Wells Fargo Bank, National Association v. Magellan Owners Association, et al, No. 2:2009cv00587 - Document 233 (D. Ariz. 2010)
Court Description: ORDER granting Pla Wells Fargo's Motion 168 to Deposit Funds. FURTHER ORDERED denying as moot Dft Magellan Owners Association's Motion 148 to Dismiss. FURTHER ORDERED directing Pla Wells Fargo to deposit with the Clerk of Court, in an i nterest bearing account, the disputed funds in the Escrow Accounts identified in Wells Fargo's Complaint, together with any and all additional interest actually earned thereon up to the date of such deposit, and provide notice to all Claimants/D efendants. Wells Fargo shall make this deposit on or before February 1, 2010. FURTHER ORDERED that Dfts will have 10 calendar days after Wells Fargo has deposited the disputed funds with the Clerk of the Court to file an objection. FURTHER ORDERED th at 20 days after the disputed funds have been deposited, Wells Fargo will be discharged from this action and all counter-claims that have been filed against it relating to the interplead funds will be dismissed with prejudice. FURTHER ORDERED that We lls Fargo will have 20 calender days after it has deposited the disputed funds with the Clerk of the Court to file its Motion for Attorney Fees. FURTHER ORDERED denying all Motions requesting the immediate disbursement of funds as premature and unrip e, Dkt.## 201 , 215 , 217 , 222 , 223 , 231 .FURTHER ORDERED granting Dft Charles E. Miller, Sr. and Rita S. Miller Revocable Trust's Motion 130 to Allow Electronic Filing by a Party Appearing without an Attorney. Signed by Judge Mary H Murguia on 12/23/09. (NOTE: See Order for full details)(KMG)
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Wells Fargo Bank, National Association v. Magellan Owners Association, et al 1 Doc. 233 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 11 12 13 14 ) ) ) Plaintiff, ) ) vs. ) ) The Magellan Owners Association, et al.,) ) ) Defendant. ) ) Wells Fargo Bank, N.A., No. CV-09-587-PHX-MHM ORDER 15 16 17 Currently pending before the Court is Plaintiff Wells Fargo Bank, N.A.’s (“Wells 18 Fargo”) Motion to Deposit Funds (Dkt.#168), and Defendant Magellan Owners Association’s 19 (“Magellan”) Motion to Dismiss, (Dkt.#148). After reviewing the pleadings and determining 20 oral argument unnecessary, the Court issues the following Order. 21 I. BACKGROUND 22 According to the Complaint, Magellan entered into Purchase and Sales Agreements 23 with the various named Defendants in this suit. The purpose of these agreements was to 24 either transfer shares of stock in The Magellan Ship Owners Association or sell full or 25 fractionalized ownership interests in residential units in a yet-to-be-built luxury cruise ship. 26 The Purchase and Sales Agreement required each Buyer to pay an initial deposit equal to or 27 greater than twenty-five percent of the total purchase price of each unit purchased. The 28 Dockets.Justia.com 1 agreement further required that each buyer, at closing, deliver the balance of the purchase 2 price, as well as an Annual Cooperative Assessment payable on account of the estimated ship 3 operating expenses. 4 On June 2, 2006, Magellan entered into an escrow agreement with Wells Fargo, which 5 set forth the terms and conditions under which Wells Fargo accepted appointment as Escrow 6 Agent for funds provided to Magellan under the Purchase and Sale Agreements. Pursuant to 7 the terms of the Escrow Agreement, Wells Fargo opened two escrow accounts: (1) Purchase 8 Escrow Account, and (2) the Annual Cooperative Assessment Escrow Account. Section 3 9 of the Escrow Agreement states that, within three days after receipt and collection of buyer 10 funds by Wells Fargo acting as Escrow Agent, the Escrow Agent shall release to Magellan 11 an amount equal to ten percent of the purchase price for each unit sold. Aside from this initial 12 disbursement of funds to Magellan, Section 3 of the Escrow Agreement states all other buyer 13 monies shall be disbursed from the Escrow only upon written certification by Magellan that 14 (1) all conditions prerequisite to disbursement, as set forth in the Escrow Agreement, have 15 been satisfied, or (2), in the case of a particular Buyer, Buyer has committed a default which 16 has not been cured in accordance with the provisions of the Agreement. The Escrow 17 Agreement lastly states that in the event Magellan has not satisfied the conditions identified 18 in the Escrow Agreement on or before the termination date of the Escrow Agreement, Wells 19 Fargo may disburse to each Buyer the balance of the buyer Funds attributed to each Buyer, 20 but only upon written instruction of Magellan. 21 Under Section 11 of the Escrow Agreement, Wells Fargo acting as Escrow Agent 22 may, “in its sole and absolute discretion,” interplead Buyer funds with any court of 23 competent jurisdiction if any disagreement or dispute arises between Magellan and Buyers 24 concerning Buyer funds or any matter relating to the Escrow Agreement. On February 9, 25 2009, Wells Fargo resigned as Escrow Agent in accordance with Section 10 of the Escrow 26 Agreement. On March 24, 2009, Wells Fargo filed a Complaint which requested that the 27 Court commence a statutory interpleader action pursuant to 28 U.S.C. § 1335. According 28 to the Complaint, Wells Fargo claims no interest in the funds held in escrow, and that a court -2- 1 ordered dispersement through the interpleader process is necessary, as a number of Buyers 2 have made demand on Wells Fargo for return of funds and have raised various legal 3 claims—directed at Magellan—in support of their demands. Lastly, the Complaint notes that 4 with the exception of four Buyers who were entitled to return of their funds pursuant to the 5 express language of the Purchase and Sales Agreement, Magellan has not authorized return 6 of any other Buyer funds in response to their demands. 7 II. LEGAL STANDARD AND ANALYSIS 8 “Interpleader is a procedural device used to resolve conflicting claims to money or 9 property. It enables a person or entity in possession of a tangible res or fund of money (the 10 stakeholder) to join in a single suit two or more claimants’ asserting mutually exclusive 11 claims to that stake.” Nevada v Pioneer Cos., 245 F Supp. 2d 1120, 1125 (D Nev. 2003) 12 (quoting 4 James Wm. Moore, et al., Moore's Federal Practice § 22.02[1] (3d ed 2002)). An 13 interpleader action avoids the problem of multiple, conflicting claims to a single fund by 14 forcing all “claimants” to a limited amount of money to resolve their potentially adverse 15 claims all at once, before the same judge. See, e.g., State Farm Fire & Casualty Co. v. 16 Tashire, 386 U.S. 523, (1967). As the Ninth Circuit has stated, an “[i]nterpleader's primary 17 purpose is not to compensate, but rather to protect stakeholders from multiple liability as well 18 as from the expense of multiple litigation.” Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 19 1034 (9th Cir. 2000). Furthermore, interpleader is an equitable remedy and is governed by 20 equitable principles. Id. 21 In order to properly invoke a statutory interpleader action, the plaintiff must establish 22 that there are “two or more adverse claimants, of diverse citizenship . . . [who] are claiming 23 or may claim to be entitled to such money or property. . . .” 28 U.S.C. § 1335(a)(1). 24 Additionally, 28 U.S.C. § 2361 provides for nationwide service on all claimants and allows 25 a district court in a statutory interpleader action to enjoin any state or federal proceedings 26 affecting the disputed funds. 28 U.S.C. § 1397 further permits statutory interpleader actions 27 to be brought at any place where one or more of the claimants reside. 28 -3- 1 An interpleader action usually involves two distinct stages. See Mid-American 2 Indem. Co. v. McMahan, 666 F. Supp. 926, 928 (S.D. Miss. 1987). During the first stage, 3 the court determines whether the plaintiff/stakeholder has the right to compel the adverse 4 claimants to interplead and litigate their claims to the fund in one proceeding. Id. At this 5 point, the court determines whether the prerequisites to statutory interpleader have been met. 6 If the court decides that interpleader is available, it may issue an order discharging the 7 stakeholder and directing the claimants to interplead. Wright & Miller, Federal Practice and 8 Procedure: Civil 3d § 1704, at 624-627 (3d ed. 2001). The court may also make any other 9 order that is appropriate and convenient for the resolution of the competing claims. Id. 10 During the second stage, the court will adjudicate the defendants’ adverse claims to the 11 interplead funds. New York Ins. Co. v. Connecticut Dev. Auth., 700 F.2d 91, 95 (2d Cir. 12 1983). The second stage generally proceeds like any other civil action and it is ultimately 13 resolved when the district court enters judgment in favor of a defendant who is lawfully 14 entitled to the interplead funds. See Diamond Shamrock Oil & Gas Corp. v. Commissioner 15 of Revenues, 422 F.2d 532, 534 (8th Cir. 1970). 16 With respect to the first stage of an interpleader action, the date a statutory 17 interpleader is “commenced,” is the date when the disputed funds are deposited with the 18 Clerk of the Court. See In Re Enron Corporation Securities, Derivative & ERISA Litigation, 19 391 F. Supp. 2d 541, 563 (S.D. Tex. 2005); Murphy v. Travelers Ins. Co., 534 F.2d 1155, 20 1159 (5th Cir. 1976) (“The deposit requirement is a jurisdictional prerequisite to a suit under 21 the interpleader statute. 28 U.S.C. § 1335.”). Accordingly, Wells Fargo requests an Order 22 from this Court permitting it to deposit with the Clerk of Court, in an interest bearing 23 account, the disputed funds in the Escrow Accounts identified in Wells Fargo’s Complaint, 24 together with any and all additional interest actually earned thereon up to the date of such 25 deposit. Wells Fargo states that good cause for such an Order exists because (1) the deposit 26 of the funds is required any time a situation like this exits pursuant to the interpleader statute, 27 28 U.S.C. § 1335(a)(2); (2) notice of Wells Fargo’s intent to deposit the funds has been 28 provided to all interested parties at their last known address; (3) no potential successor -4- 1 escrow agent has been proposed by Magellan; and (4) deposit of the funds will avoid delay 2 and expense proceeding with the interested parties’ substantive claims. 3 The Court agrees with Wells Fargo’s position. As its Motion to Deposit makes clear, 4 Wells Fargo has already been maintaining the disputed funds in an interest bearing account 5 for the benefit of the interested parties, and as of June 30, 2009, the cumulative amount of 6 the Funds, including accrued interest through June 2009 was $11,050,708.98. The Court 7 notes that none of the interested Defendant/Claimants, including Magellan, have taken issue 8 with the Court permitting Wells Fargo to deposit the disputed funds with the Clerk of the 9 Court. As such, the Court will grant Wells Fargo’s Motion to Deposit. At the same time, the 10 Court sees no reason to further delay the rightful disbursement of interplead funds by forcing 11 Wells Fargo to file an unnecessary Discharge Motion, in light of the fact that Wells Fargo 12 is clearly a “disinterested stakeholder” and the Court’s jurisdiction over this matter cannot 13 be reasonably questioned. 14 With respect to Wells Fargo’s status as a disinterested stakeholder, the Court notes 15 that Wells Fargo is simply holding the disputed funds in escrow without attempting to assert 16 any interest in them. See Schirmer Stevedoring Co., Ltd. v. Seabord Stevedoring Corp., 306 17 F.2d 188, 193-94 (9th Cir. 1962). Furthermore, Wells Fargo contends that is has not used 18 any portion of the disputed funds to compensate itself for services rendered as Escrow Agent, 19 as Wells Fargo was paid a separate lump sum annually by Magellan for escrow services. Nor 20 has Wells Fargo retained for its own benefit any portion of the interest accrued through 21 investment of the funds in the Wells Fargo Advantage Funds Government Money Market 22 Fund. Wells Fargo also claims that its internal records itemize the portion of the funds 23 traceable to each individual buyer’s net deposit in the Escrow Accounts, including all interest 24 accrued thereon both before and after Wells Fargo’s resignation as Escrow Agent and filing 25 of this action. 26 With respect to the Court’s jurisdiction, the amount in controversy clearly exceeds 27 $500, since the funds provided to Magellan under its Purchase and Sale Agreements and 28 placed in escrow are over $11 Million. Because a statutory interpleader action only requires -5- 1 “minimal diversity,” Cripps v. Life Ins. Co., 980 F.2d 1261, 1265 (9th Cir. 1992), which is 2 met when “two or more” adverse claimants are of diverse citizenship, that jurisdictional 3 element is likewise met as the claimants to the disputed funds are citizens of a variety of 4 states and foreign nations. The final jurisdictional requirement, namely, that two or more 5 adverse claimants may be to be entitled to the disputed funds is evidenced by the number of 6 requests for disbursement made by the purchasers of Magellan’s ill-fated cruise ship seeking 7 to recoup lost monies. 8 Consistent with the purpose of protecting the disinterested stakeholder, upon 9 satisfying the requirements of statutory interpleader and a deposit of the disputed of funds 10 with Clerk of the Court, 28 U.S.C. § 2361 authorizes the court to “discharge the plaintiff 11 from further liability,” permanently enjoin claimants from instituting or prosecuting other 12 claims with respect to the funds at issue,1 and “make all appropriate orders to enforce its 13 judgment.” Central Bank of Tampa v. United States, 838 F. Supp. 564, 567 (M.D. Fla. 1993) 14 (internal citations omitted). Upon satisfaction of the jurisdictional prerequisites, “[t]he court 15 should readily grant discharge of the [disinterested] stakeholder.” 4 Moore’s Federal Practice 16 § 22.03(2)(a); see also id. § 22.04(6)(b) (“Once a disinterested stakeholder deposits the stake 17 with the court, the stakeholder should be dismissed from the action.”). “The law normally 18 regards the plaintiff in an interpleader action as having been discharged of full responsibility 19 regarding the interplead[] funds when the funds have been paid into the registry of the court 20 and the parties have had notice and opportunity to be heard.” Central Bank of Tampa, 838 21 F. Supp. At 567 (internal citations omitted). 22 As such, because the Court will unquestionably assume jurisdiction over this 23 interpleader action, once Wells Fargo appropriately and without objection deposits all of the 24 25 26 27 28 1 “Because what entitles a stakeholder to bring an interpleader action in the first place is the prospect of multiple liability, in the typical case the protection provided by that device is limited to the interplead[] defendants’competing claims to the stake. Thus, the normal rule is that interpleader protection does not extend to counterclaims that are not claims to the interpleaded funds.” Prudential Ins. Co. of Am. v. Hovis, 553 F.3d 258, 264 (3d Cir. 2009). -6- 1 disputed funds with the Clerk of the Court, the Court will discharge Wells Fargo from this 2 action and will dismiss with prejudice all counter-claims that have been filed against it by 3 the various Defendants, in so far as such claims seek to recover a portion of the interplead 4 funds. 5 Accordingly, 6 IT IS HEREBY ORDERED granting Plaintiff Wells Fargo’s Motion to Deposit 7 8 9 Funds, (Dkt.#168). IT IS FURTHER ORDERED denying as moot Defendant Magellan Owners Association’s Motion to Dismiss, (Dkt.#148). 10 IT IS FURTHER ORDERED directing Plaintiff Wells Fargo to deposit with the 11 Clerk of Court, in an interest bearing account, the disputed funds in the Escrow Accounts 12 identified in Wells Fargo’s Complaint, together with any and all additional interest actually 13 earned thereon up to the date of such deposit, and provide notice to all Claimants/Defendants. 14 Wells Fargo shall make this deposit on or before February 1, 2010. 15 IT IS FURTHER ORDERED that Defendants will have 10 calendar days after 16 Wells Fargo has deposited the disputed funds with the Clerk of the Court to file an objection. 17 Only objections that attempt to challenge the nature or manner of the deposit by Wells Fargo 18 will be accepted by the Court. 19 IT IS FURTHER ORDERED that 20 days after the disputed funds have been 20 deposited, Wells Fargo will be discharged from this action and all counter-claims that have 21 been filed against it relating to the interplead funds will be dismissed with prejudice. 22 IT IS FURTHER ORDERED that Wells Fargo will have 20 calender days after it 23 has deposited the disputed funds with the Clerk of the Court to file its Motion for Attorney 24 Fees. See Sun Life Assur. Co. of Canada v. Sampson, 556 F.3d 6, 8 (1st Cir. 2009) (“It is 25 settled that a federal court has discretion to award costs and counsel fees to the stakeholder 26 in an interpleader action whenever it is fair and equitable to do so.) (Internal quotations and 27 citations omitted). 28 -7- 1 2 IT IS FURTHER ORDERED denying all Motions requesting the immediate disbursement of funds as premature and unripe, (Dkt.## 201,215,217, 222, 223,231.) 3 IT IS FURTHER ORDERED directing the remaining Claimants/Defendants, to the 4 extent practical, to meet and confer in an attempt to establish an orderly process for the 5 adjudication of claims to the interplead funds and the prosecution of any cross-claims against 6 Magellan. The remaining Claimants/Defendants must meet and confer within 45 calendar 7 days after Wells Fargo has deposited the disputed funds with the Clerk of the Court. 8 IT IS FURTHER ORDERED that within 20 calendar days after satisfying the 9 Court’s meet and confer requirement, the remaining Claimants/Defendants shall, to the extent 10 practical, file a single Joint Proposed Scheduling Order with the Court that sets forth a time 11 line for the adjudication and disbursement of the interplead funds and the resolution of any 12 independent cross-claims asserted against Magellan. If Claimants/Defendants cannot agree 13 on a single Joint Proposed Scheduling Order, the various Parties must, as early as possible, 14 request leave from the Court to file a separate Joint Proposed Scheduling Order. 15 IT IS FURTHER ORDERED granting Defendant Charles E. Miller, Sr. and Rita S. 16 Miller Revocable Trust’s Motion to Allow Electronic Filing by a Party Appearing without 17 an Attorney, (Dkt.#130). 18 DATED this 23rd day of December, 2009. 19 20 21 22 23 24 25 26 27 28 -8-
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