United States District Court, W.D. Kentucky, Louisville Division
MEMORANDUM OPINION AND ORDER
THOMAS B. RUSSELL, Senior District Judge.
This matter comes before the Court upon two motions. The Court will first consider Plaintiff USAA Life Insurance Company, Inc.'s motion for leave to deposit funds and for discharge, (Docket No. 25), to which Defendants Coletta Akin, James Akin, Phillip Akin, Ruthie Akin, and Sophia Akin have responded, (Docket No. 30), and USAA has replied, (Docket No. 33). The Court will also consider the Akin Defendants' motion to strike and dismiss certain portions of the crossclaim filed by Defendant Diana Space. (Docket No. 24). Space has responded to this motion, (Docket No. 28), and the Akins have replied, (Docket No. 32). Fully briefed, these matters stand ripe for adjudication. For the reasons that follow, the Court will GRANT IN PART and DENY IN PART USAA's motion for leave to deposit funds and will DENY the Akins' motion to dismiss.
Rose Marie Akin died on May 21, 2014. The instant interpleader action arises from her family's subsequent disputes regarding her property and the proceeds of her life insurance policy. This conflict lies between Rose's sister, Diana Space, and Rose's stepson and stepdaughter-in-law, Phillip and Coletta Akin, who are the parents of Ruthie, Sophia, and James. USAA contends that the family's disagreements create the potential for conflicting claims, leaving it unable to ascertain which of the potential beneficiaries is entitled to the policy proceeds. It moves to interplead such funds to allow the claimants to litigate ownership pursuant to Federal Rule of Civil Procedure 22 and 28 U.S.C. § 1335.
USAA insured Rose's life under two separate insurance contracts, each in the amount of $300, 000. Only one contract is at issue here. Until February 2014, the policy at issue designated that Gary Akin - Rose's husband and Phillip's father - as the primary beneficiary, with Space as the contingent beneficiary. (Docket No. 1 at 2.) Gary died in October 2013, after which Rose's mental and physical health declined rapidly. In February 2014, USAA received paperwork altering the beneficiary designations of the policy at issue, naming Coletta and her three children as the beneficiaries. (Docket No. 1 at 2-3.)
On March 10, 2014, Rose executed a power of attorney document naming Phillip and Coletta as her attorneys-in-fact. ( See Docket No. 28-1.) The following day, she was admitted to a psychiatric institution, where a physician declared her unable to manage her personal, medical, and financial affairs. ( See Docket No. 28-1.) On May 15, 2014, USAA received a second change of beneficiary designation for the two policies, naming Phillip as the beneficiary of one of the insurance contracts and Diana Space as the other.
On May 21, 2014, Rose drowned in a pond alleged to be near Phillip's home. Pursuant to the May 14, 2014, change of beneficiary, USAA paid Space $300, 000 upon Rose's death under one of the contracts. It has not issued a payment under the other, from which this litigation arises. USAA attributes its failure to award such benefits to "significant questions" surrounding Rose's death; the company alleges that these questions leave it unable to determine the proper beneficiary. Toxicology reports indicate that just before Rose died, she took an excessive dosage of over-the-counter medication. Although an investigation identified no foul play, Rose's sisters have requested that law enforcement personnel reopen the investigation. It is suggested that results of such an investigation could prove significant to the questions at issue: Kentucky law provides that if a beneficiary is convicted of taking the life of the decedent, he forfeits his interest in the life insurance policy.
The Akins have filed a counterclaim, alleging that USAA breached its contractual duties to its insured. They have also asserted a crossclaim against Space, alleging that her "questions" regarding changes to the beneficiary designation are "unsubstantiated and potentially false, slanderous and libelous." (Docket No. 17 at 3.) They further contend that Space has tortuously interfered with their right to receive the proceeds to which they are entitled.
For her part, Space has filed a crossclaim against the Akin Defendants. According to Space, her sister's waning health left her vulnerable to coercion and manipulation, and she lacked the capacity to alter the beneficiary designations. She alleges that Rose made such changes only because of undue influence exerted by Phillip and Coletta, whom she contends violated their confidential relationships with Rose. Space further contends that as attorney-in-fact, Phillip Akin withdrew or transferred over $200, 000 from Rose's Wells Fargo checking account and terminated certain accounts with sums that were payable on death to Space. (Docket No. 18.) Finally, Space claims that Phillip Akin may have transferred other funds or property to Space's detriment. (Docket No. 18 at 5.)
I. The Court enjoys jurisdiction over the instant action and will permit USAA to deposit a bond into the registry of the Court.
The Court first turns to USAA's motion to for leave to deposit $300, 000 with the Clerk of the Court in this interpleader action. "Interpleader is a procedural device which entitles a person holding money or property, concededly belonging at least in part to another, to join in a single suit two or more persons asserting mutually exclusive claims to the fund.'" Mudd v. Yarbrough, 786 F.Supp.2d 1236, 1240 (E.D. Ky. 2011) (quoting White v. Fed. Deposit Ins. Corp., 19 F.3d 249, 251 (5th Cir. 1994)). Generally, interpleader actions are comprised of two stages. First, "the court determines whether the stakeholder has properly invoked interpleader, including whether the court has jurisdiction over the suit, whether the stakeholder is actually threatened with double or multiple liability, and whether any equitable concerns prevent the use of interpleader." United States v. High Tech. Prods., Inc., 497 F.3d 637, 641 (6th Cir. 2007) (citing 7 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 1704 (3d ed. 2001)). The court then "determines the respective rights of the claimants to the fund or property at stake via normal litigation processes, including pleading, discovery, motions, and trial." Id.
In the Sixth Circuit, the "primary test" for determining whether interpleader is appropriate evaluates "whether the stakeholder legitimately fears multiple vexation directed against a single fund or property." Id. at 642 (quoting 7 Fed. Prac. & Proc. Civ. § 1704). The requirement of a "legitimate" fear of such litigation does not suggest that the Court must review the merits of the claims; this task is left for the second stage of the action. Mudd, 786 F.Supp. at 1240 (citing 7 Fed. Prac. & Proc. Civ. § 1074; John Hancock Mut. Life. Ins. Co. v. Kraft, 200 F.2d 952, 954 (2d Cir. 1953) ("In an interpleader action, the jurisdiction of the court is not dependent on the merits of the claims of the defendants.")). The Sixth Circuit has found the "legitimacy" requirement satisfied where multiple claimants raise competing claims for the same identifiable "stake." Id. (citing High Tech Prods., 497 F.3d at 642).
USAA foresees the potential for multiple or inconsistent judgments against it, as both Space and the Akins claim that they are entitled to the policy's death benefit. (Docket No. 1.) Accordingly, because USAA is subject to competing claims for these funds, the interpleader action is appropriate.
Federal courts rely upon two bases for interpleader actions; USAA relies alternatively upon each. The first approach, known as "rule interpleader, " arises from Federal Rule of Civil Procedure 22 and is "merely a procedural device" that does not imbue the Court with subject matter jurisdiction. Sun Life Assur. Co. of Canada v. Thomas, 735 F.Supp. 730, 732 (W.D. Mich. 1990) (citing Bell & Beckwith v. United States, 766 F.2d 910, 914) (6th ...