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Curious Result in Life Insurance Interpleader Case

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The US District Court recently dismissed a $1 million life insurance interpleader case for lack of subject matter jurisdiction.  The case is Transamerica Life Insurance Co. v. Marie, et al.  The result is curious, and if legally correct, virtually eliminates federal jurisdiction in any interpleader where all the claimants are citizens of the same State and the interpleading party lacks a claim to the interpleaded funds.  Here are the basic facts:

Transamerica is a New York life insurance company.  All the defendants are citizens of Washington State.  Transamerica sued the Washington defendants under Fed. R. Civ. P. 22 (interpleader) to determine to whom the funds belong, and to obtain a release from the Court.  Underlying Transamerica’s jurisdictional claim is Title 28, Section 1332, which says that federal jurisdiction exists in a case where the plaintiff(s) and defendant(s) are domiciliaries of different states and more than $75,000 is in controversy.

While the case was being litigated in the federal venue, and after Transamerica was voluntarily dismissed (after having deposited the funds), the Court dismissed the case for lack of subject matter jurisdiction, stating, “Transamerica did not attempt to articulate a state-law claim in its complaint. No state law claim is apparent, because Transamerica itself never attempted to claim any part of the insurance proceeds. It instead hoped to interplead the proceeds and let the defendants resolve their competing claims to them.”  For that reason, the Court stated, diversity jurisdiction was lacking.

The Court did not cite authority.  Taking the Court’s statement to its logical conclusion, it seems one can never have federal diversity jurisdiction in a Rule 22 interpleader case when the interpleading party is a citizen of one state, and the defendants are citizens of the a different state.  Also, this seems to contradict authority in other circuits.  See e.g. Aetna Life & Cas. Co. v. Spain, 556 F.2d 747 (5th Cir. 1977).  Perhaps the Court confused the diversity requirements in Rule 22 Interpleader with diversity requirements in a Statutory Interpleader under Title 28, Sec. 1335?

#VOTE for Farr Law Group in Biz Journal’s Social Media Contest

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Attention FDIC, KeyBank, USBank, and even Mike Mastro, Tom, TR IV, and Aaron Hazelrigg.

We look at our logs and see the hits, so we know you’re reading …

Now that we have your attention, please ”like” Farr Law Group on Facebook, and follow it on LinkedIn and Twitter.  Here are the Links:

Facebook, click HERE;

Twitter, click HERE; and

LinkedIn, click HERE.

Then click HERE and vote for Farr Law Group in Puget Sound Business Journal’s #Social Madness competition!

Stern is Back, Files Response in Support of Hazelrigg’s Fifth Amendment Privilege

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That didn’t take long.  Bankruptcy attorney Marc Stern is back.  After withdrawing from representing Tom Hazelrigg, Stern just filed a response for TRIII (click here), arguing that his Fifth Amendment claim is very real – based on a rumor that there is a grand jury investigation of Mike Mastro that may involve Hazelrigg, and some sort of IRS investigation of Hazelrigg.  Little detail of these  investigations is given.

TRIII has has now gone back to the “I can’t find records anyway” defense.  His bookkeeper, Ann Stockton, died in October, 2011.  Her surviving husband, Stephen Jacobson, claims that electronic records that Stockton kept were wiped out by a computer virus.

Hazelrigg is also trying to avoid a Rule 341 Creditors Meeting in Seattle, asking that it be held in New Mexico instead, where Hazelrigg claims he to live.  Very clever.  TRIII’s business deals were mostly in Washington State – that’s where his creditors are too.  By holding it in New Mexico, it precludes creditors from meaningfully participating.

As a side note, we take issue with TRIII’s claim that he is hanging out in New Mexico.  TEP has good reason to suspect he’s actually hanging out in Palm Springs/Palm Desert.  Jus’ sayin.

Finally, how can TRIII take such bold action against Henry Dean (click here too) on the Centurion Properties III case in the Eastern District of Washington, and now plead the Fifth (with a straight face)?  When TRIII’s was trying to screw Henry Dean in the Centurion Properties case, he was quite vociferous – like a baby being relieved of his lollipop.  Not so much now that TRIII’s on the other end.

Rigby Files Brief in Linda Mastro Appeal

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The brief is well written (here it is), with two basic arguments.  First – and the lead argument – is that Linda Mastro essentially loses the right to appeal by virtue of having left the jurisdiction and taken property that belongs to the estate.  She can’t willfully refuse to obey the court, while at the same time, expect to receive relief from it.  This is called the Fugitive Disentitlement Doctrine.  See Wengin Sun v. Mukasey, 555 F.3d 802 (9th Cir. 2009).  It appears this doctrine is usually applied in criminal cases, but Rigby cites authority that it has also been applied in civil cases.

The second part of Rigby’s brief is simply that there was sufficient evidence presented at trial to support the court’s judgment that the rings, gold, Rolls Royce, etc. was not Linda Mastro’s separate property, and thus is properly included in the bankruptcy estate.

Here’s what we think will happen:  The District Court will apply the Fugitive Disentitlement Doctrine, and affirm the Bankruptcy Court’s judgment.  By doing this, it will not need to address whether the facts at trial supported the judgment.  If the Court gets to the issue of whether the facts support the judgment, we think Rigby is on shakier ground.  While there is a lot of contradicted testimony by Linda Mastro on the jewelry, and indeed, her credibility is lacking, a gift is a gift (and from what we’ve seen, that’s what it was), so long as it was made when Mike Mastro was solvent.  Do we really believe that Mike Mastro intended to keep an interest in jewelry he gave his wife?  The evidence that Rigby cites is Mike Mastro’s having controlled the jewelry for awhile, but that seems weak to infer that he had an interest in it.  It sounds more like a bailment, if anything.

We keep coming back to how Linda can appeal, yet also be on the lam.  If Mike Gossler is unable to reach Linda does his ethical duty require that he file an appeal on her behalf to protect her interests?  Or if she’s incommunicado, can he ethically represent her interests, without receiving her specific direction?  Or is she in communication with Gossler, directing the appeal from afar?  And is he getting paid?  If so, with what money?  Our experience opposing Mike Gossler in litigation has shown us he is good, professional and ethical.  We assume whatever the facts, he’s doing what he should do under the circumstances.

Hazelrigg Files Blank Bankruptcy Schedules – Pleads the Fifth

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This is interesting – and we surmise not too amusing to Judge Dore.  On April 9, TRIII filed his bankruptcy schedules and Chapter 7 Statement of Current Income and Means Test.  Here are the Schedules.  Here is the Statement of Current Income/Means Test.  They’re both blank.  Hazelrigg is refusing to disclose anything, stating that doing so could incriminate him, and thus his refusal is protected under the Fifth Amendment of the U.S. Constitution.

This is interesting because TRIII asked the Court for more time to file the Schedules and the Court allowed it.  In asking, Hazelrigg told the Court he needed more time because he could not find all the information needed to complete the schedules.  If he intended to “take the Fifth,” we’re not sure what he was waiting for.

Pleading the Fifth is not new to the Hazelrigg clan.  TRIII’s son, Aaron, did it in the Centurion Properties bankruptcy in Spokane.  Here’s more detail on that.

We wonder if TRIII has waived his Fifth Amendment privileges by going so far into detail about his financial transactions in the Centurion Properties case, here and here.  We’ll be interested to see how the trustee responds.

Also, save the date!  The Meeting of Creditors is set for May 17, 11:00 a.m. at the U.S. Courthouse in Seattle, Room 8206.  Here’s the Official Notice.  If you are a creditor and know of any assets that aren’t on TRIII’s Schedules, here’s an excellent opportunity to show up and ask!  But we betcha the response will be the same:  “I Plead the Fifth!”