UNUM Life Insurance Company of America v. Sides et al

Filing 23

ORDER denying Defendant Brooke Sides' 10 Motion to Dismiss the Complaint. Defendant Brooke Sides' 13 Motion to Dismiss the Cross-Claim of Casey Sides is GRANTED in part and DENIED in part. The cross-claim asserted by Defendant Casey Sides seeking a constructive trust over distributions from the Insured's retirement or 401K account is DISMISSED. Initial Disclosures shall be filed within 14 days of the entry of this Order, and the discovery period shall commence 8/1/2013. Signed by Judge Richard W. Story on 7/18/2013. (cem)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

UNUM LIFE INSURANCE
COMPANY OF AMERICA
Plaintiff,
v.
BROOK BEDARD SIDES,
CASEY R. SIDES, MICHELLE T.
SMITH as Guardian Ad Litem for
COLLIN QUIN SIDES, and
TAYLOR BROOKE SIDES, and
JANE DOE as Administrator of the
ESTATE OF CHRISTOPHER N.
SIDES, Deceased
Defendants.

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CIVIL ACTION NO.
1:12-CV-4400-RWS

ORDER
This interpleader action comes before the Court for resolution of
Defendant Brooke Sides Motion to Dismiss the Complaint [10]and Motion to
Dismiss Cross-Claim of Casey R. Sides [13]. After reviewing the record and the
parties’ briefs, the Court enters the following Order.

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Background
Unum Life Insurance Company of America (“Unum”) initiated this
interpleader action seeking judicial determination of the proper disposition of
life insurance proceeds accruing in connection with the death of Christopher
Neil Sides (the “Insured”). It identified as potential claimants to such sums
Brooke Sides, as the Insured’s then current wife, Casey Sides, as the parent of
the Taylor and Collin Sides, the minor children of the Insured and Casey Sides,
and the decedent’s estate, represented here by Jane Doe. In its Complaint,
Unum seeks an order to place the life insurance benefits at issue into the
registry of the Court, and require the claimant beneficiaries to assert any claim
to the insurance proceeds. (See Complaint [1].)
The facts underlying the claimants’ competing assertions of entitlement
to the life insurance proceeds are largely undisputed. The Insured purchased a
life insurance policy (the “Policy”) from United Distributors, Inc. in 1998. He
named his then wife, Casey Sides, as the primary beneficiary. In 2007, the
Insured and Casey Sides separated. As part of the divorce Settlement
Agreement, the Insured agreed to maintain $250,000 of life insurance naming
his minor children as beneficiaries with Casey Sides as trustee. In 2010, the
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Insured executed a change of beneficiary form, and named his current wife,
Brooke Sides, as the primary beneficiary under the Policy. There were no
further changes made to the Policy. The Insured died of cardiac arrest in
August 2012. Since the Insured’s death, Brooke Sides, Casey Sides, and
Michelle Smith, as the Guardian Ad Litem of the minor children, have asserted
their entitlement to the life insurance proceeds.
Unum Life Insurance filed this interpleader action on December 20,
2012, as a disinterested stakeholder given the potentially conflicting claims to
the Insured’s benefits. Unum asserts that it is in great doubt as to which
defendant(s) is/are entitled to be paid the plan benefits payable as a result of the
death of the Insured. (Complaint at ¶ 22.) As such, Unum seeks to place into
the Court’s registry the total amount payable under the Insured’s policy, as well
as, request an order from the Court requiring the competing parties to assert any
claims to the proceeds. Defendant Brooke Beard subsequently filed a Motion to
Dismiss the Complaint [10] and a Motion to Dismiss Defendant Casey Sides’
Cross-Claim [13]. For the reasons discussed herein, both Motions to Dismiss
are denied.

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Discussion
I.

Legal Standard
Interpleader is an equitable remedy designed to protect disinterested

stakeholders from being exposed to multiple suits over a single liability and to
bring all the adverse claimants into one court so that the court can equitably
adjudicate the claims of all adverse claimants. Libby, McNeil, & Libby v. City
Nat’l Bank, 592 F.2d 504, 509 (9th Cir. 1978); United States v. Sentinel Fire
Ins. Co., 178 F.2d 217, 225 (5th Cir. 1950);1 Espat v. Espat, 56 F. Supp. 2d
1377, 1383 (M.D. Fla. 1999). Federal courts may discharge interpleader
plaintiffs from further liability. 28 U.S.C. § 2361 (2003). However,
interpleader plaintiffs seeking dismissal must show that they have satisfied the
requirements of 28 U.S.C. § 1335. Mendez v. Teachers Ins. & Annuity Ass'n &
Coll. Ret. Equities Fund, 982 F.2d 783, 788 (2d Cir. 1992). Thus, “[t]here must
be a fund greater than $500; adverse claimants of diverse citizenship; a deposit
of the fund in court; and a disinterested stakeholder” before an interpleader
plaintiff may be discharged from the action. Id. Even if an interpleader

1

The United States Court of Appeals for the Eleventh Circuit adopted as binding precedent the
decisions of the United States Court of Appeals for the Fifth Circuit handed down prior to September 30,
1981. Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1207 (1981) (en banc).

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plaintiff meets the § 1335 requirements, however, a court has the discretion not
to discharge a plaintiff “if there are serious accusations that the stakeholder
commenced the action in bad faith.” Id. (internal quotations omitted)(ancillary
jurisdiction over “cross-claim” of ex-wife respecting payment of benefits from
insured’s employer-sponsored personal savings plan).
When considering a Rule 12(b)(6) motion to dismiss, a federal court is to
accept as true “all facts set forth in the plaintiff’s complaint.” Grossman v.
Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000) (citation omitted).
Further, the court must draw all reasonable inferences in the light most
favorable to the plaintiff. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56
(2007) (internal citations omitted); Bryant, 187 F.3d at 1273 n.1. However, “[a]
pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the
elements of a cause of action will not do.’” Ashcroft v. Iqbal, 556 U.S 662, 129
S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 555). “Nor does a
complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Id.
The United States Supreme Court has dispensed with the rule that a
complaint may only be dismissed under Rule 12(b)(6) when “‘it appears beyond
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doubt that the plaintiff can prove no set of facts in support of his claim which
would entitle him to relief.’” Twombly, 127 U.S. at 561 (quoting Conley v.
Gibson, 355 U.S. 41, 45-46 (1957)). The Supreme Court has replaced that rule
with the “plausibility standard,” which requires that factual allegations “raise
the right to relief above the speculative level.” Id. at 556. The plausibility
standard “does not[, however,] impose a probability requirement at the pleading
stage; it simply calls for enough facts to raise a reasonable expectation that
discovery will reveal evidence [supporting the claim].” Id.
II.

Motion to Dismiss Complaint
Defendant Brooke Sides has moved to dismiss Unum’s Complaint for

failure to state a claim. (ECF No. [10].) In support of the requested dismissal,
Brooke Sides contends that there is no legitimate basis for uncertainty as to the
distribution of the Insured’s life insurance benefits. Brooke Sides argues that
Unum has failed to state an interpleader claim because the facts and applicable
law demonstrate clearly that Brooke Sides is entitled to the life insurance
proceeds. Brooke Sides states that the Insured had a valid properly executed
beneficiary designation form on file with Unum which unequivocally names
Brooke Sides as the beneficiary. (ECF No. [11] at 9.) According to Brooke
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Sides, such facts make it clear that neither Casey Sides nor the minor children
can assert a claim for constructive trust or otherwise against Unum. Citing
ERISA’s pre-exemption statute, Brook Sides argues that the Insured’s 2010
modified plan creates certainty by specifying payments under the policy and her
designation as the beneficiary. Any competing claims to the insurance proceeds
lack foundation in law and therefore are not colorable. As such, Brooke Sides
contends that the Court should dismiss Unum’s interpleader Complaint.
Plaintiff Unum and Defendant Casey Sides each filed timely responses to
Defendant Brooke Sides’ Motion to Dismiss [15 and 16]. In their responses,
the parties argue that the interpleader action is proper since the facts of the case
give rise to competing claims for the life insurance proceeds. Further, the
parties contend that there is no evidence that Unum has acted with bad faith in
initiating the interpleader action.
The essential requirement for rule interpleader is that the stakeholder “is
or may be exposed to double or multiple liability.” Fed.R.Civ.P. 22. An
interpleader action is appropriate where the plaintiff has demonstrated that it
has or may be subject to adverse claims on the same fund. An action in
interpleader proceeds in two stages. At the first stage, the Court determines
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whether interpleader is proper. Fidelity Brokerage Servs. v. Bank of China, 192
F.Supp.2d 173, 178 (S.D.N.Y.2002). Plaintiff need not demonstrate formal
adverse claims or the merits of the claims. The merits are not evaluated until the
second stage. Id; Ohio Nat. Life Assur. Corp. v. Langkau, 2006 WL 3162354,
*2 (M.D.Fla. Nov. 2, 2006). This matter is currently before this Court at the
first stage. “In an interpleader action, the burden is on the party seeking
interpleader to demonstrate that he is entitled to it.” Dunbar v.. United States,
502 F.2d 506, 511 (5th Cir.1974).
Upon review, the Court finds the interpleader action is proper in that
Unum has demonstrated potential exposure to competing claims to the Insured’s
life insurance proceeds. The undisputed facts demonstrate that the Insured
entered into a 2007 divorce settlement agreement which included an obligation
to provide a $250,000 life insurance benefit for his children. Subsequently, the
Insured modified and maintained plan life insurance documents naming Brooke
Sides as the beneficiary to the proceeds. The facts of this case closely parallel
the facts found in Reeves v. Reeves, 223 S.E.2d 112 (Ga. 1976). In Reeves, the
Georgia Supreme Court was called upon to determine the proper disposition of
life insurance proceeds deposited into the court's registry by an insurance
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company. The insured had entered into a settlement agreement with his former
spouse, incorporated in the divorce decree dissolving their marriage, pursuant to
which he agreed to name his minor children as beneficiaries under certain life
insurance policies. 223 S.E.2d 113-14. The insured, however, neglected to
make the required change. Id. at 114. Rather, sometime after his divorce from
his former spouse, he remarried and named his new wife as the primary
beneficiary under the life insurance policies. Id. Upon the insured’s death, his
widow claimed entitlement to the insurance proceeds under the change of
beneficiary designation, arguing that the insurance policies at issue gave the
insured a contractual right to modify or change the named beneficiaries
thereunder. Id. The trial court rejected this position, and the Georgia Supreme
Court affirmed, holding that upon entry of the divorce decree, the insured’s
children gained a vested interest in the life insurance proceeds. Id. at 114-15.
Here, a determination on the merits of each competing claim is premature
at this time. Rather, the Court finds that Unum has met its burden of
demonstrating that it is a disinterested stakeholder and potentially subject to
adverse claims. Accordingly, Defendant Brooke Sides’ Motion to Dismiss the
Complaint is DENIED.
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III.

Motion to Dismiss Cross-Claim
Defendant Brooke Sides has also filed a Motion to Dismiss Defendant

Casey Sides’s Cross-Claim. (ECF No. [13].) In the cross-claim, Casey Sides
argues that the Insured violated their 2007 divorce settlement by modifying his
life insurance plan to designate Defendant Brooke Sides as beneficiary in 2010.
Defendant Casey Sides contends that the Insured agreed to maintain their minor
children as beneficiaries to a life insurance plan in the amount of $250,00.
Accordingly, Defendant Casey Sides, as guardian and next friend for minor
children Collin and Taylor Sides, seeks the imposition of a constructive trust on
the Insured’s life insurance proceeds, as well as, the Insured’s retirement/ 401k
accounts up to the amount of $250,000. (ECF No. [5] pp. 9-11.) Upon
information and belief, the proceeds from the Insured’s retirement/ 401k
account have already been distributed to Defendant Brooke Sides in the amount
between $50,000 and $100,000. Accordingly, Defendant Casey Sides seeks a
constructive trust on any previously distributed monies and further distribution
from the insurance benefits.
Defendant Brooke Sides argues that this Court should dismiss the crossclaim for lack of jurisdiction. First, Brooke Sides states, and this Court agrees,
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that there is no original jurisdiction over the cross-claim since the parties lack
diversity. Next, Brooke Sides contends that supplemental jurisdiction is also
lacking because the cross-claim is not part of the same case or controversy as
the original claim giving rise to the cause of action. (ECF No. [13] p. 7.) In
support, Brooke Sides first points to her Motion to Dismiss the interpleader
action, arguing that upon dismissal of the Complaint, the cross-claim must be
dismissed. As this Court has denied Brooke Sides’ Motion to Dismiss the
Complaint, this first argument necessarily fails. Next, Brooke Sides argues that
this Court should decline supplemental jurisdiction since the cross-claim issues
involve novel or complex issues of state law and are outside the transaction or
occurrence of the original interpleader action. (ECF No. [13] p. 10.) Finally,
Brooke Sides contends that even if this Court finds jurisdiction proper, the
cross-claim lacks any merit because the life insurance policy designates Brooke
as the sole beneficiary. (Id.). Again, this Court finds that the parties have
sufficiently demonstrated competing claims such that this basis for dismissal is
denied.
Accordingly, the remaining issue before this Court is whether
supplemental jurisdiction is proper over Defendant Casey Sides’ cross claim
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seeking a constructive trust over proceeds from the life insurance policy and
retirement accounts. The Court’s task, then, is to determine whether the crossclaim satisfies Rule 13(g)’s same “transaction or occurrence” requirement,
supplying the “tight nexus” with the underlying interpleader action necessary to
sustain the exercise of supplemental jurisdiction. See Allstate Ins. Co. v. James,
779 F.2d 1536, 1538-39 (11th Cir. 1986) (recognizing that, while ancillary
jurisdiction exists over Rule 13(g) cross-claims, “[t]he mere filing of a claim
denominated as a cross-claim does not settle the issue whether the claim is
actually ancillary[,]” and thus, within the court’s ancillary subject-matter
jurisdiction); see also Mollfulleda v. Phillips, 882 F. Supp. 698, 700-01 (N.D.
Ill. 1994) (refusing to exercise jurisdiction over ostensible “cross-claim” that
did not “arise out of the ‘transaction or occurrence’ that [was] the subject matter
of the . . . lawsuit”); Weiss v. Advest, Inc., 607 F. Supp. 799, 802-03 (E.D. Pa.
1984) (holding likewise). After its review of pertinent authorities, the Court has
little difficulty concluding that such a requirement is satisfied in this case as to
the life insurance policy. Clearly, the dispute concerning the distribution of the
life insurance benefits is directly related to the interpleader action which seeks
to determine the rightful beneficiary of the proceeds. Accordingly, this Court
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finds supplemental jurisdiction over Defendant Casey Sides’ claim seeking a
constructive trust over the life insurance benefits.
However, this Court finds that it lacks jurisdiction over the cross-claim as
to the retirement/ 401k accounts brought by Casey Sides. This lawsuit is one to
determine the proper disposition of life insurance proceeds. Resolution of the
Defendant Casey Sides’ claim pertaining to improper distribution of the
retirement accounts implicates no legal or factual question that has any bearing
on such disposition. Nor would the Court’s determination of that issue in any
way affect any future disbursement of the sums to be placed in the registry of
the Court. While the Court recognizes that the claim stems from monies
allocated in the same divorce settlement agreement at issue, the existence and
distribution of the retirement account is wholly unrelated to the insurance policy
which is the subject of the interpleader action. Indeed, aside from Casey Sides’
claim that the Insured agreed to set aside funds for their minor children, the two
controversies share nothing in common. This highly attenuated relationship
between Unum’s interpleader action and the cross-claim to the retirement
account simply fails to provide the Court with subject-matter jurisdiction over
the latter dispute. See, e.g., Travelers Ins. Co. v. First Nat’l Bank, 675 F.2d
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633, 637-40 (5th Cir. 1982) (in interpleader action respecting proper disposition
of life insurance proceeds, court lacked ancillary jurisdiction to determine
“cross-claim” seeking declaration that decedent’s sweeping “change of
beneficiary” designations, executed power of attorney, and will were invalid);
Cherokee Ins. Co. v. Koenenn, 536 F.2d 585, 588-89 (5th Cir. 1976) (in
interpleader action to determine proper disposition of property insurance
proceeds following fire at insured restaurant, court lacked ancillary jurisdiction
over purchaser’s claim to cancel promissory note due to seller’s failure to
transfer alcoholic beverage licenses). As such, Defendant Casey Sides’ crossclaim is dismissed to the extent it seeks a constrictive trust over any retirement
accounts.
Conclusion
Accordingly, Defendant Brooke Sides’ Motion to Dismiss the Complaint
[10] is DENIED. Defendant Brooke Sides’ Motion to Dismiss the Cross-Claim
of Casey Sides [13] is GRANTED in part and DENIED in part. The crossclaim asserted by Defendant Casey Sides seeking a constructive trust over
distributions from the Insured’s retirement or 401k account is DISMISSED.

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Initial Disclosures shall be filed within 14 days of the entry of this Order, and
the discovery period shall commence August 1, 2013.
SO ORDERED this 18th day of July, 2013.

________________________________
RICHARD W. STORY
United States District Judge

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