Competing Claims for Money

Party A is in possession of money. Parties B, C and D each contend that the money belongs to them. In this scenario, Party A is called the “stakeholder”.

Rather than forcing Party A to decide who gets the money, federal law will allow Party A to deposit the money with the federal court and require Parties B, C and D to interplead ( i.e. , assert their claims against the money).

Under federal law, there are two types of interpleader. One is based on statute, and the other arises under Rule 22 of the Federal Rules of Civil Procedure.

Let us look at each of those.

Let us continue with the example of Party A. Because Party A is exposed to a risk of double or multiple liability, Party A may file a lawsuit in federal court and name Parties B, C, and D as defendants.

Further, Party A may do so whether Party A (i) makes no claim to the money or (ii) contends that some or all of the money belongs to him.

To get into federal court, however, Party A must otherwise establish the basis for subject matter jurisdiction. The most common form of subject matter jurisdiction in an interpleader action would be diversity of citizenship.

This requires complete diversity of citizenship between the plaintiff, on the one hand, and the defendants, on the other hand. In addition the money or property at stake must exceed $75,000 in value.

Rule 22 also allows a defendant exposed to the risk of double or multiple liability to interplead by way of counterclaim or cross-claim.

Note that the procedure for actually depositing funds with the court are set forth in Rule 67.

Federal Code

Interpleader is also permitted by 28 U.S.C. Section 1335. Specifically, pursuant to Section 1335, a plaintiff may commence an interpleader action in federal district court if:

Compare this to Rule 22, which requires diversity of citizenship between the plaintiff, on the one hand, and the defendants, on the other hand, and an amount in controversy of more that $75,000.

Section 1335 interpleader, however, only requires diversity of citizenship between at least two of the claimants to the money or property. This is referred to as “minimal diversity.”

If there are 3 or more claimants, it is not necessary that there be complete diversity of citizenship between all of them. It is only necessary that at least two of them be of diverse citizenship.

Further, if the stakeholder is disinterested (that is, does not claim an interest in the money or property himself), his citizenship is irrelevant.

If the stakeholder is interested, however, the case law is not consistent as to whether his citizenship may be considered.

An interpleader action under Section 1335 may be brought in the judicial district in which one or more of the claimants reside.

Note that interpleader actions are not limited to money. They can also include property.

In the Fifth Circuit, the general rule is that the disinterested stakeholder is entitled to an award of attorney’s fees incurred in bringing the action.

Panter Law Firm, PLLC, 7736 Old Canton Road, Suite B, Madison, MS 39110.

601-607-3156.

www.craigpanterlaw.com

Craig Painter

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