North American Marketing Corp. v. K. Gronbach & Associates, Inc.

221 F.R.D. 296, 2002 WL 32506915
CourtDistrict Court, D. Connecticut
DecidedJuly 9, 2002
DocketCiv. No. 3:01CV1999PCD
StatusPublished
Cited by2 cases

This text of 221 F.R.D. 296 (North American Marketing Corp. v. K. Gronbach & Associates, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Connecticut primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
North American Marketing Corp. v. K. Gronbach & Associates, Inc., 221 F.R.D. 296, 2002 WL 32506915 (D. Conn. 2002).

Opinion

RULING ON PLAINTIFF’S MOTION FOR AN ORDER OF INTERPLEADER AND PLAINTIFFS MOTION FOR AN ORDER AUTHORIZING PAYMENT INTO COURT

DORSEY, District Judge.

Plaintiff moves for an order of interpleader pursuant to Fed. R. Crv. P. 22 and 28 U.S.C. § 1335 and for an order authorizing its payment of $400,474.04 into the registry of the court. The motions are denied.

I. BACKGROUND

Plaintiff is a retailer of outdoor furniture and swimming pools. Defendant K. Gron-bach & Associates, Inc. (“KGA”) was plaintiffs advertising agency. KGA entered into agreements with various media companies on behalf of plaintiff to provide advertising for [298]*298plaintiffs business. Plaintiff paid KGA for its services and was billed through KGA for advertising expenditures. In Spring 2001, KGA became insolvent and ceased operations, at which time defendant Citizen’s Bank, which held an instrument secured by KGA’s accounts receivable, and various unpaid media companies, sought payment from plaintiff. Plaintiff presently holds $400,474.04 it characterizes as “funds designated to pay for the advertising services and products provided by KGA pursuant to KGA’s agreements with The Media Defendants.” Plaintiff made no payments to defendants, instead filing the present inter-pleader action.

II. MOTION FOR ORDER INTER-PLEADER

Plaintiff argues that an order of inter-pleader is proper and that its liability for KGA’s debts should be limited to the proposed amount. Defendants New York LLC and HearsL-Argyle1 object to plaintiffs motion as prematurely limiting its potential liability to the stated amount.

A. Standard

Interpleader is authorized by statute, see 28 U.S.C. § 1335, and by rule, see Fed. R. Civ. P. 22. Proceedings in inter-pleader are possible when (1) all defendants demand the same debt or duty, (2) all claims to the debt or duty arise from or depend upon a common source and (3) plaintiff has no independent liability to any of the defendants. See Bradley v. Kochenash, 44 F.3d 166, 168 (2d Cir.1995). The goal of inter-pleader is to protect plaintiffs from multiple lawsuits involving singular liability. See id.; Washington Elec. Co-op., Inc. v. Paterson, Walke & Pratt, P.C., 985 F.2d 677, 679 (2d Cir.1993). The initial step in the proceeding involves a determination of a stakeholder’s right to compel claimants to litigate numerous claims in one proceeding and to confine recovery to liability limited to the amount of a fund deposited in the registry of the court. See Great Am. Ins. Co. v. Bank of Bellevue, 366 F.2d 289, 293 (8th Cir.1966). The burden is on the party seeking interpleader to establish its entitlement to the same. See Dunbar v. United States, 502 F.2d 506, 511 (5th Cir.1974).

B. Discussion

The present facts are not typical of an interpleader action, such as where claims are made against a party whose obligation is fixed often by contract apart from the claims asserted by the claimants. The interpleader plaintiff, i.e., the disinterested stakeholder, seeks to forego litigation involving multiple claims to a defined amount in which it does not claim an interest, i.e., it concedes the amount is payable but once and to such of the claimants as may be determined without its involvement or participation. See, e.g., General Acc. Group v. Gagliardi, 593 F.Supp. 1080 (D.Conn.1984); 6247 Atlas Corp. v. Marine Ins. Co., 155 F.R.D. 454, 462 (S.D.N.Y.1994). In such circumstances, the payout by the interpleader would be no greater than the defined, undisputed amount. Thus interpleader liberates a disinterested party from the process of determining the entitlement among several claimants to the fund after it is paid into the registry of the court.

Plaintiffs alleged stake appears to be funds it has earmarked through its own internal measures as the amount it has set aside for advertising.2 The stake is not defined by express terms but rather appears to be quantified by plaintiffs unsupported declaration. The existence of a single, identifiable fund is a fundamental requirement to any interpleader action. See State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 530, 87 S.Ct. 1199, 1203, 18 L.Ed.2d 270 (1967); Wausau Ins. Companies v. Gifford, 954 F.2d 1098, 1100 (5th Cir.1992); Grossman v. Mushlin, 493 F.Supp. 330, 333 (S.D.N.Y.1980)(“fact that damages ... may be measured, at least in part, by reference to [299]*299the operation of the pension plan and to the payments made ... from the pension plan funds does not mean that a common fund exists with respect to the two claims”). Assuming arguendo that the funds designated by plaintiff constitute a single fund, the absence of an undisputed definition as to how the amount of the fund was determined precludes a finding that the funds are identifiable.

A second prerequisite to an inter-pleader action is two or more claimants with adverse claims. See General Ace. Group, 593 F.Supp. at 1087. In order to establish adversity, plaintiff must show a risk of double payment on a single liability or claims in excess of the movant’s liability limits. Inter-first Bank Dallas, N.A. v. Purolator Courier Corp., 608 F.Supp. 351, 353 (D.C.Tex.1985). Adversity is not demonstrated when the stakeholder may be liable to all claimants. See Bradley, 44 F.3d at 168. “[T]he protection against ‘double or multiple liability’ ... is protection only against double or multiple liability that is unjustifiable because the plaintiff has but a single obligation.” Id.

The existence of multiple claims in the wake of KGA’s insolvency does not necessarily translate to multiple adverse claims. The claims in the present action arise from dealings between KGA and, individually, the several claimants, i.e., debts arising from advertising agreements entered into between KGA and various media companies, Citizen’s Bank’s interest in KGA’s accounts receivable and a debt owed KGA for services rendered pursuant to its agreement with plaintiff. Plaintiffs involvement arises from its contract with KGA for advertising services and the consequent designation of KGA as its agent, giving rise to an obligation to pay KGA or one or more claimants based on KGA’s agency but only for such services. If plaintiff is directly hable to the media defendants through the agency relationship, then each defendant represents a discrete claim against it. Citizen’s claim would not necessarily conflict with KGA’s claim as its secured interest would place it in KGA’s shoes as the defaulting debtor.

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221 F.R.D. 296, 2002 WL 32506915, Counsel Stack Legal Research, https://law.counselstack.com/opinion/north-american-marketing-corp-v-k-gronbach-associates-inc-ctd-2002.