Opinion ID: 796142
Heading Depth: 3
Heading Rank: 3

Heading: Prudential's Demutualization

Text: 9 At the time Irving purchased the annuity contracts, Prudential was organized as a mutual insurance company under the laws of New Jersey. A mutual insurance company has no shareholders and is instead owned by its policyholders. James A. Smallenberger, Restructuring Mutual Life Insurance Companies: A Practical Guide Through the Process, 49 DRAKE L.REV. 513, 516 (2001). Those who purchase policies from mutual insurance companies receive both membership interests (e.g., the right to elect directors and the right to receive a proportionate share of the company if it liquidates) and contract rights (i.e., the obligations of the insurance company under the policy). Id. at n. 4. 10 Prior to 1998, New Jersey did not allow insurance companies to organize as stock companies. J.A. at 476 (NJ Dep't of Banking & Ins. Order No. A01-153 § I.). New Jersey law changed in 1998, and in December 2000, Prudential's board of directors adopted a plan to demutualize, that is, to reorganize from a mutual insurance company to a stock company. The demutualization plan was approved by policyholders in July 2001, and within three months, the New Jersey Insurance Commissioner approved the plan. Id. Prudential's demutualization plan required the new company, Prudential Financial, Inc. (PFI), to issue stock to eligible policyholders as consideration for their membership interests in the old company. 11 In early 2002, PFI issued 35,119 shares of stock to BNY as the successor-in-interest to Irving. The stock was intended to compensate Irving for the loss of membership interests that it held as the contract-holder of the group annuities purchased to terminate the NSA plan. However, BNY denied both that it was the contract-holder and that it was entitled to the stock. Soon, BNY began receiving conflicting demands for the demutualization proceeds when Southwire, the Employees, and Century all asserted entitlement to the stock. To settle these claims, BNY filed its interpleader complaint on February 3, 2003, naming Southwire, the Employees, and Century all as defendants. The district court had jurisdiction under the minimal diversity requirement of the federal interpleader statute because two of the claimants are diverse, as the Employees are Kentucky residents and Southwire is organized as a Delaware corporation. 28 U.S.C. § 1335(a); State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530-31, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967).