Source: https://supreme.justia.com/cases/federal/us/386/523/case.html
Timestamp: 2016-12-08 06:09:28
Document Index: 407822680

Matched Legal Cases: ['§ 1335', '§ 1335', '§ 1335', '§ 1335', '§ 1335', '§ 1441', '§ 1335']

State Farm Fire & Cas. Co. v. Tashire (full text) :: 386 U.S. 523 (1967) :: Justia U.S. Supreme Court Center Log In
› State Farm Fire & Cas. Co. v. Tashire
State Farm Fire & Cas. Co. v. Tashire 386 U.S. 523 (1967)
U.S. Supreme CourtState Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523 (1967)State Farm Fire & Casualty Co. v. TashireNo. 391Argued February 115, 1967Decided April 10, 1967386 U.S. 523CERTIORARI TO THE UNITED STATES COURT OF APPEALS
A bus and a truck collided in California resulting in a large number of casualties, including many Canadians and citizens of five States. Four victims brought suits in California state courts for damages exceeding $1,000,000 against the bus and truck drivers and the truck owner (all Oregon citizens), and the bus company, a California corporation. Before these cases were tried or other suits brought, petitioner insurance company, an Illinois corporation, brought this action in the nature of interpleader in the Federal District Court in Oregon against the drivers, the bus company, truck owner, and each prospective claimant, asserting that it had insured the truck driver against bodily injury liability to the extent of $10,000 per person and $20,000 per occurrence. It paid the latter sum into court, and asked that all claims against it and the insured be established only in this single proceeding, and that it be discharged from all further obligations under its policy, including its duty to defend the truck driver in lawsuits arising from the accident. Alternatively, it asked to be relieved of all liability on the policy, claiming that the policy excluded from coverage accidents such as the one involved here, resulting from the insured's operation of a truck owned by and being used in the business of another. Jurisdiction was based on general diversity of citizenship and 28 U.S.C. § 1335, which, inter alia, vests the district courts with jurisdiction in an interpleader action where a corporation has issued an insurance policy if two or more "adverse claimants, of diverse citizenship" claim "or may claim" to be entitled to money or the benefits arising under a policy and if the plaintiff has paid the amount due into the court's registry. An injunction was issued providing that all suits against the insurance company and its insured and (on the bus company's motion) the bus company and its driver be prosecuted in the interpleader proceeding. On interlocutory appeal, the Court of Appeals reversed, holding that, in States like Oregon which do not permit Page 386 U. S. 524 "direct action" suits against an insurance company, federal interpleader may not be invoked until the claims against the insured have been reduced to judgment, since persons with unliquidated tort claims are not "claimants" within the meaning of § 1335.
363 F.2d 7, reversed and remanded. Page 386 U. S. 525
The litigation began when four of the injured passengers filed suit in California state courts, seeking damages in excess of $1,000,000. Named as defendants were Greyhound Lines, Inc., a California corporation; Theron Nauta, the bus driver; Ellis Clark, who drove the truck, and Kenneth Glasgow, the passenger in the truck, who was apparently its owner as well. Each of the individual defendants was a citizen and resident of Oregon. Before these cases could come to trial and before other suits were filed in California or elsewhere, petitioner State Farm Fire & Casualty Company, an Illinois corporation, brought this action in the nature of interpleader in the United States District Court for the District of Oregon. Page 386 U. S. 526
Joined as defendants were Clark, Glasgow, Nauta, Greyhound Lines, and each of the prospective claimants. Jurisdiction was predicated upon 28 U.S.C. § 1335, the federal interpleader statute, [Footnote 1] and upon general diversity Page 386 U. S. 527 of citizenship, there being diversity between two or more of the claimants to the fund and between State Farm and all of the named defendants.
When a temporary injunction along the lines sought by State Farm was issued by the United States District Court for the District of Oregon, the present respondents moved to dismiss the action and, in the alternative, for a change of venue -- to the Northern District of California, in which district the collision had occurred. After a hearing, the court declined to dissolve the temporary injunction, but continued the motion for a change of venue. The injunction was later broadened to include the protection sought by Greyhound, but modified to Page 386 U. S. 528 permit the filing -- although not the prosecution -- of suits. The injunction, therefore, provided that all suits against Clark, State Farm, Greyhound, and Nauta be prosecuted in the interpleader proceeding.
On interlocutory appeal, [Footnote 2] the Court of Appeals for the Ninth Circuit reversed. 363 F.2d 7. The court found it unnecessary to reach respondents' contentions relating to service of process and the scope of the injunction, for it concluded that interpleader was not available in the circumstances of this case. It held that, in States like Oregon which do not permit "direct action" suits against insurance companies until judgments are obtained against the insured, the insurance companies may not invoke federal interpleader until the claims against the insured, the alleged tortfeasor, have been reduced to judgment. Until that is done, said the court, claimants with unliquidated tort claims are not "claimants" within the meaning of § 1335, nor are they "persons having claims against the plaintiff" within the meaning of Rule 22 of the Federal Rules of Civil Procedure. [Footnote 3] Id. Page 386 U. S. 529 at 10. In accord with that view, it directed dissolution of the temporary injunction and dismissal of the action. Because the Court of Appeals' decision on this point conflicts with those of other federal courts [Footnote 4] and concerns a matter of significance to the administration of federal interpleader, we granted certiorari. 385 U.S. 811 (1966). Although we reverse the decision of the Court of Appeals upon the jurisdictional question, we direct a substantial modification of the District Court's injunction for reasons which will appear. Page 386 U. S. 530
In Strawbridge v. Curtiss, 3 Cranch 267 (1806), this Court held that the diversity of citizenship statute required "complete diversity": where co-citizens appeared on both sides of a dispute, Page 386 U. S. 531 jurisdiction as lost. But Chief Justice Marshall there purported to construe only "The words of the act of congress," not the Constitution itself. [Footnote 6] And, in a variety of contexts, this Court and the lower courts have concluded that Article III poses no obstacle to the legislative extension of federal jurisdiction, founded on diversity, so long as any two adverse parties are not co-citizens. [Footnote 7] Accordingly, we conclude that the present case is properly in the federal courts.
We do not agree with the Court of Appeals that, in the absence of a state law or contractual provision for Page 386 U. S. 532 "direct action" suits against the insurance company, the company must wait until persons asserting claims against its insured have reduced those claims to judgment before seeking to invoke the benefits of federal interpleader. That may have been a tenable position under the 1926 [Footnote 8] and 1936 interpleader statutes. [Footnote 9] These statutes did not carry forward the language in the 1917 Act authorizing interpleader where adverse claimants "may claim" benefits as well as where they "are claiming" them. [Footnote 10] In 1948, however, in the revision of the Judicial Code, the "may claim" language was restored. [Footnote 11] Until the decision below, every court confronted by the question has concluded that the 1948 revision removed whatever requirement there might previously have been that the insurance company Page 386 U. S. 533 wait until at least two claimants reduced their claims to judgments. [Footnote 12] The commentators are in accord. [Footnote 13]
The fact that State Farm had properly invoked the interpleader jurisdiction under § 1335 did not, however, entitle it to an order both enjoining prosecution of suits against it outside the confines of the interpleader proceeding and also extending such protection to its insured, the alleged tortfeasor. Still less was Greyhound Lines entitled to have that order expanded so as to protect itself and its driver, also alleged to be tortfeasors, from suits brought by its passengers in various state or federal courts. Here, the scope of the litigation, in terms of Page 386 U. S. 534 parties and claims, was vastly more extensive than the confines of the "fund," the deposited proceeds of the insurance policy. In these circumstances, the mere existence of such a fund cannot, by use of interpleader, be employed to accomplish purposes that exceed the needs of orderly contest with respect to the fund.
But the present case is another matter. Here, an accident has happened. Thirty-five passengers or their representatives have claims which they wish to press against a variety of defendants: the bus company, its driver, the owner of the truck, and the truck driver. The circumstance that one of the prospective defendants happens Page 386 U. S. 535 to have an insurance policy is a fortuitous event which should not of itself shape the nature of the ensuing litigation. For example, a resident of California, injured in California aboard a bus owned by a California corporation, should not be forced to sue that corporation anywhere but in California simply because another prospective defendant carried an insurance policy. And an insurance company whose maximum interest in the case cannot exceed $20,000 and who, in fact, asserts that it has no interest at all, should not be allowed to determine that dozens of tort plaintiffs must be compelled to press their claims -- even those claims which are not against the insured and which in no event could be satisfied out of the meager insurance fund -- in a single forum of the insurance company's choosing. There is nothing in the statutory scheme, and very little in the judicial and academic commentary upon that scheme, which requires that the tail be allowed to wag the dog in this fashion.
We recognize, of course, that our view of interpleader means that it cannot be used to solve all the vexing problems of multiparty litigation arising out of a mass tort. But interpleader was never intended to perform such a function, to be an all-purpose "bill of peace." [Footnote 17] Had Page 386 U. S. 536 it been so intended, careful provision would necessarily have been made to insure that a party with little or no interest in the outcome of a complex controversy should not strip truly interested parties of substantial rights -- such as the right to choose the forum in which to establish their claims, subject to generally applicable rules of jurisdiction, venue, service of process, removal, and change of venue. None of the legislative and academic sponsors of a modern federal interpleader device viewed their accomplishment as a "bill of peace," capable of sweeping dozens of lawsuits out of the various state and federal courts in which they were brought and into a single interpleader proceeding. And only in two reported instances has a federal interpleader court sought to control the underlying litigation against alleged tortfeasors, as opposed to the allocation of a fund among successful tort plaintiffs. See Commercial Union Insurance Co. of New York v. Adams, 231 F.Supp. 860 (D.C.S.D. Ind.1964) (where there was virtually no objection and where all of the basic tort suits would, in any event, have been prosecuted in the forum state), and Pan American Fire Casualty Co. v. Revere, 188 F.Supp. 474 (D.C.E.D.La.1960). Another district court, on the other hand, has recently held that it lacked statutory authority to Page 386 U. S. 537 enjoin suits against the alleged tortfeasor, as opposed to proceedings against the fund itself. Travelers Indemnity Co. v. Greyhound Lines, Inc., 260 F.Supp. 530 (D.C.W.D.La.1966).
In light of the evidence that federal interpleader was not intended to serve the function of a "bill of peace" in the context of multiparty litigation arising out of a mass tort, of the anomalous power which such a construction of the statute would give the stakeholder, and of the thrust of the statute and the purpose it was intended to serve, we hold that the interpleader statute did not authorize the injunction entered in the present case. Upon remand, the injunction is to be modified consistently with this opinion. [Footnote 18] Page 386 U. S. 538
See, e.g., American Fire & Cas. Co. v. Finn, 341 U. S. 6, 341 U. S. 10, n. 3 (1951), and Barney v. Latham, 103 U. S. 205, 103 U. S. 213 (1881), construing the removal statute, now 28 U.S.C. § 1441(c); Supreme Tribe of Ben-Hur v. Cauble, 255 U. S. 356 (1921), concerning class actions; Wichita R.R. & Light Co. v. Public Util. Comm., 260 U. S. 48 (1922), dealing with intervention by co-citizens. Full-dress arguments for the constitutionality of "minimal diversity" in situations like interpleader, which arguments need not be rehearsed here, are set out in Judge Tuttle's opinion in Haynes v. Felder, 239 F.2d at 875-876; in Judge Weinfeld's opinion in Twentieth Century-Fox Film Corp. v. Taylor, 239 F.Supp. 913, 918-921 (D.C.S.D.N.Y.1965), and in ALI, Study of the Division of Jurisdiction Between State and Federal Courts 180-190 (Official Draft, Pt. 1, 1965); 3 Moore, Federal Practice ¦ 22.09, at 3033-3037; Chafee, Federal Interpleader Since the Act of 1936, 49 Yale L.J. 377, 393-406 (1940); Chafee, Interpleader in the United States Courts, 41 Yale L.J. 1134, 1165-1169 (1932). We note that the American Law Institute's proposals for revision of the Judicial Code to deal with the problem of multi-party, multi-jurisdiction litigation are predicated upon the permissibility of "minimal diversity" as a jurisdictional basis.
While I agree with the Court's view as to "minimal diversity," and that the injunction, if granted, should run only against prosecution of suits against the insurer, I feel that the use which we today allow to be made of the federal interpleader statute, [Footnote 2/1] 28 U.S.C. § 1335, is, with all deference, unwarranted. How these litigants are "claimants" to this fund in the statutory sense is indeed a mystery. If they are not "claimants" of the fund, [Footnote 2/2] neither are they in the category of those who "are claiming" or who "may claim" to be entitled to it. Page 386 U. S. 539
Thus, under this insurance policy as enforced in California and in Oregon, a "claimant" against the insured can become a "claimant" against the insurer only after final judgment against the insured or after a consensual written agreement of the insurer, a litigant, and the insured. Neither of those two events has so far happened. [Footnote 2/4] Page 386 U. S. 540
The Court rests heavily on the fact that the 1948 Act contains the phrase "may claim," while the 1926 and 1936 interpleader statutes contained the phrase "are claiming." From this change in language, the Court infers that Congress intended to allow an insurance company to interplead even though a judgment has not been entered against the insured and there is no direct action statute. This inference is drawn despite the fact that the Reviser's Note contains no reference to the change in wording or its purpose; the omission is dismissed as "inadvertent." But it strains credulity to suggest Page 386 U. S. 541 that mention would not have been made of such a drastic change if, in fact, Congress intended to make it. And, despite the change in wording, under the 1948 Act, there must be
Jurisdiction over non-resident claimants is limited to the interpleaded fund in a federal interplead...	Facts	In a collision with a truck, two passengers on a Greyhound bus were killed and another 33 passengers...