The Guardian Life Insurance Company of America v. Cortes et al
MEMORANDUM OPINION AND ORDER by District Judge Kenneth J. Gonzales granting in part 8 Plaintiff The Guardian Life Insurance Company of America's Combined Motion to Appoint Guardian Ad Litem, for Leave to Deposit Interpleader Funds, and for Dismissal with Prejudice. (tah)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA,
Civ. No. 16-438 KG/GJF
ALMA HELENA CORTES and A.C., a
MEMORANDUM OPINION AND ORDER
This matter comes before the Court upon Plaintiff The Guardian Life Insurance Company
of America’s Combined Motion to Appoint Guardian Ad Litem, for Leave to Deposit
Interpleader Funds, and for Dismissal with Prejudice (Motion), filed on October 3, 2016. (Doc.
8). Plaintiff also sought in the Motion an award of $2,000.00 for attorneys’ fees and costs
incurred in bringing this interpleader lawsuit, and requested that the award be deducted from the
$38,000.00 basic life insurance Benefit at issue in this case.
The Court subsequently held a telephonic status hearing on November 10, 2016, at which
the Court extended the time for pro se Defendant Alma Helena Cortes (Cortes) to respond to the
Motion to November 28, 2016. (Doc. 14) at 2. The Court also required Plaintiff to file a
supplemental brief to address the issue of attorney’s fees and costs, including an appropriate
affidavit and breakdown of the requested attorney’s fees and costs. Id. at 1.
On November 15, 2016, the Court granted the Motion, in part, when it appointed a
guardian ad litem for Defendant A. C., Cortes’ child. (Doc. 15). Then, on December 2, 2016,
Plaintiff filed Defendant [sic] the Guardian Life Insurance Company of America’s Supplemental
Briefing in Support of its Request to Recover Reasonable Attorneys’ Fees and Costs
(Supplemental Brief) in which Plaintiff now seeks $7,064.25 in attorneys’ fees and costs. The
new requested award is just under 20% of the Benefit. (Doc. 16) at ¶ 6. Cortes has not
responded to either the Motion or the Supplemental Brief. Having reviewed the Motion and the
Supplemental Brief, the Court will grant the Motion, in part, as described herein.
Plaintiff seeks to interplead and deposit with the Court registry the basic life insurance
Benefit of $38,000.00 which became payable under a policy Plaintiff issued to insure the life of
Ryan Edemann, now deceased. (Doc. 16) at 1; (Doc. 1) at 1, and ¶¶ 6-7. Plaintiff contends that
the insured named both Cortes and A.C. as primary beneficiaries under the policy. (Doc. 1) at ¶
8. Plaintiff further contends that, although Cortes and A.C. are named primary beneficiaries, the
policy designates Cortes as receiving “100%” of the benefit. Id. Cortes has since made a claim
to the Benefit. Id. at ¶ 9. Plaintiff asserts that it “is an innocent and disinterested stakeholder” of
the Benefit and that it “is unable to determine who is entitled to the Benefit without incurring the
risk of being subject to costs and expenses in defending itself in multiple suits or the possibility
of multiple payments for the amount due.” Id. at ¶¶ 12 and 15.
B. The Remainder of the Motion Before the Court
Plaintiff moves the Court under Fed. R. Civ. P. 22 to (1) permit Plaintiff to deposit the
Benefit, plus any applicable interest, into the Court’s registry within 30 days of the date of the
entry of this Memorandum Opinion and Order, (2) permanently enjoin Defendants and all other
claimants from asserting claims against Plaintiff related to the Benefit, (3) discharge Plaintiff
“from any and all liability with respect to the Benefit,” (4) dismiss Plaintiff from this action with
prejudice, (5) order Defendants to present their claims to the Benefit, and (6) award Plaintiff
reasonable attorney’s fees and costs incurred in bringing this interpleader action, which would be
deducted from the interpleaded Benefit. (Doc. 8) at 1-2.
1. Whether the Court Should Order Plaintiff to Deposit the Benefit into the Court’s
Registry, Enter a Permanent Injunction, Discharge Plaintiff from Liability, Dismiss
Plaintiff with Prejudice, and Order Defendants to Present Claims to the Benefit
Interpleader is a statutory remedy that offers “a party who fears being exposed to the
vexation of defending multiple claims to a limited fund or property that is under his control a
procedure to settle the controversy and satisfy his obligation in a single proceeding.” The Late
Charles Alan Wright, et al., 7 Fed. Prac. & Proc. Civ. § 1704 (3d ed.). The Court is empowered
in an interpleader action to enjoin claimants to a fund or property from “instituting or
prosecuting any proceeding in any State or United States court affecting the property ... involved
in the interpleader action.” 28 U.S.C. § 2361. The Court “may then discharge the interpleader
plaintiff of any further liability and make the injunction permanent, thereby allowing the
interpleader plaintiff to withdraw and leaving the interpleader defendants to prosecute their
competing claims to the disputed property among themselves.” In re Millennium Multiple
Employer Welfare Ben. Plan, 772 F.3d 634, 639 (10th Cir. 2014) (citing Section 2361).
Pursuant to the above well-established law and the undisputed allegations in the
complaint, the Court will order Plaintiff to deposit the Benefit, plus any applicable interest, into
the Court’s registry within 30 days of the date of the entry of this Memorandum Opinion and
Order. Moreover, upon written confirmation that Plaintiff has deposited the Benefit into the
Court’s registry, the Court will (1) permanently enjoin Defendants and all other claimants from
asserting claims against Plaintiff related to the Benefit, (2) discharge Plaintiff “from any and all
liability with respect to the Benefit,” (3) dismiss Plaintiff from this action with prejudice, and (4)
order Defendants to present their claims to the Benefit.
2. Whether the Court Should Grant Plaintiff’s Request for an Award of Attorneys’ Fees
The remaining issue then is whether to grant Plaintiff’s request for an award of attorneys’
fees and costs for bringing this interpleader action, the amount of which would be deducted from
the Benefit. The Tenth Circuit Court of Appeals “has recognized the ‘common practice’ of
reimbursing an interpleader plaintiff's litigation costs out of the fund on deposit with the court.”
Transamerica Premier Ins. Co. v. Growney, 1995 WL 675368, at *1 (10th Cir.) (quoting U.S.
Fid. & Guar. Co. v. Sidwell, 525 F.2d 472, 475 (10th Cir.1975)). The Tenth Circuit has also
recognized that “[t]he award of fees and costs to an interpleader plaintiff, or ‘stakeholder,’ is an
equitable matter that lies within the discretion of the trial court.” Id. at *1 (citing Chase
Manhattan Bank v. Mandalay Shores Coop. Hous. Ass'n (In re Mandalay Shores Coop., Hous.
Ass'n), 21 F.3d 380, 382-83 (11th Cir.1994); Abex Corp. v. Ski's Enters., 748 F.2d 513, 516 (9th
Cir.1984)). On the other hand, “a number of courts have held that attorneys fees [and costs]
should not be awarded to an insurance company in an interpleader action where the claims to the
fund are of the type that arise in the ordinary course of business and are not difficult to resolve.”
Prudential Prop. & Cas. Co. v. Baton Rouge Bank & Trust Co., 537 F.Supp. 1147, 1150 (M.D.
Ga.1982). See also Guardian Life Ins. Co. of Am. v. Church of Jesus Christ of Latter-Day
Saints, 2016 WL 4734591, at *4 (D. Utah) (listing insurance interpleader cases in which courts
denied fee awards to insurers); Allstate Life Ins. Co. v. Shaw, 2016 WL 1640461, at *5 (E.D.
Mich.) (listing insurance interpleader cases in which “courts have acknowledged an exception to
the allowance of interpleader fee and cost awards.”). But see N.Y. Life Ins. Co. v. Miller, 139
F.2d 657, 658 (8th Cir. 1944) (“If the [insurance company] had brought an independent suit in
interpleader, it would have been entitled to an allowance for attorneys' fees to be determined by
the District Court and paid out of the fund in Court.”); Tower Life Ins. Co. v. Tucker, 557 F.
Supp. 2d 1287, 1289–92 (D.N.M. 2007) (rejecting argument that insurers should not be allowed
attorney’s fees and costs in interpleader actions).
The courts which have determined not to award attorney’s fees and costs to insurers in
interpleader actions have done so for several sound reasons. The District Court for the Eastern
District of Michigan summarized some of those reasons as follows:
“First, courts have found...that insurance companies should not be compensated merely
because conflicting claims to the proceeds have arisen during the normal course of
business.” [Unum Life Ins. Co. of Am. v.] Kelling, 170 F. Supp. 2d  at 794 [(M.D.
Tenn. 2001)] (citing Thomas, 735 F. Supp. at 732 ; Prudential v. Baton Rouge, 537 F.
Supp. 1147, 1150-51 (M.D. Ga. 1982); Minnesota Mut. Life Ins. Co. v. Gustafson, 415 F.
Supp. 615, 617-19 (N.D. Ill. 1976)). Second, courts have declined to follow the general
rule where the stakeholder is an insurance company, reasoning that “insurance
companies, by definition, are interested stakeholders and that filing of the interpleader
action immunizes the company from further liability under the contested policy.” Id.
(citing Prudential, 537 F. Supp. at 1150-51; Western Life Ins. Co. v Nanney, 290 F. Supp.
687, 688 (E.D. Tenn. 1968); Cogan v. United States, 659 F. Supp. 353, 354 (S.D. Miss.
1987)). Lastly, “some courts have exempted insurance companies from the general rule
based on the policy argument that such an award senselessly deplete the fund that is the
subject of the preservation through the interpleader.” Id. at 795 (citing Paul Revere Life
Ins. Co. v. Riddle, 222 F. Supp. 867, 868 (E.D. Tenn. 1963); Metro. Life Ins. Co. v.
Jordan, 221 F. Supp. 842, 844 (W.D.N.C. 1963); Hunter v. Fed. Life Ins. Co., 111 F.2d
551, 556 (8th Cir. 1940); Trustees of Directors Guild of Am. Producer Pension Benefit
Plans v. Tise, 234 F.3d 415, 426 (9th Cir. 2000)).
Allstate Life Ins. Co., 2016 WL 1640461, at *6. Moreover, as the District Court for the District
of Kansas explained, “some courts have denied insurance company stakeholders their fees and
costs ‘because they satisfy a self interest in not paying the wrong beneficiary by filing an
interpleader.’” Aetna U.S. Healthcare v. Higgs, 962 F. Supp. 1412, 1414 (D. Kan. 1997)
(citation omitted). In concluding not to award an insurer attorney’s fees and costs, the Kansas
District Court noted that the insurer “is not merely a bystander; rather, it is in the business of
distributing proceeds from insurance policies. The court does not believe that [the insurer]
should be permitted to shift the cost of distributing the proceeds in this case to someone else.”
Id. at 1414. The Court sees no reason to depart from the above persuasive and well-reasoned
Here, Plaintiff has not indicated in either the Motion or its Supplemental Brief that it “is
anything other than an insurance company in a routine dispute over the proceeds of a life
insurance plan.” Life Inv'rs Ins. Co. of Am. v. Childs, 209 F. Supp. 2d 1255, 1256 (M.D. Ala.
2002) (searched record, without success, for explanation why insurer “would not expect this type
of dispute to arise with some regularity in its course of business.”). In addition, resolving the
dispute in this case does not depend on determining complex or difficult legal or factual issues.
The Court concludes that the claims to the Benefit are the type of claims that arise in the ordinary
course of Plaintiff’s insurance business and are not particularly difficult to decide.
Furthermore, in describing the rationale for awarding litigation expenses to an
interpleader plaintiff, the Tenth Circuit has indicated that the award is “typically” a “minor
expense” which claimants to the interpleaded fund “should be able to cover” from the fund.1
Transamerica Premier Ins. Co., 1995 WL 675368, at *1. Along that line, the Eleventh Circuit
explained that a justification for awarding attorney’s fees in interpleader action includes that
“fees for the stakeholder typically are quite minor and therefore do not greatly diminish the value
of the asset.” In re Mandalay Shores Co-op. Hous. Ass'n, Inc., 21 F.3d 380, 383 (11th Cir.
1994). In this case, however, the requested attorneys’ fees and costs award of just under 20% of
the Benefit is not “minor” and would significantly reduce the Benefit. Other courts have found
Specifically, the Tenth Circuit stated: “The rationale for the award is that the plaintiff has, at its
own expense, facilitated the efficient resolution of a dispute in which it has no interest (other
than avoiding liability for an erroneous distribution of the stake), to the benefit of the competing
claimants-the true disputants-who should be able to cover the typically minor expense involved
out of the fund distributed to them.” Transamerica Premier Ins. Co. v. Growney, 1995 WL
675368, at *1 (10th Cir.).
that awards of attorney’s fees and costs substantially less than 20% of the interpleaded fund
would greatly diminish the fund and would, therefore, not justify an award of attorney’s fees and
costs. See, e.g., Bush v. Teachers Ins. & Annuity Ass'n of Am., 2008 WL 1776684, at *3 (M.D.
Ala.) (“Thus, TIAA–CREF is seeking approximately 9.5 percent of the total value of the asset,
which would greatly diminish its value.”); Unum Life In. Co. of Am. v. Kaleo, 2006 WL
1517257, at *3 (M.D. Fla.) (finding award of $6,698 from a $40,000 fund, or about 17% of the
fund, would “greatly diminish the value of the asset.”); Life Inv'rs Ins. Co. of Am., 209 F. Supp.
2d at 1256 (finding attorney’s fees amounting to “over two percent of the total stake” not “quite
minor”). Cf. Primerica Life Ins. Co. v. Walden, 170 F.Supp.2d 1195, 1199-1200 (S.D. Ala.2001)
(finding less than one percent of total stake reasonable.). Because Plaintiff’s requested award of
attorneys’ fees and costs is not a minor expense and would greatly diminish the Benefit, the
requested award amount does not support an award of such attorneys’ fees and costs.
In sum, the Court understands the difficulties and added expenses in litigating against a
pro se defendant, like Cortes. The Court, nonetheless, finds that it would be inequitable to
deduct those expenses from the Benefit. Plaintiff, as an insurer, is in a better position to absorb
and pass on those costs as necessary and foreseeable costs of doing business. Hence, the Court
denies Plaintiff’s request for an award of attorneys’ fees and costs.
IT IS ORDERED that Guardian Life Insurance Company of America’s Combined
Motion to Appoint Guardian Ad Litem, for Leave to Deposit Interpleader Funds, and for
Dismissal with Prejudice (Doc. 8) in granted, in part, in that
1. within 30 days of the entry of this Memorandum Opinion and Order, Plaintiff must
pay the Clerk of the Court the amount of the Benefit at issue, $38,000.00, plus any applicable
interest, for deposit into the Court’s registry;
2. in accordance with Fed. R. Civ. P. 67, the Clerk of the Court is authorized and
directed to accept the interpleaded funds for deposit in an interest bearing account until further
order of the Court;
3. Plaintiff must immediately notify the Court, in writing, when it has placed the Benefit,
plus any applicable interest, into the Court’s registry, at which time the Court will enter (a) a
permanent injunction enjoining and restraining any claimant to the Benefit from instituting or
prosecuting any proceeding in any State or United States court against Plaintiff related to the
Benefit, (b) an order discharging Plaintiff from liability in connection with, or relating to, the
payment of the Benefit, (c) dismissing Plaintiff from this lawsuit with prejudice, and (d) an
order directing Defendants to assert their claims to the Benefit as provided by the Federal Rules
of Civil Procedure and the Local Rules; and
4. Plaintiff’s request for an award of attorney’s fees and costs is denied.
UNITED STATES DISTRICT JUDGE
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