Indianapolis Colts v. Mayor and City Council of Baltimore, and Capital Improvement Board of Managers of Marion County

741 F.2d 954, 1984 U.S. App. LEXIS 19660

Opinions

BAUER, Circuit Judge.

Defendants Mayor and City Council of Baltimore (collectively “Baltimore”) appeal from two district court orders entered in this interpleader action Plaintiff Indianapolis Colts filed pursuant to 28 U.S.C. § 1335 (1948). The Colts, a football team owning a National Football League franchise, filed the action claiming interpleader jurisdiction on the ground that Baltimore and the Capital Improvement Board of Managers of Marion County, Indiana (CIB), operators of the Indianapolis Hoosier Dome, had conflicting claims against the team. The district court in Indiana granted the Colts’ request for an order restraining Baltimore from pursuing its condemnation action against the Colts, which was pending in a federal district court in Maryland. Two weeks later, the district court also enjoined Baltimore from pursuing a Maryland state court action against the NFL in which Baltimore hoped to stop the Colts from moving to Indianapolis. Baltimore filed a notice of appeal from the court’s two orders on April 19, 1984. On April 23, Baltimore also filed in this court an emergency motion to stay the district court orders and to enjoin the Colts from preparing to play football in Indianapolis pending this appeal. On May 8, this court granted Baltimore’s motion for a stay, but denied Baltimore’s request for an injunction against the Colts. Indianapolis Colts v. Mayor of Baltimore, 733 F.2d 484 (7th Cir.1984). Our jurisdiction is based on 28 U.S.C. § 1292(a)(1) (1982). We hold that the district court did not have interpleader jurisdiction to hear this suit, and therefore vacate the orders and remand with instructions to dismiss.

I

Through the 1983 season,' the Colts played their home games in Baltimore Memorial Stadium. In February 1984, the Colts and the stadium managers began negotiating a renewal of the Memorial Stadium lease. At the same time, the Colts negotiated with the CIB regarding the possibility of moving the team to the Hoosier Dome.

On March 27, 1984, Colts owner Robert Irsay learned that the Maryland Senate passed a bill granting the City of Baltimore the power to acquire the Colts by eminent domain. Irsay decided to move the team to Indianapolis and promptly executed a lease with the CIB. The Colts fled Baltimore under the cloak of darkness; eight moving vans full of Colts equipment arrived in Indianapolis on March 29.

On March 29, Maryland’s governor signed into law the bill authorizing Baltimore to acquire the Colts by condemnation. Baltimore filed a condemnation petition against the Colts on March 30 in Maryland state court. The state court restrained the Colts from transferring any element of the team from Baltimore.

After learning about the condemnation suit by telegram, the Colts took two actions. First, on April 2, the Colts caused removal of the state court condemnation proceeding to federal district court in Maryland. Second, on April 5, the Colts filed this action in the United States District Court for the Southern District of Indiana, claiming that their obligations under the lease with the CIB conflicted with Baltimore’s attempts to acquire the team through eminent domain.

II

Our review of this case extends to the question of whether the interpleader was proper. Allstate Insurance Co. v. McNeill, 382 F.2d 84 (4th Cir.1967), cert, denied, 392 U.S. 931, 88 S.Ct. 2290, 20 L.Ed.2d 1390 (1968). This question is an issue of law entitled to full appellate review.

We hold that the Colts have not successfully satisfied the pleading requirements of 28 U.S.C. § 1335. Despite the Colts’ argument that it is unfair for the City of Indianapolis to lose the team by another city’s condemnation suit, we find that the CIB and Baltimore do not have conflicting claims over a single stake. Additionally, even assuming the CIB and Baltimore have claims over the same stake, the Colts do not face a reásonable danger of multiple liability or vexatious, conflicting claims from the claimants, and thus interpleader is not justified here.

A

A basic jurisdictional requirement of statutory interpleader is that there be adverse claimants to a particular fund. See Libby, McNeill & Libby v. City National Bank, 592. F.2d 504 (9th Cir.1978). The CIB and Baltimore are not claimants to the same stake. Baltimore seeks ownership of the Colts franchise, whereas the CIB has no claim to ownership of the franchise. Instead, the CIB has a lease with the Colts that requires the team to play its games in the Hoosier Dome and imposes other obligations to ensure the success of the enterprise.

The Colts argue in part that clause 11 of their lease with the CIB raises an interest in the CIB which conflicts with Baltimore’s attempt to obtain the franchise. Clause 11, grants the CIB the first chance to find purchasers for the team if Irsay decides to sell his controlling interest. This right of first refusal is the CIB’s contractual guarantee either that Irsay always will control the team or that the CIB will have the right to choose his successor. Yet this provision does not give the CIB a present right to buy the Colts, and thus does not raise a claim against the franchise conflicting with Baltimore’s claim.¹

A successful eminent domain action obviously will defeat the CIB’s interests in keeping the Colts in Indianapolis. Nevertheless, interpleader is not designed to aid every plaintiff confronted by one claim which, if successful, would defeat a second claim because the plaintiff ha.s lost the ability to pay damages. Such an interpretation would twist interpleader into protection for defendants from losing the opportunity to recover damages because the plaintiff’s resources already have been depleted. Interpleader is warranted only to protect the plaintiff-stakeholder from conflicting liability to the stake.

Interpleader is proper in cases such as a surety confronted by claims of subcontractors and materialmen which exceed the surety’s contractual liability, conflicting claims of entitlement to the proceeds of a life insurance policy, or automobile insurers surrendering the maximum sum of their liability to the court for disposition to plaintiffs in an accident case. The issue of whether the interpleaded defendants’ claims are adverse does not arise often. The Colts’ argument here that the “bottom line” of this case is which city “gets” the Colts clouds the issue of adversity. Only reasonable legal claims can form the adversity to the plaintiff necessary to justify interpleader. The CIB has no reasonable legal claim to ownership of the franchise sought by Baltimore. For the Colts, losing their franchise to Baltimore may lead to breach of the lease claims by the CIB, but this is not a situation for which interpleader was designed.² See Texas v. Florida, 306 U.S. 398, 405-08, 59 S.Ct. 563, 567-568, 83 L.Ed. 817 (1939); Indianapolis Colts, 733 F.2d at 487.

B

Interpleader is a suit in equity. See Champlin Petroleum Co. v. Ingram, 560 F.2d 994 (10th Cir.1977), cert, denied, 436 U.S. 958, 98 S.Ct. 3072, 57 L.Ed.2d 1123 (1978); see also First National Bank v. United States, 633 F.2d 1168 (5th Cir.1981); United States v. Major Oil Corp., 583 F.2d 1152 (10th Cir.1978). Because the sole basis for equitable relief to the stakeholder is the danger of exposure to double liability or the vexation of conflicting claims, Texas v. Florida, 306 U.S. at 406, 59 S.Ct. at 567, the stakeholder must have a real and reasonable fear of double liability or vexatious, conflicting claims to justify inter-pleader. Fonseca v. Regan, 734 F.2d 944 (2d Cir.1984); Bass v. Federal Savings & Loan Insurance Corp., 698 F.2d 328 (7th Cir.1983); Dunbar v. United States, 502 F.2d 506 (5th Cir.1974); General Electric Credit Corp. v. Grubbs, 447 F.2d 286 (5th Cir.1971), rev’d on other grounds, 405 U.S. 699, 92 S.Ct. 1344, 31 L.Ed.2d 612 (1972); Fulton v. Kaiser Steel Corp., 397 F.2d 580 (5th Cir.1968); Francis I. duPont & Co. v. O’Keefe, 365 F.2d 141 (7th Cir.1966); Bierman v. Marcus, 246 F.2d 200 (3d Cir.1957), cert, denied, 356 U.S. 933, 78 S.Ct. 774, 2 L.Ed.2d 762 (1958); New York Life Insurance Co. v. Lee, 232 F.2d 811 (9th Cir. 1956); John Hancock Mutual Life Insurance Co. v. Beardslee, 216 F.2d 457 (7th Cir.1954), cert, denied, 348 U.S. 964, 75 S.Ct. 523, 99 L.Ed. 751 (1955); American Fidelity Fire Insurance Co. v. Construcciones Werl, Inc., 407 F.Supp. 164 (D.V.I. 1975). Even assuming that Baltimore and the CIB are fighting over the same stake, the Colts do not havé a reasonable fear of double liability or vexatious claims here. The Colts and the CIB foresaw the likelihood of legal obstacles to prevent the Colts from leaving Baltimore, among which was an eminent domain action. The Colts and the CIB thus specifically contracted that the lease obligations will terminate at the Colts’ option if the Colts’ franchise is acquired by eminent domain. Clause 21.6 of the lease states in part:

21.6 Club’s Option.

21.6(a) Actions. The parties acknowledge and recognize that at the present time there are pending various lawsuits in the state and federal courts dealing with the issues of the provisions of the Constitution and By-Laws of the League, the Constitution of the United States, and various State Constitutions, state and federal antitrust laws, and state and federal laws of eminent domain and other state and federal laws which may be impact on the provisions of this Agreement. In acknowledgement and contemplation of those lawsuits and of the fact: that certain parties may institute lawsuits of a similar or dissimilar nature, including without limitation those described in the preceding sentence and those seeking injunctive relief to prevent the Club from keeping, observing and/or performing any of this Agreement or keeping, observing or performing any other covenant, agreement or undertaking; or, a strike suit is filed by any person; or, there is any act or action of the League, be it the institution of a suit, disciplinary or other proceedings, or threatening termination or suspension of the Franchise or of a fine as a result of or related to the Club’s transfer of its Franchise or the playing of its home games in Indianapolis; or, an eminent domain suit is filed by any governmental authority or any other statutory body capable of instituting said suits, the parties agree that:

* * * * * *

(iii) If Club is ordered by a final order of such court of final appellate jurisdiction to play other than at the Stadium or the Franchise is acquired by eminent domain, this Agreement shall terminate at Club’s option, and the parties shall have no further obligations hereunder except as stated in this Paragraph [dealing with a few final financial affairs].

This “escape” clause renders unreasonable the Colts' claim that they will face a second suit over the same stake if Baltimore ultimately succeeds in its eminent domain action.³ The Colts' characterization of the CIB’s claim does not meet a “minimal threshold level of substantiality.” 7 C. Wright & A. Miller, Federal Practice and Procedure § 1704, 370-71 (1972); Frances I. duPont & Co., 365 F.2d at 143 (cited in Wright & Miller).

The distinction in this case between the lack of adverse claims and the lack of fear of double liability or vexatious litigation is slight. Other courts, however, have recognized that even if adverse claims exist in theory, still there may be no real fear of multiple lawsuits. In Bierman, 246 F.2d 200, for example, the plaintiffs sought in-terpleader to resolve claims over a specific sum of money. One claimant asserted a valid claim. The other supposed claimant, however, was a corporation controlled by the plaintiffs. The Third Circuit ruled that the plaintiffs knew that the corporation would make no claim against the money and thus no equitable consideration supported interpleader jurisdiction. Id. at 203-04. In another case, the plaintiff stock brokerage sought to interplead the administrator of the estate to which the plaintiff owed the stake and all the legatees named in the decedent’s will. O’Keefe, 365 F.2d 141. This circuit ruled that the district court correctly determined that only the administrator would claim the stake, and thus interpleader did not lie. Id. at 143.

Because the Colts cannot assert a reasonable fear of multiple liability or vexatious, conflicting claims, interpleader jurisdiction was not proper. There is no other basis for federal jurisdiction in the federal district court in Indiana to hear the Colts’ action and thus this suit must be dismissed.

Ill

Because we find that Baltimore and the CIB do not have adverse claims and that the Colts are not exposed to the risk of vexatious litigation, we need not address the merits of Baltimore’s other arguments against the maintenance of interpleader jurisdiction. Specifically, we decline to decide whether the Colts and the CIB contrived a conflicting claim by signing the lease in order to create jurisdiction in a more favorable forum. Even if that was their plan, it did not succeed. The forum-shopping issue thus is not relevant to our disposition of the case.

The district court’s orders are vacated and this action is remanded with instructions that it be dismissed. Each party shall bear its own costs of this appeal.

Vacated And Remanded With Instructions.

1

. Other interests might constitute a claim conflicting with the eminent domain action. For example, if the CIB had signed a contract to purchase the Colts, the CIB might have had rights as equitable owner which would conflict with Baltimore’s claim. The right of first refusal and the contractual obligations of the Colts, however, do not raise such a conflict.

This case is analogous to the situation where the owner of a commercial building leases the entire building to a company for ten years and then in the middle of that lease suddenly faces a condemnation proceeding by the city. Even assuming the existence of all other jurisdictional prerequisites, the company can assert no conflicting claim to justify interpleader. The company may have a claim against the owner. The company may also have a claim against the city for damages. But the company has no claim to ownership of the building conflicting with the city’s claim of eminent domain. The CIB-Colts lease indicates clearly that the CIB has no claim.

2

. In Part II-B, we discuss how the CIB in the lease relinquished any claim over the Colts in the event of a successful eminent domain action.

3

. We are expressing here not an opinion on the likelihood of success of any action by the CIB, but rather the fact that the CIB plainly relinquished any claim to recover against the Colts for a loss due to a successful eminent domain action.