The Penn Mutual Life Insurance Company v. The Estate of Susan Smith ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 THE PENN MUTUAL LIFE INSURANCE Case No. 1:23-cv-00722-SAB COMPANY, 12 ORDER GRANTING STIPULATED Plaintiff, MOTION FOR INTERPLEADER RELIEF 13 AND ATTORNEYS’ FEE AWARD v. 14 ORDER DIRECTING CLERK OF COURT THE ESTATE OF SUSAN SMITH, et al., TO DISMISS PLAINTIFF FROM ACTION 15 Defendants. ORDER VACATING HEARING SET FOR 16 SEPTEMBER 27, 2023 17 (ECF No. 21) 18 19 I. 20 INTRODUCTION 21 On May 10, 2023, Plaintiff the Penn Mutual Life Insurance Company (“Penn”), filed this 22 interpleader action against Defendants: (1) the Estate of Susan Smith, by and through its 23 administrator, Christopher R. Wilson (“Smith Estate”); and (2) Vassar Smith (“Vassar”). (ECF 24 No. 1.) On June 6, 2023, Defendant Smith Estate filed an answer, as well as a crossclaim against 25 Defendant Vassar. (ECF Nos. 6, 7.) On June 22, 2023, Defendant Vassar filed an answer to the 26 complaint. (ECF No. 13.) On June 29, 2023, Defendant Vassar filed an answer to the 27 crossclaim. (ECF No. 16.) On July 20, 2023, pursuant to the consent of the parties, this action was reassigned to 1 Magistrate Judge Stanley A. Boone. (ECF No. 18.) 2 On August 9, 2023, the parties filed a stipulated motion for interpleader relief. (Stip. 3 Mot. Interpleader (“Mot.”), ECF No. 21.) The motion is set for hearing on September 27, 2023, 4 in Courtroom 9. (ECF No. 22.) 5 Based on the Court’s review of the stipulated motion, the Court finds the matter suitable 6 for decision without oral argument, and the hearing set for September 27, 2023, shall be vacated. 7 For the reasons explained below, the parties’ stipulated motion for interpleader relief and for the 8 award of attorneys’ fees and costs shall be granted. 9 II. 10 LEGAL STANDARD 11 “Interpleader is a procedural device used to resolve conflicting claims to money or 12 property. It enables a person or entity in possession of a tangible res or fund of money (the 13 ‘stakeholder’) to join in a suit two or more ‘claimants’ asserting mutually exclusive claims to 14 that stake.” MacPherson-Pomeroy v. N. Am. Co. for Life & Health Ins., No. 15 120CV00092DADBAM, 2022 WL 1063039, at *5 (E.D. Cal. Apr. 8, 2022) (quoting Great Wall 16 De Venezuela C.A. v. Interaudi Bank, 117 F. Supp. 3d 474, 481 (S.D.N.Y. 2015). “Both Rule 17 22 and the interpleader statute allow a party to file a claim for interpleader if there is a possibility 18 of exposure to double or multiple liability.” Lee v. W. Coast Life Ins. Co., 688 F.3d 1004, 1009 19 (9th Cir. 2012); Mack v. Kuckenmeister, 619 F.3d 1010, 1024 (9th Cir. 2010) (“The purpose of 20 interpleader is for the stakeholder to ‘protect itself against the problems posed by multiple 21 claimants to a single fund.’ ” (quoting Minn. Mut. Life Ins. Co. v. Ensley, 174 F.3d 977, 980 (9th 22 Cir. 1999))). “This includes protecting against the possibility of court-imposed liability to a 23 second claimant where the stakeholder has already voluntarily paid a first claimant. But it also 24 includes limiting litigation expenses, which is not dependent on the merits of adverse claims, 25 only their existence.” Mack, 619 F.3d at 1024. 26 When the interpleader procedure is initiated, it typically proceeds in two stages. Lee, 688 27 F.3d at 1009. “In the first stage, the district court decides whether the requirements for [a] rule 1 and whether there are adverse claimants to that fund.” Id. (quoting Mack, 619 F.3d at 1023). “If 2 the district court finds that the interpleader action has been properly brought the district court 3 will then make a determination of the respective rights of the claimants.” Id. (quoting Mack, 619 4 F.3d at 1023-24). “The two stages to an interpleader action need not be bifurcated; ‘the entire 5 action may be disposed of at one time.’ ” MacPherson-Pomeroy, 2022 WL 1063039, at *5 6 (quoting W. Conf. of Teamsters Pension Plan v. Jennings, No. C-10-03629 EDL, 2011 WL 7 2609858, at *5 (N.D. Cal. June 6, 2011)). “The second stage of an interpleader action may be 8 adjudicated at summary judgment when there is no material dispute of fact . . . and each claimant 9 has the burden of establishing his or her right to the fund or property by a preponderance of the 10 evidence.” MacPherson-Pomeroy, 2022 WL 1063039, at *5 (citations and quotation marks 11 omitted). 12 Federal provides two mechanisms for invoking interpleader—statutory interpleader under 13 28 U.S.C. § 1335 and rule interpleader under Rule 22—and their jurisdictional requirements 14 differ. Under statutory interpleader, district courts have original jurisdiction over actions if: (1) 15 the amount in dispute exceeds $500; (2) there are two or more adverse claimants of diverse 16 citizenship; and (3) the plaintiff deposits the money or property in dispute into the registry of the 17 court or posts an adequate bond. MacPherson-Pomeroy, 2022 WL 1063039, at *5 (citing 28 18 U.S.C. § 1335). “Statutory interpleader has been ‘uniformly construed to require only minimal 19 diversity, that is, diversity of citizenship between two or more claimants, without regard to the 20 circumstance that other rival claimants may be co-citizens.’ ” Id. (quoting State Farm Fire & 21 Cas. Co. v. Tashire, 386 U.S. 523, 530 (1967). In contrast, rule interpleader under Federal Rule 22 of Civil Procedure 22 is a procedural device only and requires that jurisdiction must be proper 23 under 28 U.S.C. § 1331 or § 1332. Id. (citing Morongo Band of Mission Indians v. California 24 State Bd. of Equalization, 858 F.2d 1376, 1382 (9th Cir. 1988)).1 25 1 The Plaintiff’s complaint provides that this action arises under Federal Rule of Civil Procedure 22, and that the 26 Court has jurisdiction pursuant to 28 U.S.C. § 1332(a)(2), because there is diversity among the parties and the amount in controversy greater than $75,000. (Compl. ¶ 4.) The Court notes that the stipulated motion states 27 generally, that district courts have original jurisdiction over interpleader actions where the interpleader fund exceeds $500.00 and two or more adverse claimants to the benefits are of diverse citizenship, 28 U.S.C. § 1335, but the 1 III. 2 DISCUSSION 3 A. The Court finds the Stipulated Motion for Interpleader is Properly Granted 4 Penn Mutual issued life insurance policy No. 7374035, effective January 5, 1984, 5 insuring the life of and owned by Susan Smith (the “Decedent”) with an initial specified amount 6 of $260,000.00 (the “Policy”). (Mot. 1-2.) In the application for the Policy, the Decedent 7 designated Vassar Smith (the Decedent’s then husband) as primary beneficiary, Adam V. Smith 8 (her son, now deceased) as secondary beneficiary, and Decedent’s estate as final beneficiary. 9 (Mot. 2.) 10 The Decedent and Vassar were divorced in April 2000. (Id.) The judgment of 11 dissolution entered in their divorce proceeding specified that “[o]ther life insurance policies on 12 the life of [Susan S. Smith] are confirmed to her as her sole and separate property.” (Id.) The 13 Decedent did not change the Policy beneficiary following the divorce. (Id.) 14 The parties proffer that upon information and belief, Adam V. Smith predeceased the 15 Decedent in July 2016. (Id.) The Decedent passed away in March 2018. (Id.) At the time of 16 death, the death benefit due under the Policy was $625,637.31 (the “Death Benefit”). (Id.) 17 Vassar was the sole surviving designated beneficiary of the Policy at the time of the 18 Decedent’s death. (Id.) No claim was made to the Death Benefit at the time of the Decedent’s 19 death. (Id.) 20 Penn Mutual did not learn of the Decedent’s death until it received a death notification 21 from the Social Security Administration. (Id.) Following notification, Penn Mutual contacted 22 Vassar regarding submission of a claim for the Death Benefit. (Id.) Penn Mutual exchanged 23 correspondence with Vassar Smith (both directly and through a third-party on his behalf) 24 regarding Vassar’s claim to the Death Benefit but, as of the date of filing, completed death claim 25 documents have not been submitted. (Id.) 26 Christopher R. Wilson, as administrator of the Estate of the Decedent, later contacted 27 Penn Mutual to contest Vassar’s designation as beneficiary on the basis that the divorce decree 1 this award divested Vassar of any interest in the Policy, including the right to be designated as 2 beneficiary. 3 Penn initiated this interpleader action against the Defendants due to the competing claims 4 made to the Death Benefit. Both Defendants have appeared and confirmed their respective 5 claims to the Death Benefit through the filed answers. (See ECF Nos. 6, 7, 13.) 6 The stipulated motion proffers that Plaintiff Penn is entitled to interpleader relief against 7 Defendants based on the competing claims to the Death Benefit. As noted above, an interpleader 8 action typically proceeds in two stages. First, the district court must determine whether the 9 requirements for an interpleader action have been met by determining if there is a single fund at 10 issue and whether there are adverse claims to that fund. Lee, 688 F.3d at 1009. Second, if the 11 interpleader action has been properly brought, the district court must make a determination of the 12 respective rights of the claimants. Id. 13 As set forth in the complaint, Plaintiff Penn is a disinterested stakeholder subject to 14 adverse competing claims to the Death Benefit and is exposed to multiple and/or inconsistent 15 liabilities. Specifically, Penn Mutual is subject to competing claims to the Death Benefit arising 16 from potential divorce revocation. 17 The Court finds the stipulated motion is properly granted, that Penn should be discharged 18 and dismissed with prejudice from this action, and Defendants shall proceed to litigate their 19 competing claims to the Death Benefit. See 28 U.S.C. § 2361 (“Such district court shall hear and 20 determine the case, and may discharge the plaintiff from further liability, make the injunction 21 permanent, and make all appropriate orders to enforce its judgment.”); OM Fin. Life Ins. Co. v. 22 Helton, No. CIV. 2:09-1989 WBS E, 2010 WL 3825655, at *3 (E.D. Cal. Sept. 28, 2010) 23 (“Plaintiff is subject to actual or potential adverse claims to the decedent's Policy benefits from 24 Helton and the Ozuna children . . . [and] [o]nce it is determined that interpleader is proper, 25 federal courts may discharge the stakeholder from further liability.”); Wells Fargo Bank, Nat. 26 Ass'n v. PACCAR Fin. Corp., No. 108CV-00904AWI-SMS, 2009 WL 211386, at *2 (E.D. Cal. 27 Jan. 28, 2009) (“If an interpleading plaintiff has no interest in the stake, the plaintiff should be 1 action [and] [t]hus, Plaintiff's motion for discharge can be granted.”); Great Am. Life Ins. Co. v. 2 Brown-Kingston, No. 218CV02783MCEKJN, 2019 WL 8137717, at *3 (E.D. Cal. May 14, 3 2019) (“Because the Court finds GALIC is merely a disinterested stakeholder, the Court 4 ENJOINS all defendants and future claimants from any future proceedings against GALIC 5 related to these claims.”). 6 B. The Court Shall Grant the Stipulated Motion for Attorneys’ Fees and Costs 7 “A disinterested stakeholder’s entitlement to attorney’s fees in an interpleader action ‘is 8 committed to the sound discretion of the district court.’ ” MacPherson-Pomeroy v. N. Am. Co. 9 for Life & Health Ins., No. 120CV00092ADABAM, 2023 WL 5722632, at *2 (E.D. Cal. Sept. 5, 10 2023) (quoting Tr. of Dirs. Guild of Am.-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 11 426 (9th Cir. 2000)). In awarding such fees, courts recognize that “by bringing the action, the 12 plaintiff benefits all parties by promoting early litigation on the ownership of the fund, thus 13 preventing dissipation.” Id. “Such awards generally are charged against the interpleaded funds.” 14 MacPherson-Pomeroy, 2023 WL 5722632, at *2 (quoting Chase Inv. Servs. Corp. v. Law 15 Offices of Jon Divens & Assocs., LLC, No. CV 09-9152 SVW (MANx), 2010 WL 11597568, at 16 *4 (C.D. Cal. Jun. 10, 2010)). “The party claiming attorneys’ fees bears the burden of 17 establishing its entitlement to the award.” MacPherson-Pomeroy, 2023 WL 5722632, at *2 18 (quoting Fidelity Nat’l Title Co. v. U.S. Small Bus. Admin., No. 2:13-CV-02030-KJM-AC, 2014 19 WL 6390275, at *4 (E.D. Cal. Nov. 13, 2014)). In order to avoid depleting the funds in question, 20 attorney’s fees in interpleader actions are typically modest. MacPherson-Pomeroy, 2023 WL 21 5722632, at *2 (quoting Tise, 234 F.3d at 427). 22 As one court in this district has noted, “[a]s a general matter, a court will award fees from 23 the proceeds whenever: ‘(1) the party seeking fees is a disinterested stakeholder; (2) who had 24 conceded liability; (3) has deposited the funds into court; and (4) has sought a discharge from 25 liability.’ ” Wells Fargo, 2009 WL 211386, at *2 (quoting Septembertide Publ’g v. Stein & Day, 26 Inc., 884 F.2d 675, 683 (2d Cir.1989). While the Plaintiff has not deposited the funds with the 27 Court yet, the Court notes the parties’ stipulated proposed order directs the Plaintiff to deposit 1 Plaintiff’s counsel submitted a declaration in support of the request for attorneys’ fees 2 and costs, as well as records pertaining to the hours and costs expended in this action. (Decl. 3 John T. Burnite (“Burnite Decl.”), ECF No. 21-2 at 1-3; Ex A, ECF No. 21-2 at 3-7; Ex. B, ECF 4 No. 21-2 at 8.) Plaintiff is seeking $14,712.00 in attorneys’ fees, and $402.00 in costs. 5 Based on the Court’s review of the billing entries; the declaration of counsel describing 6 the work completed and affirmation of the reasonableness of the time expended in relation to 7 similar matters; and the fact that the Defendants have agreed to the precise award of the 8 attorneys’ fees and costs, the Court shall grant the requested award of attorneys’ fees and costs. 9 IV. 10 ORDER 11 Accordingly, it is HEREBY ORDERED that: 12 1. The parties stipulated motion for interpleader relief and the award of fees and 13 costs (ECF No. 21) is GRANTED; 14 2. Penn Mutual shall deposit the Death Benefit into the Registry of the Court within 15 thirty (30) days from the date of this order; 16 3. Defendants are enjoined and restrained from instituting or prosecuting further any 17 proceeding in any state or United States court, including this Court, either at law 18 or in equity, against Penn Mutual or its affiliates and agents arising out of or 19 relating to the Policy and/or the Death Benefit underlying this action; 20 4. Penn Mutual and its affiliates and agents should be fully and finally discharged 21 from any further liability, whether to Defendants or otherwise, arising out of or 22 relating to the Policy and/or the Death Benefit underlying this action; 23 5. Penn Mutual is awarded its attorneys’ fees in the amount of $14,712.00 and costs 24 in the amount of $402.00, which are to be deducted from the Death Benefit before 25 deposit into the Registry of the Court; 26 6. Any and all claims, demands, debts, or causes of action arising out of or relating 27 to the Policy and/or the Death Benefit that could have been asserted herein against 1 dismissed with prejudice from this action; 2 7. The Clerk of the Court is DIRECTED to dismiss only Plaintiff Penn Mutual from 3 this action, and the action shall proceed as to the remaining parties; and 4 8. The hearing set for September 27, 2023, in Courtroom 9, is VACATED. 5 6 IT IS SO ORDERED. DAM Le 7 | Dated: _September 8, 2023 _ OO UNITED STATES MAGISTRATE JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28