The Prudential Insurance Company of America v. Bailey et al

Filing 31

ORDER granting in part and denying in part 25 Motion for Judgment on the Pleadings; denying 25 Motion to Dismiss; denying 25 Motion for Attorney Fees. The Court ORDERS the Clerk of Court to RELEASE to Prudential all funds it accepted into th e Court's Registry via its Order dated May 26, 2016 (doc. 8). Second, it GRANTS IN PART and DENIES IN PART Prudential's interpleader complaint. It GRANTS interpleader with respect to the approximately $332,000.00 of undistributed accid ental death benefits (doc. 25) and DENIES interpleader with respect to the $279,465.70 that Sherry Bailey alleges Prudential unlawfully converted (doc. 25). The Court thus ORDERS SherryBailey, Sharmon Howard, Kenneth Moon, Jr., James Bailey, and Randall Bailey to enter pleadings establishing their adversity to one another and stating their claims to the $332,000.00 of undistributed accidental death funds WITHIN 21 DAYS of thisOrder. Third, it DENIES Prudential's motion to discharg e itfrom the case and enjoin defendants from further legal action(id.). Fourth, it DENIES Prudential's motion for judgment onthe pleadings on all claims (id.). Fifth, it DENIES Prudential's motion for attorneys' fees (id.).Signed by Chief Judge J. Randal Hall on 9/29/17. (wwp)

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IN THE UNITED STATES DISTRICT SOUTHERN DISTRICT OF COURT FOR THE GEORGIA STATEBORO DIVISION * THE PRUDENTIAL INSURANCE * COMPANY OF AMERICA, * Plaintiff, * CV 616-060 * v, * SHERRY BAILEY, * * Counterelaimant/Defendant * v, SHARMON HOWARD, KENNETH MOON, JR., JAMES BAILEY and RANDALL * * BAILEY * * Defendants. * * ORDER Presently before the Court is a motion for judgment on the pleadings filed ("Prudential"). by Prudential (Doc. 25.) Insurance Company of America The Court DENIES IN PART and GRANTS IN PART Prudential's motion. I• Background Prudential Bailey and the provided (the "Policy"). beneficiary of Bailey died. the Policy. On June a life insurance policy to Russell Sherry Bailey was Russell Bailey's wife the 26, Policy. 2015, On June 24, 2015, Sherry Bailey made a Russell claim on The Policy contained $332,000.00 of term life coverage and $332,000.00 of accidental death coverage. Prudential placed settled the $343,420.50 "Account") in Notification" term into Sherry sent a life to portion Prudential Bailey's Sherry On January 21, 2016, name. Bailey of the Alliance The Policy Account "Alliance described the and (the Payment Account as follows: We have approved your group life insurance claim and have settled your benefit through Prudential's Alliance Account settlement option. An interest bearing account has been established in your name. . . . With the Alliance Account, you can access your money immediately by writing a draft for the amount you'd like to withdraw. You can withdraw the entire amount immediately, which will close the account, or you can write drafts as needed. Any balance you maintain will earn continuous interest. (Doc. 28-1, at 12.) On January 26, 2016, a grand for the murder of Russell Bailey. February 3, total of Account. Between January 29, 2 016, and 2016, Sherry Bailey wrote three checks withdrawing a $83,855.50 Prudential jury indicted Sherry Bailey notified from the Sherry Sherry Bailey Account. Bailey claims that that the On it February had Account 8, frozen 2016, the contained at least $259,616.51 at the time Prudential imposed the freeze. On May 25, 2016, Prudential filed an interpleader complaint in this Court seeking to enjoin Sharmon Howard, Kenneth Moon, Jr., James Bailey, and Randall Bailey as potential beneficiaries under the Policy. Simultaneously, it moved to "deposit into the Registry of of this Court a total of death benefits in the amount $591,564.90, 'Death plus Benefit') applicable that is due the death of Russell Bailey, ." (Doc. distributions 3 to at 1.) Sherry claim and interest, payable if as a who was insured under Prudential Bailey made under any result of [the Policy] no mention of the (the Policy or any the $83,855.50 Sherry Bailey had already collected under the Policy.1 On May 26, 2016, Sherry 31, this Court granted Prudential's motion. Bailey 2016. In filed her an answer counterclaim and she counterclaim alleges illegally took $259,616.51 from her Account that on August Prudential and placed it the Court's Registry without her permission. into She also alleges claims for fraud and breach of contract related to her agreement with Prudential to place the distributed term life benefits into the Account. On December 21, pleadings. discharge In it its Howard, Bailey; (2) Prudential moved for judgment on the motion, "from Sharmon 2 016, any Kenneth and Prudential all Moon, asks liability" Jr., James the Court to Sherry Bailey, to: and (1) Bailey, Randall discharge it from liability for all claims relating to the Policy; (3) enjoin any claims against it relating to the 1 Based on Sherry Bailey's allegations, the Court concludes that $591,564.90 was the sum of Russell Bailey's $332,000.00 accidental death coverage (plus applicable interest) and his $332,000.00 term life coverage (plus applicable interest), previously withdrawn by Sherry Bailey. less the $83,855.50 Policy; (4) dismiss with relating to the Policy, and (5) prejudice all claims against it including Sherry Bailey's counterclaim; award it reasonable legal fees and costs. (Doc. 25 at 1-2.) II. At clear the cut Prudential outset, as not would know counterclaim, Court Prudential party who wants does the have to the Court it however, notes would pay its who Discussion that lead the believe casts to it is to is an obligations pay. serious case Court that contractual needs this on as believe. innocent but Sherry doubt not simply Bailey's Prudential's narrative. In her counterclaim, was Sherry Bailey alleges that Prudential not entirely forthcoming in its motion to deposit funds. interpleader complaint and Specifically, she claims that Prudential stole approximately $259,000.00 from the Account and placed it Prudential disputed in did not funds significantly raise the in Court's give the complicate questions about Registry. her notice Court's also prior to Registry. Prudential's the She validity claims depositing These interpleader of the that the claims action Court's and Order accepting the disputed funds. After case, reviewing the motions and pleadings the Court takes the following actions. filed First, in this it RELEASES back to Prudential all the funds it accepted on its Order dated May 26, 2016. Second, Prudential's it DENIES interpleader IN PART request. and GRANTS Third, it Prudential's request for a discharge and injunction. DENIES IN judgment PART on and the GRANTS IN pleadings. request for attorneys' PART Fifth, DENIES PART DENIES Fourth, Prudential's it IN motion it for Prudential's fees. A. Registry Funds The funds Court into first the addresses Court's Prudential's Registry.2 request Federal to Rule deposit of Civil Procedure 67 details the procedure for depositing funds into the Court's Registry. sought is It states that xx [i] f any part of the relief . . . the disposition of a sum of money ... a party — on notice to every other party and by leave of the court — may deposit with the court all or part of R. Civ. notice P. 67(a) to (emphasis added). the other parties of the Court's Registry, opportunity to its the money Prudential, intent to respond disputing however, deposit Fed. gave no funds in and the other parties were not provided an to Prudential's Prudential's request was prematurely granted. 2 In . . . ." Sherry Bailey's conversion motion. Thus, Accordingly, and fraud the claims, Prudential repeatedly asserts that the Court "ordered" it to pay the disputed funds into the Court's Registry. (Doc. 25, at 8, 10, 11; Doc. 30, at 1, 2, 3, 7, 8, 9.) The Court reminds Prudential, however, that it issued this order only after Prudential asked the Court for permission to deposit the disputed funds into the Registry. Furthermore, it granted Prudential's request because Prudential created the impression that it had not yet distributed the funds it sought to deposit. But that impression has since been challenged. Thus, the Court rejects Prudential's attempts to hide behind its Order. Court VACATES its previous order (doc. 8) and INSTRUCTS the Clerk to return to Prudential the funds it previously accepted. The Court, however, GRANTS Prudential leave to re-file its request providing proper notice to the opposing parties. B. Interpleader Complaint The Court interpleader. "allows a next addresses Prudential's request for Interpleader is a "remedial joinder device" which stakeholder who is uncertain if and to whom he is liable for money or property held by him to join those who are or might assert Arthur R. § 1702, is double against p. 533 (3d ed. 2001) by "persons or Federal with multiple Courts must Practice, determine the § Charles Rule of that Civil may be Procedure expose joined interpleader, litigation parties 22, It which plaintiff defendants to and interpleader 1714 at the 624. remedy in In first the Id. two requesting party has at 624-25. If stages. stage, the 22 courts right "to to the stake in a court allows it must then join the proposed defendants to the and instruct interplead, and determine Wright, Fed. R. Civ. P. 22(a)(1). whether proceeding." a as compel the claimants to litigate their claims one A. Federal Practice and Procedure liability may apply 22 (hereinafter Federal Practice). claims required to interplead." Federal him." Miller & Mary K. Kane, authorized states, claims "the them to interplead. Id. After the the Court may proceed to the second stage respective rights of the claimants to the stake." Id. at 628. At this point, each claimant is adverse to the others and must prove its right to the disputed stake. The Court Prudential Howard, must currently prove Kenneth Moon, defendants has is met in this its minimum, that Jr., in is it first entitled James Bailey, litigation. burden. the The Prudential stage, to join where Sharmon and Randall Bailey as Court concludes the stakeholder is Id. Prudential of, at a $332,000.00 of undistributed accidental death benefits. Sherry Bailey is currently the beneficiary, but her indictment for Russell Bailey's murder casts legitimate doubt on her right to collect. Moon, If Jr., potentially she James be cannot collect, Bailey, the and proper Sharmon Randall Howard, Bailey beneficiaries. In Kenneth could other all words, Prudential has a finite amount of funds that is being claimed by multiple persons Prudential who might distributes the be entitled money to the incorrectly, lawsuits by any of the jilted claimants. it funds. could If face This is the definition of multiple liability. Because Prudential has demonstrated that liability, the and Sherry joins James Bailey, Court GRANTS Bailey, and The Court, respect the to undistributed Sharmon Randall litigation. Prudential's Bailey however, $332,000.00 accidental Howard, death as it faces multiple interpleader Kenneth defendants request Moon, Jr., in this only GRANTS interpleader with (plus applicable coverage. The interest) Court of DENIES Prudential's Prudential interpleader allegedly with removed the the Account. $279,465.70 the Court possessed these funds, Prudential may then request interpleader with respect to interpleader and Thus, the Bailey, Sherry Bailey, and ORDERS Randall Court the now enters the second above defendants Howard, Sharmon Bailey rightfully If determines Accordingly, Prudential to later them. that from respect Kenneth SHALL enter to Jr., James establishing their adversity to one another and stating their claims $332,000.00 of undistributed DAYS of this Order. interpleader is accidental death See 22 Federal Practice, ordered, each claimant funds to the WITHIN § 1715 at 632 should of interplead. Moon, pleadings stage respond 21 (uIf to the claims of the other claimants by denying their validity so that issue is joined."). C. Motion to Discharge and Enjoin Prudential also requests case and enjoin Defendants any other court. available, the Court discharge from further suit in it from this the Court or "When the court decides that interpleader is it may issue an order discharging the stakeholder, if stakeholder prosecuting matter, the and is disinterested, enjoining the any other proceeding related to the directing the claimants to parties from same subject interplead; the court also may make any other order that is appropriate and convenient for the Practice, resolution of the competing § 1714 at 627. 8 claims." 22 Federal The Court Defendants. is not declines to discharge Prudential or enjoin The Court will not discharge Prudential because it a disinterested party. Sherry Bailey has made a plausible counterclaim for conversion and fraud that cannot yet be dismissed, result in additional Defendants. Prudential it and the Court's claims determination of against her claim might Prudential by the other Neither will the Court enjoin further suits against because Prudential has not convinced this Court that is entitled to such relief. D. Motion for Judgment on the Pleadings The Court now addresses Prudential's motion for judgment on the pleadings. "After the pleadings are closed — but early enough not to delay trial — a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). "Judgment on the pleadings is proper when no issues of material fact exist, and the moving party is entitled to judgment as a matter of substance of the Cunningham v. F.3d 1237, 1255 judgment on material pleadings Dist. and any Attorney's (11th Cir. 2010). judicially noticed Office for Escambia facts." Cty., 592 When considering a motion for true all facts alleged in the non-moving party's pleading, and [ ] view the pleadings, law based on the those moving party." (11th Cir. facts the court in the must light most favorable Perez v. Wells Fargo N.A., 2014) . "accept as to the non- 774 F.3d 1329, 1335 Prudential It claims challenges that (1) fail; and by Sherry Bailey. her claim for conversion must claim for punitive must every claim made damages (4) must Prudential fail; has (3) acted her fail; (2) her claim for in good fraud faith at all times. 1. Conversion Prudential makes conversion claim. commit tort funds the for its two First, of own arguments against Prudential argues conversion use." because (Doc. 25 it at Sherry that "did 8.) Bailey's it Second, not convert not did the Prudential argues that it "has no funds in its possession payable by reason of the death of Russell Bailey, breach of contract." so there can be no conversion or (Id.) Prudential's arguments fail, a mischaracterization of asserts that it however, the situation. gained nothing when it because they rely on Prudential essentially froze the Account and placed the Account's funds in the Court's Registry. But, taking Sherry Bailey's agree Prudential's Prudential claims as true, characterization. distributed her and placed them the Court Sherry Russell Bailey's in an account cannot Bailey term in her life name. claims with that benefits Had to Sherry Bailey spent these funds and then been convicted of murdering Russell Bailey, Prudential might have faced liability from other beneficiaries benefits. for negligently distributing the term life By clawing back the funds it ostensibly distributed 10 to Sherry Bailey and placing them in the Court's Registry, Prudential limited any double liability it might face from other beneficiaries and Additionally, assuming arguendo thereby converted the funds to its Prudential's possession argument fails. that the Prudential funds it does placed in not have the Court's possession of Prudential only lacks physical possession of the it sought to deposit. Registry, funds to Clerk in this return the Order the disputed Court funds has to the other already ordered Prudential. even if Prudential did have a leg to stand on, more. the funds the Court would not have allowed them in the Registry absent approval of the because Had Prudential been transparent about how it obtained the funds it sought to deposit, Indeed, Even constructive it failed to fully disclose the nature and history of parties. own use. Thus, it has a leg no Prudential now has possession of Sherry Bailey's allegedly converted funds The therefore DENIES Court and it is potentially liable for Prudential's motion the pleadings with regards to Sherry Bailey's conversion. for judgment on counterclaim for conversion. 2. Fraud When pleading fraud in federal court, plaintiffs must state their claims with particularity. Georgia law, Fed. R. Civ. "[t]he tort of fraud has five elements: false representation by a defendant; to induce P. 9(b). the plaintiff to act 11 or Under . . . (1) (2) scienter; (3) intention refrain from acting; (4) justifiable reliance plaintiff." 200, 204 by Artzner v. (Ga. Ct. App. Prudential also claims claims representation show injury Prudential is Sherry be assurances her any damage Inc., to 531 S.E. 2d Sherry Bailey has not pled the is no evidence Bailey kind." and (Doc. Prudential she 25 has at made wholly 9.) a false failed Once to again, incorrect. alleges benefits secure in to the that her Prudential and Account. assured She told her also her that alleges it was justifiable, and that she was her money that these induced her to place her money in the Account, reliance the fraud and has not pled with specificity. Sherry Bailey distributing would of (5) A & A Exterminators, that "there to and 2000). essential elements of It the plaintiff; suffered that damage — Prudential unilaterally removed all the money from her Account. Thus, Sherry Baily established the elements of fraud. Sherry Bailey also pleaded with particularity. She cited descriptions provided by Prudential that she alleges were false representations of the Account, had justifiable reliance, she stated why she believed she and she attached the forms that allegedly induced her to allow Prudential to place her benefits in the Account. requirements for Sherry Bailey therefore satisfied the pleading fraud. Accordingly, the Court DENIES Prudential's motion for judgment on the pleadings with regard to Sherry Bailey's fraud claim. 12 3, Punitive Damages "Punitive damages may be awarded only in such tort actions in which it is proven by clear and convincing evidence that the defendant's wantonness, raise actions showed oppression, the willful or that entire want of presumption consequences." misconduct, of O.C.G.A. § Powertel, Inc. , plaintiff may fraud. 551 also O.C.G.A. S.E.2d recover 768 A Ct. for see Tankersley v. may Taylor v. App. damages to plaintiff conversion. (Ga. punitive § 51-12-5.1; 2d 435, 438 (Ga. Ct. App. indifference 51-12-5.1(b). 765, fraud, care which would conscious recover punitive damages for the tort of malice, 2001) . the A tort Baker, of 651 S.E. 2007). Prudential argues that that Sherry Bailey has not properly pled her punitive damages support the Sherry money finding of punitive damages. Bailey from alleges, when it in claim and that her pleadings has her alleged account the that in alternative, that Bailey's funds." facts misconduct" motion of willfully state Prudential law. removed She committed also fraud removed money from the Account after assuring her that the money in the Account would be "[her] The Court disagrees. Prudential violation do not for (Doc. as and 18, true, judgment on 4.) "[her] she has plead facts "fraud" at "secure"; sufficient the Thus, to pleadings. 13 accepting alleging survive The money"; and Sherry "willful Prudential's Court therefore DENIES Prudential's motion for judgment on the pleadings with regard to Sherry Bailey's punitive damages claim. 4. Good Faith Prudential argues from any liability. that O.C.G.A. § 33-24-41 discharges it Section 33-24-41 states: Whenever the proceeds of . . . a life . . . insurance policy . . . become payable . . . and the insurer makes payment of the proceeds . . . the payments shall fully discharge the insurer from all claims under the policy or contract unless, before payment is made, the insurer has received . . . written notice . . . [that another] person claims to be entitled to the payment or some interest in the policy or contract. Prudential appears to argue that because it prohibited the payment of funds after Sherry Bailey's indictment, protected from liability by § 33-24-41. But flawed. Prudiential Even assuming, interpreted § 33-24-41, judgment for motion arguendo, that this it argument is is correctly Sherry Baily has pled facts which make a on the pleadings improper. Prudential insists on operating under the assumption that it had not paid Sherry Bailey in full and was merely making payments to her each time it honored her checks. Sherry Bailey, however, alleges that Prudential distributed Russell Bailey's term life benefits to her in full on January 21, 2016. The parties, asserting nearly polar opposite positions, therefore, are and the Court cannot grant Prudential's judgment on the pleadings. Nevertheless, the true problem with Prudential's is that Prudential has misinterpreted § 33-24-41. 14 argument Indeed, § 33- 24-41 is wholly inapplicable to the present situation because it only addresses claim to the situations rightful another claimant. where an insurance beneficiary and company then receives pays notice The statute declares that in such a case, a of the insurance company will be discharged "from all claims under the policy," written unless, notice prior that payment. another O.C.G.A. protects insurance challenge the to § paying the claimant 33-24-41 companies claim, was received a right added). claimants distribution of proceeds. had asserting (emphasis from it This, It who to thus belatedly however, is not the scenario presented in Sherry Bailey's counterclaim. Sherry and Bailey's breach of counterclaims contract. She are for alleges conversion, Prudential fraud, distributed money to her and then illegally took it out of the Account. She also the alleges Account. from the Prudential Finally, Account, she lied to alleges Prudential her that about by breached the terms withdrawing the of the contract it money formed upon releasing the Policy's term life coverage benefits to her. None of these claims assert that Prudential distributed payments to another beneficiary after Sherry Bailey gave notice that she was a claimant on the Policy. Thus, Prudential is wrong to assert that § 33-24-41 blocks any liability for Sherry Bailey's counterclaims, and the Court DENIES Prudential's motion for judgment on the pleadings with regards to Sherry Bailey's claims for attorney's fees under the Georgia Bad Faith statute. 15 E. Attorney's Fees Finally, Prudential requests attorneys' interpleader costs and claim. counsel "A federal fees action, whether statute, whenever it Practice, § however, that to brought 1719 is at the court fees for filing the has discretion stakeholder under Rule 22 in or an to interpleader the interpleader fair and equitable to do so." 675. The attorneys' Eleventh fees are Circuit not award has Federal declared, warranted "when a stakeholder's interpleader claim arises out of the normal course of business." 21 F.3d 380, an In re Mandalay Shores Co-op. 383 insurance (11th Cir. company which resolve disputed claims to attorneys' fees unwittingly because come 1994). into Housing Ass'n, Inc., It has further declared that "avails itself of insurance proceeds" "[u]nlike possession innocent of a interpleader to does not deserve stakeholders disputed who asset, an insurance company can plan for interpleader as a regular cost of business . . . ." Prudential claim arises out therefore DENIES Id. is of an insurance its normal company course of and its business. Prudential's claim for attorneys' interpleader The Court fees related to its interpleader claim. III. To conclude, it ORDERS the Conclusion the Court makes the following rulings. Clerk of Court to RELEASE to Prudential all it accepted into the Court's Registry via 16 First, funds its Order dated May 26, 2016 (doc. 8). Second, Prudential's interpleader with respect to the it GRANTS IN PART and DENIES IN PART complaint. It GRANTS approximately $332,000.00 accidental death benefits interpleader of undistributed (doc. 25) and DENIES interpleader with respect to the $279,465.70 that Sherry Bailey alleges Prudential unlawfully converted Bailey, Sharmon Randall Bailey to to one Order. The Kenneth Court Moon, enter pleadings accidental Third, from the the Howard, 25). case it death DENIES pleadings it on DENIES all funds James to the WITHIN Prudential's Sherry Bailey, and $332,000.00 21 motion from Prudential's claims ORDERS establishing their adversity and enjoin defendants Fourth, thus Jr., another and stating their claims undistributed (id.) . (doc. DAYS to further motion (id.). for Fifth, of this discharge legal it action judgment it of on DENIES Prudential's motion for attorneys' fees (id.). ORDER ENTERED at Augusta, September, Georgia, this ^x^^day of 2017. )GE STATES DISTRICT COURT DISTRICT OF GEORGIA 17

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