Opinion
No. C-03-2205 SC
September 22, 2003
JUDGMENT
In accordance with this Court's ORDER GRANTING PLAINTIFF'S MOTION to DISCHARGE and for ATTORNEYS' FEES and COSTS, it is hereby ORDERED, ADJUDGED, and DECREED that:
Judgement shall be entered in favor or PLAINTIFF and against DEFENDANTS in the amount of $14,000.
IT IS SO ORDERED.
ORDER GRANTING PLAINTIFF'S MOTION for DISCHARGE of INTERPLEADER and for ATTORNEYS' FEES AND COSTS
I. INTRODUCTIONSun Life Assurance Company ("Sun Life" or "Plaintiff") brings this interpleader action. The matter now before the court is Sun Life's motion for discharge from further liability pursuant to 28 U.S.C. § 2361. Sun Life also requests an order for attorneys' fees and costs in the amount of $17,907.78. Defendant Maisie Lee Chan does not oppose Sun Life's motion for discharge and agrees that attorneys' fees and costs should be awarded. However, Maisie Lee Chan argues that Sun Life's requested amount is excessive and should be reduced to $12,000. Neither of the other two Defendants have opposed or joined in the opposition to Sun Life's motion. Having considered the parties' submissions, the Court grants Sun Life's motion for discharge and awards Sun Life attorneys' fees in the amount of $14,000.
II. BACKGROUND
On or about August 8, 1991, Sun Life issued Individual Life Insurance Policy No. 9241344 (the "Policy") to Richard Hung Chan. The designated primary beneficiary is Maisie Lee Chan. See Hannon Decl. ¶¶ 2-3. On February 28, 2002, Richard Hung Chan and Maisie Lee Chan were divorced. On May 29, 2002, Wilson Cheung, the agent who sold the policy, called Sun Life to report Richard Hung Chan's death. Id. at ¶ 4. The Death Certificate for Richard Hung Chan indicated that Suwy Leo Chan was his spouse at the time of his death. Id. at ¶ 8, Ex.F.
Sun Life contacted Maisie Lee Chan on July 2, 2002, requesting a copy of the divorce decree. Upon reviewing the decree, Sun Life explainted to her that it was possible that the Estate of Richard Chan might be entitled to the policy proceeds of $306,278.11. Shortly thereafter, Wilson Cheung called Sun Life and indicated that Richard Chan intended that Maisie Lee Chan remain the Policy beneficiary after their divorce, and that the Policy proceeds were properly payable to Maisie Lee Chan.Id. at ¶ 11 Ex.I.
In August of 2002, Suwy Leo Chan telephoned Sun Life inquiring as to the Policy proceeds and expressing confusion. She informed Sun Life that Richard Chan's daughter had asked her to sign papers releasing money to Maisie Lee Chan. Id. at ¶ 12, Ex.J. Sun Life informed Suwy Leo Chan that she was not the named beneficiary under the Policy. On November 26, 2002, Suwy Leo Chan told Sun Life that she had been named Administrator of the Estate of Richard Hung Chan. Hannon Decl. ¶ 13, Ex.K. On February 20, 2003, however, she informed Sun Life that Peter Chan, Richard Hung Chan's brother, was named Administrator of the Estate of Richard Chan (the "Estate") after a court hearing on the matter. Id. at ¶ 15, Ex.M. Suwy Leo Chan expressed concern that Maisie Lee Chan might not withdraw her claim to the Policy proceeds. Sun Life informed her of the competing claims and that if the parties were unable to resolve the matter, Sun Life would file an interpleader action.
On March 6, 2003, Sun Life notified the parties of the conflicting claims to the Policy proceeds. Sun Life asked that the Estate, Maisie Lee Chan, and Suwy Leo Chan (the "Claimants") attempt to resolve the dispute amongs themselves. Id. at ¶ 16, Ex.N. Sun Life further indicated that absent resolution amongst the claimants, Sun Life would have to file an interpleader action in early April. When it appeared that the parties might be able to resolve the issue without court action, Sun Life postponed filing an interpleader action. On March 31, 2003, Sun Life wrote to all the parties providing them with four more weeks to resolve their conflicting claims, and forwarding the requested Release and Discharge for execution. Id. at ¶ 20 Ex.Q. This four-week period ended without a resolution to the conflict.
On May 12, 2003, the day Sun Life's counsel was preparing to file the interpleader action, it was learned that the Estate might attempt to preempt the interpleader action by filing a probate petition (the "Petition") requesting transfer of the Policy proceeds to the Estate. See Sundarrajan Decl. ¶ 4, Ex.B. Sun Life immediately attempted to contact counsel for the Estate to determine if a petition had in fact been filed, but were unsuccessful. As planned, Sun Life filed an action in interpleader before this Court on May 12, 2003, naming the Estate, Maisie Lee Chan, and Suwy Leo Chan as Defendants. As required, Sun Life deposited the policy proceeds of $306,278.11 with the District Court upon filing this action.
On May 15, 2003, Sun Life's counsel received a facsimile copy of the Petition, which the Estate had filed on April 29, 2003. Id. at ¶¶ 5, Ex.C. From the documentation provided to Sun Life, it was unclear which parties received notice of the Estate's Petition or whether the other claimants were even aware of the Estate's Petition. On June 9, 2003, the Probate Court heard the Estate's Petition for An Order Compelling Transfer of Property. Id. at ¶ 7. Sun Life opposed the Estate's Probate Petition in order to preserve the stake necessary for maintaining the federal court interpleader action. The Probate Court denied the Estate's Petition thereby permitting this interpleader action to proceed with the stake intact. Id. at ¶ 7.
Sun Life has maintained at all times that it has no interest in the proceeds of the Policy except as a disinterested stakeholder and that it would move for discharge absent agreement by all parties as to disposition of the funds and release of Sun Life. Id., ¶ 7, Ex.E. To date, the Defendant Claimants have been unable to resolve their competing claims. Sun Life now moves for discharge from further liability pursuant to 28 U.S.C. § 2361, and also requests an order for attorneys' fees and costs in the amount of $17,907.78. Defendant Maisie Lee Chan filed a Limited Opposition, contesting only the amount of attorneys' fees that should be awarded. No other Defendants have opposed or joined in the opposition to Sun Life's motion.
III. DISCUSSION A. Interpleader 28 U.S.C. § 2361 provides that in "any civil action of interpleader" a district court may discharge the plaintiff in interpleader from further liability, enjoin the parties from instituting further actions related to the stake, and make all other appropriate orders. "If an interpleading plaintiff has no interest in the stake he should be dismissed." Metropolitan Life Insurance Co. v. Foley, 2002 WL 3139978 at *4, E.D.La., Oct. 22, 2002.
This Court believes that Sun Life has deposited the proceeds of the Policy into the Court registry in good faith. Sun Life attempted to resolve the dispute as to whom the funds should be paid but, because there was no resolution, it was required to resort to the interpleader action to assure that it could pay the funds and not be sued by the other parties. Sun Life does not contest its liability under the Policy or claim any entitlement to the proceeds. Sun Life entered this interpleader action for the sole purpose of determining the proper party to receive the proceeds, thereby avoiding future claims and litigation. Therefore, Sun Life has met its burden as a disinterested stakeholder. Accordingly, this Court dismisses Sun Life from the present action without further costs or liability to any party and with prejudice. Further, the Court enters a permanent injunction preventing future claims against Sun Life for benefits under the life insurance policy at issue in this matter.
B. Attorneys' Fees
"[C]ourts have discretion to award attorney fees to a disinterested stakeholder in an interpleader action." Abex Corp. v. Ski's Enterprises. Inc., 748 F.2d 513, 516 (9th Cir. 1984). The Ninth Circuit has explained that "the proper rule . . . in an action in the nature of interpleader, is that the plaintiff should be awarded attorney fees for the services of his attorneys in interpleading." Schirmer Stevedoring Co., Ltd. v. Seaboard Stevedoring Corp., 306 F.2d 188, 194 (9th Cir. 1962). "The court has discretion to award attorney's fees and costs: (1) against the losing claimants as costs to such claimants, (2) from the fund payable to the winning claimants, or (3) by dividing the fees among the claimants." Nestle Beverage Co. v. Bayerische Vereinsbank S.A., 1993 WL 96584, *3, N.D.Cal., Mar 24, 1993 (citing to Schirmer, 306 F.2d at 195).
As a general matter, a court will award fees from the proceeds where "(1) the party seeking fees is a disinterested stakeholder, (2) who had conceded liability, (3) has deposited the disputed funds into court, and (4) has sought a discharge from liability." Septembertide Publ'g v. Stein Day, Inc., 884 F.2d 675, 683 (2d Cir. 1989). Several considerations justify awarding the plaintiff attorney's fees from the interpleader fund:
It is thought appropriate to award counsel fees to [a disinterested] stakeholder because the retention of counsel has in all likelihood been necessitated not because of the stakeholder's wrongdoing but rather because he is the mutual target in a dispute which is not of his own making. Moreover, the stakeholder is often viewed as having performed a service to the claimants by initiating a proceeding which will expeditiously resolve their claim and by safeguarding the disputed fund by deposit in court, which at the same time guarantees the prevailing claimant immediate satisfaction without the need for execution proceedings.3A Moore's Federal Practice, at 22-171, 22-173.
It is evident to this Court that Plaintiff has met all of the aforementioned criteria for awarding attorneys' fees and costs from the Policy proceeds. In addition, the Defendants do not oppose the awarding of attorney's fees to Plaintiff's counsel. Thus, the only question is the amount to which Plaintiff is entitled. Plaintiff is requesting approximately $18,000, while Defendant Maisie Lee Chan argues that $12,000 is the more appropriate figure.
The traditional test for determining attorneys fees in an interpleader action is less rigorous than the more elaborate factors used to consider fee awards in other contexts. Powell Valley Bankshares, Inc. v. Wynn, 2002 WL 728348 at *2, W.D.Va., Apr. 11, 2002 (citingNoeller v. Metro. Life Ins. Co., 190 F.R.D. 202, 207 (E.D.Tex. 1999). Courts have broad discretion not only with respect to whether to allow attorney's fees to be deducted, but also with respect to the amount of fees to which an interpleader plaintiff is entitled. Trustees of Directors Guild of America Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 426 (9th Cir. 2000). "In an interpleader action, the broad rule is reasonableness." Id. Having reviewed all of the papers and much of the case law on this question, this Court arrives at an intermediate sum of $14,000. We arrive at this figure by concluding that $8,000 is a fair award for attorneys' fees and costs in connection with maintaining a complaint in interpleader and filing a motion for discharge, which is to be added to the approximately $6,000 spent opposing the Estate's Petition. Moreover, because the Court will not be hearing oral argument on this motion, some of Plaintiff's projected fees submitted in their motion papers will not accrue.
See e.g., Goat, Inc. v. Four Finger Art Factory, 2002 WL 31684400 (S.D.N.Y. 2002) (awarding $7,000 in attorney's fees to plaintiff interpleader who had requested an award of $27,583.10);Hoffman v. Toms, 2000 WL 246408, at *2 (S.D.N.Y. Mar. 3, 2000) (awarding $4,000 in attorney's fees where amount sought was "excessive given the simplicity of the task); Johnson v. Electrolux Corp., 763 F. Supp. 1181, 1189 (D.Conn. 1991) (awarding $1,000 in fees and costs rather than the $7,422.07 requested); Chemical Bank v. Richmul Associates, 666 F. Supp. 616, 619 (S.D.N.Y. 1987) (awarding $7,357 in fees and costs rather than the $26,570.44 requested).
IV. CONCLUSION
Sun Life's motion for discharge is HEREBY GRANTED and their request for attorneys' fees is HEREBY GRANTED to the extent that Sun Life shall be paid $14,000 from the fund on deposit with the Court for this case as reimbursement for Sun Life's reasonable attorneys' fees and costs.
IT IS SO ORDERED.