CONFEDERATION LIFE INSURANCE & ANNUITY COMPANY, et al., Plaintiffs,
HOLLY GALLION, et al., Defendants.
MEMORANDUM OPINION AND ORDER
DANNY C. REEVES, District Judge.
This matter is pending for consideration of cross-motions for summary judgment filed by Plaintiffs Confederation Life Insurance & Annuity Company and Pacific Life Insurance Company (collectively, "Pacific Life") and Defendant Holly Gallion. [Record Nos. 40, 42] Defendant Angela Ford, PSC, named in her capacity as trustee, escrow agent, and administrator of PF Judgment Funds Escrow Account ("escrow account"), has also filed a motion for summary judgment against Defendant Holly Gallion. [Record No. 52] All parties claim that there is no genuine issue of material fact regarding their claims and that they are entitled to judgment as a matter of law. For the reasons set forth below, Pacific Life's motion for summary judgment will be granted. Additionally, the relief requested by Defendant Holly Gallion will be granted, in part, and the relief requested by Defendant Angela Ford will be granted, in part.
This interpleader action involves a dispute between Defendants Holly Gallion and Angela Ford regarding monthly payments from an annuity issued by Pacific Life (the "periodic payments" or "annuity"), in William Gallion's name. The annuity arose from a 1989 personal injury settlement, which provided monthly payments of $2, 500 to be made to then-attorney William Gallion, beginning May 1, 1994, and continuing through April 1, 2019. [Record No. 18, p. 3 ¶7] Confederation Life is the payment obligor. Its obligation was assumed by Pacific Life, the now-issuer of the annuity that funds the periodic payments. [ Id., p. 4 ¶¶8, 9]
From 1989 to November 2007, Pacific Life issued monthly annuity payments in William Gallion's name. But in 1997, William and Holly Gallion divorced and their assets were divided. The division of William and Holly Gallion's assets was effected by a division order entered by the Fayette Circuit Court on October 31, 1997. [Record No. 40-4] Their divorce decree and separation agreement states, among other things, that all annuities acquired during the marriage - including the Pacific Life annuity - were to be "equally divided net of taxes." [Record No. 40-2, p. 7] After the division order was entered, a copy of the Fayette Circuit Court order was sent to (the now-defunct) Confederation Life Insurance & Annuity Company, which it received on or around November 4, 1997. [Record No. 40-4]
William and Holly Gallion's divorce attorneys hired outside counsel who corresponded with Confederation Life about changing the annuity to reflect Holly Gallion's interest by January 1, 1998. [Record No. 40-6] However, the plaintiffs never recorded or recognized Holly Gallion's interest in the annuity, and the checks remained payable to William Gallion. As a result, Holly Gallion contends that she and William Gallion entered into an arrangement whereby she would receive the entire annuity payment each month. [Record No. 58-1, pp. 36-37] Holly was to apply William Gallion's fifty percent portion of the annuity toward his child support obligation, which was one-half of their son Peter Gallion's expenses. [ Id. ]
In March 2006, former clients of William Gallion obtained in the Boone Circuit Court a $42, 000, 000.00 judgment against William Gallion and his co-defendants. See Abbott v. Cunningham, Civil Action No. 05-CI-00436 (Boone Circuit Court). As a result of that judgment, the court issued a garnishment order for the Pacific Life annuity on May 7, 2008. [Record No. 18-3] The garnishment order states that Pacific Life "shall pay all funds in [its] possession that are now due to the Judgment Debtor Gallion or that become due to the Judgment Debtor Gallion in the future" to the claimants. [Record No. 52-3, p. 1]
Upon Angela Ford's direction, Pacific Life began making the periodic payments from the annuity to the escrow account managed by Angela Ford. [Record No. 40-9] Then, upon the request of Ford, it began sending the payments directly to. Ford's office. [Record No. 18, p. 5 ¶15] On February 4, 2011, the Kentucky Court of Appeals reversed the Boone Circuit Court Judgment. Cunningham v. Abbott, 2011 Ky. App. Unpub. LEXIS 969 (Ky. Ct. App. Feb. 4, 2011) ( aff'd in part, rev'd in part, sub nom. Abbott v. Chesley, No. 2011-SC-00291-DG, 2013 Ky. LEXIS 367 (Ky. Aug. 29, 2013). The Supreme Court of Kentucky later reversed the decision of the court of appeals and remanded the matter back to the Boone Circuit Court. See id.
Fearing multiple liability on the annuity payments, Pacific Life suspended the payments and filed this action on June 1, 2012, seeking interpleader relief so that it may issue the periodic payments and be discharged from liability and further participation in this action. [ See Record Nos. 1, 18.] Holly Gallion counterclaimed against Pacific Life, claiming that the division order and divorce decree entitle her to fifty percent of the remaining periodic payments. [Record No. 19, p. 8 ¶A] She has also filed a cross-claim against Defendant Angela Ford, arguing that she is entitled to an order directing Ford to pay her one-half of the periodic payments that Pacific Life has already issued to the escrow account and Ford. [ Id., ¶B] Ford counters that she is entitled to the full amount of the periodic payments to satisfy the $42, 000, 000.00 Boone Circuit Court judgment against William Gallion. Accordingly, the true dispute is between Defendants Holly Gallion and Angela Ford; namely, whether Holly Gallion has a valid interest in the annuity and payments that issue therefrom.
Summary judgment is required when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Chao v. Hall Holding Co., 285 F.3d 415, 424 (6th Cir. 2002). A dispute over a material fact is not "genuine" unless a reasonable jury could return a verdict for the nonmoving party. That is, the determination must be "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986); see Harrison v. Ash, 539 F.3d 510, 516 (6th Cir. 2008). In deciding whether to grant summary judgment, the Court views all the facts and inferences drawn from the evidence in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
The Federal Rules of Civil Procedure provide that "[p]ersons with claims that may expose a plaintiff to double or multiple liability may be joined as defendants and required to interplead." Fed.R.Civ.P. 22(a). "Interpleader is an equitable proceeding that affords a party who fears being exposed to the vexation of defending multiple claims to a limited fund or property that is under his control a procedure to settle the controversy and satisfy his obligation in a single proceeding.'" United States v. High Tech. Prods., Inc., 497 F.3d 637, 641 (6th Cir. 2007) (quoting 7 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 1704 (3d ed. 2001)).
As an initial matter, the Court finds that this interpleader action was properly brought, because Pacific Life "legitimately fears multiple vexation" directed against the annuity. See Mudd v. Yarbrough, 786 F.Supp.2d 1236, 1240 (E.D. Ky. 2011) (citing High Tech, 497 F.3d at 642). A simple review of the defendants' filings shows that Angela Ford and Holly Gallion are asserting competing claims to the same annuity. [ See Record Nos. 40, 48.] Thus, the second step is to determine the respective rights of the claimants to the fund at stake, Mudd, 786 F.Supp.2d at 1240, a more complicated matter. The Court, like Pacific Life, is now faced with two valid but competing orders from Kentucky state courts: one proclaiming Holly Gallion's one-half interest in the annuity, and the other garnishing the undivided annuity to satisfy the Judgment against William Gallion.
Pacific Life contends that it is entitled to summary judgment regarding the interpleader claim, and all parties agree that summary judgment is proper. Accordingly, the Court will grant Pacific Life the relief it seeks and determine the ...