Liffman v. Orangetree Properties, LLC et al
Filing
19
Opinion & Order signed by Judge James S. Gwin on 5/23/18 denying defendants' motion for abstention. As the state court has already stayed its case until this federal interpleader action is resolved, the Court denies as moot defendants' alternative motion to deny plaintiff's requested stay of the state court proceedings. (Related Docs. 4 and 18 ) (D,MA)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
---------------------------------------------------------------:
KENNETH B. LIFFMAN
:
:
Plaintiff,
:
:
vs.
:
:
ORANGETREE PROPERTIES, LLC, et al., :
:
Defendants.
:
:
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CASE NO. 1:18-CV-882
OPINION & ORDER
[Resolving Docs. 4, 18]
JAMES S. GWIN, UNITED STATES DISTRICT JUDGE:
Plaintiff Kenneth B. Liffman brings this interpleader action under 28 U.S.C. § 1335. He asks
the Court, among other things, to determine the distribution of life insurance policy proceeds among
Defendant claimants.1 All of the Defendants, except for Defendant Orangetree Properties, LLC, move
for the Court to abstain from this interpleader action, or alternatively to deny Plaintiff’s request to stay
parallel state court proceedings.2
As an initial matter, the Court has subject matter jurisdiction over Plaintiff’s interpleader
action under Section 1335.3
First, Plaintiff Liffman is a trustee for Orangetree Properties LLC
Insurance Trust, which allegedly owns the insurance policy at issue (Policy No. 207099228 US issued
by MetLife Insurance Company USA) (the “Policy”).4 Plaintiff Liffman asks the Court to determine
the interests and/or claims of the Defendants to the Policy’s proceeds and seeks to deposit the
proceeds with the Court.5 Second, the amount of the Policy’s proceeds exceeds $500.6 And lastly,
there is minimal diversity among the claimants.7
1
Doc. 1.
Doc. 4.
3
See 28 U.S.C. § 1335 (requiring that (a) the money or property in dispute exceeds $500; (b) two or more adverse claimants
are of diverse citizenship (minimal diversity); and (c) the plaintiff deposit the money at issue with the Court).
4
Doc. 1 at 1, ¶ 4.
5
Id. at 4.
6
The sum of the insurance policy proceeds is $5,043,739.22. Doc. 1 at ¶ 6.
7
Orangetree Properties, LLC, David S. Munsell, Leslie S. Munsell, and Daniel Munsell are located in Ohio; Premier Trust,
Inc. is located in Nevada; Jason I. Munsell is located in Georgia; and Mitchell S. Munsell is located in Illinois. Id. at 1-2.
2
Case No. 1:18-cv-882
Gwin, J.
Defendants nevertheless argue that the Court should abstain from exercising its jurisdiction
in this federal interpleader action.8 Defendants’ main argument for abstention is that there is a
pending state court action among most of the parties concerning Plaintiff Liffman’s breach of a
fiduciary duty with respect to the Policy’s distribution.9 In that action, the moving Defendants argue
that they are entitled to the Policy’s proceeds.10 The parties dispute whether Colorado River or Wilton
abstention applies.11
The Court finds that the Wilton abstention doctrine applies in this case. Wilton abstention
permits Courts to abstain from deciding a declaratory judgment action in favor of a parallel pending
state court litigation.12 Wilton gives more discretion to federal courts to abstain in declaratory
judgment cases because federal courts are not required to exercise jurisdiction under the Declaratory
Judgment Act.13
As the Sixth Circuit has not directly addressed what doctrine should apply to interpleader
actions but has likened interpleader actions to declaratory judgments,14 the Court will apply the
Wilton doctrine to this interpleader action.15
The Court considers five factors in determining whether to abstain under Wilton:
(1) whether this action would settle the controversy;
(2) whether this action would serve a useful purpose in clarifying the legal relations in issue;
(3) whether this remedy is being used merely for the purpose of “procedural fencing” or “to
provide an arena for res judicata;”
(4) whether the use of this action would increase friction between federal and state courts
and improperly encroach upon state jurisdiction; and
(5) whether there is an alternative remedy which is better or more effective.16
8
Doc. 4.
Id. at 5-8.
10
See Doc. 4-1.
11
Doc. 4 at 5; Doc. 14 at 5-6; Doc. 16 at 6-7.
12
Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995).
13
Id. at 283.
14
Bell & Beckwith v. U.S., I.R.S., 766 F.2d 910, 914 (6th Cir. 1985).
15
See NYLife Distribs., Inc. v. Adherence Grp., Inc., 72 F.3d 371, 379-82 (3d Cir. 1995) (applying Wilton standard, rather
than Colorado River standard, to interpleader action since Section 1335 provides remedial relief and Congress did not
intend to create a duty in district courts to exercise jurisdiction under the statute).
16
Grand Trunk W. R.R. Co. v. Consol. Rail Co., 746 F.2d 323, 326 (6th Cir.1984).
9
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Case No. 1:18-cv-882
Gwin, J.
To start, the third factor weighs against exercising jurisdiction. It appears that Plaintiff Liffman
is engaging in some procedural fencing by filing this interpleader action. Plaintiff filed this action
five months after the state court action was filed and only two days before he was to be deposed.17
Plaintiff also asked for a stay in the state court action in light of this federal interpleader action, which
the state court granted.18 Plaintiff Liffman’s race to this federal courthouse suggests Liffman is engaged
in forum shopping, or procedural fencing.19
Nevertheless, the other four factors weigh in favor of exercising jurisdiction.
To start, this federal interpleader action would serve a useful purpose in clarifying the legal
relations in issue. In particular, this interpleader action will help determine the moving Defendants’
Policy entitlement rights in connection with other claimants who are not parties to the state court
litigation.20
As a result, this federal interpleader action could likely also help settle the main
controversy at issue in this federal action and in the state court action — whether the moving
Defendants are entitled to the Policy proceeds in the first place.21
Furthermore, the state court has already stayed its case until this federal interpleader action
is resolved.22 As a result, this action would not increase friction between federal and state courts.
And there does not appear to be a better alternative remedy to this federal interpleader action.
The Court therefore DENIES Defendants’ motion for abstention. As the state court has already
stayed its case until this federal interpleader action is resolved, the Court DENIES AS MOOT
17
18
19
See Doc. 4 at 7; Doc. 4-3 (Liffman’s deposition notice in state case for April 20, 2018).
Docs. 4-4, 4-5, 18-1.
W. World Ins. Co. v. Hoey, 773 F.3d 755, 761 (6th Cir. 2014) (defining procedural fencing as including forum shopping).
20
The parties who are not part of the state court litigation are: Defendant Orangetree Properties, LLC and Defendant David
S. Munsell as Trustee for the Mark R. Munsell Irrevocable Demand Trust Agreement. Compare Doc. 1,with Doc. 4-1.
21
See Docs. 1 , 4-1.
22
Doc. 18-1.
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Case No. 1:18-cv-882
Gwin, J.
Defendants’ alternative motion to deny Plaintiff’s requested stay of the state court proceedings.23
IT IS SO ORDERED.
s/
Dated: May 23, 2018
James S. Gwin
JAMES S. GWIN
UNITED STATES DISTRICT JUDGE
23
The Court also GRANTS Plaintiff’s motion to correct and supplement the record.
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