The opinion of the court was delivered by: Honorable Ronald E. Bush U. S. Magistrate Judge
Currently pending before the Court are: (1) Defendant/Counterclaimant/Third Party Plaintiff, Minnesota Life Company's, Motion to Deposit and for Partial Order of Discharge (Dkt. 35); (2) Plaintiffs, Christopher G. Neill as Conservator and Guardian of K.N. and Kylie Munds's, Motion for Summary Judgment (Dkt. 36); (3) Third Party Defendant, Christopher Neal's, Motion for Summary Judgment (Dkt. 39); and (4) Defendant/Counterclaimant/Third Party Plaintiff, Minnesota Life Insurance Company's Motion for Summary Judgment (Dkt. 43). The Court has carefully reviewed the record; considered the oral argument of counsel at the May 9, 2011 hearing; and now enters the following Order.
The Court has subject matter jurisdiction over this dispute pursuant to 28 U.S.C. § 1332, due to the diversity of the parties and because the amount in controversy exceeds $75,000. The Court may also have subject matter jurisdiction over the lawsuit, because the insurance policy at issue is an element of an employee benefit plan within the meaning of the Employee Retirement Income Security Act ("ERISA"), a federal statute raising federal question jurisdiction under 28 U.S.C. § 1331. However, the Court does not have a sufficient record before it to resolve this alternative basis for jurisdiction. The issue has not been briefed and its resolution does not impact the Court's analysis of the claims brought forth on summary judgment.
The decedent, Jeannette Neal, was issued an insurance policy, Policy Number 130010T, Plan Sponsor Number 29635-G (the "Policy") through her employment with Nestle, USA, Inc. ("Nestle"). See Ex. A, Affidavit of Counsel in Support of Minnesota Life's Motion to Deposit Funds and for Partial Order of Discharge (Dkt. 35-2). The Policy includes a basic term life insurance benefit ("Basic Term") in the amount of $80,000 and an accidental death and dismemberment benefit ("AD&D") in the amount of $200,000. Id. Defendant/Counterclaimant/ Third Party Plaintiff, Minnesota Life Insurance Company ("Minnesota Life") issued the Policy.
On September 27, 2008, Ms. Neill died in an automobile accident. At the time of her death, she was employed by Nestle and married to Third Party Defendant, Christopher Neill. Mr. and Ms. Neill had two children together, the Plaintiffs in this lawsuit, Kylie Munds and K.N. ("Daughters").
When Ms. Neill died, Mr. Neill made a claim to benefits under the policy. On December 5, 2008, Minnesota Life sent Mr. Neill a letter indicating that Mr. Neill was entitled to benefits under the policy as the surviving spouse in accordance with the priority payment language contained in the policy, applicable when there is no primary beneficiary designation. Ex. A, Rossman Affidavit (Dkt. 38-1). Two weeks later, Minnesota Life paid Mr. Neill the $80,000 Basic Term benefit.
Sometime later, a dispute arose concerning the appropriate beneficiaries under the Policy and Minnesota Life refused to pay Mr. Neill the AD&D policy proceeds. While Ms. Neill did not designate a primary beneficiary under the Policy, she had designated her Daughters as secondary beneficiaries. Ms. Neill's 2008 Beneficiary Designation form, confirming her benefit elections as of November 1, 2007, reflects that her Daughters were the only designated beneficiaries. Ex. E, Rossman Affidavit (Dkt. 38-5). However, the Daughters beneficiary status is marked "secondary," and no primary beneficiary was named on the Beneficiary Designation form.
In a letter dated October 30, 2009, a claims examiner stated that Minnesota Life would pay the Daughters the remaining AD&D benefit due provided that the Daughters signed an agreement releasing any claim to the Basic Term benefit already paid Mr. Neill. Ex. B, Rossman Affidavit (Dkt. 38-2). Mr. Neill was instructed to have a guardian ad litem appointed in order to obtain a valid release from K.N., the minor daughter.
On February 10, 2010, Mr. Neill, acting on behalf of K.N., and Kylie Munds filed a lawsuit in state court against Minnesota Life seeking payment of the Basic Term and AD&D benefits. (Dkt. 1-1). The claims in the Complaint include breach of contract, breach of the implied covenant of good faith and fair dealing, bad faith, and declaratory judgment. Id.
Minnesota Life removed the case to federal court and initially filed an Answer and Counterclaim (Dkt. 8) for declaratory relief and interpleader, asserting there was a justiciable controversy regarding whether the Daughters or Mr. Neill were the appropriate beneficiaries under the Policy. A few months later, Minnesota Life filed a Third Party Complaint against Mr. Neill individually. Dkt. 20-1. In the event the Court determines that the Daughters are the rightful beneficiaries under the Policy, Minnesota Life seeks to recover the Basic Term benefit paid to Mr. Neill under a theory of unjust enrichment.
On December 23, 2010, Mr. Neill and his Daughters filed a Stipulation Regarding Distribution of Proceeds (Dkt. 34). The Stipulation provides that Mr. Neill disclaims any interest in the AD&D benefits and the benefit should be paid to the Daughters. Id. at ¶ 3.
Almost a month later, on January 19, 2011, Minnesota Life filed the pending Motion to Deposit Funds and for Partial Order of Discharge (Dkt. 35). Despite the Stipulation Regarding Distribution of Proceeds (Dkt. 34), Minnesota Life contends a dispute remains over the proper beneficiaries under the policy. Id. In addition, both the Daughters and Minnesota Life contend that they are entitled to attorneys fees. Id. Minnesota Life would like to deposit the disputed funds with the Court and discharge any claims of liability against it, while retaining the right to seek attorneys fees from the proposed interpleader amount deposited with the Court.
In addition, there are three pending motions for summary judgment. First, the Daughters seek payment for the amounts due under both the Basic Term benefit and the AD&D benefit. Dkt. 37. Second, Mr. Neill seeks summary judgment on Minnesota Life's unjust enrichment claim. Dkt. 40. Third, Minnesota Life seeks a judgment indicating either (1) Mr. Neill is the proper beneficiary entitled to the policy benefits or, alternatively, (2) the Daughters are the proper beneficiaries entitled to the policy benefits and judgment should be awarded against Mr. Neill for the Basic Term benefits mistakenly paid him. Dkt. 43.
As explained more fully below, interpleader is no longer an appropriate mechanism for resolving the conflicting claims at issue in this case. Instead, the Court here resolves the parties' dispute on summary judgment and determines that the Daughters are the proper beneficiaries under the Policy.
A. Minnesota Life's Motion to Deposit Funds and for Partial Order of Discharge
Claiming no interest under the policy, Minnesota Life seeks to deposit the amount due on the AD&D benefit through the federal interpleader statute, 28 U.S.C. § 1335, and Rule 67. See Fed. R. Civ. P. 67; D. Idaho Loc. Civ. R. 67.1. Minnesota Life also seeks to be awarded its costs and reasonable attorneys' fees to be deducted from the interpleader property. For the reasons set forth below, the Court will deny the motion.
As a preliminary matter, Federal Rule of Civil Procedure 22 provides the procedural mechanism for interpleader in the instant case. The federal interpleader statute provides federal court jurisdiction over interpleader actions involving "[t]wo or more adverse claimants, of diverse citizenship." 28 U.S.C. § 1335. Minnesota Life cannot rely upon this provision, because the alleged adverse parties are all citizens of Idaho.
Nonetheless, Minnesota Life can seek interpleader through Rule 22, provided the Court otherwise has subject matter jurisdiction over the dispute.*fn1 See Gelfgren v. Republic Nat'l Life Ins. Co., 680 F.2d 79, 81 (9th Cir. 1982). Rule 22 allows a defendant to raise interpleader in a counterclaim as Minnesota Life did in its original Answer and Counterclaim (Dkt. 8). See Fed. R. Civ. P. 22(2) ("A defendant . . . may seek interpleader through a cross-claim or counterclaim"). Depositing the funds before seeking interpleader is not necessary. Gelfgren, 680 F.2d at 81.
Generally, interpleader "provides a process by which a party may 'join all other claimants as adverse parties when their claims are such that the stakeholder may be exposed to multiple liability." Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1033 (9th Cir. 2000) (quoting Gelfgren, 680 F.2d at 81). Interpleader can be an appropriate action for relief for ERISA plan fiduciaries, such as life insurers. Id. (citing 29 U.S.C. § 1132(a)(3)(B)(ii)). It is also recognized under Idaho law. See Idaho Code § 5-321. The purpose of interpleader actions is to "protect a stakeholder who holds funds claimed by two or more adverse parties from multiple liability." Perkins State Bank v. Connolly, 632 F.2d 1306, 1310 (5th Cir. 1980).
Interpleader is no longer available to Minnesota Life, who has waited too long and disputed too much to qualify as a disinterested party. First, Minnesota Life has known, since at least October 30, 2009, that there were competing claims for the life insurance benefits at issue. Ex. B, Rossman Affidavit (Dkt. 38-2). Yet Minnesota Life did not file an interpleader action then. This is because Minnesota Life is not a disinterested party. After making the initial payment to Mr. Neill, Minnesota Life has consistently refused to pay the Daughters the AD&D benefit for fear it will also owe the Daughters the $80,000 Basic Term benefit already paid to Mr. Neill. As reflected by the competing motions for summary judgment and Minnesota Life's Third Party Complaint against Mr. Neill, Minnesota Life has an $80,000 interest in the Court finding that Mr. Neill is the appropriate beneficiary.
Second, on January 19, 2011, when the instant motion to deposit funds was filed, there was no dispute over the proceeds. On December 23, 2010, the Daughters and Mr. Neill entered a Stipulation Regarding Distribution of Proceeds agreeing that the Daughters should receive the proceeds of the AD&D benefit. Dkt. 34. Without ...