1 2 3 4 5 6 9 10 LIFE INSURANCE COMPANY OF THE Case No. 1:22-cv-00075-ADA-EPG SOUTHWEST, 11 FINDINGS AND RECOMMENDATIONS, Plaintiff in Interpleader, RECOMMENDING THAT THE 12 APPLICATION FOR APPROVAL OF v. MINORS’ SETTLEMENT BE DENIED JOEY MUA, et al., 14 (ECF No. 28) Defendants in 15 Interpleader. OBJECTIONS, IF ANY, DUE WITHIN FOURTEEN (14) DAYS 16 17 18 This matter is before the Court on the application for approval of minors’ settlement filed 19 by Defendant Youa Lee, who is the state-appointed Guardian of Minors C.A.M. and E.K.M. 20 (ECF No. 28). As further explained below, the Court concludes that the application is governed 21 by Local Rule 202(b)(1), which states that, “[i]n actions in which the minor or incompetent is 22 represented by an appointed representative pursuant to appropriate state law, excepting only those 23 actions in which the United States courts have exclusive jurisdiction, the settlement or 24 compromise shall first be approved by the state court having jurisdiction over the personal 25 representative.” Because Lee has been appointed as guardian pursuant to state law, and this is not 26 a case where the United States courts have exclusive jurisdiction, the Court finds that the 27 settlement must first be approved by the state court having jurisdiction over Lee. Accordingly, the 28 Court will recommend that the application be denied without prejudice. 2 Plaintiff Life Insurance Company of the Southwest initiated this action on January 19, 3 2022, by filing a complaint in interpleader regarding the disbursement of funds from a life 4 insurance policy among individuals with conflicting claims to those benefits, Defendants Joey Mua, Lillian Mua, Mainhia Vue, and Lee, individually, and as the guardian ad litem for Minors 5 C.A.M. and E.K.M. (ECF No. 1). The Court’s jurisdiction over this matter is based on the parties’ 6 diversity of citizenship. (Id. at 2); see 28 U.S.C. § 1332. Among other documents attached to the 7 complaint, is a copy of an order, dated October 16, 2021, from the Merced Superior Court, 8 appointing Lee as the guardian for C.A.M. and E.K.M. (ECF No. 1-8). 9 After obtaining the Court’s approval (ECF No. 18), Plaintiff deposited $266,865.05 in the 10 Court’s Registry. (ECF No. 19). With the deposit of the funds, Plaintiff was terminated as a party 11 to this action. (ECF No. 18). 12 On December 9, 2022, the remaining parties notified the Court that they had reached a 13 settlement following a private mediation on December 1, 2022. (ECF No. 25). On December 14, 14 2022, the parties filed a stipulation regarding their settlement, accompanied by a proposed order 15 for the distribution of the funds in the Court’s Registry. (ECF No. 27). The same day, Lee1 filed 16 an application for approval of the Minors’ settlement. (ECF No. 28). Of the roughly $266,865.052 17 in funds to be disbursed, the settlement calls for $115,000 to be disbursed to Vue, with the 18 remainder of the amount to be disbursed in 25% shares to Joey Mua, Lillian Mua, C.A.M. and 19 E.K.M. (Id. at 4). For the Minors, after the deduction of attorney fees and costs, the remaining 20 amounts will be placed in a blocked account for each, with no withdrawals being permitted until 21 they turn eighteen. (Id. at 4, 8). No opposition to the application has been filed and the time to 22 oppose the application has expired. See Local Rule 230(c). 23 On January 12, 2023, the presiding District Judge referred the application to the undersigned for findings and recommendations or other appropriate action. (ECF No. 29). On 24 January 17, 2023, the Court requested a supplemental filing to address certain issues including the 25 potential applicability of Local Rule 202. On January 27, 2023, Lee filed a supplement in support 26 27 1 The application states that Lee is the Minors’ mother. 28 2 An exact amount is not available because of interest accruing on the funds. 1 of the application. (ECF No. 31). 2 II. LOCAL RULE 202 3 Local Rule 202 governs approval of a minor’s settlement. It states, in relevant part:
4 (b) Settlement. No claim by or against a minor or incompetent person may be settled or compromised absent an order by the Court approving the settlement or 5 compromise. 6 (1) Initial State Court Approval. In actions in which the minor or incompetent is 7 represented by an appointed representative pursuant to appropriate state law, excepting only those actions in which the United States courts have exclusive 8 jurisdiction, the settlement or compromise shall first be approved by the state court having jurisdiction over the personal representative. Following such approval, a 9 copy of the order and all supporting and opposing documents filed in connection 10 therewith shall be filed in the District Court with a copy to all parties and to the Judge or Magistrate Judge who may either approve the settlement or compromise 11 without hearing or calendar the matter for hearing.
12 (2) Approval in All Other Actions. In all other actions, the motion for approval of a proposed settlement or compromise shall be filed and calendared pursuant to 13 L.R. 230. The application shall disclose, among other things, the age and sex of the 14 minor or incompetent, the nature of the causes of action to be settled or compromised, the facts and circumstances out of which the causes of action arose, 15 including the time, place and persons involved, the manner in which the compromise amount or other consideration was determined, including such 16 additional information as may be required to enable the Court to determine the fairness of the settlement or compromise . . . . 17 EDCA Local Rule 202(b). In summary, Local Rule 202(b) requires court approval of a minor’s 18 settlement agreement and provides two methods to obtain the approval. The first method applies 19 in cases where the minor “is represented by an appointed representative pursuant to appropriate 20 state law, excepting only those actions in which the United States courts have exclusive 21 jurisdiction.” Local Rule 202(b)(1). In such cases, “the settlement or compromise shall first be 22 approved by the state court having jurisdiction over the personal representative,” and following 23 such approval, “a copy of the order and all supporting and opposing documents . . . shall be filed 24 in the District Court with a copy to all parties and to the Judge or Magistrate Judge who may 25 either approve the settlement or compromise without hearing or calendar the matter for hearing.” 26 Id. 27 Here, Lee was appointed as guardian of the minors by Merced Superior Court. (ECF No. 28 1 1-8). The settlement therefore falls under Rule 202(b)(1) and requires state court approval. 2 Regarding Local Rule 202(b), Lee states that “[c]ounsel does not intend to appear or bring 3 any application in State Court for the approval of the settlement because the District Court has the 4 jurisdiction and authority to rule on the parties before it and the funds it holds.” (ECF No. 31, pp. 4-5). Further, “since this case would have been tried to the Court, there is no apparent State Court 5 interest or capacity that the Federal Court lacks in considering whether the settlement is fair.” (Id. 6 at 5). Lee contends that the application falls under the second method for approval, Local Rule 7 202(b)(2), which applies “[i]n all other actions” and does not require initial state court approval. 8 (Id.). 9 The Court appreciates Lee’s argument and recognizes that there appears to be no ancillary 10 state court action pending and that this Court has subject-matter jurisdiction over the case. See 11 Penn-Star Ins. Co. v. Thee Aguila, Inc., No. CV219365PSGRAOX, 2022 WL 17224687, at *2 12 (C.D. Cal. Mar. 29, 2022) (“A court may exercise subject matter jurisdiction over a rule 13 interpleader action under 28 U.S.C.
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1 2 3 4 5 6 9 10 LIFE INSURANCE COMPANY OF THE Case No. 1:22-cv-00075-ADA-EPG SOUTHWEST, 11 FINDINGS AND RECOMMENDATIONS, Plaintiff in Interpleader, RECOMMENDING THAT THE 12 APPLICATION FOR APPROVAL OF v. MINORS’ SETTLEMENT BE DENIED JOEY MUA, et al., 14 (ECF No. 28) Defendants in 15 Interpleader. OBJECTIONS, IF ANY, DUE WITHIN FOURTEEN (14) DAYS 16 17 18 This matter is before the Court on the application for approval of minors’ settlement filed 19 by Defendant Youa Lee, who is the state-appointed Guardian of Minors C.A.M. and E.K.M. 20 (ECF No. 28). As further explained below, the Court concludes that the application is governed 21 by Local Rule 202(b)(1), which states that, “[i]n actions in which the minor or incompetent is 22 represented by an appointed representative pursuant to appropriate state law, excepting only those 23 actions in which the United States courts have exclusive jurisdiction, the settlement or 24 compromise shall first be approved by the state court having jurisdiction over the personal 25 representative.” Because Lee has been appointed as guardian pursuant to state law, and this is not 26 a case where the United States courts have exclusive jurisdiction, the Court finds that the 27 settlement must first be approved by the state court having jurisdiction over Lee. Accordingly, the 28 Court will recommend that the application be denied without prejudice. 2 Plaintiff Life Insurance Company of the Southwest initiated this action on January 19, 3 2022, by filing a complaint in interpleader regarding the disbursement of funds from a life 4 insurance policy among individuals with conflicting claims to those benefits, Defendants Joey Mua, Lillian Mua, Mainhia Vue, and Lee, individually, and as the guardian ad litem for Minors 5 C.A.M. and E.K.M. (ECF No. 1). The Court’s jurisdiction over this matter is based on the parties’ 6 diversity of citizenship. (Id. at 2); see 28 U.S.C. § 1332. Among other documents attached to the 7 complaint, is a copy of an order, dated October 16, 2021, from the Merced Superior Court, 8 appointing Lee as the guardian for C.A.M. and E.K.M. (ECF No. 1-8). 9 After obtaining the Court’s approval (ECF No. 18), Plaintiff deposited $266,865.05 in the 10 Court’s Registry. (ECF No. 19). With the deposit of the funds, Plaintiff was terminated as a party 11 to this action. (ECF No. 18). 12 On December 9, 2022, the remaining parties notified the Court that they had reached a 13 settlement following a private mediation on December 1, 2022. (ECF No. 25). On December 14, 14 2022, the parties filed a stipulation regarding their settlement, accompanied by a proposed order 15 for the distribution of the funds in the Court’s Registry. (ECF No. 27). The same day, Lee1 filed 16 an application for approval of the Minors’ settlement. (ECF No. 28). Of the roughly $266,865.052 17 in funds to be disbursed, the settlement calls for $115,000 to be disbursed to Vue, with the 18 remainder of the amount to be disbursed in 25% shares to Joey Mua, Lillian Mua, C.A.M. and 19 E.K.M. (Id. at 4). For the Minors, after the deduction of attorney fees and costs, the remaining 20 amounts will be placed in a blocked account for each, with no withdrawals being permitted until 21 they turn eighteen. (Id. at 4, 8). No opposition to the application has been filed and the time to 22 oppose the application has expired. See Local Rule 230(c). 23 On January 12, 2023, the presiding District Judge referred the application to the undersigned for findings and recommendations or other appropriate action. (ECF No. 29). On 24 January 17, 2023, the Court requested a supplemental filing to address certain issues including the 25 potential applicability of Local Rule 202. On January 27, 2023, Lee filed a supplement in support 26 27 1 The application states that Lee is the Minors’ mother. 28 2 An exact amount is not available because of interest accruing on the funds. 1 of the application. (ECF No. 31). 2 II. LOCAL RULE 202 3 Local Rule 202 governs approval of a minor’s settlement. It states, in relevant part:
4 (b) Settlement. No claim by or against a minor or incompetent person may be settled or compromised absent an order by the Court approving the settlement or 5 compromise. 6 (1) Initial State Court Approval. In actions in which the minor or incompetent is 7 represented by an appointed representative pursuant to appropriate state law, excepting only those actions in which the United States courts have exclusive 8 jurisdiction, the settlement or compromise shall first be approved by the state court having jurisdiction over the personal representative. Following such approval, a 9 copy of the order and all supporting and opposing documents filed in connection 10 therewith shall be filed in the District Court with a copy to all parties and to the Judge or Magistrate Judge who may either approve the settlement or compromise 11 without hearing or calendar the matter for hearing.
12 (2) Approval in All Other Actions. In all other actions, the motion for approval of a proposed settlement or compromise shall be filed and calendared pursuant to 13 L.R. 230. The application shall disclose, among other things, the age and sex of the 14 minor or incompetent, the nature of the causes of action to be settled or compromised, the facts and circumstances out of which the causes of action arose, 15 including the time, place and persons involved, the manner in which the compromise amount or other consideration was determined, including such 16 additional information as may be required to enable the Court to determine the fairness of the settlement or compromise . . . . 17 EDCA Local Rule 202(b). In summary, Local Rule 202(b) requires court approval of a minor’s 18 settlement agreement and provides two methods to obtain the approval. The first method applies 19 in cases where the minor “is represented by an appointed representative pursuant to appropriate 20 state law, excepting only those actions in which the United States courts have exclusive 21 jurisdiction.” Local Rule 202(b)(1). In such cases, “the settlement or compromise shall first be 22 approved by the state court having jurisdiction over the personal representative,” and following 23 such approval, “a copy of the order and all supporting and opposing documents . . . shall be filed 24 in the District Court with a copy to all parties and to the Judge or Magistrate Judge who may 25 either approve the settlement or compromise without hearing or calendar the matter for hearing.” 26 Id. 27 Here, Lee was appointed as guardian of the minors by Merced Superior Court. (ECF No. 28 1 1-8). The settlement therefore falls under Rule 202(b)(1) and requires state court approval. 2 Regarding Local Rule 202(b), Lee states that “[c]ounsel does not intend to appear or bring 3 any application in State Court for the approval of the settlement because the District Court has the 4 jurisdiction and authority to rule on the parties before it and the funds it holds.” (ECF No. 31, pp. 4-5). Further, “since this case would have been tried to the Court, there is no apparent State Court 5 interest or capacity that the Federal Court lacks in considering whether the settlement is fair.” (Id. 6 at 5). Lee contends that the application falls under the second method for approval, Local Rule 7 202(b)(2), which applies “[i]n all other actions” and does not require initial state court approval. 8 (Id.). 9 The Court appreciates Lee’s argument and recognizes that there appears to be no ancillary 10 state court action pending and that this Court has subject-matter jurisdiction over the case. See 11 Penn-Star Ins. Co. v. Thee Aguila, Inc., No. CV219365PSGRAOX, 2022 WL 17224687, at *2 12 (C.D. Cal. Mar. 29, 2022) (“A court may exercise subject matter jurisdiction over a rule 13 interpleader action under 28 U.S.C. § 1332 if there is complete diversity of citizenship between 14 the plaintiffs-in-interpleader and the defendants-in-interpleader and the amount in controversy 15 exceeds $75,000.”). The Court also acknowledges that Federal courts have a duty to review 16 proposed settlements in cases involving minors. See Robidoux v. Rosengren, 638 F.3d 1177, 1181 17 (9th Cir. 2011) (noting “special duty” to review minor’s settlement to make sure the interests of 18 the minor were protected). 19 Nevertheless, the settlement falls within the scope of Local Rule 202(b)(1), which requires 20 state court approval of the settlement before it is submitted to this Court for approval. This Court 21 does not have “exclusive jurisdiction” over the claims in this case, which concern life insurance 22 benefits filed in this Court pursuant to diversity jurisdiction. See Zora Analytics, LLC v. 23 Sakhamuri, No. 13-CV-00639 JM WMC, 2014 WL 1289450, at *5 (S.D. Cal. Mar. 27, 2014) (noting that “state courts and federal courts share concurrent jurisdiction over diverse actions”). 24 Moreover, the Court has found multiple cases enforcing Local Rule 202(b)(1) in similar 25 circumstances. See, e.g., Primerica Life Ins. Co. v. Cassie, No. CIV. 2:12-1570 WBS, 2013 WL 26 1705033, at *1 (E.D. Cal. Apr. 19, 2013) (noting in interpleader action concerning death benefits 27 that state court first approved minor’s settlement agreement under Local Rule 202(b)(1)); K.B. v. 28 1 Garfield Beach CVS, LLC, No. 1:19-CV-00507-AWI-BAM, 2020 WL 4916421, at *2 (E.D. Cal. 2 Aug. 21, 2020) (noting state court’s initial approval of minor’s settlement in compliance with 3 Local Rule 202(b)(1)); Sykes v. Shea, No. CV 2:16-2851 WBS GGH, 2018 WL 2335774, at *1 4 (E.D. Cal. May 23, 2018) (same). The Court has not located, nor has Lee cited, any contrary authority. 5 Further, the Court notes that the state court order appointing Lee as guardian states: “The 6 guardian is not authorized to take possession of money or any other property without a specific 7 court order.” (ECF No. 1-8, p. 3). Thus, there appears to be some ongoing state interest in Lee’s 8 guardianship over the minors. 9 IV. FINDINGS AND RECOMMENDATIONS 10 For the reasons given above, IT IS RECOMMENDED as follows: 11 1. The application for approval of the Minors’ settlement (ECF No. 28) be denied without 12 prejudice. 13 2. Lee be given leave to file a new application, complete in itself and without reference to 14 her previous application or supplement, fully complying with the Court’s Local Rules and 15 all other applicable law following state approval of the settlement 16 These findings and recommendations will be submitted to the United States District 17 Judge assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(1). Within 18 fourteen (14) days after being served with these findings and recommendations, the parties may 19 file written objections with the Court. The document should be captioned “Objections to 20 Magistrate Judge’s Findings and Recommendations.” Any response to the objections shall be 21 served and filed within fourteen (14) days after service of the objections. 22 \\\ 23 \\\ \\\ 24 \\\ 25 \\\ 26 \\\ 27 \\\ 28 1 The parties are advised that failure to file objections within the specified time may result 2 | in the waiver of rights on appeal. Wilkerson v. Wheeler, 772 F.3d 834, 838-39 (9th Cir. 2014) 3 | (citing Baxter v. Sullivan, 923 F.2d 1391, 1394 (9th Cir. 1991)). 4 5 IT IS SO ORDERED. 6 7| Dated: _February 1, 2023 [sJ ee ey UNITED STATES MAGISTRATE JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28