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The Prudential Insurance Co. of America v. A.M.

United States District Court, E.D. California

December 23, 2014

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff,
v.
A.M, a minor; D.P., a minor; ANDREA MORGAN in her personal capacity; INGERLISHA MARTINEZ, as mother and next friend of the minor child A.M.; and ANDREA MORGAN, in her capacity as mother and next friend of the minor child D.P.; Defendants.

CANDICE L. FIELDS, CANDICE FIELDS LAW, Sacramento, California, Attorneys for Defendant A.M., A Minor Appearing Through Guardian Ad Litem INGERLISHA MARTINEZ.

ORDER RE: MOTION FOR APPROVAL OF PROPOSED SETTLEMENT, DISBURSEMENT OF FUNDS, AND DISMISSAL OF ACTION

MORRISON C. ENGLAND, Jr., Chief District Judge.

An Interpleader Complaint was filed by The Prudential Insurance Company of America ("Prudential") to resolve a dispute regarding life insurance proceeds governed by federal law. Through the Office of Servicemembers' Group Life Insurance, Prudential provides group life insurance benefits to the Department of Veterans Affairs of the United States, pursuant to Servicemembers' Group Life Insurance, under group policy number G-32000 ("SGLI Policy"). Xantavia was covered under the SGLI Policy in the amount of $400, 000 (the "Death Benefit"). See Complaint, ECF No. 1, at Exhibit B. Pursuant to 38 U.S.C section 1965 et seq., federal law governs the policy at issue.

Xantavia never executed an SGLI form designating his beneficiaries, although his file did contain an unsigned SGLI form that listed his (former) wife, Andrea Morgan ("Andrea") and their son D.P. as co-equal beneficiaries of the Death Benefit. See id., at Exhibit D. At the time of his death, Xantavia was divorced from Andrea and unmarried. See id.; see Waiver And Withdrawal Of Claim To Death Benefit ("Waiver"), ECF No. 41, at Exhibit A.

Pursuant to 38 U.S.C. section 1970, if no qualifying beneficiary designation exists at the time of an insured's death, the death benefit under the SGLI policy is payable to the insured's surviving spouse and, if none, to the insured's surviving children, in equal shares.

For purposes of a SGLI Policy determination, a child of an insured is defined as either (1) a legitimate child or (2) an illegitimate child of the alleged father only if (a) he acknowledged the illegitimate child in a writing signed by him; or (b) he had been judicially ordered to contribute to the illegitimate child's support; or (c) he had been, before his death, judicially decreed to be the father of such child; or (d) proof of paternity has been established by a certified copy of the public record of birth or church record of baptism showing that the insured was the informant and was named as the father of the illegitimate child; or (e) proof of paternity was established from service department records, such as school or welfare agencies, which show that with his knowledge the insured was named as the father of the child. See 38 U.S.C. § 1970(8).

Ingerlisha Martinez ("Ingerlisha"), who had a relationship with Xantavia prior to his marriage to Andrea, submitted a claim to the Death Benefit on behalf of her child A.M., See Complaint, ECF No. 1, at Exhibit F. Andrea, both individually and on behalf of her child D.P., also submitted claims to the Death Benefit. See id., at Exhibits G and L. Thus, initially, there were three claimants: (a) Andrea individually, (b) D.P., and (c) A.M. Due to the dispute over entitlement to the Remaining Death Benefit, Prudential named all three claimants as defendants in this action. See Complaint, ECF No. 1.

Proof of paternity between D.P. and Xantavia was un-contested. See Complaint, ECF No. 1, at Exhibit L. D.P., as Xantavia's issue, therefore was entitled to one-half of the Death Benefit under either the unsigned beneficiary form or pursuant to 38 U.S.C. section 1970. Because there was no guardian of D.P.'s property or estate, Prudential caused D.P.'s undisputed 50% share of the Death Benefit, or $200, 000, to be paid into a Letter of Indebtedness to be held by Prudential and which may be surrendered when D.P. reaches the age of 18 or when a guardian of D.P.'s property or estate is appointed. See id.

Pursuant to this Court's Order, Prudential deposited the other one-half of the Death Benefit, plus accrued interest, or $206, 957.47, with the Court on or about May 7, 2014 ("Remaining Death Benefit"). See Order, ECF No. 44, and Receipt.

The parties have settled. Pursuant to their settlement agreement, A.M. is entitled to one-half of the insurance proceeds. Her guardian ad litem seeks the Court's approval of the proposed settlement and disbursement plan, including an award of attorneys' fees.

"District courts have a special duty, derived from Federal Rule of Civil Procedure ("FRCP") 17(c), to safeguard the interests of litigants who are minors. [...] In the context of proposed settlements in suits involving minor plaintiffs, this special duty requires a district court to conduct its own inquiry to determine whether the settlement serves the best interest of the minor.' Dacanay v. Mendoza, 573 F.2d 1357, 1080 (9th Cir. 1978); see also Salmeron v. United States, 724 F.2d 1357, 1363 (9th Cir. 1983) (holding that a court must independently investigate and evaluate any compromise or settlement of a minor's claims to assure itself that the minor's interests are protected, even if the settlement has been recommended or negotiated by the minor's parent or guardian ad litem')." Robidoux v. Rosengren, 638 F.3d 1177, 1181 (9th Cir. 2011). Referencing FRCP 17(c), Local Rule 202(b) provides that no claim by or against a minor may be settled absent an order by the Court approving the settlement. In actions in which the United States courts have exclusive jurisdiction, a motion for approval of a proposed settlement must be filed and shall disclose such information as may be required by the Court to determine the fairness of the settlement. See id., at 202(b)(2).

In Robidoux v. Rosengren, 638 F.3d 1177 (9th Cir. 2011), the Ninth Circuit provided guidance for a district court considering whether to approve a proposed settlement involving minors. In cases involving the settlement of a minor's federal claim, a court should determine "whether the net amount distributed to each minor plaintiff in the proposed settlement is fair and reasonable, in light of the facts of the case, the minor's specific claim, and recovery in similar cases. Most importantly, the district court should evaluate the fairness of each minor plaintiff's net recovery without regard to the proportion of the total settlement value designated for... Plaintiffs' counsel...." Id., at 1179. If the net recovery of each minor plaintiff under the proposed settlement is fair and reasonable, the district court should approve the settlement as proposed." Id., at 1179. The Court has original jurisdiction over this Interpleader action under the provisions of 28 U.S.C. section 1331. Therefore, the court will be guided by Robidoux 's holding.

Each of the minors filed claims to the Death Benefit. See Complaint, ECF No. 1. If the unsigned beneficiary form is operative, D.P. would be entitled to all of the Death Benefit as a designated beneficiary (since Andrea waived her claim) and A.M.'s claim would have no value. If it is not operative, then Xantavia's children should divide the Death Benefit equally. See 38 U.S.C. § 1970(a) (if the insured did not designate a beneficiary in a writing received prior to death, and no widow, proceeds to the child or children).

The parties entered into a Settlement Agreement wherein, subject to court approval, A.M. is entitled to the Remaining Death Benefit (or $200, 000 plus interest). Thus, the net amount distributed to each minor in the proposed settlement is as follows: $200, 000 plus ...


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