Summary
awarding fees to insurance company that was threatened with three separate claims, one in which the proceeds were subject to an ongoing state action, one from the identified beneficiary, and one from an estate without an administrator
Summary of this case from Nat'l Life Ins. Co. v. GomezOpinion
00-CV-2130 (ILG)
February 4, 2003
MEMORANDUM AND ORDER
SUMMARY
Plaintiff Travelers Insurance Company ("Travelers") moves for attorneys' fees and costs incurred with respect to its role as a stakeholder in this interpleader action. Defendant George Europe opposed the motion and cross-moved for attorneys' fees and costs. By order dated November 22, 2002, this Court referred the motion to Magistrate Judge Levy. On December 10, 2002, Magistrate Judge Levy issued a report recommending that Travelers be awarded $25,000, the remaining stake still deposited with the Court.
For the reasons that follow, this Court adopts Magistrate Judge Levy's recommendation. grants Travelers' motion, and denied Europe's cross-motion.
BACKGROUND
In this interpleader action. plaintiff Travelers Insurance Company ("Travelers") filed a complaint seeking to resolve potentially competing claims to the proceeds of an insurance policy (the "Policy") issued on the life of Zenifer Garcia. The policy designated defendant George Europe ("Europe") as the beneficiary. (Decl. of Jaimie L. Fried, dated May 29, 2002 (Fried Decl.), Ex. A.) Garcia passed away on November 21, 1999. (Id., ¶ 3.) At the time of her death, the Policy insured her life for $78,771.00. (Id.)
Shortly after Garcia's death, Todd J.W. Bowen, an attorney, wrote to Travelers stating that his client Lydia Mohammad, Garcia's oldest daughter, was seeking court intervention regarding the distribution of the insurance proceeds. (Id., Ex. B.) In February 2000, Bowen advised Travelers that his office was representing Garcia's five other daughters (all of whom were minors) and the estate, and that all would be asserting claims to the policy. (Id., ¶ 4.) Bowen further advised that there were at least two other cases proceeding in state court that bore on the issue of the distribution of the Policy's proceeds. (Id.)
On April 12, 2000, Travelers filed this interpleader action to determine the proper beneficiary or beneficiaries of the policy. (Id., Ex. D.) On August 7, 2000, Europe answered the interpleader complaint and counterclaimed against Travelers alleging that Travelers filed the interpleader and was refusing to disburse the Policy's proceeds in bad faith. (See Aff. of Ramgopol, dated July 15, 2002 (Ramgopol Aff.), Ex. 1.) After seeking court intervention to direct Europe to provide information regarding the other potential claimants and a copy of Garcia's death certificate to Travelers, on December 20, 2000, Travelers sent a check for $78,771.00 to the Clerk of the Court for deposit in an interest-bearing escrow account. (Fried Dec., Ex. F.)
On April 25, 2001, Europe moved for summary judgment arguing primarily that Travelers had no basis to file the interpleader action in the first place. On May 18, 2001, Travelers filed its opposition and moved to dismiss Europe's counterclaim for the same reasons as supported opposing Europe's motion. At oral argument, this Court held:
With respect to your motion for summary judgment, sir. the statute 1335 of Title 28 of the United States Code I think is quite clear, there need only be the possibility of a claim being made against a particular fund to justify interpleader action. The action which has been brought by the insurance company has been brought in an entirely appropriate fashion. Hopefully it will get to this court very quickly. * * * the money is very safely ensconced in a fund under the control of a clerk of this court. It is earning interest. Your client [Europe] is not being prejudiced in any way at this point, and if there are no legitimate claims which anybody has with respect to this fund, the money will be turned over by the direction of the court to your client.
(June 22, 2001 Tr. at 18.) Accordingly, this Court denied summary judgment and granted Travelers' motion on the counterclaim.
Magistrate Judge Levy proceeded to appoint Eli Uncyk, Esq., as guardianad litem for Garcia's minor children. Uncyk's report to the court, dated September 26, 2001, concluded that there were "no facts and legal basis or theory upon which [Garcia's minor children] can lay claim to the policy proceeds . . . or otherwise interpose any Answer to the plaintiff's Complaint." On December 21, 2001, the parties entered into a stipulation to dismiss this action with prejudice and pay out the proceeds to Europe, with the exception of $25,000 set aside pending the dispute between the parties concerning attorneys' fees and costs. In total, Travelers claims that it expended over $43,000 in attorneys' fees and costs directly related to the interpleader action (Fried Dec. ¶ 16), but only seeks an award for the $25,000 set aside pursuant to the stipulation.
Upon referral of the instant motion, Magistrate Judge Levy determined that Travelers met all the criteria entitling it to costs and attorneys' fees. Magistrate Judge Levy found that Travelers requests reimbursement only for charges related directly to this litigation, that the rates charged were in line with rates generally awarded, and that the number of hours expended were reasonable under the circumstances, given Europe's aggressive litigation approach. Magistrate Judge Levy consequently found that Travelers' request for $25,000 was appropriate and not excessive, and accordingly recommended granting Travelers' motion. He also found that Europe's request for attorneys' fees and costs lacked any basis in law, noted that Europe failed to supply any documentation to support his claim for fees, and recommended denying Europe's request in this regard.
DISCUSSION
I. Standard for Objections to Reports and Recommendations of Magistrate Judges
A district court judge may designate a magistrate judge to submit to the court a proposed report and recommendation as to the disposition of the motion. See 28 U.S.C. § 636 (b)(1)(B). Within ten days of service of the recommendation, any party may file written objections to the magistrate judges report. 28 U.S.C. § 636 (b)(1). Upon de novo review of those portions of the record to which objections are made, the district court may accept, reject, or modify the recommendation made by the magistrate judge. Id. Similarly, Federal Rule of Civil Procedure 72(b) states that a "district judge may accept, reject or modify the recommended decision, receive further evidence, or recommit the matter to the magistrate judge with instructions."
The court is not, however, required to review, under a de novo or any other standard, the factual or legal conclusions of the magistrate judge as to those portions of the report and recommendation to which no objections are addressed. See Thomas v. Arn, 474 U.S. 140, 150 (1985). While Rule 72(b) gives district courts the discretion to consider "further evidence," district courts will ordinarily refuse to consider arguments, case law and/or evidentiary material which could have been, but was not, presented to the magistrate judge in the first instance.See United States v. Pena, 51 F. Supp.2d 364, 367 (W.D.N.Y. 1998);Robinson v. Keane, 1999 WL 459811, at *4 (S.D.N.Y. June 29, 1999) ("An objecting party may not raise new arguments that were not made before the Magistrate Judge."); see also Abu-Nassar v. Elders Futures, Inc., 1994 WL 445638, at *4 n. 2 (S.D.N.Y. Aug. 17, 1994) (refusing to entertain new arguments not raised before the magistrate judge and holding that to do otherwise "would unduly undermine the authority of the Magistrate Judge by allowing litigants the option of waiting until a Report is issued to advance additional arguments") (citations omitted).
II. Europe's Objections
A. Subject Matter Jurisdiction
Europe first argues that Magistrate Judge Levy failed to consider his contention that the Court lacked jurisdiction over this action. (Def. Obj. at 2-3.) Specifically, Europe notes that statutory interpleader jurisdiction is premised upon two requirements:
The district courts shall have original jurisdiction of any civil action of interpleader or in the nature of interpleader . . . if (1) Two or more adverse claimants, of diverse citizenship as defined in section 1332 of this title, are claiming or may claim to be entitled to such money or property . . . and if (2) the plaintiff has deposited such money or property . . . into the registry of the court. there to abide the judgment of the court . . . .28 U.S.C. § 1335(a) (emphasis added). Since Travelers did not deposit the funds into the registry until eight months after initially filing the complaint, Europe argues that this court never took jurisdiction over the claim.
Although Europe did not raise this argument before Magistrate Judge Levy, the Court will consider it since it goes to subject matter jurisdiction. Lyndonville Sav. Bank Trust Co. v. Lussier, 211 F.3d 697, 700-01 (2d Cir. 2000) ("Failure of subject matter jurisdiction is not waivable and may be raised at any time by a party or by the court sua sponte. If subject matter jurisdiction is lacking, the action must be dismissed.")
The statutory language "means that the court will not have jurisdiction in an action of interpleader unless the stakeholder has deposited the entire sum in its possession which the claimants claim." Metal Transport Corp. v. Pacific Venture Steamship Corp., 288 F.2d 363, 365 (2d Cir. 1961). However, it is equally clear that the failure to deposit the stake with the Court's registry alone would not warrant outright dismissal of the interpleader action for lack of jurisdiction. Rather, it would be error to dismiss the complaint "without affording an opportunity to cure." United States Fire Ins. Co. v. Asbestospray, Inc., 182 F.3d 201, 210 n. 4 (3d Cir. 1998); see CNA Ins. Cos. v. Waters, 926 F.2d 247, 250 n. 6 (3d Cir. 1991) ("The law is clear, however, that [the stakeholder] would be permitted to cure this defect by making an additional deposit with the court registry."); General Accident Group v. Gagliardi, 593 F. Supp. 1080, 1085 (D. Conn. 1984) ("The court generally will give the stakeholder an opportunity to comply before dismissing the action."); cf. Wayzata Bank Trust Co. v. A B Farms, 855 F.2d 590, 593 (8th Cir. 1988) (noting that district court perfected jurisdiction despite fact that funds were not deposited until after limited remand from court of appeals); American Smelting Refining Co. v. Naviera Andes Peruana, S.A., 182 F. Supp. 897, 898 (S.D.N.Y. 1959) (giving plaintiff 30 days to deposit entire amount in dispute with court). Travelers deposit of the Policy's proceeds perfected this Court's jurisdiction.
In his reply, Europe also returns to his old argument from the summary judgment motion that no case or controversy ever existed in this matter because no other person had a legitimate claim. Since there is no basis to revisit this Court's prior determination that Travelers acted properly in filing an interpleader action, and because the Court has subject matter jurisdiction over the action, this argument is meritless and rejected.
B. Europe's Other Objections
1. The Bowen Letter
Europe first objects on the ground that the magistrate judge mistakenly relied upon the advice offered by Mohammad's original attorney that there were existing state court proceedings that bore upon the issue. (Def. Obj. at 3-4.) Magistrate Judge Levy addressed these arguments in his report and recommendation, noting both that this Court already held explicitly that Travelers acted properly in filing the interpleader action. and that nothing in the guardian ad litem's report indicated that Travelers acted improperly. (RR at 5.)
Europe's argument misunderstands the significance of the letter from Bowen and his subsequent communications with Travelers. His letter alerted Travelers that other claims on the insurance proceeds were likely to be made, which justified Travelers' recourse to filing this interpleader action. See 28 U.S.C. § 1335 (a)(1) (permitting interpleader to be filed where property may be subject to claims):Sotheby's Inc. v. Garcia, 802 F. Supp. 1058, 1065 (S.D.N.Y. 1992) ("[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."). Since this argument simply revisits Europe's argument for summary judgment. Magistrate Judge Levy was correct in rejecting it which this Court does as well.
2. Travelers' Entitlement to Attorneys Fees
Europe next argues that Magistrate Judge Levy erred in concluding that Travelers met the prerequisites for attorneys' fees and costs since a good faith stakeholder would have "gotten out of the case from the outset, leaving the interested parties with standing in the case." (Def. Obj. at 4-5.) However, Europe's objection overlooks the extensive effort that was necessary for Travelers to effect service on the possible claimants. Rather than submit its claim and permit Travelers to withdraw once service was effected on the other potential claimants, Europe chose to file counterclaims against Travelers and sought to force dispositive motions while the other potential claimants were still being joined in the action. Indeed, when the summary judgment motion was argued the minor children were still unrepresented.
One point mentioned briefly in Magistrate Judge Levy's report and recommendation (see RR at 4) seems worth amplification. Usually, courts need not award attorneys' fees in interpleader actions where the fees are expenses incurred in the ordinary course of business. See Correspondent Servs. Corp. v. J.V.W. Investments Ltd., 204 F.R.D. 47, 49 (S.D.N.Y. 2001). This is particularly true in the case of insurance companies. where minor problems that arise in the payment of insurance policies must be expected and the expenses incurred are part of the ordinary course of business. Travelers Indem. Co. v. Israel, 354 F.2d 488, 490 (2d Cir. 1965) ("We are not impressed with the notion that whenever a minor problem arises in the payment of insurance policies, insurers may, as a matter of course, transfer a part of their ordinary cost of doing business of their insureds by bringing an action for interpleader.").
However, this case clearly involved unique problems for a disinterested stakeholder, threatened with claims from one attorney that the proceeds were the subject of ongoing state court actions, claims from the identified beneficiary of the Policy, and claims from an estate for which no administrator had yet been appointed. Moreover, information about the ongoing state court actions was not publicly available because at least one was a custodial dispute in Family Court. Although an insurance company cannot expect to receive an award of attorneys' fees automatically, the costs in bringing this particular interpleader action cannot be said to be part of the ordinary course of business.
3. Reasonableness of the Fees and Costs
Europe's next objection is that Magistrate Judge Levy erred in finding that Travelers' counsel spent a reasonable amount of time and charged reasonable rates. (Def. Obj. at 5-6.) Specifically, Europe charges that Travelers' attorneys "padded" their hours and worked on issues "not related to relevant issues pertaining to this interpleader action." However, despite the fact that Travelers submitted time sheets that provide detailed diary entries with its initial moving papers (Fried Dec., Ex. J), Europe did not challenge any specific time entry before Magistrate Judge Levy, nor does he do so now, but rather requests a hearing on the time records. As to the hearing, reasons of efficiency and fairness prompt this Court to exercise its discretion to refuse to consider evidence that was not presented before the magistrate judge.See Paddington Partners v. Bouchard, 34 F.3d 1132, 1137-38 (2d Cir. 1994). Moreover, since Europe does not voice any objection to any specific time entry, the general objection to the hours expended cannot be sustained. See Lozeau v. Lake County, 98 F. Supp.2d 1157, 1170 (D. Mont. 2000) ("Where a party fails to articulate the amount of time to which it objects, or the grounds for such objection. that party fails to satisfy the rebuttal burden.")
In any event, an independent review of the time sheets does not reveal any excessive amount of time spent by Travelers' counsel. Over fifteen months, between February 2000 (when it became apparent that multiple claims might be made to the Policy's proceeds) through April 2001, Travelers' counsel spent only 47.9 hours total in (1) preparing and filing an interpleader complaint. (2) tracking down the potential defendants and attempting to serve them (including out-of-state defendants like Europe), (3) conferring with opposing counsel on a number occasions. and (4) preparing for and attending multiple court conferences. Travelers' counsel kept expenses down, moreover, by entrusting the matter to an associate, Jaimie Fried (now Jaimie Fried Dockray), who in turn delegated work at times to even less expensive associates or paralegals.
Travelers' counsel spent significant time (118.8 hours during May and June 2001) only when Europe moved for summary judgment before the other potential claimants could be joined (and thus before Travelers could even have sought to discharge itself from the action). Even then, Travelers' counsel assigned the laboring oar to a less senior (and less costly) associate, Hope Pecullan.
While it is true that policy favors keeping the fees for stakeholders small "out of fairness to the eventual recipient," John Hancock Mutual Life Ins. Co. v. Doran, 138 F. Supp. 47, 50 n. 2 (S.D.N.Y. 1956), such fees normally are minimal because the process of identifying the claimants is usually straightforward. However, this was an unusual case where the identity of the minor children was difficult to ascertain and where Travelers incurred extraordinary fees caused by the motion for summary judgment. None of the reported cases indicate that attorneys' fees and costs should be limited or eliminated where the unique circumstances imposed higher costs.
Accordingly, these objections to the Report and Recommendation are overruled.
4. Europe's Litigation Stance
Europe's next objection is that he is being penalized for what Magistrate Judge Levy termed an aggressive litigation stance. (Def. Obj. at 7-8.) Europe argues that he intended to do nothing and let plaintiff move the case forward, but that Magistrate Judge Levy was responsible for forcing the parties to file motions and to participate in case conferences. (Id.) Absent some item in the record (apart from simply setting a briefing schedule) showing that Magistrate Judge Levy forced Europe to bring his summary judgment motions unnecessarily, this argument is meritless. Moreover, to the extent that Europe is essentially challenging the case management conducted by Magistrate Judge Levy, these conferences only occurred because of the unique circumstances surrounding the potential claimants. This objection to the report and recommendation is overruled.
5. Europe's Claim to Attorneys' Fees
Europe's final objection is that the magistrate judge erred in recommending that Europe's cross-motion for attorneys' fees be denied. (Def. Obj. at 8-9.) Magistrate Judge Levy states that the request lacked any statutory or contractual authority, and that the statutory authority to which Europe cites, 17 U.S.C. § 505, applies only to copyright actions and is inapplicable in this case. (RR at 6.) Magistrate Judge Levy is surely correct that no statutory basis exists to support such an award. Europe argues that he has a contractual duty to pay his attorney for services rendered. but that contractual duty has no bearing on whether an insurance company must pay for a beneficiary's legal costs where the policy imposes no such duty.
Accordingly, Europe's objection on this basis is overruled as well.
CONCLUSION
For the foregoing reasons. Defendant George Europe's objections to Magistrate Judge Levy's Report and Recommendation are overruled. The Report and Recommendation is adopted, and therefore Travelers is awarded the $25,000 out of the interpleader fund deposited with the Clerk of the Court. Europe's cross-motion is denied.
SO ORDERED.