Ward et al v. Rawlake et al

Filing 41

REPORT AND RECOMMENDATIONS re 21 MOTION for Order to Deposit Funds. It is RECOMMENDED that plaintiffs be permitted to deposit $76,520 with the Court, be discharged of all liability relating to the deposited funds, and be discharged from th is action. It is FURTHER RECOMMENDED that defendants be enjoined from prosecuting any other proceeding related to the deposited funds. It is RECOMMENDED that plaintiffs' request for attorneys fees be DENIED. Objections to R&R due by 4/6/2015. Signed by Magistrate Judge Norah McCann King on 3/20/2015. (pes1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
JOHN H. WARD, et al.,
Plaintiffs,
vs.

Civil Action 2:14-cv-848
Judge Watson
Magistrate Judge King

TODD RAWLAKE, et al.,
Defendants.
REPORT AND RECOMMENDATION
This is an interpleader action under Rule 22 of the Federal Rules
of Civil Procedure.

The case arises out of a confidential settlement

reached between plaintiffs and defendant Todd Rawlake in Todd Rawlake
v. John H. Ward, et al., 2:13-cv-255 (S.D. Ohio) (the “Prior Action”).
Defendant Jim S. Hall & Associates, LLC, a Louisiana law firm, claims
a portion of the settlement proceeds based on an alleged contingency
agreement with defendant Rawlake.

Defendant Rawlake asserts a claim

to the entire settlement amount and asserts crossclaims against
defendant Jim S. Hall & Associates, LLC, for breach of contract,
tortious interference, and legal malpractice.
This matter is now before the Court, upon a specific order of
reference pursuant to 28 U.S.C. § 636(b)(1)(B), see Order, ECF 36, for
consideration of Plaintiffs’ Motion for Order to Deposit Funds
(“Plaintiffs’ Motion”), ECF 21.

Plaintiffs seek an order

(1) granting Plaintiffs leave to deposit the funds at issue
with the Court; (2) discharging Plaintiffs of all liability
relating to the funds at issue; (3) discharging Plaintiffs
from this action upon the surrender of the funds at issue
to the Court; and (4) awarding Plaintiffs their attorneys’

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fees and costs incurred in this interpleader action.
Id. at p. 1.
Defendants oppose Plaintiffs’ Motion in part. Defendant Rawlake
does not oppose plaintiffs’ request to deposit funds with the Court,
but he disputes the amount of funds to be deposited and argues that
plaintiffs are not entitled to attorneys’ fees.

Defendant Todd

Rawlake’s Response to Plaintiffs’ Motion for Order to Deposit Funds
(“Defendant Rawlake’s Response”), ECF 25. Defendant Jim S. Hall &
Associates, LLC, does not oppose plaintiffs’ request to deposit funds
with the Court, but argues that plaintiffs are not entitled to
attorneys’ fees.

Memorandum of Defendant/Cross Claimant, Jim S. Hall

& Associates, LLC and Jim S. Hall in Partial Opposition to Plaintiffs’
Motion for Order to Deposit Funds (“Defendant Hall’s Response”), ECF
26.

Plaintiffs seek to deposit $76,520 with the Court, i.e., the

amount claimed by defendant Jim S. Hall & Associates, LLC.

Defendant

Rawlake argues that only $50,000 should be deposited with the Court
and that plaintiffs should pay the difference. i.e., $26,520, directly
to defendant Rawlake pursuant to the terms of the settlement
agreement.

According to defendant Rawlake, plaintiffs’ failure to pay

the difference directly to defendant Rawlake constitutes a breach of
the settlement agreement.
Plaintiffs’ Reply, ECF 27, represents that defendant Rawlake “is
currently threatening to obtain cognovit judgments against Plaintiffs
for part of the Disputed Sum.”

Id. at p. 5.

Plaintiffs’ Reply seeks

to “enjoin Defendants from commencing, prosecuting, or continuing with

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any proceedings against Plaintiffs over the Disputed Sum, including
the threatened cognovits action.”

Id.

leave to file a sur-reply, ECF 32.
ECF 38.

Defendant Rawlake was granted

Order, ECF 30; Opinion and Order,

This matter is now ripe for consideration.

Under Federal Rule of Civil Procedure 22, “[p]ersons with claims
that may expose a plaintiff to double or multiple liability may be
joined as defendants and required to interplead.”
22(a).

Fed. R. Civ. P.

Interpleader actions typically proceed in two stages.

“During

the first stage, the court determines whether the stakeholder has
properly invoked interpleader, including whether the court has
jurisdiction over the suit, whether the stakeholder is actually
threatened with double or multiple liability, and whether any
equitable concerns prevent the use of interpleader.”

United States v.

High Tech. Prods., Inc., 497 F.3d 637, 641 (6th Cir. 2007).

“During

the second stage, the court determines the respective rights of the
claimants to the fund or property at stake via normal litigation
processes, including pleading, discovery, motions, and trial.”

Id.

Once it is determined that interpleader is available, a court “may
issue an order discharging the stakeholder, if the stakeholder is
disinterested, enjoining the parties from prosecuting any other
proceeding related to the same subject matter, and directing the
claimants to interplead.”

Id. (internal quotations omitted).

In the case presently before the Court, plaintiffs seek to
deposit $76,520 with the Court and ask that they be discharged from
the case.

Plaintiffs acknowledge that $76,520 is payable to one or

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more of the defendants and they represent that they cannot determine
who is entitled to the funds without risking multiple liability.

See

Complaint for Rule 22 Interpleader (“Complaint”), ECF 1, ¶¶ 22-26;
Plaintiffs’ Motion, PAGEID 125.

Defendant Jim S. Hall & Associates,

LLC, “does not oppose the deposit of the disputed sum in the amount of
$76,520, the discharge of Plaintiffs from further liability for the
fund, or the discharge of Plaintiffs from further participation in
this litigation.”

Defendant Hall’s Response, p. 1.

Defendant Rawlake

“consents to Plaintiffs’ request to interplead,” but argues that the
settlement agreement calls for only $50,000 to be interplead.
Defendant Rawlake’s Response, p. 6.

Although defendant Rawlake argues

that only $50,000 is in dispute, he also acknowledges that “Attorney
Hall demanded payment of $76,520 and threatened legal action against
Plaintiffs.”

Id. at p. 2.

Moreover, resolution of defendants’ cross-

claims will determine the rights of each defendant with respect to the
$76,520 claimed by defendant Jim S. Hall & Associates, LLC.
Defendant Rawlake next argues that plaintiffs acted in breach of
the settlement agreement by seeking to deposit $76,520 with the Court
because the settlement agreement apparently calls for only $50,000 to
be interpled and for the remainder to be paid to defendant Rawlake.
Defendant Rawlake’s Response, pp. 5-6.

However, defendant Rawlake has

not asserted a counterclaim for breach of the settlement agreement.
In any event, an interpleader action “shield[s] the interpleaderplaintiff from liability for counterclaims where the ‘counterclaims
are essentially based on the plaintiff's having opted to proceed via

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an interpleader complaint rather than having chosen from among adverse
claimants.’”

Wachovia Bank, N.A. v. Zomax Inc., No. 2:09-CV-0076,

2009 WL 3698443, at *4 (S.D. Ohio Nov. 3, 2009) (quoting Metro. Life
Ins. Co. v. Barretto, 178 F. Supp. 2d 745, 748 (S.D. Tex. 2001)).
Here, defendant Rawlake’s argument that plaintiffs acted in breach of
the settlement agreement is based on plaintiffs’ decision to
interplead the disputed funds rather than choose which defendant is
entitled to some or all of the funds.

Even if, as defendant Rawlake

argues, the settlement agreement provided for only $50,000 to be
interplead, that does not change the fact that defendant Jim S. Hall &
Associates, LLC, has claimed a contingent lien on the settlement
proceeds in the amount of $76,520.
Exhibit 4.

See e.g., Plaintiffs’ Motion,

Accordingly, the Court finds that $76,520 is in dispute.

In short, the Court concludes that this is a proper action for
interpleader for the disputed sum of $76,520.1

It is therefore

RECOMMENDED that plaintiffs be permitted to deposit $76,520 with the
Court, be discharged of all liability relating to the deposited funds,
and be discharged from this action.

It is FURTHER RECOMMENDED that

defendants be enjoined from prosecuting any other proceeding related
to the deposited funds.
Plaintiffs’ Motion also seeks an award of attorneys’ fees and
costs incurred in bringing this interpleader action.

“[A] federal

court has discretion to award costs and counsel fees to the
stakeholder in an interpleader action . . . whenever it is fair and
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The Court is vested with diversity jurisdiction under 28 U.S.C. 1332.
Complaint, ¶¶ 2-11; ECF 5, ¶¶ 2-5, 28; ECF 9, p. 7; ECF 10, ¶¶ 2-11.

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See

equitable to do so.”

Holmes v. Artists Rights Enforcement Corp.

(AREC), 148 F. App'x 252, 259 (6th Cir. 2005) (internal quotations
omitted).

“An interpleading party is entitled to recover costs and

attorney's fees when it is (1) a disinterested stakeholder, (2) who
has conceded liability, (3) has deposited the disputed funds into
court, and (4) has sought a discharge from liability.”

Id. (citing

Septembertide Publishing v. Stein and Day, 884 F.2d 675 (2d Cir.
1989)).

“The only limiting principle is reasonableness, and it is at

the discretion of the Court to determine what award is appropriate.”
Id.
Plaintiffs argue that they are entitled to an award of attorneys’
fees because they are “completely disinterested in this dispute as to
who is the rightful beneficiary of the Disputed Sum” and were forced
to bring this action through no fault of their own.
Motion, PAGEID 126-27.

Plaintiffs’

Plaintiffs argue that they attempted to

resolve this dispute by offering to place the disputed funds into an
escrow account, but were forced to bring this action when defendant
Rawlake would not agree to escrow the disputed funds.

Plaintiffs’

Motion, PAGEID 126-27; Plaintiffs’ Reply, p. 7; Declaration of James
P. Schuck, Esq., attached to Plaintiffs’ Reply as Exhibit 1, at ¶ 3.
Both defendants challenge plaintiffs’ request for attorneys’ fees and
costs, reasoning that plaintiffs agreed to file this interpleader
action in the settlement agreement, that the settlement agreement
makes no provision for the payment of attorneys’ fees or costs from
the disputed sum, and that the settlement agreement provides that each

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party will bear their own litigation costs.

Defendant Hall’s

Response, pp. 1-3; Defendant Rawlake’s Response, pp. 6-8.
Plaintiffs and defendant Rawlake entered into a confidential
settlement agreement in the Prior Action in July 2014.

That agreement

required plaintiffs to file an interpleader action and deposit funds
with the Court pending resolution of defendants’ dispute over
attorneys’ fees.

See Confidential Release and Settlement Agreement,

attached to Defendant Rawlake’s Response as Exhibit A, at ¶ 6.

The

agreement does not address attorneys’ fees for the interpleader
action, but it provides that the “Parties shall each bear their own
litigation costs, expenses, and attorneys’ fees in any way relative to
the Lawsuit,” i.e., the Prior Action.

Id. at pp. 1, 5.

Plaintiffs agreed as part of their settlement of the Prior Action
to file this interpleader action.

Although the settlement agreement

does not expressly address the issue of attorneys’ fees for this
action, it required the parties to bear their own “attorneys’ fees in
any way relative to the [Prior Action].”

Id. at p. 5.

It is

difficult to see how the filing of this action would not be “relative”
to the Prior Action when one of terms of settlement of the Prior
Action required plaintiffs to file this action.

Moreover, because

plaintiffs agreed to file this action as part of their negotiated
settlement agreement, the Court concludes that it would be neither
fair nor equitable to award plaintiffs attorneys’ fees when the
settlement agreement did not contemplate such an award.

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Accordingly,

it is RECOMMENDED that plaintiffs’ request for attorneys’ fees be
DENIED.
If any party seeks review by the District Judge of this Report
and Recommendation, that party may, within fourteen (14) days, file
and serve on all parties objections to the Report and Recommendation,
specifically designating this Report and Recommendation, and the part
thereof in question, as well as the basis for objection thereto.
U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).

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Response to objections

must be filed within fourteen (14) days after being served with a copy
thereof.

Fed. R. Civ. P. 72(b).

The parties are specifically advised that the failure to object
to the Report and Recommendation will result in a waiver of the right
to de novo review by the District Judge and waiver of the right to
appeal the judgment of the District Court.

See, e.g., Pfahler v.

Nat’l Latex Prod. Co., 517 F.3d 816, 829 (6th Cir. 2007) (holding that
“failure to object to the magistrate judge’s recommendations
constituted a waiver of [the defendant’s] ability to appeal the
district court’s ruling”); United States v. Sullivan, 431 F.3d 976,
984 (6th Cir. 2005) (holding that defendant waived appeal of district
court’s denial of pretrial motion by failing to timely object to
magistrate judge’s report and recommendation).

Even when timely

objections are filed, appellate review of issues not raised in those
objections is waived.

Robert v. Tesson, 507 F.3d 981, 994 (6th Cir.

2007) (“[A] general objection to a magistrate judge’s report, which
fails to specify the issues of contention, does not suffice to

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preserve an issue for appeal . . . .”) (citation omitted)).

March 20, 2015

s/Norah McCann King_______
Norah McCann King
United States Magistrate Judge

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