NUNZIATA v. JANUS FUNDS INC et al

Filing 76

ORDER ON MOTIONS FOR DISBURSEMENT OF FUNDS denying 69 Motion for Withdrawal of C.R.I.S. Funds ; granting in part and denying in part 70 Motion for Disbursement of Funds By JUDGE JOHN A. WOODCOCK, JR. (ccs)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
RALPH NUNZIATA,
Plaintiff,
v.
JANUS FUNDS, INC.,
Defendant.

)
)
)
)
)
)
)
)
)

2:16-cv-00158-JAW

ORDER ON MOTIONS FOR DISBURSEMENT OF FUNDS
A Maine plaintiff seeks disbursement of certain retirement funds originally
belonging to his brother, a New York decedent, which the Defendant, a financial
services company, deposited into the Court’s Registry after instituting an
interpleader counterclaim. Because of the highly irregular procedural posture of this
case, the Court is reluctant to take any action to disturb the pre-existing conditions
and, therefore, orders the Clerk to return the funds to the Defendant.
I.

BACKGROUND
On March 10, 2016, Ralph Nunziata (Plaintiff) filed a complaint for declaratory

judgment in this Court against Janus Funds, Inc. (Janus, Defendant) and the Thrift
Savings Plan, an agency of the United States. Compl. (ECF No. 1).1 The Complaint

The Thrift Savings Plan (TSP) moved to dismiss the Complaint on the ground that Dolores
Nunziata-Lagamon was the designated beneficiary of Robert Nunziata’s TSP account and that it was
statutorily required to pay the proceeds to her. U.S.’s Mot. to Dismiss (ECF No. 11). Ralph Nunziata
initially balked but then conceded the point and withdrew his opposition to the motion to dismiss. Obj.
to U.S.’s Mot. to Dismiss (ECF No. 14); Withdrawal of Pl.’s Obj. to United States of Am.’s Mot. to
Dismiss (ECF No. 18). On August 30, 2016, the Court granted the TSP’s motion to dismiss. Order on
Status Conf. at 2 (ECF No. 24). The Clerk’s Office entered judgment as to TSP on June 17, 2017. J.
1

alleged that Ralph Nunziata, as the executor of the Estate of Robert Nunziata, is the
rightful beneficiary of retirement accounts managed by Janus originally owned by
Robert Nunziata, who is now deceased. Id. On May 4, 2016, Janus filed an answer
and also filed an interpleader counterclaim, asserting that Robert Nunziata’s
retirement file with Janus listed Robert Nunziata’s ex-wife, Dolores NunziataLagamon, as the beneficiary of his retirement account and expressing concern that it
not be subject to double liability. Def.’s Ans. and Interpleader Countercl. (ECF No. 4).
On August 18, 2016, the Court expressed concern about whether there was a
real case or controversy and suggested that both potential adverse claimants had to
be parties for there to be a proper interpleader action, so the Court ordered Ralph
Nunziata to implead Dolores Nunziata-Lagamon. Order (ECF No. 21). On August
30, 2016, the Court further advised, “Once Ms. Nunziata-Lagamon is impleaded in
Mr. Nunziata’s direct action, Janus may wish to close the circle by interpleading Ms.
Nunziata-Lagamon to respond to the interpleader concern. . . .” Order on Status Conf.
at 3 (ECF No. 24). At the same time, as Janus was anxious to file the proceeds with
the Clerk’s Office while the issue of the rightful beneficiary was being resolved, the
Court granted its motion to deposit the proceeds with the Clerk’s Office. Agreed Order
on Def. Janus Funds, Inc.’s Interpleader Countercl. (ECF No. 25).
On September 16, 2016, Ralph Nunziata filed an amended complaint, naming
Dolores Nunziata-Lagamon as an additional party. Am. Compl. for Decl. J., an
Accounting and Turnover (ECF No. 29). The Clerk’s Office issued a summons to

(ECF No. 56). To cut to the quick, in its recitation of the facts underlying the pending motions, the
Court has eliminated any further reference to the TSP,

2

Dolores Ruth O’Dea, formerly known as Dolores Nunziata-Lagamon, on October 19,
2016. Summons in a Civil Action (ECF No. 31). On March 28, 2017, the executed
summons was filed. Sheriff’s Return (ECF No. 39). Janus never closed the circle by
interpleading Ms. O’Dea.
The Court issued a scheduling order on March 29, 2017. Scheduling Order at
1-3 (ECF No. 41). However, Ms. O’Dea failed to answer the amended complaint, and
on April 26, 2017, the Clerk’s Office filed an order to show cause. Order to Show
Cause (ECF No. 42).

On May 9, 2017, Attorney Jeffrey White, who had been

representing Ralph Nunziata, moved to withdraw as his attorney and moved to
extend the time within which to respond to the order to show cause. Mot. to Withdraw
as Counsel for the Pl. (ECF No. 43); Resp. to Order to Show Cause and Req. to Extend
Time to File Responsive Pleading (ECF No. 44). On May 10, 2017, the Court granted
the motion to extend time and the motion to withdraw as counsel, giving Ralph
Nunziata twenty-one days to find new counsel. Order (ECF No. 45); Order (ECF No.
47). On May 31, 2017, Attorney Jeffrey Bennett entered his appearance on behalf of
Ralph Nunziata. Notice of Appearance (ECF No. 50).
On June 16, 2017, Attorney Bennett for Ralph Nunziata and Attorney John
Giffune for Janus filed a Stipulation of Dismissal, dismissing the action. Stip. of
Dismissal (ECF No. 54). On the same day, Attorney Bennett filed a voluntary
dismissal as to Dolores Ruth O’Dea. Notice of Voluntary Dismissal (ECF No. 55).
On July 10, 2017, the Court expressed dissatisfaction with the state of the
docket as a result of the dismissals, because “[t]he case is . . . over from the Court’s

3

perspective, except that the Clerk’s Office continues to hold monies in anticipation of
a legally-sufficient direction from the parties as to what to do with the proceeds.”
Status Order at 3-4 (ECF No. 57). The Court instructed the parties to file documents
under Federal Rule of Civil Procedure 67, Local Rule 67(d), and 28 U.S.C. §§ 2041-42
to enable the Court to release the funds. Id. at 4.
On July 31, 2017, Mr. Nunziata entered a pro se appearance. Notice of Pro Se
Appearance (ECF No. 62). On August 2, 2017, Attorney Bennett moved to withdraw
as Mr. Nunziata’s attorney in light of the pro se appearance. Mot. to Withdraw as
Counsel for the Pl. (ECF No. 64). The Court granted the motion to withdraw on
August 3, 2017. Order (ECF No. 65).
On August 7, 2017, the Court received a letter from the Public Administrator
of Queens County, New York claiming that it was the true administrator of the Estate
of Robert Nunziata. Letter (ECF No. 66). The Public Administrator provided exhibits
showing that the Surrogate’s Court of Queens County, New York had revoked Ralph
Nunziata’s letters of Administration on August 17, 2015 and appointed the Public
Administrator as executor of the Estate. Id. Attachs. 2-3.
On August 17, 2017, Ralph Nunziata filed a motion to withdraw the funds.
Mot. for Withdrawl [sic] of C.R.I.S. Funds (ECF No. 69) (Pl.’s Mot.). On September
1, 2017, the Public Administrator filed a response, Affirmation in Opp’n to Mot. for
Withdrawal of C.R.I.S. Funds (ECF No. 71) (Public Administrator Opp’n), and Janus
filed a response on September 7, 2017. Resp. to Mot. for Withdrawl of C.R.I.S. Funds
(ECF No. 72) (Def.’s Opp’n). On September 15 and 19, 2017, Mr. Nunziata filed

4

replies. Obj. to the Office of Public Administration’s for Queens County Affirmation
in Opp’n to Pl.’s Mot. for the Withdrawl [sic] of C.R.I.S. Funds (ECF No. 74) (Pl.’s
Public Administrator Reply); Pl.’s Reply to Def.’s Obj. to Pl.’s Mot. for Disbursement
of Interpleader Funds (ECF No. 75) (Pl.’s Janus Reply).
Meanwhile, on August 22, 2017, Janus filed its motion to direct disbursement
of the funds. Mot. Regarding Disbursement of Interpleader Funds (ECF. No. 70)
(Def.’s Mot.). On September 13, 2017, Mr. Nunziata filed a response to Janus’s
motion. Pl.’s Obj. to Def.’s Mot. for Disbursement of Interpleader Funds (ECF No. 73)
(Pl.’s Opp’n).

Janus did not reply to Mr. Nunziata’s response and the Public

Administrator did not respond to either Janus’ motion or Mr. Nunziata’s response.
II.

THE PARTIES’ POSITIONS
A.

The Public Administrator’s Position

The Public Administrator requests that the Court return the proceeds to Janus
and direct it to deliver the proceeds to the Estate of Robert Nunziata.

Public

Administrator Opp’n at 4. The Public Administrator argues that the only named
beneficiary of the retirement account, Dolores O’Dea, is not entitled to the funds
because her divorce settlement with Robert Nunziata removed her rights to the funds
and she has accordingly disclaimed all rights to the funds. Id. at 2-3. The Public
Administrator suggests that, under New York law, it is entitled to the funds as the
administrator of the Estate, and that the Plaintiff will only inherit as a beneficiary of
the Estate after probate. Id. at 3-4 (citing Jacobelli v. Regan, 521 N.Y.S.2d 316 (3d
Dept. 1987); N.Y. RETIRE. & SOC. SEC. LAW § 51(d)).

5

B.

Janus’ Position

Janus requests that the Court transfer the funds to the registry of the
Surrogate’s Court, as it is in the best position to determine the true ownership of the
funds. Def.’s Mot. at 4. In the alternative, Janus is willing to accept the return of the
funds until the Surrogate’s Court makes its final determination. Id. Janus contends
that this Court no longer has subject matter jurisdiction to entertain this dispute,
because there is no federal question and the amount in controversy, approximately
$37,000, is significantly less than the $75,000 required for diversity of citizenship
jurisdiction. Id. at 3-4; Def.’s Opp’n at 3-4. Janus insists that the proper forum for
resolution of this dispute is the Surrogate’s Court “[s]ince this dispute concerns funds
that belonged to a decedent who resided in New York State, a decedent whose estate
is being handled by a court in New York State, and a decedent whose estate is being
administered by a New York State public administrator . . . .” Def.’s Opp’n at 4.
C.

Ralph Nunziata’s Position

Mr. Nunziata vehemently objects to returning the funds to Janus or
distributing the funds to the Estate. Pl.’s Mot. at 3. Mr. Nunziata maintains that
the funds should be distributed outside of probate according to the Successor
Beneficiary provisions of the accounts, which he suggests entitle him to receive the
funds. Id. at 4. Mr. Nunziata contends that the Court must adjudicate “all issues in
regards to Beneficiaries: named, unnamed or otherwise” before distributing the funds
to the Estate, unless the financial institution has made public their policy that
proceeds flow directly to the Estate or unless the decedent memorialized that
intention in writing prior to his passing. Pl.’s Public Administrator Reply at 2. Mr.
6

Nunziata disputes the Public Administrator and Janus’ contention that there is no
beneficiary to the retirement accounts, and therefore rejects the claim that the
proceeds flow to the Estate. Id. at 3. The Court infers from these arguments that
Mr. Nunziata accepts that he is not the named beneficiary or a named successor
beneficiary of the accounts, but that he believes there may be additional instructions
to disperse the funds to unnamed beneficiaries that may entitle him to the funds
outside of probate. See Pl.’s Janus Reply at 3 (referring to himself as “an Unnamed
Successor Beneficiary”).
Responding to the more specific arguments from Janus and the Public
Administrator, Mr. Nunziata explains that the decedent was never a member of a
public New York State Retirement Account, so the Public Administrator’s citation to
New York Retirement & Social Security Law § 51(d)) is inapplicable. Pl.’s Public
Administrator Reply at 3. He also rejects Janus’ proposal of sending the funds to the
Surrogate’s Court, likening that to an untimely motion for a change of venue. Id. Mr.
Nunziata replies that the Court does have subject matter jurisdiction and that Janus’
suggestion otherwise is untimely. Pl.’s Janus Reply at 2. Finally, Mr. Nunziata
raises new issues related to the TSP retirement account, alleging that Dolores O’Dea
wrongly withdrew those funds, satisfying jurisdictional requirements for him to
institute a third declaratory judgment action. Pl.’s Opp’n at 4.
III.

DISCUSSION
A.

Jurisdictional Deficiencies

The Court shares Janus’ concerns about the Court’s ability to adjudicate this
case but for different reasons. Objections to subject matter jurisdiction may be raised
7

at any time, even after the end of trial. Henderson ex rel. Henderson v. Shinseki, 562
U.S. 428, 434 (2011). It is true that the amount in controversy is less than $75,000,
which means the Court likely would have had little choice but to dismiss Mr.
Nunziata’s original complaint if it had known of these facts at the outset. But Janus
only recently raised its concerns about subject matter jurisdiction, long after it
initiated an interpleader counterclaim and deposited the roughly $37,000 of
retirement funds with the Court. For statutory interpleader actions, the amount in
controversy requirement is only $500, not $75,000 as in typical diversity actions. 28
U.S.C. § 1335(a); Railway Express Agency, Inc. v. Jones, 106 F.2d 341, 344 (7th Cir.
1939) (“The mandatory requirements of [28 U.S.C. § 1335(a)] are: (a) Two or more
adverse claimants; (b) citizens of different states; (c) a fund in possession of party
seeking to interplead, to which the two or more adverse claimants are making claim;
(d) said sum exceeds $500”). Since the roughly $37,000 here far exceeds $500, the
amount in controversy was no obstacle to subject matter jurisdiction once Janus
initiated the interpleader action.
In addition to the diversity of citizenship and amount in controversy
requirements, statutory interpleader requires multiple adverse claimants to the
interpleaded property:
The stakeholder[ ] names as defendants those who are potential
claimants to the stake. Typically, the [claimants] are not antagonistic
to the [stakeholder] but, rather, are pitted against one another. That
circumstance follows ineluctably from the principle that interpleader is
not available unless the [claimants]’ claims are “adverse” to each other.
Hudson Sav. Bank v. Austin, 479 F.3d 102, 107 (1st Cir. 2007) (citing WRIGHT AND
MILLER, FED. PRAC. & PROC. § 1705 (3d ed. 2001)) (internal citations omitted).
8

The level of adversity or the likelihood that a stakeholder will face double
liability is a “relatively undemanding jurisdictional requirement” because the statute
allows for interpleader when two or more adverse claimants “are claiming or may
claim to be entitled” to the same property. Metro. Prop. & Cas. Ins. Co. v. Shan Trac,
Inc., 324 F.3d 20, 24 (1st Cir. 2003); 28 U.S.C. § 1335(a)(1). It is frequently true that
one or more claims are tenuous, but that does not defeat jurisdiction because “the
adverse claims need attain only ‘a minimal threshold level of substantiality.’” See
Equitable Life Assur. Soc. of the U.S. v. Porter-Englehart, 867 F.2d 79, 84 (1st Cir.
1989).
Nevertheless, numerous courts have found jurisdiction lacking when there was
no real or reasonable fear of double liability or vexation of conflicting claims because
there was only one claimant, or there were two potential claimants but one of the
claimants withdrew or disavowed all rights to the property. See Indianapolis Colts
v. Mayor & City Council of Baltimore, 741 F.2d 954, 957 (7th Cir. 1984); Libby,
McNeill, & Libby v. City Nat. Bank, 592 F.2d 504, 508 (9th Cir. 1978); Vanderlinden
v. Metro. Life Ins. Co., 137 F. Supp. 2d 1160, 1164 (D. Neb. 2001); WRIGHT

AND

MILLER, FED. PRAC. & PROC. § 1705 (3d ed. 2017) (“This requirement is not met when
one of the claims clearly is devoid of substance, or one of the claimants . . . has dropped
the claim . . .”).

A stakeholder ordinarily may not eschew or “shift their

responsibilities” and “cho[o]se instead to burden the district court” when they have
other perfectly acceptable means of resolving the matter or avoiding liability. See
Forcier v. Metro. Life Ins. Co., 469 F.3d 178, 182, n.3 (1st Cir. 2006).

9

Here, it is doubtful whether Dolores O’Dea was a proper claimant because she
was barred by the divorce settlement from seeking the funds, and, more to the point,
she disclaimed all rights to the funds. Mr. Nunziata’s status as an interpleader
claimant is also unclear. If he is not named or involved anywhere in the policy
documents, as Janus argues, it is difficult to see how Janus could have reasonably
feared liability from his claim. When Mr. Nunziata filed the original complaint, he
sought the funds as the executor of the Estate, Compl. ¶¶ 18-19, 22, 24, but it now
appears that he lacked standing for that original claim because the Surrogate’s Court
actually revoked his letters of administration long before he instituted this lawsuit.
Despite this, the Court need not resolve these potential jurisdictional concerns
because the parties dismissed the action.
Even if Mr. Nunziata attempted to resurrect this interpleader action by filing
another complaint, the Court’s ability to adjudicate the matter is not clear, and the
Court would decline to decide the issues now that it is obvious there is no danger of
multiple liability and New York courts are fully capable of resolving the matter. See
Hudson, 479 F.3d at 107-08 (“At bottom, interpleader is an equitable mechanism”);
NYLife Distributors, Inc. v. Adherence Grp., Inc., 72 F.3d 371, 379 (3d Cir. 1995)
(“district courts have traditionally assumed that they possess broad equitable
discretion to decline jurisdiction over a statutory interpleader lawsuit where in their
view there is a pending state proceeding that obviates the need for the federal
action”); American Airlines, Inc. v. Block, 905 F.2d 12, 14 (2d Cir. 1990) (“it is well
recognized that interpleader is an equitable remedy, and a federal court may abstain

10

from deciding an interpleader action if another action could adequately redress the
threat that the stakeholder might be held doubly liable”).
Since this matter is closed and is likely unfit for any future proceedings in this
Court, the only question remaining is what to do with the funds in the Court Registry.
B.

Distribution of Funds after Dismissal of Interpleader Action

The parties did not cite any First Circuit authority directly addressing the
proper means of distributing property held by a court following a dismissed
interpleader action, and the Court did not locate any. Very few courts have addressed
circumstances similar to these. The Court looks to the approach of the Seventh
Circuit in Reliance National Insurance Co. v. Great Lakes Aviation, Ltd., 430 F.3d
412 (7th Cir. 2005). In Reliance, an insurer initiated an interpleader action to settle
various claims arising out of an aviation accident, bringing the passengers, plane
owners, and the pilots into a single suit. Id. at 414. The Seventh Circuit addressed
a scenario the district court might face on remand: that none of the claimants was
entitled to the $1 million the insurer deposited with the court. Id. at 416-17. The
Reliance Court concluded the best solution in the event of the unresolved interpleader
action was to return the funds to the depositor. Id. at 418 (“Logically the money
should go back to Reliance . . . . The money is, after all, Reliance’s, which it deposited
in court solely in order to avoid being dragged into the disputes between its insureds
and their tort claimants”); see also In re Hat, 363 B.R. 123, 144 (Bankr. E.D. Cal.
2007) (“Since the court has determined that neither . . . counter-defendant[ is] entitled
to any portion of the indemnity, it is left to determine whether or not those funds may

11

be returned to the interpleading plaintiff. The court finds that is the appropriate
remedy”).
The Court notes that at least one case suggests this approach may not always
be proper. The Ninth Circuit held that it was error for a district court to sua sponte
direct the funds back to the depositor after the claimants failed to prosecute the case
because the district court had properly accepted the property and dismissed the
depositor with prejudice. Soc’y Ins. Co. v. Nystrom, No. 16-16812, 2017 WL 5987764,
at *1 (9th Cir. Dec. 4, 2017) (unpublished). The Nystrom Court explained that “[t]he
primary purpose of interpleader is ‘for the stakeholder to protect itself against the
problems posed by multiple claimants to a single fund’” and reasoned that the district
court’s order “defeated the purpose of the interpleader and denied [the depositor] the
protection to which it was entitled.” Id. (quoting Michelman v. Lincoln Nat’l Life Ins.
Co., 685 F.3d 887, 894 (9th Cir. 2012)).
The Court is convinced that the facts and reasoning in Reliance are more
applicable to this situation than those in Nystrom. The Court is not acting sua sponte,
but rather, it is addressing motions and briefing from the parties. As with the
interested depositor in Reliance, which sought the return of the funds, Janus is
willing to retake possession of the property pending further action in the New York
courts. As such, Janus is not unfairly deprived of any protection to which it was
entitled and continues to seek.
The one hint the Court has located from the First Circuit aligns with this
approach. In Equitable Life Assurance Society of the U.S. v. Porter-Englehart, 867

12

F.2d at 91 n.3, the First Circuit briefly addressed in a footnote the argument that a
district court lacked jurisdiction over a portion of some interpleaded funds because
one of the claims for that portion was frivolous. The Porter-Englehart Court wrote
that if it “were to conclude that the district court lacked jurisdiction over that aspect,
the remedy would be to vacate the . . . Order awarding the money to [the victorious
claimant] and to insist that [she] return the money to the registry, so that the
[insurer] could withdraw it . . .” Id. The First Circuit did not elaborate further,
explaining that the issue was moot because the insurer would have paid the same
claimant those same funds in the end. Id. This suggests that the approach in
Reliance is correct, and the Court may return the funds to the depositor in the event
there is no resolution of the interpleader action or it subsequently discovers potential
jurisdictional deficiencies.
Finally, the Court is reluctant to transfer the funds to the Surrogate’s Court
without a request from that court. In light of the jurisdictional concerns, which Janus
itself raised, the safer course of action is to return the funds without further direction
from the Court because it restores the situation as it existed before the start of this
lawsuit.
C.

Ultimate Entitlement to the Funds

The Court’s decision does not resolve or imply a proper resolution one way or
the other about who may ultimately be entitled to the retirement funds.

Mr.

Nunziata has a point about the inapplicability of the Public Administrator’s citation
to New York Retirement & Social Security Law § 51(d) because the private retirement
account at issue is not a New York State public pension or retirement account. At
13

the same time, the Public Administrator may be correct that the Estate is entitled to
the funds if the terms of the plan or other applicable New York caselaw or statute
specify that the funds shall fall to the Estate when there is no named beneficiary that
can take them. See e.g. N.Y. EST. POWERS & TRUSTS LAW § 5-1.4 (specifying that
subsequently divorced spouses are to be treated as predeceased for purposes of
interpreting retirement benefits plans unless the terms of the policy explicitly provide
otherwise).
The Court need not address these questions because the parties have dismissed
the action and, in any event, the Court can no longer conclude this matter is fit for
equitable resolution through an interpleader action.
IV.

CONCLUSION
The Court DENIES Ralph Nunziata’s Motion for Withdrawl [sic] of C.R.I.S.

Funds (ECF No. 69). The Court GRANTS in part and DENIES in part Janus’ Motion
Regarding Disbursement of Interpleader Funds (ECF No. 70). The Court ORDERS
the Clerk to return the funds that Janus deposited, together with any interest and
income earned theron. In accordance with 28 U.S.C. § 1914 and the guidelines set by
the Director of the Administrative Office of the United States Courts, the Clerk is
directed, without further order of this Court, to deduct from the income earned on the
money a fee equal to ten percent of the income earned. Such fee shall not exceed that
authorized by the Judicial Conference of the United States.

14

SO ORDERED.

/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 30th day of March, 2018

15