American General Life Insurance Company v. Russell et al
Filing
72
RULING AND ORDER : 33 AGLICs Motion for Discharge is GRANTED. 45 Motion to Strike is DENIED as moot. Signed by Judge John W. deGravelles on 07/02/2018. (ELW)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
AMERICAN GENERAL LIFE
INSURANCE COMPANY
CIVIL ACTION
VERSUS
NO. 16-851-JWD-RLB
NICHOLAS RUSSELL, ET AL.
RULING AND ORDER
This matter comes before the Court on American General Life Insurance Company’s
(“AGLIC”) Motion for Discharge (Doc. 33) and the Motion to Strike AGLIC’s Redacted Invoices
(Doc. 44), Requiring Compliance with this Court’s Orders (Docs. 31 & 43) and Local Rule
54(B) (“Motion to Strike”) (Doc. 45) filed by Defendants Nicholas Russel and Michele
DiBenedetto (“the Children”). These motions have been briefed extensively. (Docs. 38, 39, 47,
48, 52.) Oral argument is not necessary. The Court has carefully considered the law, the facts in
the record, and the arguments and submissions of the parties and is prepared to rule. For the
following reasons, the Motion for Discharge is granted in part and denied in part, and the Motion
to Strike is denied as moot.
AGLIC seeks three categories of relief: (1) discharge; (2) protective relief related to the
discharge; and (3) attorney’s fees. Concerning the first, the Court grants AGLIC discharge from
the interpleader action. With respect to AGLIC’s request for protective relief, the Court denies
the request for discharge from all liability to Defendants; however, the Court permanently
enjoins Defendants from initiating any future action against AGLIC insofar as the interpled
funds are concerned and excuses AGLIC from further discovery and prosecution of this action,
except as otherwise ordered by this Court. Lastly, the Court denies AGLIC’s request for
reimbursement of its attorney’s fees and costs in the amount of $51,256.14 and denies AGLIC’s
request to deduct fees from the annuity benefit prior to its distribution. Instead, the Court grants
AGLIC $3,750.00 in reasonable attorney’s fees, to be awarded once the merits of this action
have been resolved and the Court has determined who the losing claimant is.
I.
Discharge
AGLIC first asks to be discharged with prejudice from this action. (Doc. 33-1 at 10.) As
neither Defendant has objected to this portion of AGLIC’s requested relief (Docs 38 at 1, 39 at
1), and the statutory requirements of 28 U.S.C. § 1335 have now been met (Doc. 32), AGLIC’s
request for discharge is appropriate and within the Court’s “broad powers [] in an interpleader
action.” Rhoades v. Casey, 196 F.3d 592, 600 (5th Cir. 1999). Accordingly, the Court hereby
grants AGLIC’s first requested relief and discharges it with prejudice from the interpleader
action.
II.
Protective Relief
In connection with its discharge, AGLIC further asks this Court to enjoin the defendants
“from filing any action . . . related to the annuity benefit at issue,” to excuse it from further
discovery, and for an order discharging it “from all liability to any defendant named herein.”
(Doc. 33-1 at 10.)
“Although interpleader may entitle a party to certain limited relief, it does not entitle a
party to an order ‘both enjoining prosecution of suits against [the stake] outside the confines of
the interpleader proceeding and also extending such protection to its insured, the alleged
tortfeasor.’” Nat'l Specialty Ins. Co. v. Knoten, 2010 WL 1267827, at *1 (E.D. La. Mar. 24,
2010) (quoting State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 533 (1967)). See also,
Wasserman v. Fid. & Deposit Co. of Maryland, 490 F. Supp. 564, 567 (S.D.N.Y. 1979)
(declining to enjoin claims based on negligence and breach of fiduciary duty that were
independent of the claims to the fund deposited); Lee v. W. Coast Life Ins. Co., 688 F.3d 1004,
1011 (9th Cir. 2012) (“interpleader does not shield the stakeholder from tort liability, nor from
liability in excess of the stake.”); Jackson Nat'l Life Ins. Co. v. Dobbins, 2016 WL 4268770, at
*2 (N.D. Tex. Aug. 15, 2016) (“The discharge of liability the interpleader receives is defined by
the scope of the funds interpleaded.”).
The Court is, therefore, without the authority to grant the full scope of relief sought by
AGLIC. Accordingly, AGLIC’s request for discharge of liability is denied. The Court will,
however, grant AGLIC injunctive relief insofar as the interpled funds are concerned, and excuse
it from further discovery and prosecution of this action, except as otherwise ordered by this
Court.
III.
Attorney’s Fees
Under Fifth Circuit precedent “modern federal courts retain discretion to award attorney's
fees and costs to the stakeholder in an interpleader action, whenever it is fair and equitable to do
so.” Noeller v. Metro. Life Ins. Co., 190 F.R.D. 202, 206 (E.D. Tex. 1999). See also, Corrigan
Dispatch Co. v. Casa Guzman, 696 F.2d 359, 364 (5th Cir. 1983); Rhoades, 196 F.3d at 603.
Such awards are not, however, automatic. Gen. Elec. Capital Assur. v. Van Norman, 209 F.
Supp. 2d 668, 672 (S.D. Tex. 2002) (citing Gulf Oil Corp. v. Olivier, 412 F.2d 938 (5th Cir.
1969)). When a court finds an award of fees appropriate, the amount is generally modest because
“all that is necessary is the preparation of a petition, the deposit in court or posting of a bond,
service on the claimants, and the preparation of an order discharging the stakeholder.” 7 Charles
Alan Wright, et al., Federal Practice and Procedure § 1719 (3d ed.).
When granting attorney’s fees in an interpleader action, courts weigh the following
factors to determine the proper amount: (1) the complexity of the case; (2) whether the plaintiff
performed unique services for the claimants or the court; (3) whether the plaintiff acted in good
faith and with diligence; (4) whether the services rendered benefited the plaintiff; and (5)
whether the claimants improperly protracted the proceedings. See Wright, Federal Practice and
Procedure § 1719; New York Life Ins. & Annuity Corp. v. Cannatella, 550 F. App’x. 211, 217
(5th Cir. 2013) (unpublished); Amica Life Ins. Co. v. White, 2010 WL 2682394, at *2 (M.D. La.
July 2, 2010). Applying these factors to the instant matter, the Court finds they do not support the
$51,256.14 fee award requested by AGLIC.
Concerning the first factor, complexity of the case, while AGLIC claims to be unfamiliar
with the specific requirements of a Power of Attorney form under the Louisiana Civil Code
(Doc. 33-1 at 3), “the underlying interpleader action is a mundane exercise for an insurance
company writing life insurance policies.” First Colony Ins. Co. v. Kreppein, 2007 WL 1832133,
at *1 (E.D. La. June 25, 2007). Thus, this factor weighs against a larger award.
Regarding the second factor, no unique services were performed for the Court or
claimants. For example, in EXCO Operating Co., LP v. Arnold, the stakeholder, remained in the
case past the initial pleadings to assist the Special Master “in the preparation of an interest and
distribution spreadsheet.” 2014 U.S. Dist. LEXIS 131873, at *7 (W.D. La. July 3, 2014).
However, even with this additional work, the magistrate judge found EXCO’s $48,990.76 fee
request excessive and cut nearly $40,000 from the final award. Id. at 8–11.
Moving to the third factor, AGLIC has not acted with diligence or in good faith. AGLIC
initiated this action on December 15, 2016. (Doc. 1.) Defendants had each been served, retained
counsel, and filed a response by February 21, 2017 (Docs. 6, 7, 10, 11, 12), at which point
AGLIC could have sought discharge in this matter. However, AGLIC’s first motion for
discharge was not filed until April 5, 2017 (Doc. 170), and included no documentation
supporting the requested $20,184.50 in fees. Additionally, AGLIC incorrectly argued that it was
not required to deposit the annuity funds or post a bond with the Court, so the jurisdictional
requirements of 28 U.S.C. § 1335 (under which this action was brought) were not met until
November 17, 2017. (Doc. 32.) Moreover, invoices supporting AGLIC’s requested fees were not
received until January 4, 2018 (Doc. 44), which the Court notes are heavily redacted and not in
compliance with Local Rule 54(b), despite multiple express reminders to do so. (Docs 31 at 3, 43
at 1.) Furthermore, despite counsel’s assertion that they have not included time entries that
occurred prior to filing the interpleader action (Doc. 44-1 at 1 ¶ 2), the Court can only arrive at
the $51,256.14 total AGLIC has requested by including the full amounts listed on each submitted
invoice – totals that appear to still include pre-filing time entries. (See, e.g., Doc. 44 at 1–10.)
These facts all demonstrate a lack of diligence and, likely, good faith.
Turning to the fourth factor, benefit to the plaintiff, a review of the non-redacted portion
of AGLIC’s invoices shows, as best the Court can determine, a total of 143 hours billed (Doc.
44), with matters typically eligible for reimbursement – preparing the petition, posting of a bond,
service on the claimants, and preparation of a discharge motion – accounting for, at most, 23.10
hours. The remaining hours were spent on a multitude of other items that would have been
unnecessary if AGLIC had timely posted the bond and submitted timesheets in compliance with
Local Rule 54(b) as requested by the Children in February 2017. (Doc. 19.)
Lastly, under the fifth factor, the Court finds that neither Defendant has improperly
protracted these proceedings. While the Children have opposed AGLIC’s discharge, the Court
does not find the basis for their opposition – nonpayment of bond and lack of documentation
supporting AGLIC’s requested fees – to be unreasonable or improper.
Additionally, as argued by the Children (Doc. 39 at 6–7), it is important to note that some
jurisdictions have found it inappropriate to award attorney’s fees to insurance companies in
interpleader actions. These cases reason that beneficiaries should not bear the “ordinary costs of
the plaintiff in transacting its business.” Fid. & Deposit Co. of Md. v. A to Z Equip. Corp., 258 F.
Supp. 862, 863 (E.D.N.Y. 1966). See also, Unum Life Ins. Co. of Am. v. Kelling, 170 F. Supp. 2d
792, 794 (M.D. Tenn. 2001) (recovery of attorney’s fees inappropriate “because insurance
companies, by definition, are interested stakeholders; filing the interpleader action immunizes
the company from further liability under the contested policy.”); Life Inv'rs Ins. Co. of Am. v.
Childs, 209 F. Supp. 2d 1255, 1256 (M.D. Ala. 2002) (“Unlike innocent stakeholders who
unwittingly come into possession of a disputed asset, an insurance company can plan for
interpleader as a regular cost of business and, therefore, is undeserving of a fee award.”); Banner
Life Ins. Co. v. U.S. Bank, NA, 931 F. Supp. 2d 629 (D. Del. 2013) (Awarding attorney fees to
insurance companies in interpleader actions shifts the insurer's ordinary business expenses to the
claimants, which is generally not appropriate); Guardian Life Ins. Co. v. Gilmore, 45 F. Supp. 3d
310 (S.D.N.Y. 2014) (Insurer not entitled to fees when it did not identify any unique expenses
incurred in connection with its interpleader action, nor any other special circumstances that
would justify an award) (all internal citations omitted).
While this reasoning was previously adopted by this district in Life Ins. Co. of N. Am. v.
Nava, 667 F. Supp. 279, 280–81 (M.D. La. 1987), the Court will not take such a strict approach
here. The Court will, however, follow “the broad rule that an award must be reasonable.”
Noeller, 190 F.R.D. at 207 (citing James Talcott, Inc. v. Allahabad Bank, Ltd., 444 F.2d 451, 468
(5th Cir. 1971)). Accordingly, in determining a reasonable fee award, the Court will employ the
interpleader-specific five factors analyzed above and Fifth Circuit precedent. See, Phillips
Petroleum Co. v. Hazlewood, 534 F.2d 61, 63 (5th Cir. 1976) (recognizing that “the award of
attorney's fees is within the discretion of the court”); Watkins v. Fordice, 7 F.3d 453, 457 (5th
Cir. 1993) (instructing district courts to “exclude all time that is excessive, duplicative, or
inadequately documented.”) (citing Hensley v. Eckerhart, 461 U.S. 424, 432-34 (1983)); Tollett
v. City of Kemah, 285 F.3d 357, 368 (5th Cir. 2002) (hourly rate should be adjusted to match
“the community in which the district court sits.”) (internal quotation omitted); Davis v. Bd. Of
Sch. Comm'rs of Mobile Cty., 526 F.2d 865, 868 (5th Cir. 1976) (recognizing that “the district
court is itself an expert in assessing these matters.”).
As previously discussed, from what the Court is able to discern, counsel for AGLIC spent
at most 23.10 hours bringing this action, serving the defendants, posting the bond, and seeking
discharge. (Doc. 44.) The Court “finds [this] to be an overly inflated amount that does not
properly reflect the simplicity of this issue.” Amica Life, 2010 WL 2682394 at *3. Further, the
fees associated for this work total $7,019.10, corresponding to an average hourly rate of $303.86.
The Court finds this rate to be “unreasonable considering the prevailing rate in the forum
community, the Middle District of Louisiana.” Id.
After careful consideration of the issues presented in this interpleader, the considerable
experience of AGLIC’s counsel, and the Court’s own familiarity with the legal market in this
locality, the Court finds that 15 billable hours at a rate of $250 per hour is appropriate and
reasonable. See Appendix (describing compensated amounts); Amica Life, 2010 WL 2682394 at
*3 (using, in 2010, a single rate of $150 per hour for all plaintiff’s counsel, which included “a
well respected, experienced member of the Louisiana bar”). Accordingly, AGLIC’s request for
$52,256.14 is denied. The Court will, however, award AGLIC attorney’s fees in the reasonable
amount of $3,750.00.
Finally, each Defendant has previously asked the Court to find this interpleader action
necessary only because of their opponent’s actions. (Docs 20 at 3, 21-2 at 3, 39 at 7.) The
Children have further asked the Court to delay any fee award until a decision on the merits has
been reached. (Docs 21-3 at 5, 39 at 7.)
As all parties have noted, fee awards are solely within the Court’s discretion. (Docs 38 at
1, 39 at 2, 47 at 4.) “In the normal case, these will be taxed against the losing claimant, although
the costs and fees have been divided in some cases.” Wright, Federal Practice and Procedure §
1719. See also, Prudential Ins. Co. of Am. v. Cooper, 666 F. Supp. 190, 193 (D. Idaho 1987),
aff'd, 859 F.2d 154 (9th Cir. 1988) (Insurer in interpleader action not entitled to attorney fees out
of policy proceeds awarded to the primary beneficiary, when the fees were primarily due to
actions of the secondary beneficiary, because “it would [not] be equitable in this case to lessen
the amount of proceeds to be awarded.”). The Court finds these arguments compelling and will
therefore deny AGLIC’s request to deduct the awarded fees from the interpled fund (Doc. 33-1 at
10 ¶ (d)). The Court will delay any determination regarding the allocation of AGLIC’s fees until
the merits of this action have been resolved.
IV.
Conclusion
Accordingly,
IT IS ORDERED that:
(1) AGLIC’s request for discharge is GRANTED;
(2) AGLIC’s request for discharge from all liability to the Defendants is DENIED;
(3) Defendants are PERMINANTELY ENJOINED from initiating any future action
against AGLIC insofar as the interpled funds are concerned;
(4) AGLIC’s request for exclusion from discovery and prosecution of this action,
except by Order of this Court so instructing AGLIC to participate, is GRANTED;
(5) AGLIC’s requests for reimbursement of its attorney’s fees and costs in the
amount of $51,256.14, and to deduct fees from the annuity benefit prior to its
distribution are DENIED;
(6) AGLIC is awarded $3,375 in reasonable attorney’s fees, to be allocated once the
merits of this action have been resolved and the Court has determined the losing
claimant.
IT IS FURTHER ORDERED, in light of the above decision on AGLIC’s fee request,
that the Motion to Strike (Doc. 45) filed by Defendants Nicholas Russel and Michele
DiBenedetto is DENIED AS MOOT.
Signed in Baton Rouge, Louisiana, on July 2, 2018.
S
JUDGE JOHN W. deGRAVELLES
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
APPENDIX1
Non-Redacted Recoverable Fees
Date of Service
November 15, 2016
November 29, 2016
December 14, 2016
December 15, 2016
December 15, 2016
December 15, 2016
December 23, 2016
January 11, 2017
January 17, 2017
January 17, 2017
January 18, 2017
February 14, 2017
April 4, 2017
April 5, 2018
April 5, 2018
November 15, 2017
November 17, 2017
1
Description
Prepare Complaint & Corporate
Disclosures
Amend Complaint
Finalize Complaint & Prepare Email
re: Documents to be Filed
Review & Reply to Emails re:
Complaint Filing & Service on
Defendants
Review Complaint to Verify
Compliance with Louisiana Law
Draft Cover Sheet & Summons
Request
Prepare Waiver of Service Notice
Discuss Potential Waiver of Service
with Defense Counsel
Review Emails re: Service on
Defendants
Review & File Waiver of Service for
Franklin
Review & File Service Return for
DiBenedetto
Review Contact Information and
Draft Service Documents for Russell
Draft Motion for Discharge
Revise Motion for Discharge
Revise & File Motion for Discharge
Prepare Bond Pleading
Prepare & File Notice of Bond
Posting
Total
Attorney
Hours
Amount at Revised
Rate
2.10
$525.00
1.00
$250.00
1.20
$300.00
0.50
$125.00
0.70
$175.00
0.60
$150.00
1.10
$275.00
0.30
$75.00
0.20
$50.00
0.40
$100.00
0.40
$100.00
0.70
$175.00
1.80
2.00
0.60
1.20
$450.00
$500.00
$150.00
$300.00
0.20
$50.00
15.00
$3,750.00
The data herein is a summary of the non-redacted entries contained in the AGLIC submitted invoices which reflect
recompensable work. (Doc 44.) It is presented to show the parties how the Court calculated AGLIC’s fee award.
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