Rule Versus Statutory Interpleader

Rule Versus Statutory Interpleader

A stakeholder in federal court has two interpleader devices to choose from, and Rule 22(b) says they live side by side. The Rule supplements, and does not limit, the joinder of parties that Rule 20 allows. The remedy it provides is in addition to, and does not supersede or limit, the remedy under 28 U.S.C. §§ 1335, 1397, and 2361. And an action under those statutes must be conducted under the Federal Rules.¹ The stakeholder therefore holds two federal remedies, neither displacing the other, and a statutory case, once filed, runs under the same Rules as a Rule 22 case. The differences lie in how each case gets into court and in what the court can do at the outset.

The statute exists because the Rule alone could not close a gap. Before it was enacted, no effective procedure let rival claimants of diverse citizenship and residence be sued in any one federal district, and territorial limits on service of process barred state courts from giving relief. The statute cured that situation, and the Rule supplements it.² The cure is generous. The statute asks for minimal diversity among the claimants, a stake of $500 or more, and a deposit or bond.³ It also allows nationwide service of process.⁴ Where the other requirements are met, it makes irrelevant that the claimants’ titles do not have a common origin.⁵ Rule 22 asks for ordinary diversity jurisdiction, which means complete diversity and more than $75,000 at issue.⁶

The two devices share the stakeholder’s route into the case. The stakeholder can sue as an original plaintiff or, if already sued, plead interpleader by counterclaim or crossclaim, and it need not be a disinterested party who admits liability to someone.⁷ The choice between them therefore turns on four differences that fall into two pairs. Two concern what the stakeholder must put up and what protection the court can give against suits elsewhere. Two concern jurisdiction and service. The first pair comes next, and the second joins it afterward into a method for choosing. An exam stem that defeats one device has not ended the analysis, because the other may fit the same facts.

Deposit and Injunctions

The statute requires the stakeholder to put the stake in the court’s hands. The grant of original jurisdiction in § 1335(a) runs to a plaintiff who “has deposited such money or property” into the registry of the court or “has given bond payable to the clerk of the court in such amount and with such surety as the court or judge may deem proper.”⁸ Section 2361 pairs that commitment with a power. The court may enter an order restraining the claimants “from instituting or prosecuting any proceeding in any State or United States court affecting the property, instrument or obligation involved in the interpleader action until further order of the court.”⁹ Rule 22(a) carries neither provision, although the court may order a deposit under Rule 67 and has some power to enjoin other proceedings under 28 U.S.C. § 2283.¹⁰

A deposit, or a bond for the stake’s value, puts the fund under the court’s control, and the court sets the terms of the bond. In Hapag-Lloyd, the district court ordered Hapag-Lloyd to post an initial bond, with a six-percent increase if the litigation lasted longer than a year.¹¹ Depositing concedes nothing about liability. For either device, the stakeholder need not be a disinterested party who admits full liability to someone, and it can claim even the whole stake by contending that it owes nothing to any claimant.¹² Rule 22(a)(1) likewise treats joinder as proper even though the plaintiff denies liability in whole or in part to any or all of the claimants.¹³

Rule 22 has no deposit requirement, although the court may allow the stakeholder to deposit the property under Rule 67 if the stakeholder wishes. A stakeholder that would rather keep control of the property as long as possible therefore does better under the Rule.¹⁴

The injunction power carries more weight than the deposit, because the threat of multiple suits over one stake is the stakeholder’s reason for interpleading in the first place. The statute answers that threat directly, since the court has specific authority in the statutory proceeding to enjoin the claimants from suing elsewhere. That power cannot be used indiscriminately to enjoin all related litigation, but it is a potent weapon against the harassment of multiple suits.¹⁵ The statutory text draws the line itself, because the court may restrain only proceedings “affecting the property, instrument or obligation involved in the interpleader action.”¹⁶

Rule 22 offers no comparable express grant, and that is where the uncertainty enters. The federal anti-injunction statute, 28 U.S.C. § 2283, generally forbids federal courts to enjoin state proceedings without specific statutory authority, and the interpleader statute is one such authority.¹⁷ A Rule 22 plaintiff has no such text to point to, so it must fit its request into an exception, and the only candidate is an injunction “in aid of its jurisdiction.” Whether a court will treat an injunction in a Rule 22 case that way is not certain, so the power may be narrower than it is under the statute.¹⁸ One source puts the point affirmatively, saying the court has some power to enjoin other proceedings under § 2283, while the other says only that the power may be narrower.¹⁹ A careful answer calls the power uncertain and neither announces that Rule 22 grants it nor flatly denies it.

Courts show the same restraint outside interpleader. They usually refuse to enjoin criminal prosecutions once instituted, because the person seeking the injunction can usually present a good defense in the prosecution itself, and the interest in orderly procedure counsels keeping hands off the criminal process.²⁰ Section 2361 is notable because it gives the interpleader court a textual basis for restraining competing claims that Rule 22 lacks.

An exam stem in which claimants have already filed suit in state court, or are about to, and in which the stakeholder asks for an order stopping them, points toward the statute, since only § 2361 supplies the express authority that clears the anti-injunction statute. A stem in which the stakeholder wants the property to stay in its own hands and no other suit is pending points the other way, toward Rule 22. The statute buys the stronger protection at the price of control, and the Rule preserves control at the price of certainty about the injunction. The next subsection sets that trade beside the jurisdictional differences to show how a lawyer chooses.

Choosing the Device

Rule 22(a)(1) lets a plaintiff join persons whose claims may expose it to double or multiple liability and require them to interplead.²² The statute asks instead for two or more adverse claimants, but courts read the two phrases alike, so a showing of the threat of multiple suits satisfies either. The stakeholder may rely on the possibility of future claims and need not wait until claims have been brought.²³ Because that showing does not separate the devices, the choice turns on jurisdiction, service, and what the stakeholder must put up.

The statute’s first advantage is minimal diversity. Under § 1335, a party may file if it holds money or property worth $500 or more, two or more claimants are diverse, and it has deposited the stake or given bond for compliance with the court’s eventual order.²⁴ Diversity is measured among the claimants alone. The stakeholder’s citizenship is irrelevant, and the only concern is that at least two claimants be diverse.²⁵ A Minnesota stakeholder facing one New York claimant and four Minnesota claimants can therefore proceed, because two adverse claimants are of diverse citizenship.²⁶ Reaching past complete diversity raises a constitutional question, and in Tashire the Supreme Court answered that Congress may do so. Chief Justice Marshall’s complete-diversity rule in Strawbridge v. Curtiss construed only the words of the act of Congress, and Article III poses no obstacle to a legislative extension of diversity jurisdiction “so long as any two adverse parties are not co-citizens.”²⁷

That holding explains why the Rule cannot match the statute. Congress wrote minimal diversity into § 1335 but has never amended § 1332(a), the basic diversity statute, so the complete-diversity rule still governs there.²⁸ A Rule 22 plaintiff therefore cannot base jurisdiction on minimal diversity.²⁹ It must show that more than $75,000 is at issue and that no claimant shares the stakeholder’s citizenship.³⁰

Service and venue are the statute’s other advantages. Nationwide service of process is available in statutory interpleader actions under § 2361.³¹ Venue in a Rule 22 action is proper under the general venue statute, and the options are narrow. The action may be brought where any claimant resides, but only if all claimants reside in the same state. It may be brought where a substantial part of the events or omissions giving rise to the claim occurred, or where a substantial part of the property is situated. And it may be brought where any claimant is subject to personal jurisdiction, but only if no other district exists where suit may be brought.³² These provisions matter most when the claimants are scattered. In Noble, energy companies sought to distribute royalties to those with an interest in a tract of land from which they had extracted gas and other minerals. Nationwide jurisdiction under § 1335 let the producers put all 152 potential claimants before one court, which could render a binding judgment determining the rights of every claimant.³³

Rule 22 therefore earns its place in two situations. The first is when its requirements are met and the statute’s are not. The statute demands diversity between at least two claimants, and the Rule demands diversity between the stakeholder and each claimant, so claimants who all share one state, different from the stakeholder’s, defeat the statute and leave the Rule intact.³⁴ The second is when both devices are available and the stakeholder wants to avoid depositing the stake. The statute requires a deposit or bond when suit is filed, and Rule 22 has no such requirement, although the court may allow a deposit under Rule 67.³⁵ The Rule’s tighter jurisdictional limits are the price of a device that does not ask the stakeholder to commit the stake up front.

Reaching for the statute first because it is more generous fails when the claimants share a citizenship. An Illinois art gallery holds a $125,000 painting claimed by four Oklahoma heirs. No two claimants are diverse, so the statute is out. The gallery is diverse from every heir and the stake exceeds $75,000, so Rule 22 works.³⁶ Reverse the pattern and the result reverses. A Nevada insurer holds $100,000 in policy proceeds claimed by three Iowa citizens and one Nevada citizen. The Iowa and Nevada claimants are diverse from each other, which satisfies the statute, but the Nevada claimant shares the insurer’s citizenship, so Rule 22 lacks complete diversity.³⁷ The stake exceeds $75,000 in both scenes, so the amount cannot be what separates them. What separates them is where the shared citizenship sits. The statute counts diversity among the claimants, and the Rule counts it between the stakeholder and each claimant. A claimant from the stakeholder’s own state defeats the Rule and leaves the statute intact, provided two claimants are diverse from each other.

The amount in controversy splits the devices in the same way. An insurer holding a $30,000 policy claimed by Al and Betty, who are citizens of different states and diverse from the insurer, has minimal diversity and a stake above $500, so the statute is available. Rule 22 is not, because $30,000 falls below the $75,000 threshold and diversity jurisdiction under § 1332 is unavailable.³⁸ A Kentucky horse breeder holding a $50,000 purse claimed by four Arkansas citizens fails both tests. The claimants are co-citizens, so the statute lacks minimal diversity, and $50,000 is below the Rule’s threshold.³⁹ Assume in each example that no claim arises under federal law.

Steps one and two do most of the work on an exam, because stems usually vary only citizenship and amount. When both gates open, tactics decide. A stakeholder facing scattered claimants or pending suits gains the most from the statute, while one that wants to keep control of the stake does better under the Rule.⁴⁰