Opinion
EP-06-CA-173-FM.
November 2, 2006
MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S MOTION FOR ATTORNEY'S FEES AND COSTS
Before the Court is Plaintiff Life Insurance Company of North America's ("LINA") "Motion to Discharge Plaintiff and Claim for Attorney Fees and Expenses" ("Motion to Discharge Plaintiff") [Rec. No. 20], filed through counsel in the above-captioned cause on October 6, 2006. LINA, the stakeholder in this interpleader action, therein asks the Court to discharge it from this proceeding and to release it from any further liability regarding the disputed proceeds of Decedent Lorena Kreuzer's Accidental Death Group Insurance Policy Number FLX-051339. LINA additionally moves the Court for $6,808.06 in fees and costs. In its "Order on Plaintiff's Motion to Discharge Plaintiff and Claim for Attorney's Fees" ("Order") dated October 19, 2006 [Rec. No. 23], the Court granted LINA's Motion to Discharge Plaintiff to the extent of discharging LINA from this proceeding. In its Order, however, the Court also advised the Parties that it would take LINA's request for attorney's fees and costs under advisement and enter a separate ruling on that issue in due course. The Court now reviews LINA's request for attorney's fees and costs. After due consideration, for the reasons discussed below, the Court will exercise its discretion by DENYING LINA's request for attorney's fees and costs.
I. APPLICABLE LAW
LINA instituted this interpleader action under 28 U.S.C. § 1335 and Federal Rule of Civil Procedure 22. A district court possesses the discretion to award reasonable attorney's fees and costs in interpleader actions. Rhoades v. Casey, 196 F.3d 592, 603 (5th Cir. 1999); Corrigan Dispatch Co. v. Casa Guzman, 696 F.2d 359, 364 (5th Cir. 1983); 7 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 1719 (3d ed. 2001). Attorney's fees and costs are available when the interpleader is a disinterested stakeholder and not in substantial controversy with one of the claimants. Rhoades, 196 F.3d at 603.
Pl.'s Original Compl. in Interpleader Mot. for Appointment of Guardian Ad Litem, Rec. No. 1, at ¶ 6.
It is of the essence of an interpleader suit that the plaintiff should be entirely indifferent between the conflicting claims, asserting no interest in himself in the fund in dispute. An attitude of perfect disinterestedness, excluding even an indirect interest, on the part of the plaintiff, is indispensable to the maintenance of the bill, and his position must be one on "continuous impartiality," save that the thing in his possession be awarded to the right party.
108 A.L.R. 267, § I (West 2006).
Attorney's fees and costs are generally available to the interpleader when the district court determines that the interpleader action is proper and that the interpleader is a mere disinterested stakeholder. Murphy v. Traveler's Insurance Co., 534 F.2d 1155, 1164 (5th Cir. 1976); Phillips Petroleum Co. v. Hazlewood, 534 F.2d 61, 63 (5th Cir. 1976). Where interpleader is proper, attorney's fees and costs are usually awarded to the disinterested stakeholder from the interpleader fund. Septembertide Publishing, B.V. v. Stein Day, Inc., 884 F.2d 675, 683 (2d Cir. 1989); Prudential Ins. Co. v. Boyd, 781 F.2d 1494, 1497 (11th Cir. 1986); 4 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE § 22.06, available at LEXIS MOORES FEDERAL PRACTICE — CIVIL 22.06. Where circumstances justifying interpleader do not exist, however, the stakeholder is not entitled to attorney's fees and costs. Bank One, Texas, N.A. v. Taylor, 970 F.2d. 16, 23 (5th Cir. 1992).
While the award of attorney's fees connected to an interpleader action lies within a court's sound discretion, a court should generally award fees and costs to a disinterested stakeholder required to participate in a dispute not of the stakeholder's own making. Murphy, 534 F.2d at 1164. However, when a district court chooses to award attorney's fees and costs to a disinterested stakeholder, the amount of the award will typically be modest. WRIGHT, supra, at § 1719. The rationale for limiting the award's amount derives from the fact that it is only necessary for the stakeholder to prepare the interpleader petition, deposit the disputed stake into the court's registry, serve the claimants, and prepare a motion asking the Court to discharge the stakeholder. Id.
Reasonableness of the costs and fees the stakeholder seeks is the touchstone of a district court's inquiry. See James Talcott, Inc. v. Allahabad Bank, Ltd., 444 F.2d 451, 468 (5th Cir. 1971) (stating that it is clear that a district court has the authority to award a stakeholder reasonable attorney's fees and costs in an interpleader action). In deciding whether to award attorney's fees and costs to a disinterested stakeholder in an interpleader action, a district court should consider whether: (1) the case is simple or complex; (2) the stakeholder performed any unique services for the claimants or the court; (3) the stakeholder acted in good faith and diligently; (4) the services the stakeholder rendered benefitted the stakeholder; and (5) the claimants improperly protracted the proceedings. WRIGHT, supra, at § 1719. II. DISCUSSION
After review, the Court finds that LINA is a disinterested stakeholder in this interpleader action. Here, LINA claims no interest in the policy proceeds. In addition, LINA promptly and without qualification presented the policy proceeds for deposit into the Court's registry. Further, LINA has not sought to favor one claimant over the other. Thus, there can be no serious dispute that LINA is a disinterested stakeholder in this action. LINA is therefore eligible to receive reasonable attorney's fees and costs should the Court decide to exercise its discretion in LINA's favor. However, for the reasons discussed below, the Court declines to exercise its discretion in this manner.
In considering the five factor test outlined in Part I, supra, of this Memorandum Opinion, the Court finds that the factors ultimately weigh against LINA's request. Turning to the first factor, the Court notes that this is a simple case, involving a factual and legal scenario likely encountered by LINA on a frequent basis. Considering the second factor, the Court finds LINA has not shown that it performed any unique services for the claimants or the Court in this matter. Thus, the first and second factors weigh against awarding LINA its requested attorney's fees and costs.
Moving to the third factor, the Court determines that it weighs heavily against awarding LINA its attorney's fees and costs. Although the Court finds that LINA acted in good faith, it also finds that LINA's lack of diligence in serving Defendant Richard Kreuzer ("Kreuzer") delayed the ultimate disposition of this matter. On one hand, the Court recognizes that Kreuzer's employment and residence at a remote fishery in the State of Alaska created difficulties in serving him pursuant to Federal Rule of Civil Procedure 4(e)(2). On the other hand, Federal Rule of Civil Procedure 4(e)(1) plainly sets forth alternative methods of service:
(e) Service Upon Individuals Within a Judicial District of the United States. Unless otherwise provided by federal law, service upon an individual from whom a waiver of service has not been obtained and filed, other than an infant or an incompetent person, may be effected in any judicial district of the United States:
(1) pursuant to the law of the state in which the district court is located, or in which service is effected, for the service of a summons upon the defendant in an action brought in the courts of general jurisdiction of the State . . .
FED. R. CIV. P. 4(e)(1) (West 2006 rev.). Thus, under Rule 4(e)(1), LINA could have resorted to either Texas or Alaskan law for effecting service of summons and a copy of its Complaint upon Kreuzer. The Court notes that Texas Rule of Civil Procedure 106 states:
Upon motion supported by affidavit stating the location of the defendant's usual place of business or usual place of abode or other place where the defendant can probably be found and stating specifically the facts showing that service has been attempted under either [Texas Rule of Civil Procedure 106](a)(1) or (a)(2) at the location named in such affidavit but has not been successful, the court may authorize service
(1) by leaving a true copy of the citation, with a copy of the petition attached, with anyone over sixteen years of age at the location specified in such affidavit, or
(2) in any other manner that the affidavit or other evidence before the court shows will be reasonably effective to give the defendant notice of the suit.
TEX. R. CIV. P. 106 (West 2006) (emphasis added). After it encountered difficulties with traditional methods of service, LINA could clearly have moved this Court under Federal Rule of Civil Procedure 4(e)(1) and Texas Rule of Civil Procedure 106(b)(2) to allow LINA to serve Kreuzer by alternative methods and substantially shortened the time, costs, and efforts to accomplish it. LINA, however, failed to avail itself of this relief, to the detriment of this action's speedy resolution.
Turning to the fourth factor, the Court finds that LINA derived no direct benefit from the services it rendered. However, LINA has received an indirect administrative benefit because LINA can close its books regarding the proceeds Lorena Kreuzer's life insurance policy without the fear of further litigation. The Court accordingly finds that the fourth factor thus rests in equipoise, neither favoring or disfavoring the award of attorney's fees and costs.
Considering the final factor, whether the claimants improperly protracted the proceedings, the Court finds no evidence to support such a conclusion. Although LINA encountered certain difficulties in serving Richard Kreuzer, there is no evidence that Kreuzer himself is the source of those difficulties. The facts of which the Court are aware suggest that LINA's difficulty in serving Kreuzer resulted from the remote location in which Kreuzer lived and worked, rather than any affirmative misconduct by Kreuzer, such as an active attempt to evade service. The fifth factor of the five-factor test thus does not weigh in favor of the Court's granting LINA its attorney's fees or costs.
In sum, after considering each factor carefully, the Court finds that the factors on balance weigh against LINA's request. The Court will accordingly deny LINA's motion for attorney's fees and costs in this interpleader action.
III. CONCLUSION AND ORDER
For the reasons it discusses above, the Court declines to award LINA attorney's fees and costs associated with the instant interpleader proceeding. The Court accordingly enters the following order:
1. Plaintiff LINA's "Motion to Discharge Plaintiff and Claim for Attorney Fees and Expenses" [Rec. No. 20], filed through counsel in the above-captioned cause on October 6, 2006, is DENIED to the extent LINA asks the Court to awards it attorney's fees and costs.
SO ORDERED.