Hartford Life and Accident Insurance Company v. Sabol et al

Filing 32

ORDER signed by Judge J P Stadtmueller on 2/9/10 granting 29 interpleader plaintiff's motion to deposit the amount of the insurance benefits for the life and accidental death policy for Joan Reidenbach plus interest and to dismiss Hartford Lif e and Accident Insurance Company from this action with prejudice and without further costs or liability upon depositing the insurance benefits plus interest with the court; the interpleader plaintiff is permitted to subtract attorneys' fees in t he amount of $4,304 and costs in the amount of $465.77 from the insurance benefits prior to their deposit with the court; the clerk of court shall deposit the insurance benefits plus interest in an interest-bearing account. See Order. (cc: Gary J. Sabol, all counsel)(nm)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
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H A R T F O R D LIFE AND ACCIDENT IN S U R A N C E COMPANY, Interpleader Plaintiff, v. G A R Y J. SABOL, TIM REIDENBACH, a n d REVOCABLE JOANN K. REIDENBACH F A M IL Y TRUST, Interpleader Defendants.
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C a s e No. 09-CV-45

ORDER
In te rp le a d e r plaintiff Hartford Life and Accident Insurance Company ( "H a rtfo rd ") filed this action seeking to determine the appropriate recipient of the p r o c e e d s of a life and accidental death insurance policy for Joann Reidenbach b e c a u s e the named beneficiary has been charged with her murder. The insurance p o lic y requires Hartford to pay benefits in accordance with the beneficiary d e s ig n a tio n , but a W is c o n s in "slayer statute" prohibits a person who intentionally m u rd e rs another from profiting from that death. For this reason, Hartford filed the in s ta n t interpleader suit naming as interpleader defendants all possible claimants to th e insurance benefits. Hartford concedes liability for the insurance proceeds and m e re ly seeks to avoid liability for paying the proceeds to the wrong party. Hartford n o w requests permission to deposit the insurance funds with the court and asks the c o u r t to dismiss it from the action. The court will grant these requests.

B AC K G R O U N D H a rtfo rd issued a group life and accidental death and dismemberment in s u ra n c e policy to fund an employee welfare benefit plan sponsored by W M S G a m in g , effective January 1, 2004. Joann Reidenbach was an employee of W M S G a m in g and was insured under the policy for a total of $40,000. She executed a b e n e fic ia ry designation form on August 8, 2006, naming her husband, Gary Sabol ("S a b o l"), as the primary beneficiary under the policy. Ten days later, Joann

R e id e n b a c h executed a last will and testament and bequeathed all property, re tire m e n t funds, benefits and proceeds to the Revocable Joann K. Reidenbach F a m ily Trust ("the Trust"). The will specifically excluded Sabol from receiving any T ru s t assets. Joann Reidenbach also executed an instrument creating the trust and n a m in g her nephew, Timothy Reidenbach ("Reidenbach"), as the Trust beneficiary. J o a n n Reidenbach died two years later, on May 15, 2008, from gunshot and stab w o u n d s to the chest. Sabol was arrested and charged with her murder. The

c irc u m s ta n c e s of Joann Reidenbach's death made the proper recipient of her life in s u ra n c e benefits unclear and motivated Hartford to file this action on January 9, 2009. AN AL Y S IS H a rtfo rd commenced this interpleader action to avoid potential multiple liability re g a rd in g the payment of Joann Reidenbach's life insurance benefits. Federal Rule o f Civil Procedure 22 permits interpleader, and states: "Persons with claims that may

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e xp o s e a plaintiff to double or multiple liability may be joined as defendants and re q u ire d to interplead." Fed. R. Civ. P. 22(a)(1).1 Interpleader is meant to allow "a n e u tra l stakeholder, usually an insurance company or a bank, to shield itself from lia b ility for paying over the stake to the wrong party. This is done by forcing all the c l a i m a n ts to litigate their claims in a single action brought by the stakeholder." L u th e ra n Brotherhood v. Comyne, 216 F. Supp. 2d 859, 869 (E.D. W is . 2002) (q u o tin g Indianapolis Colts v. Mayor and City Council of Baltimore, 733 F.2d 484, 4 8 6 (7th Cir. 1984)). The court finds that Hartford properly brought this interpleader action because it is a neutral stakeholder and may be subject to liability if it pays the life insurance p ro c e e d s to either Sabol, Reidenbach, or the Trust. The beneficiary designation fo rm governing Joann Reidenbach's insurance policy names Sabol as the recipient o f the benefits. This policy also states that the benefits "will be paid in accordance w ith the life insurance Beneficiary Designation." (See Dk #30, Ex. A, at 45). The E m p lo ym e n t Retirement Income Security Act (ERISA) requires plan administrators to "act in accordance with the documents and instruments governing the plan." K e n n e d y v. Plan Administrator for DuPont Savings & Investment Plan, 129 S. Ct.

The court notes that it has subject m a tte r jurisdiction over this action because the insurance policy a t issue is governed by ERISA. See Aetna Life Ins. Co. v. Hager, 930 F. Supp. 343 (E.D. W is . 1996) (finding th a t the court had subject m a t te r jurisdiction over an interpleader action to determ in e conflicting claim s to life in s u r a n c e policy proceeds). The interpleader statute, 28 U.S.C. § 1335, also provides jurisdiction over in t e r p le a d e r actions to district courts, but does not apply in the instant case. The statute requires two or m o r e a d v e r s e claim a n ts of diverse citizenship as a prerequisite for jurisdiction. 28 U.S.C. § 1335(a)(1). The c la im a n t s here are not diverse because Sabol, Reidenbach, and the Trust are all citizens of W is c o n s in .

1

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8 6 5 , 875 (2009) (quoting 29 U.S.C. § 1104(1)(1)(D)). Therefore, ERISA appears to re q u ire that Hartford pay the insurance benefits to Sabol, the named beneficiary. H o w e ve r, W is c o n s in Statute § 854.14 explicitly prohibits Sabol from financially b e n e fittin g from his wife's death if he intentionally killed her. The statute states that a beneficiary's "unlawful and intentional killing of the decedent...revokes a provision in a governing instrument that, by reason of the decedent's death...transfers or a p p o in ts property to the killer." W is . Stat. § 854.14(2). The beneficiary designation fo rm is a provision in a governing instrument that appoints property to Sabol, the a c c u s e d killer. Thus, the statute prohibits Hartford from paying the insurance

b e n e fits to Sabol after a determination is made that he unlawfully and intentionally k ille d Joann Reidenbach. W is. Stat. 854.14(5). As a result, resolving the question of who may receive the insurance benefits in vo lve s a determination of whether ERISA preempts the W isc o n s in "slayer statute." S e e Atwater v. Nortel Networks, Inc., 388 F. Supp. 2d 610, 614 (M.D.N.C. 2005) (a d d re s s in g the question of whether federal common law under ERISA preempts the N o rth Carolina slayer statute); Connecticut General Life Insurance Company v. R in e r, 351 F. Supp. 2d 492, 497 (W .D . Va. 2005) (raising the question of whether E R IS A preempts the Virginia slayer statute); Administrative Committee for the H.E.B. In v e s tm e n t and Retirement Plan v. Harris, 217 F. Supp. 2d 759, 761 (E.D. Tex. 2 0 0 2 ) (raising the question of ERISA's preemption of Texas's slayer statute). No c o u rt has addressed preemption of the W is c o n s in statute and the question of

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w h e th e r ERISA preempts all state slayer statutes has not been definitively a n s w e re d . See Egelhoff v. Egelhoff, 532 U.S. 141, 152 (2001) (Supreme Court n o te d in dicta that slayer statutes are "well established in the law and [have] a long h is to ric a l pedigree predating ERISA" so their possible "interference with the aims of E R IS A is at least debatable"). As a disinterested stakeholder, Hartford takes no position on the issue and s e e k s only to wash its hands of the entire affair. Hartford asks for permission to d e p o s it the disputed life insurance benefits with the court prior to exiting the case. In interpleader actions, parties may deposit funds with the court pursuant to Federal R u le of Civil Procedure 67. See Southtrust Bank of Florida, N.A. v. Wilson, 971 F. S u p p . 539, 542 (M.D. Fla. 1997) (ordering the interpleader plaintiff to deposit c o n te s te d funds into the court's registry pursuant to Rule 67). Rule 67 allows a party to deposit money whose disposition is sought by the action if the moving party p ro vid e s notice to every other party and obtains leave of the court. Fed. R. Civ. P. 6 7 (a ). Hartford has provided notice to the interpleader defendants by serving them w ith this motion to deposit funds and the defendants have not indicated any o p p o s itio n . (See Dk #27). Thus, the court will grant Hartford's request to deposit the c o n te s te d insurance proceeds until final disposition of the case. Hartford also asks that the court dismiss it from the action with prejudice. The c o u rt finds that dismissal is appropriate. Hartford properly brought an interpleader a c tio n to determine the recipient of the life insurance proceeds. Resolution of the

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is s u e is not dependent upon Hartford's continued presence. By depositing the fu n d s , Hartford has satisfied its obligations under the interpleader statute and may b e dismissed from the action. See Lutheran Brotherhood, 216 F. Supp. 2d 859, 8626 3 . Further, the interpleader defendants do not object. As a final matter, Hartford seeks to deduct its attorneys' fees and costs from th e amount deposited with the court. The determination of whether to allow the d e d u c tio n of attorneys' fees and in what amount falls within the court's broad d is c r e tio n . Lutheran Brotherhood, 216 F. Supp. 2d at 864 (citing Trustees of D ire c to r s Guild of America-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 4 2 6 (9th Cir. 2000)). Generally, courts award fees from deposited funds when: 1) th e party seeking fees is a disinterested stakeholder; 2) the party conceded liability fo r the funds; 3) the party deposited the funds into court; and 4) the party sought d isc h a rg e from liability. Id. at 863 (quoting Septembertide Publ'g v. Stein & Day, Inc., 8 8 4 F.2d 675, 683 (2d Cir. 1989)). The court concludes that awarding fees and c o s ts to Hartford is appropriate in light of these factors. Hartford is a disinterested s ta k e h o ld e r, it has conceded liability for the life insurance benefits, and it seeks to d e p o s it the contested funds and then be dismissed from the interpleader suit it in itia te d . Additionally, the interpleader defendants do not oppose the request for a tto rn e ys ' fees. The court will award attorneys' fees in this action, but not at the amount re q u e s te d by Hartford. Hartford seeks $7,362.77 in fees and costs out of the

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$ 4 0 ,0 0 0 in insurance proceeds that are at issue. The court finds that awarding costs a n d fees related to researching and filing the interpleader action and interacting with th e interpleader defendants is appropriate because these activities directly c o n trib u te d to an ultimate resolution of the underlying question regarding the proper re c ip ie n t of the benefits under the law. However, time spent preparing and reviewing H a rtfo rd 's motion for dismissal and for permission to deposit funds did not. Instead, d e p o s it of the funds and dismissal from the case are matters of convenience for H a rtfo rd . Therefore, the court will deduct the time attributed strictly to drafting and re vis in g the motion to deposit and supporting brief from its award. A review of the a tto rn e ys ' billing records submitted with the motion reveal a total of 13.3 hours billed a t $150.00 per hour and 2.6 hours billed at $230.00 per hour that do not list any a c tivity other than research and revision of the brief and motion for dismissal and the d e p o s it of funds. (See Tostrud Aff., Ex. 8). The court will not include these amounts in its award, but will allow Hartford to recover its $465.77 in costs and the remaining $ 4 ,3 0 4 .0 0 in attorneys' fees. A c c o r d in g ly , IT IS ORDERED that the interpleader plaintiff's motion to deposit funds and to dismiss interpleader plaintiff (Docket #29) be and the same is hereby GRANTED. IT IS FURTHER ORDERED that the interpleader plaintiff shall deposit the a m o u n t of the insurance benefits for the life and accidental death policy for Joann R e id e n b a c h plus interest with the court;

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IT IS FURTHER ORDERED that the interpleader plaintiff shall be permitted to subtract attorneys' fees in the amount of $4,304.00 and costs in the amount of $ 4 6 5 .7 7 from the insurance benefits prior to their deposit with the court; IT IS FURTHER ORDERED that the clerk of court shall deposit the insurance b e n e fits plus interest received from plaintiff Hartford Life and Accident Insurance C o m p a n y in an interest-bearing account; IT IS FURTHER ORDERED that the interpleader plaintiff shall be dismissed fro m this action with prejudice and without further costs or liability to any party upon d e p o s itin g the insurance benefits plus interest with the court. D a te d at Milwaukee, W is c o n s in , this 9th day of February, 2010. BY THE COURT:

J .P . Stadtmueller U .S . District Judge

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