their conflicting claims. See 4 Moore's Federal Practice 3d, § 22.03[2][a], p. 22-40 (2000).
It is undisputed that Essex has deposited the proceeds of the insurance policy at issue into the Court registry and asserts no claim to the proceeds. The Court therefore concludes that Essex should be dismissed from this action. Under the common law, it is within the court's discretion to award reasonable attorney's fees to a disinterested stakeholder in an interpleader action from funds deposited in the Court registry. See Millers Mut. Ins. Ass'n v. Wassall, 738 F.2d 302,304 (8th Cir. 1984). However, the Internal Revenue Code prohibits an award of attorney fees where the effect of such an award would be to diminish the amount recovered by the United States under a prior federal tax lien. 26 U.S.C. § 6321, 6322 (2002). See, e.g., United States v. Equitable Life, 384 U.S. 323 (1966); Millers Mutual, 738 F.2d at 303. Here it is undisputed that the federal tax liens attached prior to the commencement of the interpleader action and thus had priority over any inchoate claim for attorney fees arising out of that action. Therefore, the Court must deny Essex's motion for attorney's fees and costs.
III. CONCLUSION
For the foregoing reasons, the Court will grant Essex's motion for discharge and deny its motion for attorneys fees and costs.
Accordingly,
IT IS HEREBY ORDERED that plaintiff Essex Insurance Company's motion for discharge is GRANTED. (Doc. 66-1)
IT IS FURTHER ORDERED that plaintiff Essex Insurance Company's motion for attorney's fees and costs is DENIED. (Doc. 66-2)
IT IS FURTHER ORDERED that plaintiff Essex Insurance Company is DISMISSED and discharged from this action and is released from any and all further liability with respect to claims for the proceeds the policy at issue.