Opinion
C.A. No. 03C-01-225-JRS.
Date Submitted: October 30, 2006.Date Decided: December 8, 2006.
Revised and Corrected: December 12, 2006.
Upon Consideration of Plaintiff's Motion for Attorneys' Fees and Costs. GRANTED.
Robert J. Katzenstein, Esquire, SMITH, KATZENSTEIN FURLOW, LLP, Wilmington, Delaware. Attorney for Plaintiff.
Bernard A. Van Ogtrop, Esquire and Kevin A. Guerke, Esquire, SEITZ, VAN OGTROP GREEN, P.A., Wilmington, Delaware. Attorney for Defendants.
I.
Plaintiff, Professional Underwriters Liability Insurance Company ("PULIC"), has moved for attorneys' fees and costs in this interpleader action. The defendants, all potential beneficiaries of the interpleaded funds, have objected on the ground that this Court lacks the authority to award fees because such authority has not been vested in the Court by statute or by the interpleader rule. For the reasons that follow, the Court is satisfied that it may award attorneys' fees as costs in an interpleader action, and that such an award is justified in this case. Accordingly, PULIC's motion for attorneys' fees and costs is GRANTED.
Del. Super. Ct. Civ. R. 22 ("Rule 22").
II.
Plaintiff filed its complaint in interpleader on January 28, 2003. Since then, for reasons still unclear to the Court, the defendants have been unable to disperse the $1,000,602.74 that PULIC has deposited into the Court's interpleader account. Plaintiff represents that it has incurred attorneys' fees of $3,024.00, expenses of $98.88, and advances of $353.50, for a total of $3,476.38, in connection with the filing of the complaint and the subsequent monitoring of this case.III.
The general rule regarding the award of attorneys' fees was stated by this Court in Casson v. Nationwide Ins. Co.:In Delaware, it is well-settled that ordinary court costs are usually allowed to a prevailing party. (citation omitted) But allowance of counsel fees as part of the costs is the exception to the general rule. (citation omitted) As our Supreme Court has noted, `[w]isely our courts have been very cautious in approving exceptions to that general rule.' (citation omitted) In an action at law, a court may not order the payment of attorneys' fees as part of costs to be paid by the losing party unless the payment of such fees is authorized by some provision of statute or contract. (citation omitted)
Plaintiff has cited cases out of the Court of Chancery as support for the proposition that the court may a ward attorneys' fees to the interpleading party. From these cases, it is clear that the Court of Chancery has, in the past, awarded attorneys' fees in interpleader actions in appropriate cases. It is also clear, however, that the Court of Chancery summoned its equitable powers when doing so. The question remains, therefore, whether this Court, now vested with exclusive jurisdiction to hear interpleader actions, may draw upon the equitable origins of the interpleader action as a basis to award attorneys' fees in appropriate cases. To be sure, any award of attorneys' fees would be based on an equitable notion that the plaintiff in an interpleader action, through no fault of its own, has incurred costs and fees in order to provide a benefit to those claiming a stake in the interpleader fund.
See e.g. Security Connecticut Life Ins. Co. v. Dudziak, 1986 WL 4493, at *1 (Del.Ch.)("this Court has discretion to award fees to an interpleading party out of the interpleaded fund.") (citations omitted).
See Id. at *1 (citing 10 Del. C. § 5106: "The Court of Chancery shall make such order concerning costs in every case as is agreeable to equity.") (emphasis supplied).
See Poppiti v. Newport Garden Apartment Associates, 1990 WL 102442 (Del.Ch.) (holding that under Rule 22 the Superior Court is now vested with authority to provide an adequate remedy in interpleader actions thereby divesting the Court of Chancery of jurisdiction over such matters.).
See 7 Wright Miller, FEDERAL PRACTICE AND PROCEDURE, § 1719 (2001)("a Federal Court has discretion to award costs and counsel fees to the stakeholder in an interpleader action, whether brought under Rule 22 or the interpleader statute, whenever it is fair and equitable to do so."); Louisiana State Lottery Co. v. Clark, 16 Fed. 20, 21 (C.C.D. La. 1883)("there is no equity in compelling [the] stakeholder to bear [costs and fees]. On the contrary, the parties that have benefitted thereby should bear them.").
Neither Rule 22 nor the statute that authorizes interpleader actions make specific provisions for the award of attorneys' fees. Thus, at first glance, it would appear that this Court lacks authority to award attorneys' fees in this interpleader action even though our sister court, the Court of Chancery, was not so restricted when it adjudicated identical claims under its rule of procedure. Our Supreme Court recently addressed this peculiar dynamic created by our bifurcated court system in the context of an application for counsel fees in a municipal real estate matter:
See Del. Super. Ct. Civ. R. 22; 10 Del. C. § 3910.
A court of equity has jurisdiction to award counsel fees as part of costs in a proper case, but in an action at law, absent a statutory or contractual provision, a court may not ordinarily order the payment of attorneys' fees as costs to be paid by the losing party. That rule is not as rigid as would appear at first glance, however. The Superior Court does hear cases in which it is occasionally required to apply equitable principals. In such cases, the Superior Court has jurisdiction to award attorneys' fees even if no contract or statute requires it.
Dover Historical v. Dover Planning Com'n, 902 A.2d 1084, 1090 (Del. 2006).
As explained in Dover Historical Society, the Superior Court does, from time to time, adjudicate claims that have origins in equity, or pursuant to which it must apply equitable principals. Foreclosure actions, for instance, fall within this category. The relief sought in Dover Historical Society — wherein a petitioner sought to block a construction project by seeking an order of the Court directing a municipal planning commission not to issue an architectural review certificate to the builder — likewise was deemed to be equitable in nature such that an award of attorneys' fees was permissible. The key, therefore, to this Court's authority to award attorneys' fees as costs in this action is a determination that interpleader actions represent another of the rare instances where this Court treads in equitable waters. To borrow a phrase from Dover Historical Society: "this is one of those cases."
See e.g. Burge v. Fidelity Bond Mort. Co. 648 A.2d 414, 421-22 (Del. 1994) (upholding award of attorneys' fees in a Superior Court action involving a mortgage foreclosure, noting that the nature of the action was "inherently equitable").
Dover Historical Society, Inc., 902 A.2d at 1090-91.
Id.
Professors Wright and Miller provide a concise history of interpleader in their oft-cited treatise:
[Interpleader] originated in the common-law courts as a device that could be used by a defendant in a limited number of circumstances for protection from double vexation upon a single liability. Interpleader proceedings subsequently began to appear in the equity courts and in a relatively short period of time the remedy was viewed as falling exclusively within the jurisdiction of the English Equity Chancellors. The Courts of Chancery seemed to be a natural and logical place for the development of the interpleader device, and over time it became available to plaintiffs as an affirmative remedy to be used against multiple claimants seeking relief upon a single obligation.
* * *
The passage of the federal interpleader statutes of 1917, 1925, 1926, and 1936 left open the question whether the federal courts retained their historic equity jurisdiction over interpleader actions based on general-federal-question jurisdiction or diversity of citizenship between the plaintiff-stakeholder and the defendant-claimants. The courts generally had allowed these actions prior to the federal rules. Any doubt on the point was eliminated by the promulgation of Federal Rule 22 in 1938, which provides for interpleader proceedings, assuming that the court has subject matter jurisdiction. The rule operates in addition to the remedy provided by the interpleader statute. But the federal rule does more than simply preserve the old equity practice.
* * *
With the disappearance of the historical limitations on interpleader, several courts have recognized that the device also can be used to protect the claimants by bringing them together in one action and reaching an equitable division of a limited fund. This situation frequently arises when the insurer of an alleged tortfeasor is faced with claims aggregating more than its liability under the policy.
As can be readily gleaned from Wright Miller's historical overview, interpleader is, by its nature, an equitable device by which a limited fund may be distributed among several claimants. By virtue of its adoption of Rule 22, this Court has recognized the utility of this procedural device as a means to resolve certain actions at law, including actions in which "an alleged tortfeasor is faced with claims aggregating more than its liability under [a liability insurance] policy." The fact that interpleader has been adopted as a procedural device by a law court does not diminish the equitable principles upon which the remedy is based.
Id.
Given that interpleader is based upon equitable principles, the Court is satisfied that it has authority to award attorneys' fees as costs to the stakeholder/interpleader plaintiff in appropriate cases. This is such a case. PULIC timely initiated this interpleader action soon after recognizing that the potential claims against its insured might exceed policy limits. PULIC followed the Court's rules and provided notice to all potential claimants. Thereafter, PULIC's counsel was required to monitor the litigation for several years (including periodic court appearances) while the claimants wrestled with distribution-related issues. This delay was of no fault of the plaintiff. And while the defendants have argued that PULIC's costs and fees are simply "costs of doing business," the mere fact that PULIC is an insurance company does not diminish its right to recover attorneys' fees as costs.
See Dover Historical Society, 902 A.2d at 1090-91; Burge, 648 A.2d at 421-22.
See 7 Wright Miller, supra, § 1719:
A few courts have suggested that insurance-company stakeholders may be denied their attorneys' fee s and costs because they satisfy a self interest in not paying the wrong beneficiary by filing in interpleader. Others have noted that filing interpleader proceedings because of the conflicting claims of beneficiaries is part of the ordinary course of business for insurers and those costs should not be born by the fund. Insofar as these decisions rest on the notion that the stakeholder benefits by being discharged, they are wrongly decided because all stakeholders benefit by being able to use interpleader and that alone does not negate the equitable considerations supporting an award of attorneys fees. Further, the cost-of-business rationale fails to recognize that other equitable concerns should be consulted in determining whether fees or costs are warranted. The test for awarding fees and costs is a typical equitable one that is very similar to the standard used to determine whether interpleader relief ought to be granted — should the interpleading party be required to assume the risk of multiplicity of actions and erroneous election. If not, then the stakeholder should be made whole.
IV.
Defendants have not challenged the amounts of PULIC's attorneys' fees, expenses or advances as submitted in PULIC's motion. Nevertheless, the Court has reviewed the attorneys' fees and costs and finds them to be reasonable. Accordingly, having found that the Court has the authority to award attorneys' fees and costs in this interpleader action, and that the amount of such fees and costs is reasonable, the Court concludes that plaintiff's motion for attorneys' fees and costs should beGRANTED.
IT IS SO ORDERED.