Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_14-cv-00517/USCOURTS-alnd-2_14-cv-00517-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

REGIONS BANK,

Plaintiff/Counter Defendant,

v.

OLD REPUBLIC UNION

INSURANCE COMPANY, et al.,

Defendants/Counter Plaintiffs.

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Case No.: 2:14-CV-517-VEH

MEMORANDUM OPINION

Because the federal courts are generally without jurisdiction to hear cases

concerning domestic relations, see Barber v. Barber, 62 U.S. (21 How.) 582, 584

(1858), the opportunity to preside over a messy breakup, distribute assets, and

continually revisit who-wronged-whomissomewhat less common than in state court.

This case presentsthe rare exception: a business divorce. When they were young, Old

Republic Union Insurance Company and Old Republic Insurance Company

[collectively, “OldRepublic”] entered into a relationship with John Thompson Lanier

and Chattawood Insurance Company [collectively, “Chattawood”]. The bloom

eventually came off the rose, and a custody dispute arose over the fruits of their

relationship, which are funds in certain accounts at Regions Bank, N.A. After more

than twenty years, the haplessfoster parent, Regions, has asked the court to figure out

FILED

 2016 Aug-16 AM 09:33

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 1 of 14
who should get the baby—or to determine whether a more Solomonic solution is in

order. Of course, the parents have dredged up old disputes while also litigating the

issue of custody, and currently before the court are Regions’ and Old Republic’s

motions for summary judgment on the claims asserted against them by Old Republic

and Chattawood, respectively. Chattawood, for its part, has moved for the court to

award full custody. The motions for summary judgment will be GRANTED, and

Chattawood’s motion will be DENIED WITHOUT PREJUDICE. 

FACTUAL BACKGROUND

The facts of this case were set forth exhaustively in the court’s opinion on

Chattawood’s motion for summary judgment, so there is no need for a detailed retread

here; a précis willsuffice.1In short, this action revolvesthe parties’ competing claims

to two accounts at Regions, and in particular, 1) how much of each account belongs

to each party, and 2) who is entitled to make withdrawals from the accounts. Some

background information about Chattawood and Old Republic’s prior falling-out will

help to put the present ownership dispute in perspective.

Chattawood and Old Republic entered into a reinsurance agreement in 1987,

and in 1991 two accounts were funded at Regions to facilitate the transfer of funds

pursuant to the reinsurance agreement. These are the accounts at issue here. By 1992,

1

 Needless to say, this statement does not represent findings of fact. 

2

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 2 of 14
Chattawood and Old Republic were embroiled in a controversy about whether Old

Republic was complying with its obligations under the agreement. The disagreement

resulted in litigation, which in turn resulted in arbitration, which led to more litigation

(including a petition for contempt!). Ultimately, they settled in 1997 and agreed that

Chattawood was entitled to all amounts in excess of 102% of the amount required to

be in the custody accounts, and Old Republic was entitled to reimbursements for

amountsit paid pursuant to the reinsurance agreements.The problemwas(and is) that

the parties, while abstractly acknowledging the terms of the settlement, cannot agree

on a dollar amount to which each of them is entitled. This is the genesis of dispute

number one. 

The second dispute, who was entitled to make withdrawals, raised the specter

of multiple liability for Regions, so it sought the court’s assistance by initiating this

action. The original custody agreements provided that Chattawood owned the

accounts, with Old Republic listed as beneficiary thereon. Additionally, the

agreements’ Section IV provided that “[t]he amounts deposited in the custodian

accountshall be withdrawn on order of [Old Republic] . . . for the following purposes

only;” the approved purposesthemselves appear to be immaterial to this action. (Doc.

100-1 at 4). Further, “[t]he Custodian shall have no responsibility whatsoever in

connection with the propriety of withdrawals from the Custodian Account . . . except

3

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 3 of 14
to see that withdrawals are made only upon the order of properly authorized

representative of the beneficiary.” (Id. at 5). Based on the foregoing, it is Old

Republic’s position that it can make a withdrawal whenever it pleases, and it has been

asking Regions to “put the money in the bag,”2

 so to say, since 2001. 

But Section VI of the agreement provides that the “Bank is hereby authorized

and instructed to act upon all directions received by it from [Chattawood] subject to

Section IV.” (Id. at 5–6). Since 1997, Chattawood has claimed that Old Republic

overcharged it for this or that and has therefore disputed the amount of the custodial

accounts to which Old Republic was (and is) entitled. Until these disputes are

resolved, Chattawood opposes Old Republic’s withdrawal of funds. So Regions was

caught between complying with Chattawood, whichmay give instructionstoRegions,

and complying with Old Republic, which was arguably entitled to remove the money

at will. Throwing its hands up, Regions refused in 1997 to disburse any money

without Chattawood’s and Old Republic’s consent. Since at least 2006, there have

been no withdrawals from the account, despite Old Republic’s repeated attempts.

Regions interpleaded the funds in this court in 2014, naming Chattawood and

Old Republic as interpleader defendants.Old Republic answered, filing counterclaims

2

 Spongebob Squarepants: Doing Time (Nickelodeon television broadcast Jan. 21, 2002)

(in which the titular Spongebob, while wearing a robber’s mask, demands that the money be

placed into a bag—from his own account). 

4

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 4 of 14
against Regions and alleging cross claims against Chattawood. Chattawood’s initial

answer did not contain any cross claims, but its amended answer asserted cross

claims—they called them counterclaims—against Old Republic, as well as a third

party complaint against Stan Caldwell and Universal Adjusters, Inc. The court

granted summary judgment in favor of Chattawood on Old Republic’s cross claims.

In particular (it is important later), the court found that all but one legal claim was

time-barred; the remaining legal claim for civil conspiracy lacked an underlying

wrong on which to predicate a conspiracy, and the equitable claim was dismissed

because Old Republic’s legal remedies were adequate to protect its rights. 

Chattawood’s Third Party Claims against Caldwell and Universal Adjusters

were dismissed by stipulation in short order. On February 26, 2016, the courtreceived

a deluge: Regions moved for summary judgment against Old Republic; Old Republic

moved for summary judgment against Chattawood; and Chattawood moved to

disburse all of the funds to Chattawood. The motions for summary judgment will be

GRANTED, and the motion for disbursement of funds will be DENIED WITHOUT

PREJUDICE. 

SUMMARY JUDGMENT STANDARD

Under FederalRule of Civil Procedure 56, summary judgment is proper if there

is no genuine dispute as to any material fact and the moving party is entitled to

5

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 5 of 14
judgment as a matter of law. Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett,

477 U.S. 317, 322 (1986) (“[S]ummary judgment is proper if the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of law.”) (internal quotation

marks omitted).

OLD REPUBLIC’S MOTION FOR SUMMARY JUDGMENT

Old Republic moves for summary judgment as to all of Chattawood’s claims,

3

arguing that all of them except for civil conspiracy are time-barred, and the claim of

civil conspiracymust be dismissed because an underlying wrong isrequired to sustain

a claim of civil conspiracy. Chattawood does not dispute that the claims would be

time-barred (and civil conspiracy would therefore crumble), if the statute of

limitations applied to its claims. But, they say, compulsory counterclaims are not

subject to the statutes of limitations in Alabama, so their claims should survive. Old

Republic takesthe position that the compulsory counterclaimexception to the general

applicability of statutes of limitations is inapplicable in this case. 

3

 Chattawood has asserted the following claims against Old Republic: Count I - Breach

of Agreements; Count II - Wantonness; Count III - Malice/Oppression; Count IV - Conversion;

Count V - Civil Conspiracy; Count VI - Negligence/Wantonness; Count VII - Bad Faith. (See

generally doc. 57).

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Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 6 of 14
The rule in Alabama is that “all compulsory counterclaims, whether offensive

or defensive, are not subject to the statute-of-limitations defense.” Exxon Corp. v.

Dep’t of Conservation and Nat. Res., 859 So.2d 1096, 1102 (Ala. 2002). Let’s call

this the compulsory counterclaim exception (“CCE”). Although the CCE admits of

no exceptions on its face, the parties agree that the reasoning in Romar Dev. Co., Inc.

v. Gulf View Mgmt. Corp., 644 So.2d 462 (Ala. 1994), which announced the CCE,

suggests that the initial claims triggering the compulsion to file counterclaims must

themselves be enforceable (and hence timely) for the CCE to apply. Despite

Chattawood’s agreement that Romar appears to require that the initial claims be

timely, it has thrown out a Hail Mary by suggesting that, if the court determines

another rule applies, perhaps its claims would not be time-barred. 

As long as the court is asked to do issue spotting, a threshold one for the

application of CCE isthat the asserted claim is both a counterclaim and a compulsory

one. Since the question here turns on the enforceability of an Alabama statue of

limitations, it is almost certainly the case that the court must consider whether the

claim here would be a compulsory counterclaim under Alabama law of civil

procedure.4See Baron Tube Co. v. Transp. Ins. Co., 365 F.2d 858, 860 (5th Cir.

4

 This is so even though federal law governs the assertion of the claims as a procedural

matter; i.e., federal law determines whether the claim was actually a compulsory counterclaim in

this action, not whether it would have been if brought in Alabama.

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Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 7 of 14
1966) (federal courts apply state statute of limitations on state claims).5 Since

Chattawood’s claims are asserted against a co-defendant, they are nominally crossclaims, and there is no such thing as a compulsory cross-claim—not under Alabama

law, and not under federal law. See Stewart v. Brinley, 902 So.2d 1, 11 (Ala. 2004);

Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 146 n. 11 (3d Cir. 1999). In

Alabama, “[h]owever, once a co-party hasfiled a cross-claim, the party against whom

a cross-claim is asserted must plead as a counterclaim any right to relief that he has

against that co-party which arisesfrom the same transaction or occurrence.” Ex parte

Reliance Ins. Co., 404 So.2d 610, 612 (Ala. 1981).6 Since Chattawood’s claims arise

from the same dispute as Old Republic’s claims, the Alabama courts would consider

Chattawood’s claims compulsory counterclaims.

Now, the main event: does the CCE apply when the initial claim is untimely?

It does not appear that any Alabama case hasso held, but the CCE is usually qualified

by language to the effect that “it may be availed of . . . so long as plaintiff’s cause of

action exists,” Campbell v. Regal Typewriter Co., Inc., 341 So.2d 120, 127 (Ala.

5

 This authority is controlling in the Eleventh Circuit. See Bonner v. City of Prichard,

661 F.2d 1206, 1209 (11th Cir. 1981) (holding that decisions of the former Fifth Circuit handed

down prior to the close of business on September 30, 1981, are binding in the Eleventh Circuit). 

6

 The federal decisions, such as they are, are similar, although some courts have

suggested that the initial cross-claim must seek something beyond indemnity to require the

counter-cross-claim to be pleaded. See generally 6 CHARLES ALAN WRIGHT, ARTHUR R. MILLER,

& MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 1404 (3d ed. 2010). 

8

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 8 of 14
1976) (citation omitted), or so long as it “subsists and may be enforced,” Romar, 644

So.2d at 470 (citation omitted), or so “long as the main action is timely.” Riley v.

Montgomery, 463 N.E. 2d 1246, 1249 (Ohio 1984). So, Old Republic reasons that,

since its claims are time-barred, they are unenforceable, and thus, Romar’s qualifying

language prevents the CCE’s operation. The court concludes that Romar, as well as

its qualifying language, controls here. Summary judgment will be granted on

Chattawood’s Counts I–IV and VI–VII because they are untimely. Summary

judgment will be granted on Count V, Civil Conspiracy, because summary judgment

was granted on all other claims. See U.S. Steel, LLC v. Tieco, Inc., 261 F.3d 1275,

1294 (11th Cir. 2001) (“[A] plaintiff must have a viable underlying cause of action”

for a civil conspiracy claim.).

REGIONS’ MOTION FOR SUMMARY JUDGMENT

Regions moves for summary judgment as to Old Republic’s claims against

Regions.

7

In particular, Regions argues that the longest limitations period applicable

to any of Old Republic’s claims is six years, so any of Old Republic’s claims that

accrued before 2008 will be time-barred. All of Old Republic’s claims did in fact

7

 Old Republic has brought the following claims against Regions: “Counterclaim III -

Breach of Account Agreements;” “Cross[-]claim & Counterclaim IV - Conversion;”

“Counterclaim VII - Violation of UCC Article 4A;” “Cross[-]claim & Counterclaim VIII -Civil

Conspiracy;” and “Crossclaim IX - Equitable Accounting.” (See generally doc. 73).

9

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 9 of 14
accrue before 2008, so they are all (except the claim for equitable accounting)timebarred. Old Republic only tepidly disputes that the claims are untimely, arguing that

Regions has a continuing duty to Old Republic to allow Old Republic to withdraw the

funds. To the extent this is an argument disputing the date of accrual of the claims,

it is insufficiently developed. “[T]he onus is upon the parties to formulate

arguments,” Resolution Tr. Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir.

1995), and a failure to cite authority waives an argument. See U.S. Steel Corp. v.

Astrue, 495 F.3d 1272, 1287 n. 13 (11th Cir. 2007). Curiously, Old Republic then

proceeds to tacitly concede that the claims are time barred when it says “[r]egardless

of the date of accrual of Old Republic’s affirmative claims against Regions, equity

demands that Old Republic be allowed [to prove how much of the fund it is entitled

to].” Summary judgment will be granted in favor of Regions on Old Republic’s

Counterclaims III–IV and VII–VIII. 

Asto the request for an equitable accounting, the court declinesto do so for the

reason set forth in the court’s opinion on Chattawood’s motion for summary

judgment: Old Republic has failed to demonstrate the inadequacy of its remedies at

law. See Comer v. Birmingham News Co., 118 So. 806, 807 (Ala. 1928). Further, the

court’s disposition of this interpleader action will require that it consider the equities

here, rendering an equitable accounting redundant. See Austin v. Texas-Ohio GasCo.,

10

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 10 of 14
218 F.2d 739, 744 (5th Cir. 1955) (“The right to interplead is an equitable right.”).

Regions’ motion for summary judgment will be GRANTED. 

CHATTAWOOD’S MOTION FOR DISBURSEMENT OF FUNDS

Chattawood moves for release of the funds in this case on two grounds: first,

that all of Old Republic’s claims have been dismissed, and second, that Chattawood

is the “Owner” of the accounts and the only remaining claimant. Old Republic

responds by arguing, first, that the non-viability of its affirmative claims does not

undermine the undisputed fact that Old Republic is entitled to some portion of the

interpleaded funds, and second, that Chattawood is the “Owner” of the funds for the

benefit of Old Republic. In reply, Chattawood points out that Old Republic failed to

plead its entitlement to the funds as required by Alabama(?)

8

law. Chattawood’s

motion will be denied without prejudice for the reasons that follow. 

Chattawood submitted its motion for disbursement of funds after summary

judgment was granted in its favor against Old Republic but before the other shoe

dropped onChattawood’s claims. The order accompanying this opinion isthat second

shoe, which grants summary judgment against Chattawood in favor of Old Republic.

8

 “Questions of jurisdiction and procedure in federal court interpleader actions are

determined by federal law.” Orseck, P.A. v. Servicios Legales De Mesoamerica S. De R.L., 699

F. Supp. 2d 1344, 1348 n. 3 (S.D. Fla. 2010). While Alabama’s substantive law provides the rule

for who owns the funds, the suggestion that there is a time, place, and manner of asserting

ownership is essentially a procedural objection, so it is to federal law that the court and parties

should turn. 

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Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 11 of 14
So, if the non-viability of the Old Republic’s damages claims were fatal to its

entitlement to the funds, then the time-bar similarly would be fatal to Chattawood’s

entitlement; Chattawood’s position would doom its own claim as well. It would then

seem the funds belong to Regions, or perhaps should simultaneously be owned by

Old Republic and Chattawood until the end of time. 

Or Chattawood’s position could be wrong, which is the court’s take on the

matter. Simply because the parties’ tort and contract claims have expired does not

mean that the underlying ownership rights of Chattawood and/or Old Republic have

evaporated. Accordingly, the court rejects Chattawood’s position that it is the sole

remaining claimant, in no small part because the parties do not dispute that, while

Chattawood is the “Owner” of the accounts, it is for the benefit of Old Republic. 

This brings us to Chattawood’s alternative argument that Old Republic—in a

massive oversight—failed to claim the property. They support their position by

pointing to Regions’ initial complaint, which alleged (in relevant part) that “Regions

has been the subject of conflicting and competing claims the Old Republic

Companies and Chattawood to the Custodial Account assets. Regions has no

ownership interest or claim to the assets.” (Doc. 1, ¶ 7). In its answer, Old Republic

said “Old Republic admits that Regions has no ownership interest or claim to the

assets. Old Republic denies the remaining averments in paragraph 7.” (Doc. 73, ¶ 7).

12

Case 2:14-cv-00517-VEH Document 106 Filed 08/16/16 Page 12 of 14
Hence, Chattawood says Old Republic cannot “point to its Answer to the interpleader

itself as establishing a claim to the interpleaded funds.” (Doc. 97 at 3).

Were the court considering a motion to dismiss a purely legal claim, Old

Republic’s omission would perhaps be its downfall. Or perhaps not; the Rules of

Civil Procedure do not require the recitation of magic words. Cf. Weiland v. Palm

Beach Cty. Sheriff’s Office, 792 F.3d 1313 (11th Cir. 2015) (dismissal for technical

pleading deficiency is appropriate where it is “virtually impossible” to understand the

complaint). Rather, the rules reflect a generalrejection of rigid pleading requirements.

See Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). This liberality is more important

here, in an equitable proceeding, see Johnson v. Johnson, 139 F.2d 930, 933 (5th Cir.

1943),9 where unforgiving condemnation of a party’s missteps would be grossly

inequitable. Additionally, Old Republic’s complaint is replete with references to its

alleged right to the account, so a technical failing in one portion does not wipe away

the rest of the complaint. (See, e.g., doc. 73, ¶¶ 42, 44, 57, 58).

Simply put, it is obvious that Old Republic is entitled to at least some of the

funds in the account, see doc. 96-2 at 258:6–14, so the court will not allow Old

Republic’s claim to be defeated by the fact Chattawood was first past the post on

9

 This authority is controlling in the Eleventh Circuit. See Bonner v. City of Prichard,

661 F.2d 1206, 1209 (11th Cir. 1981) (holding that decisions of the former Fifth Circuit handed

down prior to the close of business on September 30, 1981, are binding in the Eleventh Circuit). 

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summary judgment. See Orseck, P.A. v. Servicios Legales De Mesoamerica S. De

R.L., 699 F. Supp. 2d 1344, 1348 (S.D. Fla. 2010) (“[D]istrict courts have broad and

significant powers in an interpleader action.”). Finally, mere failure to formally

answer the interpleader complaint, in certain circumstances, is not sufficient to deny

the non-answering party’s right to the property.

10

Syms v. McRitchie, 187 F.2d 915,

919 (5th Cir. 1951).11 Chattawood’s motion will be denied without prejudice. 

The motions discussed herein will be disposed of by separate order. An order

setting a status conference as well as directions on which issues the parties shall be

prepared to address will also be published separately.

DONE this 16th day of August, 2016. 

 

 VIRGINIA EMERSON HOPKINS

United States District Judge

10

 Syms also stands for the proposition that when all but one claimant is dismissed, the

court does not necessarily err by giving the interpleaded funds to the sole remaining claimant. 

11

 This authority is controlling in the Eleventh Circuit. See Bonner v. City of Prichard,

661 F.2d 1206, 1209 (11th Cir. 1981) (holding that decisions of the former Fifth Circuit handed

down prior to the close of business on September 30, 1981, are binding in the Eleventh Circuit). 

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