The Bressler team is pleased to present its update on federal court interpleader rulings of note from the second quarter of 2026.
Disregarding § 1332 Diversity Jurisdiction for Interpleaders
Prudential Ins. Co. of Am. v. Sailor, No. 4:23-cv-00019-JMD, 2026 U.S. Dist. LEXIS 72519 (E.D. Mo. Mar. 31, 2026)
Sailor is now the second case to rely on a 2020 Comment in the UPenn Law Review and determine it lacks jurisdiction over a Rule 22 interpleader where the competing claimant defendants are all citizens of the same State. While recognizing the “binding” Eighth Circuit and U.S. Supreme Court precedent on which it relied was decided under the interpleader statute not the Rule, the Sailor court nevertheless ruled that the underlying principle that a neutral stakeholder’s citizenship is disregarded applies to all interpleaders.
While Sailor and Katsock v. Nassau Life Ins. Co., No. 25-cv-0816, 2025 U.S. Dist. LEXIS 95086 (E.D. Pa. May 19, 2025) absolutely remain outlier rulings, one potential workaround for a stakeholder whose interpleader action ends up in Judge Kenney or Judge Divine’s court is to include a claim for declaratory judgment seeking a judicial declaration regarding the proper beneficiary. And a state court interpleader action is of course always an option.
Two Abstentions
Security Life of Denver Ins. Co. v. Hersko, No. 24-CV-05215 (HG) (LKE), 2026 U.S. Dist. LEXIS 67836 (E.D.N.Y. Mar. 30, 2026) (Bressler)
The Hersko Court applied Colorado River to abstain from exercising jurisdiction over an interpleader involving a $6.25 million life insurance policy death benefit where the two competing claimant brothers had been litigating their entitlement to the death benefit and $40+ million in other assets in state court for four years before the interpleader was filed. The Court determined the “most important” Colorado River factor—avoiding piecemeal litigation—weighed “heavily in favor of abstention,” and gave short shrift to SLD’s argument that the Court should not abstain until the second stage of interpleader because SLD could seek the same relief in state court. And without much discussion, the Court determined to dismiss the action and return the interpleaded funds to SLD rather than stay it pending resolution of the state court litigation.
Bressler represents SLD in the Hersko matter and believes the ruling was largely motivated by the Court’s desire to avoid dealing with the two competing claimants, whose state court litigation has been hotly contested and sprawled over three separate trial court actions and multiple appeals. Indeed, footnote 17 of the ruling references the “tortured litigation history among Defendants” and posits the “vexatious or reactive nature” of the action might also provide an additional basis for abstention. The competing claimants’ acrimony had also spilled into the federal court action and required motion practice over whether to include an “Attorneys’ Eyes Only” provision in the confidentiality order and a sanctions motion for violating the confidentiality order.
Zions Bancorp. N.A. v. RMS Cloud N. Am., LLC, No. 24-cv-2275-AJB-MMP, 2026 U.S. Dist. LEXIS 66309 (S.D. Cal. Mar. 27, 2026)
RMS Cloud also applied Colorado River abstention to abstain in favor of a concurrent state court action. However, unlike Hersko, the RMS Cloud Court determined to stay the action and retain the interpleader funds pending resolution of the state court case rather than dismissing it.
Satisfying § 1335 Deposit Requirement When Disputed Property Is Securities
Varadhachary v. Medina, No. 5:25-cv-1904-CLS, 2026 U.S. Dist. LEXIS 105863 (N.D. Ala. May 13, 2026)
While Varadhachary primarily involves a straightforward denial of a motion to set aside clerk’s default and granting default judgment, it is notable for brokerage firm stakeholders as it addresses the conflict between competing claimants to securities who do not want the securities liquidated to avoid the resulting tax consequences and the federal interpleader statute requiring deposit of the disputed fund with the court in cash in order to confer jurisdiction. Here the stakeholder brokerage firm and the competing claimants agreed that the firm posting a bond of 5-10% of the roughly $9 million account value would be sufficient, and the Court ordered the firm to post a $90,000 bond. Notably, it appears the deposit issue could have been avoided entirely if the firm, which was diverse from all of the competing claimant Defendants, had also sought interpleader relief under Rule 22 as it does not require a deposit to confer jurisdiction. Varadhachary also awards attorneys’ fees in an amount to be determined to a stakeholder in the notoriously difficult to obtain fees Eleventh Circuit, but it was an unopposed request.
ERISA Interpleader Involving Abandoned Benefit Plan
United States Life Ins. Co. in the City of New York v. Arvan, No. 1:24-cv-02845-FB-MMH, Doc. 41 (E.D.N.Y. Apr. 7, 2026) (Bressler)
In Arvan, US Life obtained discharge in an ERISA-based interpleader involving four annuities issued to a physician’s defined benefit pension plan, where the former spouse, estate representatives, and the Plan each had potential competing claims to the proceeds. The matter was unusual because the Plan sponsor and administrator was the deceased annuitant, no successor administrator could be located, and the insurer could not safely determine whether the annuities were payable based on the beneficiary designations, the Plan documents, or a pre-death divorce order that contemplated an equal division of the plan assets but was never implemented through a QDRO. Because the benefit plan effectively had no active sponsor or fiduciary to act for it, US Life obtained appointment of an independent fiduciary, who later directed liquidation of the annuities and transfer of the proceeds to a Plan account. The Court granted US Life’s unopposed discharge motion, ordered liquidation and transfer of the proceeds to the Plan, discharged US Life with prejudice, enjoined further proceedings against it, and awarded a compromised $15,000 fee reimbursement from the plan proceeds.
Diverse Claimants Must Also Be Adverse to Confer § 1335 Jurisdiction
Anderson v. Pro Tec Inc., No. 4:26-CV-00118-BD, 2026 U.S. Dist. LEXIS 112509 (E.D. Tex. May 21, 2026)
Anderson dismissed an interpleader complaint with leave to amend where the interpleading parties failed to properly allege the citizenship of the adverse parties to support jurisdiction under the interpleader statute. While the complaint did allege that certain claimants were citizens of Texas and Missouri, the EDTX noted their citizenship could not support diversity jurisdiction under the interpleader statute because these claimants were not adverse to each other. Anderson emphasizes that for diversity jurisdiction to exist under the interpleader statute, the competing claimants who are diverse from each other must also be adverse to each other.
Stakeholder’s Choice of Venue “Enjoys No Weight” in Venue Transfer Analysis
Creel v. Sequent (Fla.) LLC, No. 26-cv-2778 (LJL), 2026 U.S. Dist. LEXIS 117304 (S.D.N.Y. May 27, 2026)
In this unusual interpleader involving a life insurance agent attempting to interplead her former employer and various carriers over commissions she received directly from the carriers that may be owed to the employer, the SDNY enforced a forum selection clause in Plaintiff’s employment agreement and transferred the case to the SDFL. Creel contains an in-depth discussion of motions to transfer venue in interpleader actions, including a reminder that the disinterested plaintiff’s choice of forum ordinarily “enjoy[s] no weight.”
Two Notable Fee Decisions
MetLife Ins. Co. v. Cooper, No. 1:25cv1161, 2026 U.S. Dist. LEXIS 106553 (M.D.N.C. May 14, 2026)
Magistrate Judge Auld recommended MetLife’s discharge motion be granted except for its request for a permanent injunction and attorneys’ fees. The Court reasoned injunctions were not automatically available under the interpleader rule and MetLife had not demonstrated it was otherwise entitled to such relief. Judge Auld’s recommendation to deny MetLife’s request for attorneys’ fees appeared to be motivated by the questionable merits of the alleged competing claim, MetLife’s four-month delay in filing the interpleader action, and MetLife not attempting to resolve the competing claims without litigation.
Protective Life Ins. Co. v. Lankford, No. C25-1751-JCC, 2026 U.S. Dist. LEXIS 80523 (W.D. Wash. Apr. 13, 2026)
In Lankford, the WDWA rejected the competing claimants’ arguments that Protective’s proposed injunction against other actions was overbroad and that its requested attorneys’ fees should be denied. The Court determined “[u]npleaded hypothetical counterclaims” were not sufficient to deny the injunction and Protective’s request for $9,227.44 in fees and costs from the $530,000 benefit on deposit based on attorney hourly rates ranging from $250.75 to $450 was reasonable.
U.S. Citizens Domiciled Abroad Cannot Be Diverse
Charles Schwab & Co. v. Ross, No. 25-cv-8567, 2026 U.S. Dist. LEXIS 96693 (N.D. Ill. May 1, 2026)
The Ross court dismissed the interpleader complaint for lack of subject matter jurisdiction since one of the competing claimants was a U.S. citizen domiciled abroad and therefore, per well-established Seventh Circuit precedent, could not be sued in federal court based on diversity jurisdiction under Section 1332.