United States District Court, E.D. California
L. Nunley United States District Judge
matter is before the Court on Plaintiff Karen Field's
(“Plaintiff”) Motion for Discharge of Stakeholder
(ECF No. 142) and Motion for Attorneys' Fees and Costs
(ECF No. 149). Defendants United States and California
Franchise Tax Board (collectively, “Defendants”)
opposed Plaintiff's motions. (ECF Nos. 157, 158.)
Plaintiff replied. (ECF Nos. 167, 168.) For the reasons set
forth below, the Court hereby GRANTS Plaintiff's Motion
for Discharge (ECF No. 142) and defers ruling on
Plaintiff's Motion for Attorneys' Fees and Costs (ECF
a professional fiduciary licensed by the State of California,
is the court-appointed Trustee of the DeShon Revocable Trust
(the “Trust”). (ECF No. 56 at 3.) The settlor of
the Trust was Henry DeShon, who is now deceased. (ECF No. 56
at 3.) During his life, Mr. DeShon embezzled funds from
certain claimants in the instant action and placed the
embezzled funds in the same account from which he drew funds
to purchase and maintain life insurance policies on his life.
(ECF No. 143 at 2.) Mr. DeShon named the Trust as the
beneficiary of the life insurance policies, and the Trust
therefore received the insurance proceeds following Mr.
DeShon's death. (ECF No. 56 at 3.)
alleges that several victims and creditors filed claims for
the funds in probate court and that at least part of the
funds may be owed to Defendants as unreported tax on the
embezzlement income. (ECF No. 56 at 3-4.) According to
Plaintiff, the total amount of claims exceeds the amount of
the funds. (ECF No. 56 at 3-4.) As of July 26, 2017,
Plaintiff deposited $380, 965.70 of the funds with the Court
such that she is no longer in possession of any Trust assets.
(ECF No. 108 at 4-5.)
Standard of Law
is a procedure authorized by 28 U.S.C. § 1335
(“§ 1335”) and Federal Rule of Civil
Procedure 22 (“Rule 22”). When a person holding
funds or property (the stakeholder) encounters other parties
who are making conflicting possessory claims for those funds
or property, she may join the parties as defendants and
require them to litigate who is entitled to the funds or
property. Michelman v. Lincoln Nat. life Ins. Co.,
685 F.3d 887, 893 (9th Cir. 2012); Bradley v.
Kochenash, 44 F.3d 166, 168 (2d Cir. 1995); Libby,
McNeill & Libby v. City Nat'l Bank, 592 F.2d
504, 507 (9th Cir. 1978). The main purpose of interpleader
actions is to protect the stakeholder from the expense of
multiple lawsuits and from having to contend with
inconsistent or multiple determinations of liability.
Texas v. Florida, 306 U.S. 398, 406-07 (1939);
In re Republic of Philippines, 309 F.3d 1143, 1153
(9th Cir. 2002); Aetna Life Ins. Co. v. Bayona, 223
F.3d 1030, 1034 (9th Cir. 2000).
are some general requirements for interpleader. Interpleader
requires that the plaintiff-stakeholder have control over a
particular fund or property. Mock v. Collins, No.
EDCV 04-395-VAP SGLX, 2004 WL 3619122, at *2 (C.D. Cal. Sept.
1, 2004). Further, there must be multiple, adverse claims
made to that same property or fund. Libby, McNeill, &
Libby, 592 F.2d at 507. Finally, the
plaintiff-stakeholder must have a reasonable fear of multiple
liability. Michelman, 685 F.3d at 894. The
stakeholder is not required to determine the validity of the
competing claims or wait to be actually sued by one or more
of the claimants. Tashire, 386 U.S. at 532-33.
However, the stakeholder must have “a good faith belief
that there are or may be colorable competing claims to the
stake, ” based on “a real and reasonable fear of
exposure to double liability or the vexation of conflicting
claims.” Michelman, 685 F.3d at 894. The
Supreme Court has emphasized that interpleader is a remedial
device that should be applied liberally. State Farm Fire
& Cas. Co. v. Tashire, 386 U.S. 523, 533 (1967).
plaintiff-stakeholder has satisfied the interpleader
requirements listed above, the court may discharge the
stakeholder from liability and dismiss her from the action.
28 U.S.C. § 2361; United States v. High Tech. Prod.,
Inc., 497 F.3d 637, 641 (6th Cir. 2007). The
plaintiff-stakeholder may also request injunctive relief in
which the court enjoins pending or future proceedings against
it by defendants in any other court. 28 U.S.C. § 2361;
United States v. Major Oil Corp., 583 F.2d 1152,
1157 (10th Cir. 1978). Further, under a court's inherent
equitable powers in interpleader actions, courts have
discretion to award attorneys' fees and costs to a
disinterested stakeholder where the stakeholder has acted in
good faith. Abe x Corp. v. Ski's Enter., Inc.,
748 F.2d 513, 516 (9th Cir. 1984); Schirmer Stevedoring
Co. Ltd. v. Seaboard Stevedoring Corp., 306 F.2d 188,
194-95 (9th Cir. 1962).
motion for discharge, Plaintiff requests that the Court (1)
find that interpleader is proper pursuant to § 1335 and
Rule 22 and (2) discharge the Trustee from further liability
pursuant to 28 U.S.C. § 2361 and dismiss her from the
action. (ECF No. 142.) Plaintiff also filed a separate motion
for attorneys' fees and costs related to the
interpleader. (ECF No. 149.) The Court will address
Plaintiff's motions in turn.
Motion for Interpleader and Discharge
argues that interpleader is justified in this case because it
meets all the requirements of § 1335 and Rule 22. (ECF
No. 143 at 8.) Notably, Defendants do not argue that
interpleader is improper, likely because the facts in this
case present a classic example of interpleader. The parties
do not dispute that Plaintiff, as Trustee, had control of the
now-deposited funds at issue. (ECF No. 143 at 8); see
Mock, 2004 WL 3619122, at *2. Further, the parties do
not dispute that there are multiple, adverse claims to those
funds. See Libby, 592 F.2d at 507. Indeed, besides
Defendants, there are several other victims and creditors who
claim a right to the funds. (ECF No. 143 at 9.) Finally,
based on the several competing claims for the funds,
Plaintiff clearly has a reasonable fear of multiple
liability. (ECF No. 143 at 9); see Michelman, 685
F.3d at 894. Thus, the Court finds that all the elements of
interpleader are met.
next argues that she is entitled to discharge of liability.
(ECF No. 143 at 11.) In addition to ordering the
Plaintiff's discharge and dismissing her from the action,
Plaintiff also asks the Court to enjoin claimants from
instituting any proceeding against her concerning the funds
or liability involved in the interpleader pursuant to 28
U.S.C. § 2361. (ECF No. 143 at 11.) In opposition,
Defendants argue the Court should not enter Plaintiff's
discharge because (1) such relief is statutorily barred, (2)
Plaintiff may be independently liable to the United States or
other claimants, and (3) ...