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Liffman v. Orangetree Properties, LLC

United States District Court, N.D. Ohio

May 23, 2018

KENNETH B. LIFFMAN Plaintiff,
v.
ORANGETREE PROPERTIES, LLC, et al., Defendants.

          OPINION & ORDER [RESOLVING DOCS. 4, 18]

          JAMES S. GWIN UNITED STATES DISTRICT JUDGE.

         Plaintiff Kenneth B. Liffman brings this interpleader action under 28 U.S.C. § 1335. He asks the Court, among other things, to determine the distribution of life insurance policy proceeds among Defendant claimants.[1] All of the Defendants, except for Defendant Orangetree Properties, LLC, move for the Court to abstain from this interpleader action, or alternatively to deny Plaintiff's request to stay parallel state court proceedings.[2]

         As an initial matter, the Court has subject matter jurisdiction over Plaintiff's interpleader action under Section 1335.[3] First, Plaintiff Liffman is a trustee for Orangetree Properties LLC Insurance Trust, which allegedly owns the insurance policy at issue (Policy No. 207099228 U.S. issued by MetLife Insurance Company USA) (the “Policy”).[4] Plaintiff Liffman asks the Court to determine the interests and/or claims of the Defendants to the Policy's proceeds and seeks to deposit the proceeds with the Court.[5] Second, the amount of the Policy's proceeds exceeds $500.[6] And lastly, there is minimal diversity among the claimants.[7]

         Defendants nevertheless argue that the Court should abstain from exercising its jurisdiction in this federal interpleader action.[8] Defendants' main argument for abstention is that there is a pending state court action among most of the parties concerning Plaintiff Liffman's breach of a fiduciary duty with respect to the Policy's distribution.[9] In that action, the moving Defendants argue that they are entitled to the Policy's proceeds.[10] The parties dispute whether Colorado River or Wilton abstention applies.[11]

         The Court finds that the Wilton abstention doctrine applies in this case. Wilton abstention permits Courts to abstain from deciding a declaratory judgment action in favor of a parallel pending state court litigation.[12] Wilton gives more discretion to federal courts to abstain in declaratory judgment cases because federal courts are not required to exercise jurisdiction under the Declaratory Judgment Act.[13]

         As the Sixth Circuit has not directly addressed what doctrine should apply to interpleader actions but has likened interpleader actions to declaratory judgments, [14] the Court will apply the Wilton doctrine to this interpleader action.[15]

         The Court considers five factors in determining whether to abstain under Wilto n:

(1) whether this action would settle the controversy;
(2) whether this action would serve a useful purpose in clarifying the legal relations in issue;
(3) whether this remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for res judicata;”
(4) whether the use of this action would increase friction between federal and state courts and improperly encroach upon state jurisdiction; and
(5) whether there is an alternative remedy which is better or more effective.[16]

         To start, the third factor weighs against exercising jurisdiction. It appears that Plaintiff Liffman is engaging in some procedural fencing by filing this interpleader action. Plaintiff filed this action five months after the state court action was filed and only two days before he was to be deposed.[17]Plaintiff also asked for a stay in the state court action in light of this federal interpleader action, which the state court granted.[18] Plaintiff ...


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