Interpleader


Interpleader is a civil procedure device that allows a plaintiff or a defendant to initiate a lawsuit in order to compel two or more other parties to litigate a dispute. An interpleader action originates when the plaintiff holds property on behalf of another, but does not know to whom the property should be transferred. It is often used to resolve disputes arising under insurance contracts.

Terminology and overview

In an interpleader action, the party initiating the litigation, normally the plaintiff, is termed the stakeholder. The money or other property in controversy is called the res. All defendants having a possible interest in the subject matter of the case are called claimants. In some jurisdictions, the plaintiff is referred to as the plaintiff-in-interpleader and each claimant a claimant-in-interpleader.
An interpleader proceeding has two stages. The first stage determines if the stakeholder is entitled to an interpleader and if he should be discharged from liability. The second stage is like an action at law to determine which of the claimants is entitled to the res.

Application

Suppose a person dies with a valid life insurance policy in effect. The insurance company is ready, willing, and able to pay the policy proceeds in specified percentages to named beneficiaries as last directed by the policyholder, but becomes aware of a dispute among them and/or third parties as to who are the proper beneficiaries or the proper distribution of proceeds among the beneficiaries. Such a dispute commonly arises from interpersonal friction among the policyholder's survivors. One specific situation commonly seen in the reported cases is where the policyholder was allegedly murdered by a beneficiary.
To resolve such a dispute, the insurance company can file an interpleader action. The insurance company is the stakeholder, the claimants are the persons who might be beneficiaries under the policy, and the cash value of the policy benefit is the res. Under the proceeding as originally developed, the stakeholder would deposit the res with the court, and then the defendants would have their claims adjudicated by the court. Statutory modifications to the procedure, which vary by jurisdiction, sometimes allow the stakeholder to retain the res pending final disposition of the case. Typically, once the stakeholder deposits the res into the court, the stakeholder is released from the action and the claimants proceed against each other to determine which of them is legally entitled to the res. A disinterested stakeholder is entitled to costs including attorney's fees. Except for the denominations of the parties, the action proceeds for the most part as other civil lawsuits in the same jurisdiction.
In some jurisdictions, the res will earn interest at the legal rate until disbursed. The successful claimant is entitled to the interest as well as the principal.

History

Origins in common law and equity

Interpleader had its origins as a civil procedure at common law, which was later adopted and expanded by the Court of Chancery in its equitable jurisprudence. The common law procedure became obsolete over time and fell into disuse, but it remained active in the courts of equity.
It originally applied to bailees subject to multiple actions of detinue, and privity was required either between the parties or in detinue, in order for the defendant to be able to sue for garnishment.
In contrast, the equitable bill of interpleader required that:
  1. The same thing, debt, or duty must be the res claimed by all the claimants;
  2. All the adverse titles or claims must be dependent or derived from a common source;
  3. The stakeholder must not have or claim any interest it the res,
  4. The stakeholder must have incurred no independent liability to any claimant, i.e. he must be perfectly indifferent between them.

    Subsequent development in England and Wales

In 1831 Parliament passed the Interpleader Act 1831 that authorized a bill of interpleader to be brought in the common law courts by:
Statutory interpleader was extended by Common Law Procedure Act 1860, which allowed a defendant to interplead claimants even if the title of the claimants to the res have no common origin, but are adverse to and independent of one another.
The statutory rules governing interpleader proceedings were replaced by rules of court that came into force upon the passage of the Supreme Court of Judicature Act 1873, which came to be known as Order 17 of the Rules of the Supreme Court. A similar provision was enacted in the County Court Rules, known as Order 33 in the Rules of 1981.
In the High Court In the County Court

  • a person is under a liability in respect of a debt or in respect of any money, goods or chattels and he is, or expects to be, sued for or in respect of that debt or money or those goods or chattels by two or more persons making adverse claims thereto; or
  • a sheriff or a person expected to be sued by two or more persons as claims made to any money, goods, or chattels taken or intended to be taken by a sheriff in execution under any process, or to the proceeds or value of any such goods or chattels, by a person other than the person against whom the process is issued,
  • a person is making a claim to or in respect of goods seized in execution of the County Court or the proceeds or value thereof
  • a person is under a liability in respect of a debt or any money or goods and he is, or expects to be, sued for or in respect of the debt, money or goods by two or more persons making adverse claims thereto.
    • In cases where a person was subject to multiple claims, the applicant had to show that he:
    As a result of the coming into force of Part 3 and Schedule 12 of the Tribunals, Courts and Enforcement Act 2007 on 6 April 2014, Order 17 and Order 33 were replaced by the new Parts 83-86 of the Civil Procedure Rules. This replaced the interpleader proceedings previously governed by the court rules by the procedure of "enforcement by taking control of goods" under newly passed regulations. In addition, s. 65 of the 2007 Act declared:
    Procedures are in effect for claims where:
    The 2014 amendments have proved to be problematic, in that they now fail to cover a situation where:
    In February 2018, several High Court enforcement officers asked the Queen's Bench Division for directions as to how to proceed in such circumstances, and the Master ruled that the repeal of Rule 17 had the effect of reviving the equitable form of interpleader proceedings, as the 2007 Act did not expressly abolish the interpleader action itself, and "interpleader statutes are not at all to limit or affect the equitable jurisdiction of the court to entertain an interpleader suit or action."

    In the United States

    Formerly a plaintiff had to disavow any claim to the res in order to avail himself of the interpleader remedy, but this requirement has also been relaxed or abolished in most jurisdictions by there being a rather than a . A plaintiff may now argue that neither of the claimants has a right to the property at issue. For example, a person dies with a life insurance policy that excludes coverage for suicide. Two people come forward claiming to be the beneficiary named in the policy. The insurance company believes that the deceased committed suicide, but the claimants believe the death was by accident. The insurance company could interplead the two claimants and simultaneously deny the claims.
    The Supreme Court of the United States ruled in New York Life v. Dunlevy, that for a claimant to be bound by an interpleader that party must be served process in a way that obtains personal jurisdiction. In 1922 the United States Supreme Court in Liberty Oil Co. v. Condon Nat. Bank sustained that a defensive interpeader in an action at law in federal court could be taken under Judicial Code section 274b added by that authorized the interposing of equitable defenses in actions at law.
    The Federal Interpleader Act of 1917 was enacted by the 64th United States Congress approved February 22, 1917 to overcome the problem with an interpleader when the claimants live in different states raised in New York Life v. Dunlevy. Federal Interpleader Act of 1917 allowed an insurance company, or fraternal benefit society subject to multiple claims on the same policy to file a suit in equity by a bill of interpleader in United States District Courts and providing nationwide service of process. The policy must have a value of at least $500 claimed were claimed or may be claimed by adverse claimants; which is less than the amount in controversy of $3,000 in Judicial Code §48 then required for general diversity jurisdiction and two or more of the beneficiaries must live in different states. In 1926 it was repealed and replaced by, approved May 8, 1926, which added to those who can bring suit casualty company and surety company, empowered the court to enjoin claimant from proceeding in any state or other federal court on the same liability, adding provisions as to the proper venue for the interpleader in certain cases but required that there must be actual claims by eliminating the words "may claim" that were in the 1917 act. In 1936 the Federal Interpeader Act was again repealed and replaced by the Federal Interpleader Act of 1936,, approved Jan. 20, 1936, drafted by Zechariah Chafee which codified it in as United States Judicial Code §41, and established the modern [|statutory interpleader] allowing suit to be brought by any person, firm, corporation, association or society having custody of money or property or insurance policy or instrument valued at $500 or more which there are two or more adverse claimant who are citizens of different states, whether or not the claims have common origins, identical, adverse or independent of each other, and allowed it to be an :Category:equitable defenses|equitable defense in actions at law, Judicial Code §274b. When the United States Judicial Code was enacted into United States Code as positive law in 1948, approved June 25, 1948, it was reconstituted as,, and.
    Federal Courts have held that because of the deposit of the res with the court an interpleader action is an action to determine the validity of competing claims to identified property that served may be under which authorize other forms of service to obtain in rem jurisdiction over absent defendants.

    Different types of interpleader in U.S. federal practice

    There are two specific types of interpleader actions in the United States federal courts. Statutory Interpleader governed by, and Rule Interpleader established by Federal Rules of Civil Procedure.

    Statutory interpleader

    Such an action may be entertained although the titles or claims of the conflicting claimants do not have a common origin, or are not identical, but are adverse to and independent of one another..
    The may claim language added in 1948 codification to Title 28 of the United States Code in the definitions of claim allow interpleader for unliquidated claims, such as multiple claimant to a liability insurance policy injured in an accident before they are reduced to judgment or settled, however the injunction may only restrain the claimants from suits making claims against the res not suits to liquidate the claim or against third parties. The procedures for a Statutory Interpleader action are governed by the Federal Rules of Civil Procedure. Rule 22.

    Rule interpleader

    Interpleader is also allowed by the Federal Rules of Civil Procedure. Rule 22 is known as rule interpleader. Rule interpleader provides a remedy for any person who is, or may be exposed to double or multiple liabilities. The stakeholder may invoke Rule 22 as a plaintiff, or by counter-claiming in an action already started against him by one, or more claimants. There are specific differences between Statutory Interpleader, and Rule Interpleader:
    In bankruptcy court interpleader under Federal Rules of Civil Procedure may be maintained as an adversary proceeding under Federal Rules of Bankruptcy Procedure.

    Federal Rules of Civil Procedure 22

    Interpleader in U.S. State practice

    The Uniform Commercial Code adopted in all 50 of the states of the United States provides that a bailee when more than one person claims title to or possession of the goods under document of title may bring an interpleader as an original action or as a defense to a suit for nondelivery.
    In Louisiana interpleader is called concursus. In most states there are statutes or court rules that provide for interpleader similar to the federal rules.