THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK v. HOLTZMAN et al
OPINION filed. Signed by Judge Freda L. Wolfson on 11/24/2015. (mmh)
*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
THE UNITED STATES LIFE
Civ. Action No.: 14-113(FLW)
INSURANCE COMPANY IN THE
CITY OF NEW YORK,
ABRAHAM HOLTZMAN, and
THE STATE OF NEW JERSEY,
DEPARTMENT OF HUMAN SERVICES,
DIVISION OF MEDICAL ASSISTANCE
AND HEALTH SERVICES,
WOLFSON, District Judge:
This Court, in its previous Opinion, granted Plaintiff United States Life Insurance
Company (“U.S. Life” or “Plaintiff”) interpleader relief and ordered Plaintiff to deposit
$109,430.76 in the Court’s registry for the benefit of pro se Defendant, Abraham Holtzman
(“Holtzman” or “Defendant”), and the State of New Jersey Department of Human Services
Division of Medical Assistance and Health Services (“Medicaid”). The Court also exercised its
discretion in awarding U.S. Life reasonable attorneys’ fees and costs, and in that regard, directed
Plaintiff to submit a certification setting forth the number of billable hours and compensable costs.
In the instant application, U.S. Life seeks $19,057.68 as reimbursement for its attorneys’ fees and
costs. Holtzman objects to that request on the grounds that the fees are unreasonable, and
Holtzman reargues his rejected position that U.S Life lacks capacity to sue or be sued. For the
reasons expressed herein, the Court AWARDS Plaintiff, from the Court’s registry, a total amount
of $10,532.38 in attorneys’ fees and costs.
BACKGROUND AND PROCEDURAL HISTORY
I will incorporate the facts delineated in my previous Opinion here. As a brief background,
Holtzman and his two dependent children, Jacob and Zipora, were insured under the New York
State United Teachers Catastrophe Major Medical Insurance Plan. U.S. Life Ins. Co. in the City
of New York v. Holtzman, No. 14-00113, 2014 WL 5149707, at *1 (D.N.J. Oct. 14, 2014). In
2002, Holtzman’s two young children required medical care at a custodial care facility. Medicaid
made payments for both children while in the care facility, despite the fact that it was the payor of
last resort. Medicaid requested reimbursement from U.S. Life for Jacob and Zipora’s expenses,
totaling $180,507.46. A month later, in July 2008, U.S. Life informed Holtzman that it determined
that U.S. Life was obligated to reimburse Medicaid. Holtzman objected.
On January 14, 2014, U.S. Life filed the instant Complaint for interpleader relief, which
Holtzman moved to dismiss on several grounds, including that U.S. Life lacks the capacity to sue
or be sued. On that motion, the Court ruled as follows: (1) U.S. Life is an incorporated company
with the capacity to sue or be sued; (2) U.S. Life met the requirements of the interpleader statute
and may be relieved from liability; (3) U.S. Life was directed to deposit $109,430.76 into the
registry of the Court. U.S. Life was also awarded reasonable attorneys’ fees and costs, and in that
regard, it was directed to submit a separate application for the amount of fees. Id. at *7.
Presently, U.S Life seeks attorneys’ fees and costs in the amount of $19,057.68. In
response, Holtzman argues that U.S. Life’s request should be denied because U.S. Life has
demonstrated “no basis for a grant of fees or costs.” 1 Furthermore, Holtzman argues that this Court
Holtzman also argues that the Court lacks jurisdiction because U.S. Life is a “defunct”
corporation that lacks the capacity to sue or be sued. The Court need not address this argument
since this issue was previously disposed of. See U.S. Life Ins. Co in the City of New York, 2014
WL 514707 at *2-3. Indeed, the Court held that U.S. Life “is organized under the laws of New
York, and it is [further] licensed to engage in life insurance, annuities, and accident and health
and counsel for U.S. Life engaged in ex-parte communications which provided an unfair advantage
to U.S. Life. Holtzman asserts that in light of the alleged “unethical ex parte conduct,” I should
recuse myself from this case. 2 I will address each of these arguments, in turn.
Holtzman argues that U.S. Life and this Court engaged in “unethical” behavior by engaging
in ex parte communications where the “court . . . requested that a supplemental brief be filed by
opposing counsel in an attempt to cure fatal strict jurisdictional defect.” In that regard, Holtzman
maintains that this Court should recuse itself from the instant matter.
Holtzman, however, mischaracterizes the nature of the communication between Plaintiff
and this Court. Specifically, at issue, is a communication from Chambers staff to U.S. Life
concerning subject matter jurisdiction; the Court, exercising its authority, directed Plaintiff to file
supplemental briefing on the issue whether Plaintiff deposited the interpleader funds with the
Clerk’s office when the Complaint was filed. See 28 U.S.C. § 1335(a)(2). Indeed, the Court is
permitted to sua sponte raise subject matter jurisdiction concerns. See Nesbit v. Gears Unlimited,
insurance within the State of New York.” Id. Therefore, contrary to Defendant’s insistence, U.S.
Life is a valid corporation that has the capacity to sue and be sued.
Inexplicably, Holtzman applies collateral estoppel to the alleged “unethical conduct.” The
doctrine of collateral estoppel prohibits a party from bringing forth an issue that was previously
litigated by the same parties and directly ruled on by a court. Montana v. U.S., 440 U.S. 147, 147148 (1979); Glictronix Corp v. American Tel. and Co., 603 F. Supp. 552, 564 (D.N.J. 1984);
Witikowski v. Welch, 173 F.3d 192, 199 (3d Cir. 1999). Collateral estoppel is used for the purposes
of protecting parties from the “burden of relitigating an identical issue with the same party” and
ensuring judicial economy by eliminating unnecessary litigation. Parklane Hosiery Co., Inc. v.
Shore, 439 U.S. 322, 326 (1979); see also Blonder-Tounge Laboratories, Inc. v. University of
Illinois Foundation, 402 U.S. 313, 329 (1971); Jean Alexander Cosmetics, Inc. v. L’Oreal USA,
Inc., 458 F.3d 244, 253 (3d Cir. 2006). Here, there are no factual circumstances to which collateral
estoppel could apply.
Inc., 347 F.3d 72, 77 (3d Cir. 2003). To be sure, the communication from Chambers was necessary
to relay to Plaintiff this Court’s concerns regarding subject matter jurisdiction. In fact, such a
request from Chambers was made to benefit Holtzman, a pro se defendant.
In response to Chambers’ inquiry, U.S. Life stated in its supplemental briefing that it did
not deposit the funds into the registry, but maintained that its failure to deposit the funds was not
a sufficient basis for the Court to dismiss the Complaint for lack of jurisdiction. See CNA Ins.
Companies v. Waters, 926 F.2d 247, 249 n.6 (3d Cir.1991); U.S. Fire Ins. Co. v. Asbestospray,
Inc., 182 F.3d 201, 210 (3d Cir. 1999); Lincoln Gen. Ins. Co. v. State Farm Mut. Auto. Ins. Co.,
425 F.Supp.2d 738,742 (E.D. Va. 2006) (citing CNA Ins. Companies, 926 F.2d at 249 n.6); see
also Legacy Inv. & Mgmt., LLC v. Susquehanna Bank, No. 12-2877, 2013 WL 5423919, at *5 (D.
Md. Sept. 26, 2013) (“However, an interpleader stakeholder that does not immediately deposit the
disputed funds with the Court is entitled to perfect jurisdiction by moving to deposit the funds at
a later time, as long as there is no ‘persistent failure’ to perfect subject matter jurisdiction”). Based
on Plaintiff’s representations, the Court made certain determinations in its previous Opinion.
Accordingly, I reject Holtzman’s argument that Chambers’ communication with counsel was
Attorneys’ Fees and Costs
U.S. Life submits that it has incurred $18,221.00 in attorneys’ fees for services rendered
by Wilson, Elser, Moskowitz, Edelman & Dicker (“Wilson Esler”). Certification in Supp. of Req.
for Reimbursement of Att’ys Fees ¶ 2. Additionally, U.S. Life seeks $836.38 in costs, which
include the filing fee for the Complaint, serving the Complaint and legal research. Id. In response,
Holtzman argues that the requested fees are unreasonable. 3
In interpleader actions brought in federal court, “the prevailing principle . . . , whether
under the interpleader statute or under [Federal Rule of Civil Procedure 22], is that it is within the
discretion of the court to award the stakeholder costs, including reasonable attorneys’ fees, out of
the deposited fund.” Prudential Ins. Co. of Am. v. Richmond, No. 06-525, 2007 WL 1959252, at
* 4 (D.N.J. July 2, 2007) (citing 3a JAMES WM. MOORE, MOORE’S FEDERAL PRACTICE ¶ 22.16(2)).
Furthermore, “authority to award a stakeholder costs and fees does not derive from the interpleader
statute or the rule, but is an equitable doctrine.” Frontier Ins. Co. v. Missions Carrier, Inc., No. 915151, 1992 WL 209299, at *2 (D.N.J. Aug. 24, 1992) (citing Murphy v. Travelers Ins. Co., 534
F.2d 1155 1164 (5th Cir. 1976)).
A court may award attorneys’ fees to an interpleader plaintiff from the deposited funds if
the plaintiff is “(1) a disinterested stakeholder, (2) who had conceded liability, (3) has deposited
the disputed funds with the court, and (4) has sought a discharge from liability.” Metro. Life Ins,
Co. v. Kubichek, 83 Fed. Appx. 425, 431 (3d Cir. 2003); see also Stonebridge Life Ins. Co. v.
Kissinger, No. 14-2489, 2015 WL 715329, at *5 (D.N.J. Feb. 19, 2015); Banner Life Ins. Co v.
Lukacin, No. 13-6589, 2014 WL 4724902, at *3 (D.N.J. Sept. 22, 2014); Frontier Ins. Co., 1992
WL 209299, at *2. Here, the Court has already determined that U.S. Life is a disinterested
stakeholder that is entitled to reasonable attorneys’ fees and costs. See U.S. Life v. Holtzman, 2014
Holtzman additionally contends the Court should apply state law in considering Plaintiff’s
request for attorneys’ fees. Indeed, Holtzman argues that because this is a diversity action, and
could have been brought in either New York or New Jersey, the Erie doctrine requires application
of state law. However, as explained in this Court’s prior opinion, this Court’s subject matter
jurisdiction is based on the federal interpleader statute, 28 U.S.C. § 1335, not diversity of
citizenship. Thus, state law does not apply.
WL5149707, at *7. Thus, the only issue the Court needs to address is the amount of fees to which
Plaintiff is entitled.
Neither the Third Circuit nor the district courts have expressly stated a standard to
determine the reasonableness of fees and costs in the context of interpleader. The lack of such may
be attributed to the fact that the awarding of attorneys’ fees is equitable relief subject to the
discretion of the court. See Metro. Life Ins. Co., 83 Fed. Appx. at 431 (“Because we find no merit
in Brennan’s argument that the injunction was an abuse of discretion, Metlife is entitled to its costs
and attorneys fees for this appeal”); Banner Life Ins. Co, 2014 WL 4724902, at *4 (“Exercising
its discretion, the Court finds that Banner is entitled to $16,616.48 in attorneys’ fees and costs”).
However, courts have emphasized that the amount awarded for attorneys’ fees should not
“seriously deplete the fund” or be “excessive, unnecessary or redundant,” because the work
necessary to bring an interpleader action is minimal. Id. at *3-4 (citing Frontier Ins. Co., 1992 WL
209299, at *2).
Here, the Court finds that Plaintiff’s requested amount of $19,057.68 in fees and costs
would significantly deplete the $109,420.76 fund. Indeed, Plaintiff’s requested fees comprise
approximately 17% of the fund, “significantly diminish[ing] Defendan[t’s] . . . interest in the . . .
assets.” United Refining Co. Incentive Sav. Plan for Hourly Employees v. Morrison, No. 12-238,
2014 WL 126004, at *3 (W.D. Pa. Jan. 10, 2014). While Plaintiff relies on Banner for the
proposition that, generally, its fee amount is comparable to other fees awarded in interpleader
actions, Plaintiff fails to take into account that the fund in Banner was in excess of $8.5 million,
and the attorney’s fees comprised less than one percent of the fund. See Banner, 2014 WL 4724902
at *1. Thus, it is necessary for the Court to assess Plaintiff’s requested fees and determine whether
they are “excessive, unnecessary or redundant.” Id. at *3-4.
Typically, fee awards for disinterested stakeholders in interpleader actions should only be
sufficient to reimburse “the minimal work necessary to institute a suit in interpleader.” John
Hancock Mut. Ins. Co. v. Doran, 138 F. Supp. 47, 50 n.2 (S.D.N.Y. 1956); see also In re OEM
Indus., 135 B.R. 247, 250 (Bankr. E.D. Pa. 1991). In that connection, courts have found that the
award should only reflect fees that directly relate to the filing of the interpleader action and certain
motion practices. Cf. Protective Life Ins. v. Conway, No. 97-3246, 1998 WL 83024, at *1 (E.D.
Pa. Feb. 19, 1998) (“The amount awarded to the Plaintiff should be minimal because ‘all that is
required of the stakeholder is the preparation of the petition, the deposit of the funds into court,
service on claimants and the preparation of an order discharging the stakeholder form liability.’”).
Having reviewed counsel’s billable hours, the Court finds not compensable the time spent, inter
alia, conferring with its client and conferencing with other attorneys regarding strategy. For
example, Wilson Elser billed 5.1 hours for corresponding with U.S. Life (its client), which totaled
$1,213.50. Also excludable are 12.8 hours spent strategizing over the filing of the Complaint,
which totaled $3,072.5. 4
These hours spent on correspondents and preparation are not
compensable because they were not necessary to the filing of the interpleader action and would
only contribute to the depletion of the funds.
In addition to the non-compensable hours discussed above, there were additional hours
billed for services that are not necessary. Banner Life Ins., 2014 WL 4724902, at *3-4. For
example, Wilson Elser spent 1.2 hours conferring with the Attorney General of New Jersey’s office
regarding service of the Complaint and the State’s answer to the Complaint, totaling $214.50.
This amount includes time spent on reviewing the file and developing a plan for
interpleader, correspondence and conferences between attorneys at Wilson Elser, and analysis of
documents related to the interpleader claim; I find that they all relate to strategizing, rather than
necessary services to maintain the interpleader funds.
More importantly, hours spent drafting supplemental briefing requested by this Court are also not
compensable, because they were incurred as a result of counsel’s oversight. I do not find that
these hours are necessary.
Thus, when exercising its discretion, the Court finds that an attorneys’ fee award of
$9,696.00 is appropriate in this matter. 5 This fee calculation includes time spent for services
specifically related to the filing of the interpleader action, and hours spent addressing the motion
to dismiss filed by Defendant. This amount, unlike Plaintiff’s original request of $18,221.00, is
reasonable in light of the work required to maintain the funds. Moreover, the reduced amount will
not significantly deplete the funds, as it constitutes approximately ten percent of the funds.
Compare Fantaye, 2009 WL 482699, at *1-3 (awarding attorneys’ fees in an interpleader action
that amounted to approximately nine percent of the interpleader fund). I further find that the
requested costs of $836.38 are compensable.
Accordingly, Plaintiff is awarded attorneys’ fees in the amount of $9,696.00, and costs in
the amount of $836.38, for a total of $10,532.38. This award is payable from the interpleader
funds deposited by Plaintiff in the Court’s registry.
DATE: November 24, 2015
Freda L. Wolfson
Freda L. Wolfson
United State District Judge
For the sake of judicial economy, the Court will not list each service billed and explain
how it relates to the interpleader action. Suffice it to say, I find that all the services included in the
$9,696.00 amount were directly related to the preparation and maintenance of the interpleader
funds. See Conway, 1998 WL 83024, at *1.
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