Joinder of Claims & Parties
1. Analytical Framework
a. Stage 1: lawsuit is filed asking for Interpleader
i. Court determines if requirements for Interpleader are met
ØIf judge decides Interpleader not appropriate, or requirements not met, action is dismissed
i. If court determines requirements are met and appropriate, P directed to interplead; P stakeholder then makes deposit to court of the stake
ØIf stakeholder disinterested then dismissed and not required to be in litigation anymore
b. Stage 2: (a) determine merits of claimant’s rights in court if judge enjoined other proceeding pursuant to §2283; or (b) if court did not stay proceedings of other courts where claimants have brought actions then will wait until after all judgments of interested parties are entered
i. If federal interpleader case then claimants have right to jury trial. If jury trial is requested jury will determine merits of claim
ØErie Doctrine & Klaxon Rule (choice of law of forum state) are applicable
c. Stage 3: after all judgments and merits of claims have been gathered by court, judge divides up funds between claimants
2. G/R: 2 forms of Interpleader: Rule Interpleader & Statutory Interpleader. Court goes through same process in both, but applies different standards; however, function and policy of interpleader is essentially the same
3. G/R: Function of Interpleader: function of interpleader is to rescue debtor form undue harassment when there are several claims made against same fund
a. Rule Interpleaders only permits interpleader if claims are “such that P is or may be exposed to liability”
i. Requirement that P “may be” exposed to multiple liability is not strict. Danger need not be immediate, any possibility of having to pay more than what is justly due is, no matter how improbably or remote sufficient
ii. Interpleader allows person holding property (stakeholder) to go to court and deposit the property. Stakeholder is custodian over property but does not own it or claim it. It allows stakeholder to let claimants litigate over property while stakeholder is dismissed from action
ØStakeholder deposits property in court and then interpleads (gathers together all claimants) then during 2nd stage of interpleader allows all claimants to litigate among themselves as to whose property it is because stakeholder typically is dismissed after depositing property
ØThere are situations which stakeholder is also claimant, which is perfectly legitimate
4. Defensive Interpleader: Interpleader arises defensively when one of claimants sues stakeholder and then stakeholder defensively deposits property with court and interplead other claimants
5. Interpleader can function to protect both stakeholder and claimant
a. Example: Stakeholder protection: Bill has a $1 million life insurance policy, which he names “to his wife, Hillary, as beneficiary.” Bill then is divorced by Hillary, and remarries Monica. Bill dies with his life insurance policy to his wife. The concern for the life insurance company is that they will have to pay twice; if Hillary and Monica both sue in separate suits to collect the insurance proceeds. So the insurance company stakeholder would go to court, interplead (if all the requirements are met) Hillary and Monica, deposit the million dollars and be dismissed and only have to pay once.
b. Example: Claimant Protection: interpleader can also protect claimants. If an auto insurance company only has $1 million dollar policy, and Bill and Monica are in a car accident, then they both won’t have to race to the court house to try and collect on the policy before the other
6. Policy for Interpleader: function of interpleader gives effect to several policy reasons for the rules:
a. Benefits to Stakeholder: (a) avoids having to decide which P has better claims; (b) stakeholder doesn’t have to be involved in multiple suits in different states; (c) protects stakeholder from multiple liability and vexatious litigation; (d) allows stakeholder to be dismissed from the action after depositing stake
b. Benefits to Claimant: ((a) the claimants to do not have to race to the courthouse to try and obtain a judgment on the limited fund first; (b) results in an equitable distribution of a limited fund; (c) the money/fund/stake the claimants are trying to obtain are already in court.
c. Promotes judicial economy
d. Disadvantages of Interpleader:(a) adversely affects the claimants ability to choose which court/forum it wants to defend in; (b) sometimes it is not allowed; (c) requires the claimant to become entangled in more complex, hence costly, litigation because each claimant has to prove that not only is the plaintiff liable but all the other claimants competing for the fund are less deserving
7. G/R: If in federal court, stakeholder can recover both costs and atty’s fees even though there isn’t a rule for fee shifting, which is in contravention of American Rule that holds that each party is entitled to pay own atty’s fees and costs
B. Rule Interpleader
1. Rule 22: Interpleader: (1) Persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double liability.
2. [Rule 22] there are five main requirements for Rule interpleader:
a. Subject Matter Jurisdiction:
i. Diversity of Citizenship: requires complete diversity between the stakeholder and claimants [28 USC § 1332].
ii. Amount in Controversy: requires that the stake exceed $75,000 (i.e. at least $75,000.01) [28 U.S.C. §1332].
b. Personal Jurisdiction: requires traditional personal jurisdiction over all the claimants: service within a state, territorial, or long arm. Minimum contracts, International Shoe, etc…
c. Venue: is under § 1391(a) there can be defendant residential venue (where the defendant lives), substantial part of the claim venue (where a substantial part of the claim arose), or the default provision (it can be brought where there is personal jurisdiction over the claimant).
d. Bonds: the court may set a bond pursuant to Rule 67; however, if rule interpleader is properly invoked there is no requirement that the stake be deposited with the court.
e. Injunctions: the court may grant an injunction to stay the proceedings in another action in “aid of its jurisdiction” pursuant to 28 USC §2283.
**In an interpleader suit: (a) the stakeholder is seeking equitable relief to deposit the stake and be dismissed from the action (unless he/it is also a claimant); (b) the plaintiff is the person/company seeking interpleader (i.e. the stakeholder) and the defendants are the claimants; (c) the defendants then usually cross claim against each other, and may counterclaim against the plaintiff
3. G/R: Venue and Service of Process: there are two procedural limitations under Rule 22, which become important whenever the claimants are not all within the territorial jurisdiction of the district court:
a. The only proper venue for the suit when the defendants do not reside in the same state is the residence of the plaintiff; and
b. Process cannot run beyond the boundaries of the state in which the court sits.
**These restrictions are waivable.
4. G/R: Enjoining other Proceedings: usually interpleader will not be effective unless all of the claimants are brought before the same court in one proceeding and restricted to that single forum in the assertion of their claims.
a. §2283: prohibits federal courts from interfering with a pending state court action except in three situations:
i. Where such a course is expressly authorized by an act of Congress;
ØThis exception is applicable to a suit brought under the Interpleader Act [§1335] because that statute expressly empowers the court to enjoin claimants from instituting or prosecuting any proceeding in any State or federal court affecting property, instrument or obligation involved in interpleader action.
ØThis exception does not apply to Rule 22.
ii. Where the issuance of an injunction by the federal court is necessary in aid of its jurisdiction;
ØThis exception is applicable to Rule 22.
iii. Where the court’s action required to protect or effectuate its judgments.
ØThis exception is possible applicable to Rule 22
5. G/R: interpleader is available when there are several claimants who have obtained judgments which aggregate too more than the amount of the policy.
a. In such a case, it makes no difference whether the claims originated in tort or contract.
b. It is settled that interpleader is available to an insurer whose policy is insufficient to satisfy the contractual claims, even if they have not been reduced to judgment
6. G/R: Utility of Rule Interpleader: the only time a party will need to use Ruler interpleader, as opposed to statutory interpleader is when a stakeholder has complete diversity under §1332, but not minimal diversity.
a. Example: Plaintiff (Wyo.) v. Defendant #1 (Colo.); Defendant #2 (Colo.); Defendant #3 (Colo.).
i. This action could also be brought in State court.
b. Statutory interpleader is usually used instead of rule interpleader because it has less stringent jurisdictional requirements
C. Statutory Interpleader
1. 28 U.S.C. § 1335: Interpleader: (a) The district courts shall have original jurisdiction of any civil action of interpleader…if filed by any person or corporation…having in its custody or possession money or property of the value $500 or more…if:
a. Two or more adverse claimants, of diverse citizenship as defined in §1332…are claiming or may claim to be entitled to such money or property; and
b. The plaintiff has deposited such money or property…due under such obligation….to the court, there to abide the judgment of the court.
2. Statutory Interpleader: [28 USC §1335]: there are five requirements for statutory interpleader:
a. Subject Matter Jurisdiction:
i. Diversity of Citizenship: statutory interpleader only requires minimal diversity; that is, diversity between two or more claimants without regard to the circumstances that other rival co-claimants may be co-citizens; and the stakeholder does not matter. In other words, ONLY two defendants need to be diverse. [State Farm v. Tashire].
ØEx: Plaintiff (Wyo.) v. Defendant #1 (Wyo.); Defendant #2, (Wyo.); Defendant #3 (Colo.) would satisfy the minimal diversity requirement.
ii. Amount in Controversy: statutory interpleader only requires that the claim be more than $500 [§1335(a)].
b. Personal Jurisdiction: the reach of service of process is nationwide [§2361; Rule 4(k)(1)(C)].
c. Venue: the action may be brought in the residence of one or more of the claimants [§1397].
d. Bond: the court is required to take a bond, or deposit, of $500 or more; that is, in order to invoke statutory interpleader the plaintiff must deposit the entire amount of his possession that is claimed by the claimants and may not hold back the amount he claims. [§1335].
e. Injunctions: the court shall hear and determine the case, may discharge the plaintiff from further liability, and make the injunction permanent [§2361].
i. §2283 expressly authorizes the court to enjoin other proceedings when “authorized by an act of Congress.” §2361, expressly authorizes a court to enjoin other proceedings and make its determination final.
*Thus, statutory interpleader creates its owns rules for venue and jurisdiction and is governed by Rule 4(k)(1)(C) [federal statutory interpleader exception]; §1335 [interpleader statute]; and §1397 [interpleader venue statute].
3. G/R: Choice of Law: in a statutory interpleader suit based on diversity jurisdiction (minimal) a federal court is bound by the Erie doctrine to apply the conflict of law rules of the state in which it sits [Klaxon Rule] Intervention
A. Generally: intervention allows a third party, who was not a party to the original action, to join the action upon filing a motion and meeting the requirements of Rule 24(a) or (b) mainly to protect their rights.
1. Intervention is a procedural device designed for protecting private rights and promoting judicial economy; however this may also complicate the action and make it longer.
2. The court when granting permissive intervention, and to a limited extent intervention of right, will balance two countervailing interests:
a. The plaintiff’s right to control his own action, i.e. allowing him to choose a defendant, without prejudicing existing parties by complicating the issue and causing delay; and
b. Avoiding multiplicity of litigation and inconsistent verdicts.
B. G/R: Timeliness: Rule 24(a) and (b) both require that intervention be “upon timely application,” which means intervention is discretionary by the court and the intervener:
1. The court will not allow intervention, even if it is invention of right, the intervener seeks to intervene shortly before trial, or during trial; however, if it is only a short time after the suit has been instituted then the court will probably determine that it was timely. It is largely in the discretion of the trial court to determine timeliness.
a. Factors: the court may take into consideration (a) when the intervener became aware of the lawsuit, (b) when they knew that their interests were being affected; (c) how long the parties are along in discovery; (d) the extent of distribution, delay, and prejudice to the parties already in the lawsuit.
b. Remember, it is the discretion of the trial court, and the court may allow intervention during the trial, or only for appeal [Smuck v. Hobson] if it deems it appropriate.
C. Rule 24(a): Intervention of Right: intervention is granted as a matter of right:
1. Unconditional Statutory Right: when a federal statute confers an unconditional right to intervene; or
a. Ex: 28 USC §2403 (US government can intervene in any action to defend the constitutionality of an act of congress).
2. Protect Intervener’s Interest: when the applicant claims an interest relating to the property or transaction of the action:
a. The disposition of the action must as a practical matter impair or impede [i.e. prejudice] the intervener’s ability to protect that interest; and
i. The nature of the interest must be a significant protectable interest to support intervention; that is, the right or interest which will authorize a third person to intervene must be of such a direct and immediate character that the intervener will either lose or gain by the direct legal operation of judgment [Brune v. McDonald] and
ii. The intervener must show that the resolution of the litigation would impair her interest (this does not just me res judicata) but as a practical matter.
iii. This interest can be raised on appeal if it raises a substantial unsettled question of law [Smuck].
b. b. the intervener’s interest is not adequately represented by existing parties.
i. This means that if the intervener has demonstrated that his interest will be practically impaired, then the only way intervention should be denied is if the parties in the action are adequately representing that interest.
ii. Typical grounds for the inadequacy of representation are:
ØThe intervener’s interests are not represented at all;
ØThe applicant and the attorney who is representing the interest have different views; and
ØThere is collusion between the representative and adverse party.
3. Stare Decisis Effect: it has been argued that the stare decisis effect of litigation alone is sufficient to grant intervention right when a unique issue of law is involved and there is little likelihood that it will be reconsidered after it is decided in the current litigation [Atlantis Development Corp. v. US].
D. Rule 24(b): Permissive Intervention: the court has discretion to permit a nonparty to intervene if:
1. Conditional Statutory Right: when a statute of the US confers a conditional statutory right to intervene;
2. Common Question of Law or Fact: when an intervener’s claim or defense and the main action have a common question of law or fact.
3. The trial court has broad discretion in granting intervention of right and must weight countervailing interests:
a. Delay or prejudice to the original parties; the original parties interest; against
b. The intervener’s interest, and the public interest in judicial economy and efficiency.
E. G/R: Conditions Imposed by the Court: in both intervention of right, and permissive intervention, the court in its discretion may impose conditions on the intervener, such as:
1. Restricting the scope of discovery;
2. Limiting the issues the intervener can raise at the trial; and
3. Not allowing duplicative interrogatories, among other things of the like nature.
F. G/R: Supplemental Jurisdiction: if the action is in federal court and based on diversity jurisdiction there is no supplement jurisdiction under §1367(b).
G. G/R: Appeals: if the court grants the motion to intervene, the other party cannot take an interlocutory appeal and the case must be tried and it is unlikely it will be reversed for granting the intervention motion because it is highly discretionary
1. If the motion to intervene is denied, the applicant can intervene right away because, in effect, the case is over for him
H. G/R: Other Notes: most intervener’s file their motions under both Rule 24(a) and (b); arguing an interest in the litigation; and in the alternative a common question of law or fact.
1. The applicant must file a motion for leave to intervene, and the proper pleadings. Until the court grants the motion the case is not docketed; however, the statute of limitations ceases to run while the court is considering the motion
I. Operation of the Class Action Device
A. Initiation of the Class Action
1. Analytical Framework: there are several requirements, and 5-steps to go through in order to bring a class action, and get it resolved:
a. Determine if the class can be certified:
i. There are 7 prerequisites for bringing a class action:
ØThere must be a class;
ØThere must be class representative;
ØNumerosity: more than 40 will usually suffice;
ØCommonality: must be common question of law and fact;
ØTypicality: the class representative’s claim must be typical of all other claims;
ØAdequacy: due process requirement, the class, class representative, and class representative’s lawyer must all be adequate;
ØThen determine if it is a Rule 23(b)(1); (b)(2); or (b)(3) class action.
ii. Rule 23(b)(1): anti-prejudice class action: if not certifying the class will prejudice:
ØThe party opposing the class action because of inconsistent or multiple litigation, the class can be certified; or
ØTo the class because it will impair or impede their ability to protect their interests.
iii. Rule 23(b)(2): injunctive or declaratory class action: for an action to fall within Rule 23(b)(2) the defendant’s conduct need only be generally applicable to the class, there is no requirement that the conduct be damaging, or offensive to every class member.
iv. Rule 23(b)(3): damage class action: there are two additional prerequisites for a 23(b)(3) class action:
ØPredominance: the common questions must predominate, that is, there must be several common issues of law and fact;
ØSuperiority: the class action must be more superior than individual adjudication, which is essentially a manageability question.
b. Determine what notice the class is required to give if it is certified:
i. Rule 23(b)(1) and (b)(2) notice requirements are governed by Rule 23(d)(2), which allows the court in its discretion to determine the manner in which notice is given.
ii. Rule 23(b)(3) notice requirements are governed by Rule 23(c)(2). Each member of the class:
ØMust be given individual notice, super-Mullane; and
ØBe given the option to opt-out of the class.
c. If the class certification is denied, or granted, someone will want to appeal that decision:
i. Rule 23(f) gives the appellate court discretion to hear an appeal based on the grant or denial of certification;
Ø§1291 does not work for an interlocutory appeal because the grant or denial of certification is not a “final judgment.”
ØA party could also try and seek an appeal under §1293, but that usually does not work.
ii. However, the party seeking appeal must do it within 10-days after the order.
d. Determine if the court has jurisdiction: the court must have either federal or diversity jurisdiction to hear the case:
i. Federal Question Jurisdiction: traditional rules apply, the action must be brought under a federal statute, and based on a federal cause of action (i.e. discrimination, securities, etc…).
ii. Diversity Jurisdiction:
ØDiversity of Citizenship: there must be complete diversity. Diversity is determined by looking SOLELY at the citizenship of the representative (not the entire class).
ØAmount in Controversy: each plaintiff must have a claim that satisfies the jurisdictional minimum, $75,000 and the absent class members cannot aggregate their claims. Only the persons not meeting the jurisdictional minimum are dismissed from the action.
Þ Counterargument: under Abbott Labs, and the 5th circuit, the absent class members can be aggregated because §1367 the plain language of the statute allows for pendant party jurisdiction, or supplemental parties.
iii. Personal Jurisdiction:
ØDefendant: the defendant must have minimum contacts with the forum, traditional International Shoe, Denkla, Volkswagen Rules.
ØAbsent class members:
Þ The absent class members in a 23(b)(1) or 23(b)(2) class action are entitled to, at least, adequate representation.
Þ In a rule 23(b)(3) class action (and could argue that this applies to all class actions) the absent class members are entitled to:
à Adequate representation;
à Notice reasonable practicable under the circumstances to reach the parties; and
à The right to “opt-out” of the action and pursue their own claims or drop out completely.
e. Apply general rules to get the case to trial:
i. Choice of Law: the due proces
nal rights, all of the people are together in seeking the injunction or declaratory remedy.
à (B) This class action seeks to achieve therapeutic social remedies.
Ød. An absent class member cannot opt-out of the Rule 23(b)(2) class action.
iii. 3. Damage Class Actions [Rule 23(b)(3)]: the 23(b)(3) class action is not a natural class and simply embraces a group of people who have been injured by a common practice and all want damages from the defendant; that is, the only tie between the class is that they claim to have been injured in the same way by the defendant. The class has been thrust together solely because they have been injured by the same thing (mass/toxic tort, tobacco, Agent Orange, breast implants, etc…). There are TWO PREREQUISITES that do not apply to other class actions which make the Rule 23(b)(3) class action more difficult to have certified than the other class actions:
Øa. Predominance: questions of law and fact must predominate over any questions affecting only individual class members; that is, for the action to be certified the court must find that the common issue predominate; commonality is not enough. In other words, there is a real insistence for efficiency and economy of group adjudication through the predominance requirement.
Þ i. Test for Predominance: if the liability issues are common (things like fault or causation) and ONLY the damages issues are individual (and damage issues are always individual) then there is predominance. This may mean there has to be a substantial number of common questions.
Þ ii. The key to resolving predominance lies in ascertaining whether the efficiency and economy of common adjudication outweigh the interest each class member may have in individual adjudication.
Øb. Superiority: Rule 23(b)(3) also requires that the court must find that a class action is superior to other available methods for the fair and efficient adjudication of the controversy; that is the class action must be the superior method as opposed to individual actions. The court considers four factors, with the fourth being the most important, to determine if the class action is superior:
Þ i. Rule 23(b)(3)(A): the interests of the members of the class in individually controlling the prosecution or defense of separate actions;
Þ ii. Rule 23(b)(3)(B): the extent and nature of any litigation concerning the controversy already commenced;
Þ iii. Rule 23(b)(3)(C): the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
Þ iv. the difficulties like to be encountered in the management of the class action.
à (A) is the class so large and diverse that it is unmanageable?
à (B) would the notice requirement be too onerous or burdensome?
à (C) how many people will intervene?
à (D) will there have to multiple sub-classes, or are there conflicting interests?
Øc. In addition, if predominance and superiority are satisfied Rule 23(c) requires to additional requirements for a Rule 23(b)(3) class action:
Þ i. Notice requirement, and
Þ ii. An opt-out options.
2. B. Final Certification Decision: [Rule 23(c)(1)]: after considering the certification prerequisites, Rule 23(c) gives the judge the power to certify the class as proposed, deny the certification, or certify and modify the class conditionally.
a. 1. In issuing a certification order, the judge defines the terms on which the class action will proceed:
i. a. the order approves a particular description of the class; that is, it defines who is included in it;
ii. b. the certification defines the substantive issue the suit will consider; and
iii. c. the certification order appoints the class representative, in plaintiff class actions the parties seeking certification will normally nominate themselves as class representatives, however, this does not necessarily mean they will be appointed.
b. 2. Certification is probably the most critical stage in a class action because if the class is certified it gives the plaintiff’s a lot of bargaining power for settlements, and if it is denied the case is over.
3. C. Appealability of the Certification Decision: [Rule 23(f)]: a court of appeals, may in its discretion:
a. 1. Permit an appeal from an order granting or denying certification;
i. a. Denial: if the court does not certify the class the plaintiff does not have a right to appeal automatically under §1291 because the certification decision is not a “final judgment”, the appellate court can discretionarily hear the appeal though.
Øi. The plaintiff could try and bring an action under §1293, however those usually do not succeed.
ii. b. Certification: if the court certifies the class, the defendant will want an immediate appeal because it does not want to go to all the time and energy of trying the case if the district court is overturned on its certification after a long, expense drawn out trial.
Ø1. The plaintiff may want certification appealed also, because if the action is overturned as error on certification, all the plaintiffs will have to bring their actions individually.
4. D. Notice Requirements for Class Actions: if the class is certified, then the court will order, or determine, what notice to the class members needs to be given, and the type of notice will vary depending on whether the class is certified as a Rule 23(b)(1) or (b)(2) class action, or a Rule 23(b)(3) class action.
a. D(1). Anti-Prejudice, and Injunctive Class Actions: [Rule 23(d)(2)]: Notice Requirement for Rule 23(b)(1) and (b)(2) Class Actions: the court may make appropriate orders, in its discretion, requiring for the protection of of the members of the class for the friar conduct of the action, that notice be given is such a manner as the court may direct.
i. 1. The trial judge, in his discretion, can determine what is adequate notice for Rule 23(b)(1) and (b)(2) class actions. He can require anything from publication, to no notice is required, or to individual notice of each absent class member.
b. D(2). Damage Class Actions: [Rule 23(c)(2)]: Notice Requirement for Rule 23(b)(3) Class Action: in any 23(b)(3) class action, the court shall direct to the members of the class the best notice reasonable under the circumstances, INCLUDING, individual notice to all members who can be identified through reasonable effort [Mullane Requirement]. The notice shall advise each member:
i. 1. Opt-Out Option: the court will exclude the member from the class if the member so requests by a specified date;
Øa. this means that, after receiving notice the absent class member does not have utilize the class representative if she does not want to; the absent class members can hire their own lawyers, bring an individual claim after they opt-out, or intervene and become a party to the class action, or do nothing (just opt-out of the case).
ii. 2. the judgment, whether favorable or not, will include members who do not request exclusion; and
iii. 3. any member who does not request exclusion, may enter an appearance through counsel if they desire.
Øa. This is a very demanding notice requirement, it is super-Mullane: this rule not only includes what is reasonable under the circumstances, but says including individual notice to all class members who can be identified with reasonable effort. This means if you have a large class, it means that can be very expensive, and cumbersome; but it is required by due process because of the special delicacy of adjudicating absent class members rights to damages.
Þ i. In other words, individual notice to each class member is always required [Eisen v. Carlise and Jacqueline].
Øb. Preparation: most courts direct the class representative to draft a notice and permit the opposing party to make objections; the court usually mediates between the parties to insure adequate notice is provided. The class representative, plaintiff, bears the cost of providing notice.
Øc. Contents: the contents, in addition to the three things in Rule 23(c) must include:
Þ i. a description of the class claim;
Þ ii. a description of any counterclaims filed against the class; and
Þ iii. sometimes a disclaimer stating that notice of the pending class action does not indicate that the court believes it will prevail on the merits.
Ød. Costs: the costs of providing notice must be borne by the party seeking class treatment. If the class suit is successful, the costs of sending notice may be subtracted from the class recovery, thus making each class member share the costs on a pro-rata basis. *[Oppenhiemer Fund v. Sanders].
A. Jurisdiction and Class Actions
1. Federal Question Jurisdiction: a class action based upon a federal question does not raise any special problems of subject-matter jurisdiction; just have to meet the normal requirements.
If the class action is based on a federal question, like a