QBE Specialty Insurance Company v. Kane et al

Filing 48

ORDER REJECTING THE MAGISTRATE JUDGE'S RECOMMENDATION; GRANTING INTERPLEADER-PLAINTIFF QBE SPECIALTY INSURANCE COMPANY'S FIRST AMENDED MOTION FOR LEAVE TO DEPOSIT INTERPLEADER FUNDS, DISCHARGE, AND DISMISSAL WITH PREJUDICE; AND ORDERING LIM ITED INJUNCTION re 12 , 32 . Signed by JUDGE SUSAN OKI MOLLWAY on 1/27/2023. The court, having reviewed QBE's motion de novo, concludes that interpleader is proper. QBE's motion to deposit funds and for discharge and dismissal w ith prejudice is granted to the extent the motion concerns Policy funds. This court enjoins claimants in this case from proceeding in other actions seeking all or part of the Policy funds. QBE is ordered to deposit the remaining Policy balance w ith the Clerk of Court within three working days of the date this order is filed. It appears to this court that the pending claims in other civil actions by Marinelli and Au to Policy funds cannot proceed consistent with this order and must inste ad be litigated in the interpleader action with other claimants to Policy funds. If Marinelli or Au contends otherwise, a written explanation must be filed no later than February 6, 2023. If, without waiving any right to challenge this order in later proceedings, Marinelli or Au agrees that this order precludes pending claims to Policy funds in separate actions, they are directed to state that in writing by the same deadline. If Marinelli so states, this court will deny his pending preliminary i njunction motion and grant QBE's motion to dismiss in Civ. No. 22-00391 to the extent the motion addresses Marinelli's claim to Policy funds. Au is directed to confer with QBE as to the possibility of a stipulation to dismiss any claim to P olicy funds in Civ. No. 22-00557. Such a stipulation could be without prejudice to an appeal by Au to this order when it is appealable. Claims seeking relief other than Policy funds are unaffected by this order. IT IS SO ORDERED. (cib)COURTS CERTIFICATE OF SERVICE - Non-Registered CM/ECF Participants have been served by First Class Mail to the addresses of record listed on the (NEF). Pro Se (Non-Prisoner) Litigants that have consented to receive documents and Notices of Electronic Filings by email, have been served electronically at the e-mail address listed on the (NEF) Modified on 1/27/2023 to add conclusion to the docket text (cib).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

QBE SPECIALTY INSURANCE
COMPANY,
Interpleader-Plaintiff,
vs.
ELIZABETH KANE, AS CHAPTER 7
TRUSTEE FOR HAWAII ISLAND
AIR, INC., ET AL.,

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Interpleader-Defendants.
_____________________________

CIVIL NO. 22-00450 SOM-KJM
ORDER REJECTING THE
MAGISTRATE JUDGE’S
RECOMMENDATION; GRANTING
INTERPLEADER-PLAINTIFF QBE
SPECIALTY INSURANCE
COMPANY’S FIRST AMENDED
MOTION FOR LEAVE TO DEPOSIT
INTERPLEADER FUNDS,
DISCHARGE, AND DISMISSAL
WITH PREJUDICE; AND ORDERING
LIMITED INJUNCTION

ORDER REJECTING THE MAGISTRATE JUDGE’S RECOMMENDATION;
GRANTING INTERPLEADER-PLAINTIFF QBE SPECIALTY
INSURANCE COMPANY’S FIRST AMENDED MOTION FOR LEAVE
TO DEPOSIT INTERPLEADER FUNDS, DISCHARGE, AND
DISMISSAL WITH PREJUDICE; AND ORDERING LIMITED INJUNCTION
I.

INTRODUCTION.
Interpleader-Plaintiff QBE Specialty Insurance Company

(“QBE”) filed this interpleader action to avoid further
litigation associated with the bankruptcy of Hawaii Island Air,
Inc. (“Island Air”), and a lawsuit against several of the
company’s former officers, directors, owners, and lenders.

The

former officers and directors are covered by QBE insurance policy
number QPLO192298 (“the Policy”).

Rather than taking on the

risks associated with a determination of which InterpleaderDefendants are entitled to the finite Policy funds, QBE filed a

Complaint for Interpleader in the U.S. Bankruptcy Court for the
District of Hawaii.

See QBE Specialty Ins. Co. v. Kane, et al.,

Adv. Pro. No. 22-90006 (“Interpleader Bankruptcy Proceeding”),
ECF No. 1.

Not long after, QBE filed this motion for leave to

deposit the remaining Policy funds with the court and for
discharge, injunctive relief, and dismissal.

See ECF No. 12.1

This case began in the bankruptcy court pursuant to a
reference to that court by the district court.

The district

court later withdrew the referral, see ECF No. 11, and this
interpleader case came before the district court.

The motion

seeking to deposit Policy funds with the court was then reviewed
by the Magistrate Judge, who denied the motion.

See ECF No. 32.

Because QBE’s motion is dispositive, the court treats that denial
as the Magistrate Judge’s findings and recommendation and reviews
it de novo.2
QBE clearly satisfies most of the interpleader
requirements, but there is a dispute as to whether QBE filed this

1

All ECF references are to QBE Specialty Insurance Company
v. Elizabeth Kane, et al., Civil Number 22-00450 except when
otherwise noted.
2

The Magistrate Judge’s decision is styled as an order,
but, applying the reasoning detailed later in the present order,
this court construes that decision as the Magistrate Judge’s
Findings and Recommendation and reviews it de novo because the
underlying motion was dispositive. See Florence v. Stanback, 607
F. Supp. 2d 1119, 1122 (C.D. Cal. 2009) (Even if “the Magistrate
Judge entered an order purporting to determine a dispositive
matter, the Court has the authority to ignore the form of the
decision and treat it as a Report and Recommendation.”).
2

action in good faith.

If it did, the motion should be granted.

If it did not (that is, if it filed without any real or
reasonable fear of multiple liability), the court should deny the
motion and dismiss the case.
Having reviewed the parties’ positions, the court
concludes that QBE faces a real threat of multiple competing
claims and is properly seeking interpleader.

In so concluding,

this court has before it more material than was before the
Magistrate Judge.

This court includes that new material in its

consideration and, combining it with the law and other evidence
outlined in this order, rejects the Magistrate Judge’s
recommendation and grants QBE’s motion for leave to deposit
funds, discharge, and dismissal.

This court also orders a

limited injunction.
II.

BACKGROUND.
A.

The Policy.

The insurance policy at issue covers directors and
officers and entity (“D & O”) liability and employment practices
liability for claims first made against the insureds between
March 2, 2017, and March 2, 2018.

See ECF No. 34–2.

The D & O

liability covers Island Air, its subsidiaries, its executives,
and its employees up to a maximum aggregate limit of liability of
$5,000,000.

See ECF No. 34–2, PageID # 302.

It also provides

$1,000,000 for nonindemnifiable loss for executives or natural
3

person general partners.

See ECF No. 34–2, PageID # 292.

Subject to terms and conditions, the Policy insures covered
persons against losses suffered during legal, administrative, or
regulatory proceedings related to their wrongful acts.
B.

The Litigation.

Island Air filed for bankruptcy in 2017.
No. # 17–01078, ECF No. 1.

See Adv. Pro.

Two years later, the bankruptcy

trustee, joined by two labor unions, filed an adversary
proceeding with a 13-count complaint in the Bankruptcy Court for
the District of Hawaii against several of Island Air’s prior
owners, executives, directors, and lenders, arguing that they
caused the company’s bankruptcy.

See Adv. Pro. No. # 19-90027

(“the Trustee Proceeding” filed in the Bankruptcy Court for the
District of Hawaii), ECF No. 1.
Throughout the course of the Trustee Proceeding, a
number of parties sought funds from QBE to cover defense costs
related to the trustee’s claim, as well as the related crossclaims, third-party complaints, and subpoenas.
PageID # 108–09.3

See ECF No. 14,

QBE has acknowledged that the Trustee

Proceeding, and various claims deriving from it, are covered
claims.

See ECF No. 13, PageID # 97.

3

Indeed, QBE has already

A global settlement has twice been attempted, but the
matter has not so far settled. See ECF No. 33; see also Paul
Marinelli v. QBE Speciality Insurance Company, Civ. No. 22–00391,
ECF No. 1, PageID # 12.
4

advanced defense costs to three Interpleader-Defendants for
losses related to these claims.

See ECF No. 35, PageID # 340.

These payments have reduced the available Policy funds to
$5,513,221.51.

See ECF No. 35, PageID # 9, 11.

In March 2022, QBE initiated this interpleader action
in the Bankruptcy Court for the District of Hawaii.
No. 1.

See ECF

After QBE filed its complaint, several additional parties

requested advancement of Policy funds for defense costs.
Interpleader-Defendants Paul Marinelli, David H. Pflieger Jr.,
Philip Wegescheide, and Jeffrey Au each secured relief from an
automatic stay imposed by the bankruptcy court and submitted
formal requests to QBE for $3,560,783.84, $48,945, $12,678.37,
and $3,630,732.93, respectively.

See ECF No. 13, PageID # 98;

ECF No. 35, PageID # 342; Adv. Pro. No. #17-01078, ECF Nos. 1105,
1131, 1153.
During this same period, the bankruptcy trustee
proposed to settle with Interpleader-Defendants Christopher
Gossert and Catherine Yannone by having Gossert and Yannone each
pay the trustee $1.2 million in exchange for resolution of all
claims against them.

The proposal was contingent on QBE’s

approval and has not yet been finalized.

See Interpleader

Bankruptcy Proceeding, ECF No. 133, Pg. 14.

5

QBE filed this motion in July 2022.4

See ECF No. 12.

In October 2022, the Bankruptcy Judge recommended that the
district court withdraw the reference of this matter to the
bankruptcy court.
No. 154.

See Interpleader Bankruptcy Proceeding, ECF

The court adopted that recommendation, and the matter

is now proceeding in a district court.

See ECF No. 11.

Several Interpleader-Defendants filed timely responses
to QBE’s Motion for Leave to Deposit Funds, Discharge, Injunctive
Relief, and Dismissal.

See ECF Nos. 17–20.

The responses by

Philip Wegescheide, Paul Marinelli, and Jeffrey Au, Malama
Investments, LLC, and PaCap Aviation Finance LLC were in
opposition.

See ECF Nos. 17–19.

The response filed by Gossert

and Yannone urged the court to approve their proposed settlement
and to then dismiss Gossert and Yannone before granting QBE’s
motion.

See id.
On November 29, 2022, the Magistrate Judge denied QBE’s

Motion.

See ECF No. 32.

He concluded that the plain language of

the Policy makes clear which parties are entitled to the Policy
funds and that claims inconsistent with that language lack
substance and do not give rise to real and reasonable fears of
multiple liability.

See id.

QBE challenges the Magistrate Judge’s ruling, as do
4

QBE filed the original motion on July 14 and a first
amended version the following day. See Interpleader Bankruptcy
Proceeding, ECF Nos. 110, 114.
6

Gossert and Yannone.

See ECF Nos. 34–35.

They argue that QBE

faces competing claims to its limited Policy funds and that the
claims are substantial enough to justify interpleader.
Marinelli agrees with the Magistrate Judge’s conclusion
that the plain language of the Policy resolves competing claims
to the funds and forecloses any real threat of multiple
liability.

See ECF No. 38.

According to Marinelli, the Policy

clearly requires that funds be paid to the first claimant who
seeks Policy funds.

See id., PageID # 410.

Characterizing the

sequence of claim submissions as clear and recognizing the
likelihood that the claims already submitted will exhaust the
remaining Policy funds, Marinelli argues that QBE cannot
reasonably fear adverse claims and is improperly using the
interpleader procedure to avoid clear, contractual obligations.
See id., PageID# 410–12.
During the pendency of QBE’s motion, two
Interpleader–Defendants, Marinelli and Au, have separately filed
actions against QBE (PaCap Aviation Finance, LLC and Malama
Investments, LLC are also plaintiffs in the Au action).

Both

actions include claims for breach of contract and insurance bad
faith.

See Marinelli v. QBE Specialty Insurance Company, Civ.

No. 22-00391, ECF No. 1; Au v. QBE Specialty Insurance Company,
Civ. No. 22-00557, ECF No. 1.

Marinelli has also filed a Motion

for Preliminary Injunction, urging the court to order QBE to pay
7

his defense costs.

See Marinelli v. QBE, ECF No. 11.

later, QBE filed a Motion to Dismiss.
No. 14.

One week

See Marinelli v. QBE, ECF

The court has not taken action on either Marinelli’s

preliminary injunction motion or QBE’s motion to dismiss while
settlement discussions have been ongoing.

See Marinelli v. QBE,

ECF No. 30.
III.

JURISDICTION.
The court has an independent duty to ascertain whether

it has subject matter jurisdiction over this case; it may raise
this issue sua sponte.

See Bridge Aina Le’a, LLC v. State of

Hawaii Land Use Comm’n, 125 F. Supp. 3d 1051, 1059 (D. Haw.
2015).
QBE brought this action as a rule interpleader case,
under Federal Rule of Civil Procedure 22.5
Proceeding, ECF No. 1, Pg. 2.

See Trustee

In a rule interpleader case,

subject-matter jurisdiction derives from the general grants of
jurisdiction in federal law.

In this case, diversity

jurisdiction exists because the amount in controversy exceeds
$75,000 and the Interpleader-Plaintiff’s citizenship is diverse
from that of all Interpleader-Defendants.

5

The court also has

QBE says that the case also arises under Rule 7022 of the
Federal Rules of Bankruptcy Procedure. Rule 7022 operates to
make Rule 22 of the Federal Rules of Civil Procedure applicable
in adversary proceedings in Bankruptcy Court. Rule 7022 pertains
to bankruptcy proceedings and does not affect the district
court’s jurisdiction.
8

jurisdiction because this matter relates to a bankruptcy.

See

28 U.S.C. § 1334; see also Interpleader Bankruptcy Proceeding,
ECF No. 154, Pg. 8 (finding that the court has bankruptcy
jurisdiction over this matter because QBE’s action arises in and
is related to the Trustee Proceeding).
IV.

LEGAL STANDARD.
In the absence of the parties’ consent on the record, a

magistrate judge cannot issue orders on dispositive motions.

See

28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(1); Reynaga v.
Cammisa, 971 F.2d 414, 416 (9th Cir. 1992).

The parties in this

case have not submitted such consent, so a magistrate judge may
only issue findings and a recommendation to the district judge
with respect to a dispositive motion.

The district judge would

then review the findings and recommendation de novo.

With a

nondispositive motion, a magistrate judge issues an order, and
the district judge may reconsider the order if it is clearly
erroneous or contrary to law.

See 28 U.S.C. § 636(b)(1)(A); Fed.

R. Civ. P. 72(a).
To determine whether QBE’s motion is dispositive, the
court begins by looking at the language of 28 U.S.C.
§ 636(b)(1)(A), which provides a list of eight motions that are
always dispositive.
QBE requests four forms of relief: leave to deposit
interpleader funds, discharge, injunctive relief, and dismissal.
9

See ECF No. 13.

Motions for injunctive relief and dismissal are

listed in 28 U.S.C. § 636(b)(1)(A) and are therefore dispositive.
At the very least, part of QBE’s motion is dispositive.
The other two forms of relief requested—leave to
deposit funds and discharge from liability—are not explicitly
addressed by 28 U.S.C. § 636(b)(1)(A).

Given the statute’s

silence concerning these forms of relief, the court considers the
function the relief would serve in the broader case.

See Flam v.

Flam, 788 F.3d 1043, 1046 (9th Cir. 2015) (“Though the list
contained in 28 U.S.C. § 636(b)(1)(A) appears to be exhaustive
. . . the Supreme Court has identified some judicial functions as
dispositive notwithstanding the fact that they do not appear in
the list.”).

Specifically, the court must determine whether its

decision could “effectively den[y] the ultimate relief sought by
a party or dispose[] of any claims or defenses.”

CPC Pat. Techs.

Pty Ltd. v. Apple, Inc., 34 F.4th 801, 807 (9th Cir. 2022)
(internal quotation marks omitted).
motion is dispositive.6

If it would, the underlying

See id.

The denial of QBE’s motion “effectively denies the
ultimate relief sought” and disposes of QBE’s central claim.
6

See

This court need not decide whether motions for leave to
deposit funds or for discharge of liability are always
dispositive, just whether they are dispositive in the context of
this case. Cf. Hall v. Cnty. of Fresno, 2016 WL 374550, at *3
(E.D. Cal. 2016) (deeming the motion to unseal dispositive even
though similar motions are generally characterized as
nondispositive).
10

id. (internal quotation marks omitted).
case.

This is an interpleader

See Interpleader Bankruptcy Proceeding, ECF No. 1.

The

ultimate relief sought in every interpleader action is leave to
deposit funds and to be discharged from liability.

See 7 Charles

Alan Wright, et al., Federal Practice & Procedure § 1702 (3d ed.)
(“Federal Practice & Procedure”).

Accordingly, denying these

requested forms of relief would prevent QBE from securing the
ultimate relief it seeks.

Without leave to deposit funds and a

discharge from liability, QBE cannot attain interpleader, which
is the sole aim of its Complaint.
When courts confront motions for interpleader, they
almost uniformly treat them as dispositive.

See, e.g., Texas

Life Ins. Co. v. Ford, 2016 WL 10932919, at *1 (S.D. Tex. 2016)
(“A motion for dismissal is a dispositive motion, as is a
decision to proceed as an interpleader.”), report and
recommendation adopted, 2017 WL 7726734 (S.D. Tex. 2017);
Aes-Apex Emp. Servs., Inc. v. Rotondo, 2016 WL 6462244, at *5
(E.D. Mich. 2016) (referring to a motion to interplead funds as
one of “three dispositive motions”), report and recommendation
adopted in part, rejected in part on separate grounds, 2016 WL
5334636 (E.D. Mich. 2016), clarified on denial of
reconsideration, 2017 WL 3225985 (E.D. Mich. 2017), and aff'd,
924 F.3d 857 (6th Cir. 2019); State Farm Life & Assur. Co. v.
Epps, 2013 WL 3992754, at *1 (W.D.N.Y. 2013) (noting that the
11

court referred a motion for interpleader deposit to a magistrate
judge for issuance of findings and a recommendation).7

7

See also N. Am. Co. for Life & Health Ins. v. Jones, 2022
WL 4389288 (D.S.C. 2022) (issuing a report and recommendation in
response to a motion for interpleader deposit), report and
recommendation adopted, 2022 WL 4387488 (D.S.C. 2022); Kernon v.
Banner Life Ins. Co., 2022 WL 2121513 (M.D. Fla. 2022) (issuing a
report and recommendation in response to a motion to interplead),
report and recommendation adopted, 2022 WL 1683361 (M.D. Fla.
2022); Unum Life Ins. Co. of Am. v. Scales, 2021 WL 259352 (W.D.
Mich. 2021) (issuing a report and recommendation in response to a
motion for interpleader deposit), report and recommendation
adopted sub nom. Unum Life Ins. Co. of Am. v. Robert Scales, et
al., 2021 WL 2592572 (W.D. Mich. 2021); Tumiak v. Berryhill, 2019
WL 4040633, at *1 (W.D. Pa. 2019) (mentioning that the magistrate
judge issued a report and recommendation in response to a motion
for interpleader), aff'd sub nom. Tymiak v. Comm'r Soc. Sec., 844
F. App'x 537 (3d Cir. 2021); Huntington Nat'l Bank v. Jesus Film
Project, 2019 WL 2225754, at *1 (M.D. Fla. 2019) (mentioning that
the magistrate judge issued a report and recommendation in
response to a motion for interpleader); Allstate Indem. Co. v.
Collura, 2017 WL 6380343 (E.D.N.Y. 2017) (issuing a report and
recommendation in response to a motion for interpleader deposit),
report and recommendation adopted in part, rejected in part, 2017
WL 1076328 (E.D.N.Y. 2017), modified on reconsideration, 2018 WL
718398 (E.D.N.Y. 2018); Unum Life Ins. Co. of Am. v. Brookshire,
2015 WL 13229264 (D.S.C. 2015) (issuing a report and
recommendation in response to a motion for interpleader deposit),
report and recommendation adopted, 2016 WL 8711680 (D.S.C. 2016),
amended, 2016 WL 703933 (D.S.C. 2016); Metro. Life Ins. Co. v.
Bell, 2014 WL 8021562 (M.D. Fla. 2014) (issuing a report and
recommendation in response to a motion to interplead), report and
recommendation adopted, 2015 WL 926040 (M.D. Fla. 2015); Feehan
v. Feehan, 2011 WL 497852 (S.D.N.Y. 2011) (issuing a report and
recommendation in response to a motion to interplead), report and
recommendation adopted, 2011 WL 497776 (S.D.N.Y. 2011); Ireijo v.
Agnew, 2007 WL 4633328 (D. Haw. 2007) (issuing findings and a
recommendation in response to a motion to interplead), findings
and recommendation adopted as modified, 2007 WL 4190694 (D. Haw.
2007).
12

Cases involving orders in response to motions for
interpleader sometimes arise in significantly different contexts8
or lack sufficient detail to determine why courts have treated
motions as they have.

See Wells Fargo Bank v. Mesh Suture Inc.,

2021 WL 1207444 (D. Colo. 2021); Roland v. Hickman, 2015 WL
10735658 (D. Nev. 2015); Est. of Evans v. Kinecta Fed. Credit
Union, 2014 WL 12790972 (D. Nev. 2014); Reliastar Life Ins. Co.
of New York v. LeMone, 2006 WL 733968 (W.D. Va. 2006).

Of

course, if the parties in the foregoing cases previously
consented to having a magistrate judge issue final determinations
on dispositive motions, the issuance of orders in these cases
would not necessarily indicate that the courts deemed the motions
to be dispositive.
None of the above courts discussed why interpleader
motions might or might not be dispositive.

This court is guided

by the analysis in other cases unrelated to interpleader but
involving motions not listed in 28 U.S.C. § 636(b)(1)(A).

Those

cases suggest that QBE’s motion is dispositive.
In Flam v. Flam, the Ninth Circuit considered whether
motions to remand are dispositive and determined that they are
because they possess “important elements of finality” that “put
8

See Nat'l Ins. Crime Bureau v. Wagner, 2019 WL 5592862, at
*4 (W.D. Wash. 2019) (deeming a motion to be nondispositive for
purposes of a local rule’s notice provisions). The analysis did
not address Rule 72 of the Federal Rules of Civil Procedure, and
so did not apply the Ninth Circuit’s functional approach.
13

the parties effectively out of federal court.”

788 F.3d at 1047

(quoting Harmston v. City & Cnty. of San Francisco, 627 F.3d
1273, 1278–1279 (9th Cir. 2010))(emphasis in original, internal
quotation marks omitted).
Like a motion to remand, a motion to interplead funds
in a case aimed entirely at interpleader gives the court an
opportunity to completely conclude the interpleader-plaintiff’s
claims.

It signals the end of the road for those claims.

That

is, a motion for leave to deposit funds, discharge, injunctive
relief, and dismissal shares with a motion to remand “important
elements of finality” and appears similarly dispositive of a
plaintiff’s claims (although interpleader-defendants’
cross–claims may remain).
In Reynaga v. Cammisa, 971 F.2d 414 (9th Cir. 1992),
the Ninth Circuit made clear that when a form of relief is not
listed in 28 U.S.C. § 636(b)(1)(A) but has the effect of one of
the listed motions, it should be characterized as dispositive.
The Ninth Circuit therefore characterized the motion to stay in
that case as dispositive, even though motions to stay are
generally nondispositive.

The requested stay would have

“effectively denied [the movant’s] request for an injunction.”
Id. at 416.

The court suggested that, just as motions for

injunctive relief are explicitly deemed dispositive by 28 U.S.C.

14

§ 636(b)(1)(A), any motion that could serve to block or grant
injunctive relief should be considered dispositive.
The reasoning in Reynaga has implications for the case
at hand.

Motions for leave to deposit funds and discharge from

liability are not listed in 28 U.S.C. § 636(b)(1)(A), but motions
for injunctive relief and dismissal are.

If the court denies

QBE’s requests for leave and discharge, determining that QBE has
no real and reasonable fear of multiple liability, QBE cannot
obtain the injunctive relief and dismissal that it also requests.
As in Reynaga, these forms of requested relief, while not
explicitly deemed dispositive in 28 U.S.C. § 636(b)(1)(A), are
dispositive here because they dictate the viability of injunctive
relief or dismissal.
Given the above, this court treats QBE’s motion as
dispositive and construes the Magistrate Judge’s decision as his
findings and recommendation, reviewed de novo here.
Even if the court characterizes QBE’s motion as
nondispositive, the court reaches the same conclusion.

When

reviewing a magistrate judge’s conclusions of law or mixed
questions of law and fact, it is proper for the court to reject a
magistrate judge’s determination when it is contrary to law.

See

Bennett v. Yoshina, 98 F. Supp. 2d 1139, 1145 (D. Haw. 2000),
aff'd, 259 F.3d 1097 (9th Cir. 2001).

As discussed below, this

court rules that QBE has real and reasonable fears of multiple
15

liability.

Accordingly, the denial of QBE’s motion, on the basis

of an absence of good faith, is clearly erroneous or contrary to
law and must be rejected.
V.

DISCUSSION.
The purpose of interpleader is to free a stakeholder

from involvement in a battle among claimants when the stakeholder
has no interest in the fund.
§ 1702.

See Federal Practice & Procedure

“Interpleader is proper [when] there is a single fund at

issue [and] adverse claimants to that fund.”

Hyan v. Liberty

Surplus Ins. Corp., 2014 WL 12573542, at *4 (C.D. Cal. 2014)
(internal quotation marks omitted).

The party seeking

interpleader has the burden of demonstrating that it is
justified.

See Metro. Life Ins. Co. v. Sanchez, 2017 WL 2081794,

at *2 (E.D. Cal. 2017).

QBE must therefore show that it has a

“real and reasonable fear of exposure to double liability or the
vexation of conflicting claims.”

Michelman v. Lincoln Nat. Life

Ins. Co., 685 F.3d 887, 894 (9th Cir. 2012).
“This is not an onerous requirement.”

See id.; see

also 4 James Wm. Moore, Moore's Federal Practice § 22.03(1)(c)
(3d ed. 1997) (“In most cases, it is not difficult for the
stakeholder to meet the requirement of a reasonable or good faith
fear of multiple litigation.”).

The stakeholder need not prove

that any claims have already been filed or are meritorious.
Michelman, 685 F.3d at 895.

See

The interpleading party must merely
16

demonstrate that potential adverse claims meet “a minimal
threshold level of substantiality.”

Lincoln Nat'l Life Ins. Co.

v. Ridgway, 293 F. Supp. 3d 1254, 1261 (W.D. Wash. 2018)(quoting
Michelman, 685 F.3d at 895)(internal quotation marks omitted).
To meet the minimal threshold, the movant must
demonstrate that its fear of multiple liability is “more than
conjectural.”

All. for Educ., Inc. v. Airborne Wireless Network,

Inc., 2018 WL 6016994, at *3 (C.D. Cal. 2018)(quoting 4 James Wm.
Moore, Moore's Federal Practice § 22.03(1)(c) (3d ed. 1997)).
Courts sometimes deny interpleader based on an absence of good
faith, but “it is only in rare instances that [interpleader] is
withheld on this ground alone.”
§ 1704.

Federal Practice & Procedure

When it happens, it is typically because the potential

adverse claims are highly improbable or entirely baseless.
In Bierman v. Marcus, 246 F.2d 200, 203 (3d Cir. 1957),
the Third Circuit held that the movant had filed for interpleader
in bad faith because the corporation with the supposedly adverse
claim was actually owned by the interpleader-plaintiff.

There

was thus no real threat that the corporation would sue.
In John Hancock Mut. Life Ins. Co. V. Beardslee, 216
F.2d 457 (7th Cir. 1954), the Seventh Circuit found an absence of
good faith because the reputedly adverse claimant never claimed
she was entitled to benefits under the life insurance policy in
issue and had no apparent basis for making such a claim.
17

The

court noted, “Instead of amounting to a claim of right[,] her
letter could only be considered as a plea for help.”

Id. at 461.

In both Bierman and Beardslee, there were no actual adverse
claims, and the courts denied interpleader on that basis.
When courts reject interpleader in cases with actual
adverse claims, those claims are clearly baseless.

In Hyan v.

Liberty Surplus Ins. Corp., 2014 WL 12573542 (C.D. Cal. 2014),
the professional liability policy at issue expressly foreclosed
competing claims.

The interpleader-plaintiff argued that it

feared multiple liability because of conflicting claims between
parties seeking coverage for defense costs and those seeking
coverage for settlement costs.

Id. at *6.

The policy language

squarely required “payment of claims expenses (defense costs)
before damages (settlement costs).”
marks omitted).

Id. (internal quotation

The court therefore concluded that “the plain

terms of the policy eliminate[d] any possible ‘real or
reasonable’ fear of multiple liability.”

Id.

When the only

issue underlying an adverse claim can be resolved by the court
based solely on the record, a court may reject an assertion of
multiple conflicting claims.
But this is rare, given the liberal application of
interpleader.

The more common occurrence is for courts to find

in favor of the interpleader, even when the supposedly adverse
claims are not particularly strong or fleshed-out.
18

In Bitstamp

Ltd. v. Ripple Labs Inc., 2015 WL 13025768 (N.D. Cal. 2015), the
court chose not to interrogate the substance of the competing
claims at all; it was enough that adverse claims had already been
made.

“Bitstamp was not required to determine whether Ripple

Labs's claim to the disputed funds was colorable; it is
sufficient that Ripple Labs made a claim.”

Id. at *3.

Similarly, in West Coast Stock Transfer, Inc. v. Terra Tech
Corp., 2019 WL 6998770, at *7 (C.D. Cal. 2019), the court refused
to parse the merits of the competing claims, “since it appears
inevitable that West Coast would be faced with litigation whether
it transferred or refused to transfer the Disputed Restricted
Stock.”

When it is indisputable that multiple claims will arise

against the stakeholder, the party seeking interpleader may not
have to prove that those claims have any substance at all.
Once parties secure interpleader, they often seek
injunctions to prevent further lawsuits related to the
interpleaded funds.

QBE has made such a request here and already

faces two separate lawsuits that would be implicated by
injunctive relief, if granted.

See Marinelli v. QBE, Civ.

No. 22–00391, ECF No. 1 (filed on Aug. 24, 2022); Au v. QBE, Civ.
No. 22–00557, ECF No. 1 (filed on Dec. 30, 2022, after the
Magistrate Judge filed his ruling on QBE’s motion to deposit

19

funds).9

Both of these cases include breach of contract claims

and requests for compensatory damages.
No. 1; Au v. QBE, ECF No. 1.

See Marinelli v. QBE, ECF

These matters directly implicate

the Policy funds at issue in this case and thus would be affected
by even a narrowly tailored injunction.
A.

QBE Has a Real and Reasonable Concern That the
Policy Language Does Not Necessarily
Resolve The Competing Claims to the Policy Funds.

Marinelli argues that the Policy language is so clear
that QBE could have no reasonable fear of multiple liability.
See ECF No. 38, PageID # 405.

According to Marinelli, “the

policy’s ‘Advancement’ and ‘Priority of Payments’ provisions
easily solve all the purported conflicts identified by QBE.”
ECF No. 38, PageID # 404.

See

But QBE’s fear that the Policy

language Marinelli relies on may not necessarily resolve
competing claims is neither unrealistic nor unreasonable.

In so

stating, this court is not here making a summary judgment ruling
as to the import of any Policy provision.

This court is instead

considering only whether QBE’s fears are real and reasonable.
course, even if a fear is real and reasonable, that does not

Of

definitively establish the meaning of any Policy language.

9

Au had submitted a claim to QBE before the Magistrate
Judge ruled, but had not commenced a lawsuit. Au’s lawsuit may
have been a reaction to the Magistrate Judge’s ruling.
20

1. “On a Current Basis.”
Central to Marinelli’s claim is the “Advancement”
provision of the D & O Policy:
A.

. . . In any other Claim, the Insurer
shall advance Defense Costs on a current
basis, but no later than 60 days after
receipt of the legal bills and any
supporting documentation.

B.

If
it
is
determined
by
a final
adjudication that any advanced Defense
Costs are not covered under this
Coverage Part, the Insureds, severally
according to their respective interests,
shall repay such uncovered Defense Costs
to the Insurer[.]

See ECF No. 34–2, PageID # 304.

Marinelli argues that the phrase

“on a current basis” in subsection (A) requires QBE to distribute
Policy funds based on when parties first submitted claims to QBE.
The objectors (QBE and the Gossert Defendants, Gossert and
Yannone) disagree.
First, QBE, while conceding that advancement must be
made “on a current basis,” argues that the Policy might not
determine substantive rights on that same basis.

See ECF No. 35,

PageID # 354 (“The Advancement provision does not resolve any
substantive right to coverage or address conflicting claims.”).
Because advancement provisions do not always conclusively resolve
a party’s ultimate entitlement to funds, contracts often treat
advancement and ultimate entitlement differently.

Cf. Heine v.

Bank of Oswego, 144 F. Supp. 3d 1198, 1207 (D. Or. 2015)
21

(addressing advancement and indemnification as separate matters
and noting that “an individual ultimately determined to be
ineligible for indemnification may still be entitled to
advancement before that ultimate determination”); Advanced Mining
Sys., Inc. v. Fricke, 623 A.2d 82, 84 (Del. Ch. 1992) (noting
that advancement of legal expenses and ultimate entitlement to
indemnification are two distinct questions).
Further, as QBE points out, the Policy acknowledges
that advancement differs from ultimate entitlement in that a
party must return to QBE any money received as an advancement
that is subsequently found not to be covered by the Policy.

See

ECF No. 34–2, PageID # 304 (D & O Policy, Section V(B)).
Marinelli responds that, because QBE has already
conceded his right to the Policy funds, he will not have to
return any of his advancement.

See ECF No. 38, PageID # 408.

(“QBE’s argument conflicts with QBE’s earlier concessions that
Mr. Marinelli (and Mr. Au) are insured persons under the policy,
that the case against them asserts covered claims, and that they
are therefore entitled to reimbursement of their reasonable
defense costs.”)

QBE’s admissions might not, however, preclude

future conflicts.
QBE did concede that the Trustee Proceeding is a
covered matter and that the company must cover defense costs in
connection with it.

See ECF No. 14, Pg. 109.
22

However, that does

not amount to a concession that Marinelli and Au are entitled to
receive and ultimately retain all of the Policy funds they claim.
QBE makes clear that whatever money it pays to these parties is
“subject to a full reservation of all of the Policy’s terms,
conditions, and exclusions.”

See id.

Thus, even if the company

acknowledges that Marinelli and Au are covered persons with
covered claims, there are a number of possibilities that could
preclude them from retaining funds.

This court assumes here that

Marinelli and Au have given QBE sufficient documentation
supporting their reimbursement requests, but the court is
uncertain as to whether those documents include expenses related
to any uninsured matter, or reflect some improper or excessive
expense.

Thus, if QBE provided Marinelli with advancements, he

might have to return some of the money later if it were
determined, for example, that the advancement was for expenses
unrelated to covered claims by insured persons.

This process

could give rise to multiple lawsuits, as parties could dispute
how much of his advancement a claimant like Marinelli had to
return and to whom those funds should be redistributed.
Separately, QBE argues that QBE was not able to make
payments on a current basis, and that this inability has rendered
the “Current Basis” clause inoperable.
# 352.

See ECF No. 35, PageID

While engaged in settlement discussions, Marinelli and Au

chose not to submit claims on an ongoing basis.
23

QBE argues that

it was thus in no position to make payments as fees and costs
were incurred.

See id.

QBE has not pointed to any language in the contract or
any law indicating that an insured’s failure to submit claims on
an ongoing basis somehow changes how funds are to be distributed.
Moreover, as Marinelli highlights, the language of the Policy
specifically ties payments—at least advancement payments—to the
submission of claims, not the accrual of fees and costs.

See ECF

No. 34–2, PageID # 304 (referring to advancements “no later than
60 days after receipt of the legal bills and supporting
documentation”).

This court, given the present record, is

therefore not relying on this argument as, on its own, justifying
interpleader.
Lastly, Gossert and Yannone argue that the “Current
Basis” clause does not resolve competing conflicts because
Marinelli has not yet submitted a completed claim.
No. 34, PageID # 278.

See ECF

They argue that payments cannot be

provided until a party provides all “legal bills and supporting
documentation” and that money does not yet become due until that
point.

See id.

As Marinelli points out, QBE itself does not

make this argument in its objection.
# 405.

See ECF No. 38, PageID

Indeed, QBE indicates that Marinelli has provided

substantial information including “copies of defense invoices”
and “backup documentation.”

See ECF No. 35, PageID #342.
24

On the

present record, this particular argument by Gossert and Yannone
is not determinative of the matters before this court.
Although this court is not here relying on all of the
challenges to the Magistrate Judge’s ruling, QBE’s assertion that
the “Current Basis” clause addresses advancement only, not
ultimate entitlement, is sufficient to demonstrate that the
Policy language may not foreclose all adverse claims.

This court

stresses again that this conclusion goes only to the court’s
determination of whether QBE’s fears of multiple liability are
real and reasonable, not to a substantive ruling construing any
Policy language.
2.

“Priority of Payments.”

Marinelli also argues that the “Priority of Payments”
provision resolves who is entitled to Policy funds.

The relevant

portion of the “Priority of Payments” provision provides:
A.

In the event that Loss under Insuring Clause
A and any other Loss are concurrently due
under this Coverage Part, then the Loss under
Insuring Clause A shall be paid first. In all
other instances, the Insurer may pay Loss as
it becomes due under this Coverage Part
without regard to the potential for other
future payment obligations under this Coverage
Part.

See ECF No. 34–2, PageID # 305.

According to Marinelli’s

opposition to QBE’s motion, this language provides that “any
settlement payment can be made only after all pending defense
costs have been paid.”

See ECF No. 17, PageID # 124.
25

As a

result, he argues, Gossert and Yannone’s settlement negotiations
with the trustee could never give rise to a genuinely adverse
claim.

See ECF No. 17, PageID # 125.
QBE responds that the “Priority of Payments” provision

does not address conflicts between concurrently filed claims for
defense and settlement costs.

See ECF No. 35, PageID # 334.

QBE’s argument is by no means frivolous.

The provision requires

that claims under “Insuring Clause A” must be paid before claims
for other losses.

See ECF No. 34–2, PageID # 305.

All of the

potentially adverse claims arise under “Insuring Clause A,” so
the “Priority of Payments” provision does not clarify which
claimant has priority to the funds in dispute.
Marinelli also argues that “the Priority of Payments
clause . . . makes it clear that earlier-submitted claims for
defense costs . . . should be paid first.”

See ECF No. 38,

PageID # 412 (internal quotation marks omitted).

The Policy does

indeed say that “the Insurer may pay Loss as it becomes due,” but
that could possibly be read as permissive and not mandatory.
That language does not expressly require QBE to distribute funds
to cover or reimburse defense costs before addressing
settlements.
Both of the Policy provisions Marinelli relies on (the
“Current Basis” provision and the “Priority of Payments”
provision) allow for considerable interpretation.
26

In the context

of determining whether QBE’s fears of multiple liability are real
and reasonable, this court notes that adverse claims might indeed
arise.
Gossert and Yannone argue, for instance, that state law
supports the distribution of Policy proceeds first to parties
that work out settlement agreements with the trustee.
No. 20, PageID # 173–76.

See ECF

Whether this argument does or does not

ultimately succeed, the failure of the Policy language to
definitively resolve all claims leaves the potential for adverse
claims of sufficient substance to justify QBE’s fear of multiple
liability.
QBE suggests that, because claims were not submitted
when expenses were first incurred, the court will now need to
determine a new method of distributing funds.
PageID # 352.

See ECF No. 35,

This court is not agreeing or disagreeing with

that position, but it is premature to reject it.
B.

Parties Have Already Filed Multiple Lawsuits

In some cases, potentially adverse claims are deemed
“too conjectural” to justify interpleader.
Network, 2018 WL 6016994, at *3.

Airborne Wireless

That is not so here.

adverse claims have already been filed against QBE.
Marinelli v. QBE, ECF No. 1; Au v. QBE, ECF No. 1.

Multiple

See
Moreover,

Gossert and Yannone have given QBE ample reason to believe that
they may bring adverse claims if they are not allowed to proceed
27

with settlement.

QBE’s fear of multiple litigation is not merely

speculative.
Bitstamp and Terra Tech suggest that, when adverse
claims are actually present, an interpleader-plaintiff need not
even prove that those claims meet a threshold of substantiality.
See Bitstamp, 2015 WL 13025768, at *3; Terra Tech, 2019 WL
6998770, at *7.

Whether or not this court adopts that position,

there are adverse claims with substance here.

The presence of

actual and engaged adverse claimants counsels in favor of
interpleader.

QBE is already embroiled in multiple lawsuits over

its limited Policy funds and has every reason to fear that the
claims will conflict, even if one claim turns out to be stronger
than the others.

Michelman, 685 F.3d at 894 (9th Cir.

2012)(citing New York Life Ins. Co. v. Welch, 297 F.2d 787, 790
(D.C.Cir.1961) (“A stakeholder, acting in good faith, may
maintain a suit in interpleader to avoid the vexation and expense
of resisting adverse claims, even though he believes only one of
them is meritorious.”)).
The substance of the asserted adverse claims and the
reality of engaged adverse claimants makes this case
distinguishable from interpleader cases involving a lack of good
faith.

This case differs significantly from Bierman, which

involved a putative claimant the court concluded would never file
a claim because it was a corporation owned by the interpleader28

plaintiff.

246 F.2d at 203.

This case is also distinguishable

from Beardslee, in which the supposedly adverse claimant had
never asserted a right to the stake and there was no readily
apparent basis for such a claim.

216 F.2d at 461.

Nor is this case akin to Hyan, which involved policy
language so clear that the supposedly adverse claim lacked any
substance at all.

As discussed above, the policy in Hyan

required “the payment of claims expenses (defense costs) before
damages (settlement costs).”
quotation marks omitted).

2014 WL 12573542, at *6 (internal

The supposedly conflicting claims in

Hyan involved defense costs, on the one hand, and settlement
costs, on the other.

See id.

The policy language clearly

resolved any conflict: “claim expenses shall first be subtracted
from the applicable limit of liability with the remainder, if
any, being the amount available to pay damages.”
(emphasis in original).

See id.

As a result, the court denied the

request for interpleader, finding an absence of good faith.

See

id.
The “Advancement” and “Priority of Payment” provisions
in QBE’s Policy are not as explicit as the language addressed in
Hyan, and the circumstances under which claims have been filed
may raise questions about who is entitled to what.

While in Hyan

“[a]pplication of the plain terms of the policy eliminates any
possible ‘real or reasonable fear’ of multiple liability,” see
29

id., this court cannot say the same here.

In fact, adverse

lawsuits have already been filed.10
VI.

RELIEF.
Because QBE satisfies the requirements of rule

interpleader, the court vacates the Magistrate Judge’s Findings
and Recommendations and grants most of QBE’s motion.
A.

Leave to Deposit Funds.

Pursuant to its equitable powers, the court orders QBE
to deposit $5,513,221.51 with the court within three working
days.

QBE should make the deposit in accordance with Rule 67 of

10

Marinelli argues that granting interpleader in this case
would exceed the proper scope of interpleader, allowing QBE to
use interpleader to avoid its clear contractual obligations. See
ECF No. 38, PageID # 404. But the cases he cites in advancing
this argument are clearly distinguishable. The court in Wells
Fargo Bank, N.A. v. Waterfall Asset Management, LLC, 2019 WL
1172269, at *8 (S.D.N.Y., 2019), denied interpleader because the
“case [was] not merely about the distribution of a single fund
held by Wells Fargo.” The court did not focus on whether the
interpleader-plaintiff’s fears of multiple liability were real or
reasonable. See id. Instead, it noted that the supposedly
adverse claims went “well beyond the distribution of the res held
by Wells Fargo.” See id. at *9. While Marinelli and others do
have claims going beyond Policy funds, QBE is seeking
interpleader protection only with respect to Policy funds. In
Sun Life Assur. Co. of Canada v. Thomas, 735 F. Supp. 730 (W.D.
Mich. 1990), the court actually granted complete discharge from
liability to the interpleader-plaintiff. The court examined the
obligation that insurance companies have to deal with competing
claims only in explaining its decision to deny the interpleaderplaintiff’s request for attorney’s fees and costs. See id. at
733. Kurz v. New York Life Ins. Co., 168 So. 2d 564 (Fla. Dist.
Ct. App. 1964), is also distinguishable. The trial court and the
court of appeals addressed the merits of the case, determining
that the insurer’s obligations were “unequivocally supported by
the record.” Id. at 566. An equivalent finding on the merits
has not issued at this stage of this case.
30

the Federal Rules of Civil Procedure.
B.

Discharge.

QBE requests that the court discharge it from
liability.

See ECF No. 13, PageID # 95.

court’s authority.

Doing so is within the

See Advantage Title Agency, Inc. v. Rosen,

297 F. Supp. 2d 536 (E.D.N.Y. 2003) (“[T]he Court is empowered to
discharge a plaintiff from further liability in any civil
interpleader action.”); see also 28 U.S.C. § 2361.
Once QBE deposits the remaining Policy funds, it will
have satisfied the requirements of rule interpleader.

Contingent

on QBE’s deposit of the money, the court grants QBE’s discharge
from all claims of entitlement to the Policy funds.

There are,

of course, other pending claims against QBE, which are not
affected by this order.
C.

Dismissal.

QBE has also requested dismissal with prejudice.

When

interpleader is granted and the stakeholder is disinterested in
the deposited funds, the court can dismiss the party from the
case.

See, e.g., Scottrade, Inc. v. Gibbons, 590 F. App'x 657,

659 (9th Cir. 2014); Gen. Atomic Co. v. Duke Power Co., 553 F.2d
53, 56 (10th Cir. 1977)(“If the stakeholder is disinterested, he
is entitled to dismissal.”).
Because QBE has not asserted any claims to the
remaining Policy funds, dismissal with prejudice is proper.
31

This

dismissal concerns only the remaining Policy funds.

The court is

not here considering the merits of other claims against QBE
concerning other aspects of the Policy or claims seeking relief
other than Policy funds.

Those other claims are not covered by

this dismissal, and this dismissal addresses QBE only as
Interpleader–Plaintiff.
D.

Injunctive Relief.

QBE requests an injunction to prevent “the
Interpleader-Defendants and any other third parties . . . from
bringing any action in state or federal court against QBE
concerning the Policy.”

See ECF No. 13, PageID # 104; see also

Pan Am. Fire & Cas. Co. v. Revere, 188 F. Supp. 474, 485 (E.D.
La. 1960) (concluding that courts can issue injunctions against
overlapping proceedings in rule interpleader cases,
notwithstanding the limitations on injunctions imposed by
28 U.S.C. § 2283); 48 C.J.S. Interpleader § 28 (“[I]n a rule
interpleader proceeding, the court retains discretion to restrain
litigants before the court from litigating claims in derogation
of the court's exercise of jurisdiction.”).
Injunctive relief is common in interpleader, “the
whole purpose being to avoid inconsistent results in separate
lawsuits.”

Aristud-Gonzalez v. Gov't Dev. Bank for Puerto Rico,

501 F.3d 24, 27 (1st Cir. 2007).

Of course, as in other

contexts, the party requesting injunctive relief must show
32

“irreparable harm and inadequacy of legal remedies.”
Theatres, Inc. v. Westover, 359 U.S. 500, 507 (1959).

Beacon
This court

is persuaded that QBE will face irreparable harm if claimants are
able to initiate or continue litigation against QBE seeking part
or all of the Policy funds outside of this proceeding.

See

Trustmark Ins. Co. v. Barragan, 2018 WL 5116459, at *5 (C.D. Cal.
2018) (“Relitigation would defeat the purpose of Trustmark's
interpleader action and result in waste.”).

Legal remedies alone

would not sufficiently redress those harms given QBE’s real and
reasonable fears of multiple liability.

Once it deposits funds

with this court, QBE will have no assurance that it can recover
from any insured even were QBE to prevail in particular lawsuits
brought by potentially multiple claimants.

Injunctive relief is

proper.
Interpleader-Defendant Wegescheide notes that, in
seeking to enjoin any action “concerning the Policy,” QBE may be
seeking injunctive relief that goes “above and beyond what might
otherwise be appropriate.”

See ECF No. 18, PageID # 133.

He

argues that any injunction should only extend to claims over the
Policy funds, as opposed to reaching all claims “concerning” the
Policy.

See ECF No. 18, PageID # 136–37.

Anything more, he

says, would exceed the proper scope and purpose of interpleader.
See id.

33

Courts recognize interpleader as having benefits for
the stakeholder, the claimants, and the court; as such, it is
applied liberally.

See State Farm Fire & Cas. Co. v. Tashire,

386 U.S. 523, 533 (1967).

But the Supreme Court has made clear

that interpleader is not an all purpose “bill of peace.”

See id.

at 537.
Given the important constraints on the court’s
discretion in the interpleader context, the court concludes that
a narrowly tailored injunction is proper.
claims seeking Policy funds.

The court enjoins only

Such an injunction will prevent

overlapping litigation and inconsistent decisions, without
improperly constraining the substantial rights of interested
parties.
During the pendency of this litigation, the court
enjoins the institution or prosecution by any party to this
action of any proceeding in a state or federal court against QBE
seeking all or part of the Policy funds.11
E.

Disposition.

Having decided that interpleader is a proper remedy in
this case, the court must address the claimants’ respective
rights.

See United States v. High Tech. Prod., Inc., 497 F.3d

11

The court may extend the preliminary injunction to thirdparties if QBE proves that the third-parties have been notified
of this order. If and when QBE provides such proof, the court
may extend the injunction to the notified parties.
34

637, 641 (6th Cir. 2007) (“An interpleader action typically
proceeds in two stages.”).

To do so, the court relies on the

normal litigation processes, including pleading, discovery,
motions, and trial.

See id. (citing Federal Practice & Procedure

§ 1704).
To aid in this process, the court directs the
Magistrate Judge to establish a schedule for discovery (if
warranted) and briefing in this matter.

The claimants should

have an opportunity to address their claims to the res and to
outline any asserted priority over other claimants.

One of the

matters to which this procedure applies is the settlement that
Gossert and Yannone seek approval of.
VII.

CONCLUSION.
The court, having reviewed QBE’s motion de novo,

concludes that interpleader is proper.

QBE’s motion to deposit

funds and for discharge and dismissal with prejudice is granted
to the extent the motion concerns Policy funds.

This court

enjoins claimants in this case from proceeding in other actions
seeking all or part of the Policy funds.

QBE is ordered to

deposit the remaining Policy balance with the Clerk of Court
within three working days of the date this order is filed.
It appears to this court that the pending claims in
other civil actions by Marinelli and Au to Policy funds cannot
proceed consistent with this order and must instead be litigated
35

in the interpleader action with other claimants to Policy funds.
If Marinelli or Au contends otherwise, a written explanation must
be filed no later than February 6, 2023.

If, without waiving any

right to challenge this order in later proceedings, Marinelli or
Au agrees that this order precludes pending claims to Policy
funds in separate actions, they are directed to state that in
writing by the same deadline.

If Marinelli so states, this court

will deny his pending preliminary injunction motion and grant
QBE’s motion to dismiss in Civ. No. 22–00391 to the extent the
motion addresses Marinelli’s claim to Policy funds.

Au is

directed to confer with QBE as to the possibility of a
stipulation to dismiss any claim to Policy funds in Civ. No.
22–00557.

Such a stipulation could be without prejudice to an

appeal by Au to this order when it is appealable.

Claims seeking

relief other than Policy funds are unaffected by this order.

36

IT IS SO ORDERED.
DATED: Honolulu, Hawaii, January 27, 2023.

/s/ Susan Oki Mollway
Susan Oki Mollway
United States District Judge

QBE SPECIALTY INSURANCE COMPANY v. ELIZABETH KANE, AS CHAPTER 7 TRUSTEE FOR HAWAII
ISLAND AIR, INC., ET AL., CIVIL NO. 22-00450 SOM-KJM; ORDER REJECTING THE MAGISTRATE
JUDGE’S RECOMMENDATION; GRANTING INTERPLEADER-PLAINTIFF QBE SPECIALTY INSURANCE
COMPANY’S FIRST AMENDED MOTION FOR LEAVE TO DEPOSIT FUNDS, DISCHARGE, AND DISMISSAL
WITH PREJUDICE; AND ORDERING LIMITED INJUNCTION.

37