The Stakeholder's Dilemma

Interpleader Under Rule 22

The Stakeholder's Dilemma

A bank holds an account that two customers, X and Y, both claim. Y demands the money. If the bank litigates against Y and then has to defend a second suit brought by X, it may end up paying the same account twice.¹ Paying Y without a fight solves nothing. X was never a party to any proceeding between the bank and Y, so nothing the bank does with Y binds X, and X remains free to sue.² The bank is unsure which claimant is entitled, and it is exposed whichever way it moves. That is the stakeholder's dilemma.

Interpleader resolves the dilemma. Rule 22(a)(1) provides that persons with claims that may expose a plaintiff to double or multiple liability may be joined as defendants and required to interplead.³ The stakeholder, here the bank, sues as plaintiff, joins X and Y as defendants, and requires them to litigate their rival claims against each other. The bank then pays only the winner.⁴ Interpleader is thus a form of joinder open to a person who does not know which of several claimants is owed, if any is. It brings all the claimants into a single action and makes them fight it out among themselves.⁵

The protection reaches further than double payment. Under both the statute and the rule, the purpose is to guard against double vexation in respect to a single liability, not to prevent a double liability as such.⁶ For that reason interpleader is allowed even when one of the claims lacks merit, so long as the claim is not so utterly baseless that the possibility of conflicting claims falls below a minimal threshold of substantiality.⁷

The same bind appears wherever one person holds property that several others want. In Mark E. Mitchell, Inc. v. Charleston Library Society, Christie's held a document consigned for auction, and the Charleston Library Society asserted that it owned the document. Christie's claimed no ownership of its own and sought to interplead the competing claimants. If a foreclosing bank turns the excess sale proceeds over to the homeowner, a second mortgagee and others may sue, claiming the money should have been paid to them. If a life insurer pays the proceeds to Belle, it will likely face a suit from Marina demanding payment to her. In all three cases, interpleader lets the holder tender the property or money to the court and leave the claimants to litigate ownership before a court that can bind all the parties by its resulting judgment.⁸

A stakeholder who knows of competing claims and pays anyway acts at its own peril. Shebester v. Triple Crown Insurers so held for an agent of an undisclosed insurer that had timely notice of several claimants to the policy proceeds. The agent paid out without interpleading all the claimants. Oklahoma's interpleader statute let a party exposed to double or multiple liability tender the property into court, and the court observed that interpleader, which is viewed with favor, would have been appropriate.⁹

The device matters only when competing claims threaten the stakeholder.

Interpleader is also voluntary. A stakeholder may decline to invoke it and litigate the claims separately, accepting the exposure described above. Because of its remedial nature, courts allow interpleader liberally.¹⁰ Federal practice offers two routes to the device. Statutory interpleader under 28 U.S.C. § 1335 makes very liberal provision for jurisdiction, venue, and service of process. Rule interpleader under Rule 22, the subject of this chapter, carries the same jurisdictional and procedural requirements as an ordinary civil action.¹¹ The sections that follow take Rule 22 first and compare the statute afterward.