Opinion
01-CV-6189 CJS(F)
April 12, 2002
For plaintiff: Norman L. Tolle, Esq., Rivkin, Radler Kremer, LLP, Uniondale, N.Y.
For Birdie V. Minnick: Robert B. Wiggins, Esq., Wiggins Law Office, Lima, N.Y.
For Ned R. Hoskin and Mark Hoskin: Lawrence I. Goldstein, Esq., Goldstein LaBue, Rochester, N.Y.
DECISION and ORDER
This case is an interpleader action commenced by plaintiff on April 13, 2001, in which plaintiff sought to deposit proceeds of an insurance policy into the Court registry for disbursement pursuant to judicial determination. Since defendant Birdie V. Minnick ("Minnick") refused to consent to this relief, plaintiff brought a motion for an order permitting the deposit of the insurance proceeds into the Court registry and thereby relieving plaintiff of any liability, as well as for attorney fees and costs associated with the application. For the reasons stated below, the Court awards plaintiff reasonable attorney fees of $2,000 plus costs associated with bringing the motion.
FACTUAL BACKGROUND
On September 12, 2001, plaintiff filed a motion, pursuant to 28 U.S. Code § 1335, and Federal Rule of Civil Procedure 67, seeking to deposit the proceeds of a life insurance policy into the Court and so that the Court could determine which of three disputing claimants was entitled to the proceeds. As part of that motion, plaintiff sought attorney fees against Minnick for her failure to "stipulate to the dismissal of plaintiff from this action upon its deposit of the sum at issue into the registry of this Court, necessitating this motion." Although he has never appeared before the Court, it is undisputed that Robert Wiggins, Esq. ("Wiggins"), has been representing Minnick regarding the disposition of the insurance proceeds. In that regard, plaintiff attached to its motion (# 3) several pieces of correspondence with Wiggins. In his letter to John T. Seybert, Esq. dated June 15, 2001, Wiggins stated, inter alia
The disputing claimants, named as defendants, are Birdie Minnick on the one side, and Ned and Mark Hoskin, as executors of the decedent's estate, on the other.
I freely admit I am not familiar with this process [interpleader]. . . . For Metropolitan to `bail out' is extremely unfair to the decedent who paid those premiums and to the designated beneficiaries.
If the reality is that the Court will allow you to escape, then, I agree, it is foolish to spend money fighting the inevitable.
Robert B. Wiggins, Esq. letter to John T. Seybert, Esq. (Jun. 15, 2001) (attached as Exhibit C to plaintiff's Motion [# 3]). Despite this language, Minnick never signed a stipulation.
By Order dated December 5, 2001, the Court granted plaintiff's application, permitting the deposit of the insurance proceeds with interest into the Court registry, and the Court further granted plaintiff's application for attorney fees against Minnick. Regarding attorney fees, the Court directed plaintiff to file an affidavit detailing the amount incurred for legal services relating to the subject motion. Plaintiff did so, seeking an award of $3,914.00. Wiggins then filed an affidavit on December 28, 2001, opposing the imposition of fees, arguing that he received only telephonic notice from the Court just prior to the motion argument date. On January 30, 2002, as a result of Wiggins' affidavit, the Court issued a new Motion Scheduling Order setting an oral argument date and time on April 4, 2002 at 3:30 p.m. Subsequently, on February 19, 2002, Wiggins filed another affidavit in which he stated, among other things, "[t]hat, while the lack of `cooperation' may result in Court time and legal fees, those expenses cannot be levied against a party who follows her conscience and violates no legal or contractual obligation," and further indicated, "[t]hat the defendant consented to that which plaintiff sought when advised by a non partisan that her stand was Quixotic, and she should not be punished."
Oral argument proceeded as scheduled with plaintiff's counsel present, however, Wiggins failed to appear. The Court phoned Wiggins' law office from the bench and was informed by a woman, presumably his secretary, that Wiggins was not in his office and did not have the motion argument scheduled on his calendar. The day following oral argument, the Court received a faxed letter from Wiggins apologizing for his non appearance, but offering no reason for it.
DISCUSSION
This case is before the Court on federal question jurisdiction, since the life insurance benefit in dispute was part of an ERISA-regulated benefit plan. Wiggins' affidavit of December 28, 2001, prompted the Court to allow reargument of plaintiff's motion for the imposition of attorney fees and costs against Minnick. As the Court explained on the record on April 4, since Wiggins never entered an appearance in this case, his name was not listed on the Clerk's docket sheet as attorney of record, and, therefore, the Clerk's office never forwarded to him a copy of the Court's original scheduling order.
In his affidavit filed February 19, 2002, Wiggins stated, inter alia,
Deponent, as the Defendant's attorney, was entitled to be properly served with motion papers, including the date and time of any scheduled hearing or return date.
That deponent was never served with such proper papers, and was only informed of a return date by virtue of a telephonic message from the Court.
That Deponent was informed by the Court that the procedure being followed by Metlife was consistent with established practice, at which point deponent, as counsel for Defendant, Birdie Minnick, acquiesced to the Federal Court taking over the obligation to determine the proper beneficiaries.
Wiggins aff. at ¶¶ 3-5. Wiggins' assertion that he received only "telephonic" notice is not accurate. The day prior to the first scheduled oral argument, the Court sent a facsimile copy of the original Motion Scheduling Order to Wiggins' office, and received a receipt confirming that the transmitted papers were received by Wiggins' machine. Despite receiving notice in this manner, Wiggins never contacted the Court to request a different oral argument date. In addition, at oral argument on April 4, 2002, plaintiff's counsel represented to the Court that Wiggins was properly served with plaintiff's papers.
While a lawyer has an ethical duty to represent his client zealously, he must, of course, do so within the bounds of professional ethics. It is a violation of the Rules of Professional Responsibility to "[k]nowingly advance a claim or defense that is unwarranted under existing law, except that the lawyer may advance such claim or defense if it can be supported by good faith argument. . . ." DR 7-102(2). The fact that Minnick, as alluded to in Wiggins' affidavit of February 19, chose to pursue the impossible dream is not tantamount to good faith. Rather, the Court agrees with plaintiff's counsel that there was no good faith basis for withholding consent to relieve plaintiff of liability upon deposit of the insurance proceeds into the Court registry. Plaintiff's counsel corresponded extensively with Wiggins prior to applying to the Court for relief in an effort to explain to him the applicability of statutory interpleader to this case. Ignorance of the law is not a sufficient basis for denying plaintiff's application for attorney fees and costs, especially where the law is so well settled.
As plaintiff pointed out in its memorandum of law (# 4), the Second Circuit has held that payment of the disputed amount into the Court is the preferred method of resolving the contesting claims.
As to interpleader,
The Second Circuit has recognized that normally an interpleader action is concluded in two stages, the first determining that the requirements of [28 U.S. Code §] 1335 are met and relieving plaintiff stakeholder from liability, and the second adjudicating the adverse claims of the defendant claimants. New York Life Ins. Co. v. Connecticut Development Authority, 700 F.2d 91, 95 (2d Cir. 1983).
National Union Fire Ins. Co. v. Ambassador Group, 691 F. Supp. 618, 624 (E.D.N.Y. 1988). Plaintiff claims jurisdiction based on a federal question. The pertinent provisions of 28 U.S. Code § 1335, statutory interpleader, are:
(a) The district courts shall have original jurisdiction of any civil action of interpleader or in the nature of interpleader filed by any person, firm, or corporation, association, or society having in his or its custody or possession money or property of the value of $500 or more, or having issued a note, bond, certificate, policy of insurance, or other instrument of value or amount of $500 or more, or providing for the delivery or payment or the loan of money or property of such amount or value, or being under any obligation written or unwritten to the amount of $500 or more, if
(1) Two or more adverse claimants, of diverse citizenship as defined in section 1332 of this title [ 28 U.S.C.S § 1332], are claiming 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; and if
(2) plaintiff has deposited such money or property or has 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 plaintiff with the future order or judgment of the court with respect to the subject matter of the controversy.
28 U.S. Code § 1335. Clearly this case involves a federal question under ERISA where adverse claimants are seeking benefits arising out of the Group Plan, with plaintiff being merely a stakeholder, and, therefore, the Court has jurisdiction under 29 U.S. Code § 1132. That section permits a fiduciary to bring an action under ERISA to "obtain other appropriate equitable relief. . . ." 29 U.S. Code § 1132(a)(3)(B); see also 29 U.S. Code § 1132(e) (district courts have exclusive jurisdiction when a fiduciary brings an action under ERISA).
Although diversity is lacking in this case, the Second Circuit, in Metropolitan Life Ins. Co. v. Bigelow, ___ F.3d ___, 2002 U.S. App. LEXIS 3664, *5 (2d Cir., No. 01-7474, Mar. 7, 2002), held that ERISA provides an independent basis for subject matter jurisdiction.
Interpleader is designed to protect the stakeholder, here plaintiff, from "the vexation of multiple lawsuits and from the possibility of multiple liability that could result from inconsistent determinations in different courts." Sotheby's, Inc. v. Garcia, 802 F. Supp. 1058, 1064 (S.D.N.Y. 1992). The Southern District stated in that case,
"The mere threat of future litigation is a sufficient basis for interpleader." A/S Krediit Pank, 155 F. Supp. at 34. Moreover, a party is not required to evaluate the merits of conflicting claims at its peril; rather, it need only have a good faith concern about duplicitous litigation and multiple liability if it responds to the requests of certain claimants and not to others. Bache Halsey Stuart Shields Inc. v. Garmaise, 519 F. Supp. 682, 684-85 (S.D.N.Y. 1981); 3A Moore's Federal Practice P 22.02[1], at 22-7 (2d ed. 1992).
The Court finds in the case at bar that plaintiff properly sought release from liability by invoking the Court's interpleader jurisdiction. Minnick's refusal to stipulate to relieving plaintiff of liability upon deposit of the insurance proceeds into the Court registry was, without doubt, unreasonable under the circumstances. The Second Circuit has determined that an interpleading party is entitled to recover costs and attorney fees when it is: (1) a disinterested stakeholder, (2) who has conceded liability, (3) has deposited the disputed funds into court, and (4) has sought a discharge from liability. Septembertide Publishing v. Stein and Day, 884 F.2d 675 (2d Cir. 1989) (citing A. Moore's Federal Practice P 2.16[2] (2d ed. 1989)). Plaintiff initiated discussions with Minnick in June 2001 through her attorney, Wiggins, and plaintiff stood ready, willing and able to deposit the disputed funds into the Court's registry throughout the negotiation process. Both of the remaining defendants, Ned R. Hoskin and Mark Hoskin, consented to release plaintiff from liability once the proceeds were paid into the Court and did so on June 11, 2001. Wiggins' failure to advise plaintiff during almost three months of correspondence back and forth, about whether his client would stipulate to dismiss plaintiff upon payment of the proceeds into Court, and his lack of a good faith basis for questioning plaintiff's use of the Interpleader statue, is sufficient basis for imposition of costs and attorney fees against Minnick. Nevertheless, the Court finds that it can be reasonably inferred from Wiggins' affidavit of February 19, 2002, that had he been timely notified of the oral argument date, his client, Minnick, would have then consented to the relief sought, thereby obviating the need for a court appearance. Therefore, the Court will cap fees by imposing them only for the period prior to the first oral argument date of November 15, 2001.
CONCLUSION
For the reasons stated above, the Court hereby imposes attorney fees in the amount of $2,000 plus costs upon defendant Birdie Minnick, to be paid to Metropolitan Life Insurance Company.
IT IS SO ORDERED.