Raymond James & Associates, Inc. v. Ellison et al

Filing 40

DECISION AND ORDER denying without prejudice 28 MOTION for Interpleader Deposit (28 U.S.C. Section 1335). Signed by Hon. Elizabeth A. Wolford on 08/29/2024. (CDH)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
RAYMOND JAMES & ASSOCIATES, INC.,
DECISION AND ORDER
Plaintiff,
v.

6:23-CV-06497 EAW

WILLIAM JAMES ELLISON, JULIAN
BROWN, SHIRLEY BROWN, JACK
BROWN, MICHAEL BROWN, SCOTT
BROWN, PRECIOUS BROWN,
CHASTITY GREENE, and WILLIE
JAMES ELLISON,
Defendants.
BACKGROUND
Plaintiff Raymond James & Associates, Inc. (“Raymond James”), a financial
services firm, commenced this interpleader action pursuant to 28 U.S.C. § 1335. (Dkt. 1).
The action relates to two Individual Retirement Accounts (the “Accounts”) with Raymond
James owned by Gayla Ellison (“Decedent”) at the time of her death in May 2021. (See
id. at ¶¶ 2, 15, 27).
Decedent opened the Accounts in May 2018. (Dkt. 28-2 at ¶ 3). She did not
designate a beneficiary at that time. (Id. at ¶ 5). Under Raymond James’ Traditional And
Roth Individual Retirement Custodial Account Agreement, where no beneficiary has been
designated at the time of a depositor’s death, “the Beneficiary of the Depositor’s Custodial
Account shall be deemed to be the Depositor’s surviving spouse, if married and if not
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married, the Beneficiary shall be deemed to be the Depositor’s estate.” (Id. at ¶ 6 (citation
omitted)).
On

June

15,

2020,

Raymond

James

received

an

IRA

Beneficiary

Designation/Change Form for one of the Accounts (the “Beneficiary Form”). (Id. at ¶ 7).
The Beneficiary form had been executed on October 5, 2018, approximately 20 months
earlier. (Id. at ¶ 8). The Beneficiary Form identified five primary beneficiaries: Julian
Brown, Mike Brown, Jack Brown, Precious Brown, and Chastity Greene. (Id. at ¶ 9). The
Beneficiary Form was not fully completed: it lacked Social Security numbers for all the
beneficiaries except Julian Brown, it lacked a birth year for Mike Brown, and Julian
Brown’s allocation percentage had been changed. (Id.).
The Beneficiary Form also listed three contingent beneficiaries: Julian Brown (who
was also listed as a primary beneficiary); Shirley Wells; and Scott Brown. (Id. at ¶ 10).
No allocation percentages were included for any of these contingent beneficiaries, “and
Shirley Wells’ and Scott Brown’s names are handwritten below empty boxes[.]” (Id.).
There were also no Social Security numbers or birthdates provided for Shirley Wells and
Scott Brown. (Id.).
The Beneficiary Form contained a spousal consent section, which was executed by
Decedent’s husband, Willie James Ellison, Jr. (“Willie Ellison”), on November 7, 2018.
(Id. at ¶ 11).

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Raymond James advised Decedent that it had rejected the Beneficiary Form,
“because that form was outdated and, by June 2020, Raymond James used an updated
version of the form.”

(Id. at ¶¶ 12-13).

“Raymond James received no additional

beneficiary designation documentation from Decedent after the Beneficiary Form.” (Id. at
¶ 14).
Decedent died on May 19, 2021. (Id. at ¶ 15). She was survived by her husband,
Willie Ellison. (Id. at ¶ 16). At the time of Decedent’s death, the Accounts were valued at
approximately $480,000. (Dkt. 34-2). To date, the Accounts remain under management
through Raymond James’ Rochester, New York office. (Dkt. 28-2 at ¶ 18). As of January
31, 2024, the value of the Accounts was approximately $493,000. (Dkt. 34-3).
After Decedent’s death, Willie Ellison “filed a Petition for Letters of
Administration for Decedent’s Estate in New York Surrogate’s Court in Ontario County[.]”
(Dkt. 28-2 at ¶ 19). He “represented that he was the only person with an interest in the
proceeding.” (Id.).
On July 13, 2021, counsel for Michael Brown, Jack Brown, Scott Brown, and
Shirley Wells wrote a letter to Raymond James’ Rochester office regarding the Accounts,
stating that it was “their understanding that [Decedent] completed the paperwork to name
them as beneficiaries on the account but that your company is not accepting this
paperwork.” (Id. at ¶ 21 (alteration in original)).

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In November 2022, Julian Brown took legal action in the Surrogate’s Court
proceeding to require Raymond James and Decedent’s estate to produce documents related
to the Accounts, including any beneficiary designation forms. (Id. at ¶ 22). Julian Brown
has taken the position that he “has a claim to certain assets of the Estate of Gayla M. Ellison,
as follows: as a beneficiary of the retirement account(s) of Decedent Gayla M. Ellison,
maintained by Raymond James & Associates, Inc.” (Id. at ¶ 25 (alteration and citation
omitted)). “Since Decedent’s death, Shirley Wells and Precious Brown have also contacted
Raymond James regarding the Accounts.” (Id. at ¶ 26).
Raymond James filed its complaint for interpleader on August 28, 2023. (Dkt. 1).
Mike Brown, Scott Brown, Shirley Wells, Chastity Greene, and Jack Brown have been
served but have not appeared, and their time to respond to the complaint has expired. (See
Dkt. 28-2 at ¶¶ 28-31, 33). Willie Ellison, Julian Brown, and Precious Brown have
appeared and filed answers. (See Dkt. 23; Dkt. 25).
Raymond James moved for interpleader deposit on January 23, 2024. (Dkt. 28). In
its motion, Raymond James seeks the following: (1) that the Court order that the action
proceed as an action in interpleader; (2) that the Court order Raymond James to secure a
bond in the amount of $1,000, payable to the Clerk of Court, United States District Court
for the Western District of New York; (3) that Raymond James be “adjudicated as not liable
to any of the Defendants with respect to the Accounts except to abide by any settlement
reached between the parties or final adjudication of this action directing Raymond James
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as to what action it should take with respect to the Accounts”; (4) that the Court “fully and
finally” discharge Raymond James from any further liability with respect to the Accounts
and dismiss it from this action; (5) that “Defendants, their agents, attorneys, and/or
representatives, be permanently enjoined from instituting or prosecuting any proceeding in
any jurisdiction against Raymond James on the basis of the Accounts or their respective
claims thereto”; (6) that Raymond James be “awarded its attorneys’ fees and costs incurred
in bringing this interpleader action, to be further determined after the adjudication of the
merits of this action and upon declaration by Raymond James’ counsel of the fees and costs
incurred by Raymond James”; and (7) for such other relief as the Court finds warranted.
(Dkt. 28 at 1-2).
Willie Ellison has not opposed Raymond James’ motion, but Julian Brown and
Precious Brown (hereinafter “Objecting Defendants”) have. (Dkt. 32). In particular,
Objecting Defendants argue: (1) the Court should not allow Raymond James to keep
possession of the Accounts with payment of a nominal bond of $1,000, but should instead
“direct that Raymond James divest itself of the IRA and that its funds be deposited in an
investment account with a third-party investment agency and that said account be jointly
selected and managed by the defendants who have appeared in this action”; (2) the Court
should not discharge Raymond James from liability or dismiss the action as to Raymond
James; and (3) the Court should deny Raymond James’ request for attorneys’ fees and
costs. (Id. at 10-14). Objecting Defendants’ arguments are based on their contention that
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Raymond James “is at the core of this dispute” because it “intentionally denied the
existence of a beneficiary designation it knew existed, and then refused to produce it until
forced to do so by a subpoena in the underlying state court proceeding before the Ontario
County Surrogate’s Court.” (Dkt. 32 at 4). Objecting Defendants assert that these actions
of “delay, concealment, and denial” have allowed Raymond James to “unlawfully retain[]”
possession of the funds in the retirement account “for the apparent purpose of enriching
itself off the management of those funds.” (Id.).
For the reasons that follow, the Court denies Raymond James’ motion without
prejudice.
DISCUSSION
I.

Legal Standard
Pursuant to 28 U.S.C. § 1335(a), a federal district court has “original jurisdiction of

any civil action of interpleader or in the nature of interpleader filed by any person, firm, or
corporation, association, or society having in his or its custody or possession money or
property of the value of $500 or more” if “(1) [t]wo or more adverse claimants, of diverse
citizenship . . ., are claiming or may claim to be entitled to such money or property” and
“(2) the plaintiff has deposited such money or property . . . into the registry of the court . . .
or has given bond payable to the clerk of the court in such amount and with such surety as
the court or judge may deem proper, conditioned upon the compliance by the plaintiff with
the future order or judgment of the court with respect to the subject matter of the
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controversy.” Id.; see also Metal Transp. Corp. v. Pac. Venture S. S. Corp., 288 F.2d 363,
365 (2d Cir. 1961) (“As a general rule, when a sum of money is involved, a district court
has no jurisdiction of an action of interpleader if the stakeholder deposits a sum smaller
than that claimed by the claimants.”); William Penn Life Ins. Co. of New York v. Viscuso,
569 F. Supp. 2d 355, 359 (S.D.N.Y. 2008) (“The federal interpleader statute grants district
courts original jurisdiction over actions of interpleader or in the nature of interpleader
where a plaintiff stakeholder has in its possession money or property worth $500 or more
that is or may be the subject of adverse claims by two or more claimants of diverse
citizenship.”).
“Interpleader actions usually unfold in two stages. First, the court determines
whether interpleader jurisdiction exists and, if it does, discharges the stakeholder from the
action. The court then adjudicates the defendants’ competing claims.” Id. (citations
omitted). “The appropriateness of an interpleader action rests on whether the plaintiff has
a real and reasonable fear of double liability or vexatious, conflicting claims against the
single fund, regardless of the merits of the competing claims.”

Metro. Life Ins. Co. v.

Mitchell, 966 F. Supp. 2d 97, 102 (E.D.N.Y. 2013) (quotations and citations omitted).
“[T]he interpleader statute is remedial and to be liberally construed, particularly to prevent
races to judgment and the unfairness of multiple and potentially conflicting obligations.”
Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading LLC, 814 F.3d 146, 151 (2d Cir. 2016)
(quotation omitted).
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II.

Interpleader Jurisdiction
Before considering the Objection Plaintiffs’ opposition, the Court has an obligation

to assure itself that interpleader jurisdiction exists. As set forth above, payment of a deposit
or bond is a jurisdictional requirement under § 1335(a): “without a deposit or bond, the
Court does not have subject matter jurisdiction and thus has no authority to hear the
dispute.” Madison Stock Transfer, Inc. v. Exlites Holdings Int’l, Inc., 368 F. Supp. 3d 460,
485 (E.D.N.Y. 2019).1 “The structure of statutory interpleader is intended to relieve the
stakeholder of its responsibility, and the deposit requirement ensures that is possible.” Id.
at 485-86. The Court cannot proceed on the relief requested by Raymond James until the
deposit requirement has been satisfied.
Raymond James requests that it be permitted to satisfy the deposit requirement by
securing a bond for the nominal amount of $1,000. (Dkt. 28-1 at 11). In support of its
contention that a nominal bond is appropriate, Raymond James cites two unreported cases
from the District of South Carolina, in one of which it was the plaintiff. (See id. (citing
Raymond James & Assocs., Inc. v. Bassford, No. 2:21-CV-01825-DCN, 2022 WL 673833,

1

“It is established practice . . . to give the party asserting interpleader jurisdiction
over contested funds an opportunity to deposit those funds prior to dismissing the action
because deposit has been construed as a requirement of maintaining interpleader
jurisdiction, rather than a prerequisite to bringing suit.” Doe v. Ejercito De Liberacion
Nacional, No. 15 CV 8652-LTS, 2015 WL 9077344, at *3 (S.D.N.Y. Dec. 16, 2015)
(quotation omitted), modified in part, No. 15 CV 8652-LTS, 2016 WL 1073100 (S.D.N.Y.
Mar. 10, 2016).
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at *3 (D.S.C. Mar. 7, 2022) and UBS Fin. Servs., Inc. v. Banco Popular de Puerto Rico,
No. CV 6:17-00607-MGL, 2017 WL 3500055, at *4 (D.S.C. Aug. 16, 2017))). But this
out-of-Circuit case law is unpersuasive. In Bassford, the court held that “[c]ourts have
previously granted interpleader based on a nominal bond when the assets in controversy
were held in investment accounts.” 2022 WL 673833, at *3. The only case cited by the
Bassford court for this proposition was UBS. But in UBS, the plaintiff was subject to a
preliminary injunction, and the court still denied the plaintiff’s request that it be required
to secure only a nominal bond. See UBS, 2017 WL 3500055, at *4 (“The Court holds a
bond in the amount of $10,000 conditioned upon Plaintiff's compliance with any present
or future order of the Court in this matter is sufficient to protect the interests of BPPR and
to invoke interpleader jurisdiction under § 1335. Such a bond constitutes more than a
nominal bond, but a bond in a greater amount is unnecessary in light of the obligations the
Agreed Preliminary Injunction Order imposes upon Plaintiff.” (emphasis added)). These
cases are not persuasive authority that Raymond James should be permitted to post a
nominal bond.
In its reply, Raymond James cites an unreported case from the Southern District of
Ohio, UBS Financial Services, Inc. v. Ulrick, et al., No. 18-cv-178 (S.D. Ohio 2018), in
which “a federal court permitted a financial services company to interplead a nominal bond
of $1 when the IRA account at issue was valued at over $400,000 at the time of the
decedent’s death.” (Dkt. 34 at 8). But the order entered in the Ulrick case contains no
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analysis at all of the propriety of a nominal bond (see Dkt. 34-6), and is accordingly of no
persuasive value.
Further, the Court’s own research has uncovered no cases in the Second Circuit
where a court has permitted a party to satisfy the deposit requirement by posting a nominal
bond. To the contrary, some courts in this Circuit have held that it is necessary to post a
bond for the highest amount that may be in dispute. See, e.g., Coopers & Lybrand, L.L.P.
v. Michaels, No. 94-CV-5643 (RJD), 1995 WL 860760, at *9 (E.D.N.Y. Oct. 31, 1995);
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Ambassador Grp., Inc., 691 F. Supp. 618,
621 (E.D.N.Y. 1988); see also Deutsche Bank Tr. Co. Americas v. Am. Gen. Life Ins. Co.,
No. 1:15-CV-3869-GHW, 2015 WL 5178408, at *4 (S.D.N.Y. Sept. 4, 2015) (“As a
general rule, 28 U.S.C. § 1335 requires that a plaintiff deposit or post a bond in an amount
equal to the largest claim.”).
Under § 1335(a), the Court has discretion to determine the amount of the bond that
must be posted. Hapag-Lloyd, 814 F.3d at 153 n.19 (finding no abuse of discretion in
district court’s determination that bonds exceeding the costs of the invoices at issue were
sufficient). Raymond James has not persuaded the Court that allowing it to post only a
nominal bond would satisfy the purposes of the deposit requirement. Accordingly, the
Court cannot grant the relief sought by Raymond James.
The Court further finds that Objecting Plaintiffs’ suggestion—that Raymond James
be required to deposit the funds currently in the Accounts into an investment account with
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a third-party investment agency (see Dkt. 32 at 10)—would not satisfy the jurisdictional
requirements of § 1335(a). The interpleader statute is clear—to invoke the Court’s
jurisdiction, Raymond James must either deposit the funds into the registry of the Court or
post an appropriate bond. This Court lacks authority to expand its jurisdiction beyond that
granted by the statute.2
The Court will permit Raymond James to submit a renewed motion for interpleader
deposit within 30 days of entry of this Decision and Order. If Raymond James seeks to
post a bond in its renewed motion, it must set forth in detail the reasons why the amount of
the proposed bond is adequate to satisfy the purposes of the deposit requirement. In the
event that Raymond James fails to submit a renewed motion for interpleader deposit, the
Court will dismiss this action for lack of subject matter jurisdiction.
CONCLUSION
For the foregoing reasons, Raymond James’ motion for interpleader deposit (Dkt.
28) is denied without prejudice. Any renewed motion must be filed within 30 days of entry
of this Decision and Order. If no renewed motion is filed, the matter will be dismissed
without prejudice for lack of subject matter jurisdiction.

2

Citigroup Glob. Markets, Inc. v. KLCC Invs., LLC, No. 06 CIV. 5466 (LBS), 2007
WL 102128 (S.D.N.Y. Jan. 11, 2007), which Objecting Defendants cite in support of their
proposal, is inapposite. In Citigroup, the property at issue had a “volatile and unique
nature” that meant that “liquidating it and paying the proceeds into the registry of the court
would result in significant losses.” Id. at *7. No comparable facts are present here.
Further, the court in Citigroup ordered the parties to “submit a proposed order for how the
property should be managed and deposited with the Court.” Id. (emphasis added).
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SO ORDERED.

__
______________
_ ________________
____________________________
ELIIZABETH A.
A. WOLFORD
WOLFORD
D
ELIZABETH
udge
Chief JJudge
U i d States
S
Di
i Court
C
United
District
Dated: August 29, 2024
Rochester, New York

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