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?