The insurance company that insured the driver of a car that collided with a Greyhound bus brough an interpleader action to require all of the plaintiffs to bring their claims in a single proceeding.
Using interpleader to confine litigation to a single forum is allowable if there are multiple claimants to the same fund and a stakeholder must acknowledge liability to one of the claimants.
A Greyhound bus collided with a pickup truck in California killing two and injuring 33. Four of the injured passengers from the Greyhound brought suit in California state court for $1 million in damages against Greyhound, the bus driver, Clark who was driving the pickup, and Clark’s passenger. Plaintiff State Farm brought an interpleader action in the United States District Court for the District of Oregon before any of the cases went to trial. State Farm insured Clark. In the policy State Farm agreed to be liable up to $10,000 per person capped at $20,000 total per action, which included Clark’s attorney’s fees. State Farm paid into the court $20,000 and filed a complaint requesting that the court require all plaintiffs suing Clark to bring their claims against State Farm in a single proceeding. The court issued an order requiring all parties to show why they should not be restricted in bringing their claims in together in the same proceeding. The district court thereafter issued an injunction requiring all suits against Clark, State Farm, Greyhound, and the bus driver to be brought in the interpleader proceeding. The court of appeals reversed. State Farm appealed and the Supreme Court granted certiorari.
Can an interpleader action be used to confine a mass litigation to a single forum?
Yes, the use of interpleader to confine a litigation to a single forum and proceeding is allowable if there are multiple claimants to the same fund and a stakeholder in the end must acknowledge liability to one of the claimants.
Justice Justice Douglas dissenting in part
The use of interpleader in this case is inappropriate because the cases have not yet gone to trial and State Fark or Clark are liable to anyone yet. Since there are not yet claimants to the $20,000 insurance money, the interpleader proceedings were improper.
1. 28 U.S.C. § 1335 states that federal district courts have original jurisdiction over an interpleader action filed by any entity that has issued an insurance policy with a value of over $500, if two or more claimants are or may claim a stake in the policy benefits and the plaintiff stakeholder has paid the amount due into the court’s registry.
2. Allowing an interpleader action to confine a litigation to a single forum and proceeding ensures that the stakeholder is not subject to multiple litigations over the same fund.
3. Under 28 U.S.C. § 2361 when an action is brought under any action brought under § 1335, a district court may issue an order retraining claimants from initiating a suit affecting the obligation involved in interpleader
4. Here, the court was correct in limiting the plaintiffs in bringing their claims in the interpleader action.
5. State Farm was not obligated to wait for Clark to be adjudged before seeking interpleader.
But, the district court erred in restricting the other plaintiffs to the interpleader proceeding.
State Farm with its relatively small interest in such a huge accident cannot control the entire litigation and mandate that all plaintiffs bring their claims against any of the defendants in the forum of State Farm’s choice.
6.The judgement of the appellate court is reversed and remanded for modification of the injunction.