Transamerica Life Insurance Company v. Bagala et al

Filing 85

ORDER AND REASONS denying 76 Motion for relief from Judgment.. Signed by Judge Sarah S. Vance on 6/6/16. (jjs)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

TRANSAMERICA LIFE INSURANCE
COMPANY

CIVIL ACTION

VERSUS

NO: 14-2738

PEGGY CARSKADON BAGALA, ET AL.

SECTION: R

ORDER AND REASONS
Transamerica Life Insurance Company filed this interpleader action to
determine the beneficiaries of an annuity contract. On December 29, 2015, the
Court granted summary judgment in favor of defendants-in-interpleader and
counter-claimants Dawn, Darlene, Dena, and Buddy Bagala (collectively, the
"Bagala children").1 Defendant-in-interpleader and counter-claimant Peggy
Bagala now moves under Federal Rule of Civil Procedure 60(b)(4) to vacate
the Court's order as void for lack of jurisdiction.2 For the following reasons,
the Court denies the motion.

I.

BACKGROUND
1

R. Doc. 63.

2

R. Doc. 76.

This case involves an annuity contract issued by Merrill Lynch Life
Insurance Company, a predecessor in interest of Transamerica, to Shelby
Bagala.3 Upon Mr. Bagala's death in January 2014, Shelby Bagala's widow,
Peggy Bagala, and the four Bagala children asserted competing claims to the
annuity contract proceeds. In response, Transamerica filed this interpleader
lawsuit, requesting that this Court issue a judgment declaring the rights of
each of the parties and determine the proper distribution of the annuity
proceeds. In its complaint, Transamerica alleged that jurisdiction was proper
under the diversity statute, 28 U.S.C. § 1332(a)(1).4 In the heading for the
second cause of action, titled "Interpleader," the complaint also cited the
interpleader statute, 28 U.S.C. § 1335, which grants federal jurisdiction over
interpleader actions in which there is minimal diversity among the claimants
and the amount in controversy is at least $500.5
After filing its complaint, Transamerica deposited the disputed proceeds
with the registry of the court. Transamerica then moved the Court for
dismissal, arguing that it was a mere stakeholder with no interest in the

3

Unless otherwise noted, the Court draws these facts from its earlier summary
judgment order, R. Doc. 63.
4

R. Doc. at 1 ¶ 1.

5

Id. at 6.
2

proceeds. The Court granted the motion and dismissed Transamerica as a
party. Later, the four Bagala children moved for summary judgment seeking
to be declared the rightful beneficiaries under the plain terms of Shelby
Bagala's annuity contract. Peggy Bagala did not oppose the motion. The Court
granted the Bagala children's motion for summary judgment and entered a
judgment declaring Dawn, Darlene, Dena, and Buddy Bagala the four
beneficiaries under the annuity contract.6
After failing to file a timely appeal of the Court's judgment, Peggy Bagala
fired her attorney and obtained new representation.7 Through her new
attorney, Peggy Bagala now moves to vacate the Court's judgment under
Federal Rule of Civil Procedure 60(b)(4).8 Peggy Bagala argues that the
Court's judgment was void for lack of jurisdiction because Transamerica's
complaint did not satisfy the jurisdictional requirements of the interpleader
statute.9 In her reply brief, Peggy Bagala argues for the first time that although
the Court had diversity jurisdiction when this case was filed, jurisdiction was

6

R. Doc. 64.

7

R. Doc. 76-1 at 5.

8

R. Doc. 76.

9

R. Doc. 76-1 at 5-7.
3

destroyed when Transamerica was dismissed without having invoked the
interpleader provisions of Federal Rule of Civil Procedure 22.10

II.

LEGAL STANDARD
A district court has broad discretion to grant or deny a motion under

Rule 60(b). Halicki v. Louisiana Casino Cruises, Inc., 151 F.3d 465, 470 (5th
Cir. 1998). Under Rule 60(b), a court will grant relief from a final judgment
or order only upon a showing of one of:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence which by due diligence could not
have been discovered in time to move for a new trial under Rule
59(b);
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or other misconduct of an adverse party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged, or a
prior judgment upon which it is based has been reversed or
otherwise vacated, or it is no longer equitable that the judgment
should have prospective application; or
(6) any other reason justifying relief from the operation of
judgment.
Fed. R. Civ. P. 60(b).

10

R. Doc. 84 at 4-6.
4

Peggy Bagala argues that the Court's judgment should be set aside under
Rule 60(b)(4). Although this rule permits a district court to relieve a party
from a final judgment if the judgment was "void," the interests of finality
dictate that "the concept of void judgment must be narrowly restricted." In re
Ziebarth, 51 F.3d 1044 (5th Cir. 1995) (quoting United States v. 119.67 Acres
of Land, Etc., 663 F.2d 1328, 1331 (5th Cir. 1981)). The Court may therefore
set aside a judgment under Rule 60(b)(4) if it lacks subject matter jurisdiction.
Callon Petroleum Co. v. Frontier Ins. Co., 351 F.3d 204, 208 (5th Cir. 2003);
Hill v. McDermott, Inc., 827 F.2d 1040, 1043 (5th Cir. 1987). But "because
federal courts regulate the scope of their own jurisdiction, a Rule 60(b)(4)
challenge to jurisdiction should be sustained only where there is a 'clear
usurpation of power' or 'total want of jurisdiction.'" Callon Petroleum Co. v.
Frontier Ins. Co., 351 F.3d 204, 208 (5th Cir. 2003).

III. DISCUSSION
Peggy Bagala argues that the Court's order granting summary judgment
in favor of the Bagala children must be vacated because the Court lacks subject
matter jurisdiction. As an initial matter, Peggy Bagala's motion fails to
establish that she is entitled to her requested relief. Rule 60(b)(4) challenges
to a court's jurisdiction are disfavored. See Callon, 351 F.3d at 208 (holding
5

that courts should not sustain a Rule 60(b)(4) challenge to jurisdiction unless
there is a "clear usurpation of power" or "total want of jurisdiction"). As the
Fifth Circuit holds, "a district court's exercise of subject-matter jurisdiction,
even if erroneous, is res judicata and is not subject to collateral attack through
Rule 60(b)(4) if the party seeking to void the judgment had the opportunity
previously to challenge jurisdiction and failed to do so." In re Bell Family
Trust, 575 F. App'x 229, 233 (5th Cir. 2014); see also Brown v. Illinois Cent.
R. Co., 480 F. App'x 753, 754 (5th Cir. 2010) (same).
Here, Transamerica filed its interpleader complaint in December 2014.11
The Court did not enter its final judgment until December 29, 2015, giving
Peggy Bagala ample opportunity to challenge the Court's subject matter
jurisdiction. Nonetheless, Peggy Bagala waited until three months after the
Court's final judgment before raising her jurisdictional arguments for the first
time Rule 60(b)(4) motion. Peggy Bagala attempts to explain this delay by
arguing that her former counsel's performance took a "turn" for the worse "in
late 2015," causing him to miss a deadline for filing an opposition to the Bagala
children's motion for summary judgment. But even if errors or inadvertence
of counsel could, under certain circumstances, prevent a litigant from

11

R. Doc. 22 at 1; R. Doc. 61 at 1.
6

challenging jurisdiction,12 Peggy Bagala does not explain how her attorney's
"turn" at a late stage of this case prevented her from litigating jurisdictional
issues earlier in the proceedings. Cf. Bell, 575 Fed. App'x at 223 (finding Rule
60(b)(4) relief unwarranted when movant argued that she only recently
realized a jurisdictional defect in the trial court's earlier order). Having failed
to raise her jurisdictional arguments in a timely manner, Peggy Bagala cannot
reopen the issue at this late stage under Rule 60(b)(4). See Picco v. Glob.
Marine Drilling Co., 900 F.2d 846, 850 (5th Cir. 1990) (barring a Rule
60(b)(4) challenge to jurisdiction because the challenging party had notice of
the order in question and opportunity to challenge jurisdiction on appeal, but
did not do so).
Even setting aside Peggy Bagala's dilatoriness, her jurisdictional
arguments lack merit. Peggy Bagala contends that federal jurisdiction over
Transamerica's suit arises under the interpleader statute, 28 U.S.C. § 1335.
Peggy Bagala argues that because the interpleader statute's minimum diversity
requirement is not satisfied, the Court's summary judgment is void for lack of
jurisdiction.

12

Peggy Bagala cites no case, Fifth Circuit or otherwise, for this proposition.
7

This argument ignores that there are two types of interpleader actions:
statutory interpleader under 28 U.S.C. § 1335 and rule interpleader under
Federal Rule of Civil Procedure 22. Auto Parts Mfg. Mississippi, Inc. v. King
Const. of Houston, L.L.C., 782 F.3d 186, 192 (5th Cir. 2015). Although these
actions are substantively the same, they differ in their jurisdictional
requirements. Id. (citing 7 Charles Alan Wright, Arthur R. Miller & Mary Kay
Kane, Federal Practice and Procedure § 1703 (3d ed.)). The interpleader
statute grants federal jurisdiction over an interpleader action if there is
minimal diversity among the claimants--that is, two or more adverse claimants
have diverse citizenship--and the amount in controversy is at least $500. 28
U.S.C. § 1335(a); Auto Parts, 782 F.3d at 192. By contrast, Rule 22 does not
confer subject matter jurisdiction; it is merely a procedural device for bringing
interpleader claims that fall within one of the general statutory grants of
federal jurisdiction. Selective Ins. Co. of Am. v. Norris, 209 F. Supp. 2d 580,
582 (E.D.N.C. 2002). This includes the diversity statute, which confers federal
jurisdiction over all cases in which there is complete diversity and the amount
in controversy exceeds $75,000. See 28 U.S.C. § 1332(a). Thus, a federal
court has subject matter jurisdiction over an Rule 22 interpleader action when
there is "(1) complete diversity of citizenship, which is met when the
stakeholder is diverse from all the claimants, even if citizenship of the
8

claimants is not diverse; and (2) an amount-in-controversy that exceeds
$75,000 exclusive of interest and costs." Hussain v. Boston Old Colony Ins.
Co., 311 F.3d 623, 635 n. 46 (5th Cir. 2002).
Here, while minimum diversity among the claimants is lacking,
Transamerica's interpleader suit satisfies the diversity statute. The amount in
controversy exceeds $75,000. And there is complete diversity because the
stakeholder, Transamerica, is an Iowa corporation with its principal place of
business in Iowa, and each claimant is a citizen of Louisiana. Thus, the Court
had jurisdiction to determine the proper distribution of the annuity contract
proceeds. See Travelers Ins. Co. v. First Nat. Bank of Shreveport, 675 F.2d
633, 637 (5th Cir. 1982) (holding district court had jurisdiction over rule
interpleader action brought by an insurer to determine ownership of life
insurance policy proceeds when the insurer was diverse from every claimant,
even though the claimants were all citizens of the same state). And because
Transamerica's suit met the requirements for rule interpleader under Rule 22,
the Court did not lose jurisdiction when Transamerica was discharged from
this litigation, leaving only the non-diverse potential claimants to the disputed
proceeds. See Standard Ins. Co. v. Nelson, No. C07-0140RSM, 2007 WL
1453099, at *1 (W.D. Wash. May 17, 2007) ("Federal courts maintain subject
matter jurisdiction over rule interpleader actions even when the diverse
9

stakeholder is dismissed, leaving co-citizen claimants to litigate the outcome
of the stake in controversy." (citing 7 Charles Alan Wright, Arthur R. Miller &
Mary Kay Kane, Federal Practice and Procedure § 1710 (3d ed.)).13

IV.

CONCLUSION
For the foregoing reasons, the Court DENIES Peggy Bagala's motion for

relief from judgment.

6th
New Orleans, Louisiana, this ___ day of June, 2016.

_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

13

To resist this conclusion, Peggy Bagala argues that Transamerica's suit cannot
be maintained as a rule interpleader suit because Transamerica did not affirmatively
"invoke" Federal Rule of Civil Procedure 22 prior to obtaining its dismissal from this
case. The Court will not consider this argument because Peggy Bagala raised it for the
first time in her reply brief. Cf. United States v. Myers, 772 F.3d 213, 218 (5th Cir.
2014).
10