The Prudential Insurance Company of America v. Brown

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

THE PRUDENTIAL INSURANCE COMPANY OF )

AMERICA, )

)

Plaintiff, )

)

v. )

) CIVIL ACTION NO. 18-CV-00517-JB-N

MADISON R. BROWN, AMBER R. BROWN, )

JUSTIN R. BROWN, MYNA J. BROWN, TRACE )

M. BROWN, and DIANNA BROWN, )

)

Defendants. )

ORDER

This matter is before the Court on Plaintiff, The Prudential Insurance Company of

America’s (“Prudential”), Motions for Default Judgment against Defendant Madison R. Brown,

(Doc. 53), to Deposit Funds Pursuant to Fed. R. Civ. P. 67 (Doc. 54), and for Interpleader Relief.

(Doc. 55). After due consideration, the Court finds that Prudential is entitled to the relief

requested in each Motion as set forth herein.

PROCEDURAL HISTORY

Prudential instituted this action via Interpleader Complaint on December 11, 2018. (Doc.

1). In its Complaint, Prudential acknowledges the several claims to the insurance policy

proceeds,1 notes that it has no stake in the outcome of the proceedings, and requests various

forms of relief from this Court. In response to Prudential’s filing, Dianna Brown (Doc. 12) and the

1 As noted in Prudential’s Interpleader Complaint, Amber Brown submitted a competing claim to

the policy proceeds on August 27, 2018, alleging the final beneficiary designation (made on May

31, 2018) was fraudulent. (Doc. 1, pp. 4, 5). Dianna Brown also submitted a claim to the policy’s

proceeds on August 28, 2018. (Id. at 5).

Brown Children (Doc. 24) filed Answers, with the Brown Children cross-claiming against Dianna

Brown. In their cross-claim, the Brown children allege that Dianna Brown either coerced Richard

Brown via duress, or as a consequence of undue influence, or her own forgery, to designate her

as the beneficiary to “another $250,000 insurance policy.” (Doc. 24, p. 3). After the Brown

Children filed their cross-claim, Dianna Brown answered and filed her own cross-claim against

the Brown Children. (Doc. 31). Thereafter, the Brown Children filed Motions to Dismiss (Doc. 37)

and for Partial Summary Judgment (Doc. 38), each of which they sought to withdraw shortly

thereafter, and the Court obliged their requests. Following the Brown Children’s most recent

filings, Prudential filed the Motions now before the Court. (Docs. 53 – 55).

FACTS

On December 4, 2001, Richard E. Brown (“Brown” or “the Insured”) divorced his first wife

(and the biological mother of the Brown children), Cynthia Brown. (Doc. 38-2, p. 92). Among the

various provisions of the divorce decree, the Mobile County Circuit Court ordered the following

regarding the Insured’s life insurance policy:

That the Defendant shall name the minor children irrevocable

beneficiaries of all life insurance policies presently in existence on

his life. The Defendant shall furnish the Plaintiff proof of the

existence of said life insurance, the death benefit, and this

irrevocable beneficiary designation within thirty (30) days from the

date of the signing of the divorce decree and at least once each

year during the month of January upon Plaintiff’s written request.

(Doc. 38-2, p. 91) (emphasis removed). At the time of his divorce from Cynthia Brown, the

Insured was retired from the United States Army and was working full time with the Veterans

Administration. (Id.). As a consequence of his military service, Brown was insured by the

Prudential Insurance Company of America through a Veteran’s Group Life Insurance Policy (“VGLI

Policy”). Brown’s coverage under this policy began on June 1, 1995; the death benefit under this

policy was $100,000. (Doc. 38-2, pp. 95 – 97). Accordingly, the policy referred to in the Mobile

County Circuit Court’s divorce decree was in effect at the time of the divorce and subsequent to

it. (Doc. 1, p. 3).

As more fully set out in Prudential’s and the Brown Children’s filings, the Insured executed

Beneficiary Designations naming the Brown Children as his primary beneficiaries on the above-

referenced policy in 2013. (See Doc. 1-2, pp. 1 – 32; Doc. 38, p. 2). On March 31, 2016, Brown

married Dianna Brown. (Doc. 38-2, p. 3). Approximately one year after his marriage, Brown again

named the Brown children as the primary beneficiaries on his Prudential life insurance policy,

providing each individual child with a twenty (20) percent interest in the policy’s proceeds. (Doc.

1-2, pp. 1 – 12). On May 31, 2018, Brown purportedly altered his beneficiary designation on the

Prudential life insurance policy, indicating that he wished the proceeds of the policy to be

distributed “by law.” (Doc. 1-2, p. 15). Brown passed away on August 17, 2018 (Doc. 38-2, p. 1).

DISCUSSION

I. Default judgment must be entered against Madison Brown.

In its first Motion before the Court, Prudential asks the Court to enter default judgment

against Defendant Madison Brown (“Madison”). In support of its Motion, Prudential argues the

following: (1) Madison was served the Complaint on January 18, 2019 (Doc. 22); (2) Madison

failed to answer in the time required by Rule 12 of the Federal Rules of Civil Procedure; (3) that

the Clerk entered Default against Madison on March 2, 2019 (Doc. 36); (4) Madison is not a

member of the military and is not an incompetent person, thus making the entry of default

against her proper; and (5) Rule 55 of the Federal Rules of Civil Procedure permits the Court to

provide the relief Prudential seeks. (Doc. 53, pp. 4 – 6).

As a threshold issue, the Court notes that Prudential is correct to assert that Madison was

served on the date identified and that she has failed to answer or otherwise appear in this action.

(See Doc. 22). Likewise, the Clerk entered default against Madison on March 7, 2019. (Doc. 29).

Further, there is no evidence to suggest that Madison is an infant or an incompetent person, and

Prudential has shown that Madison is not a member of the military.2

This Court has previously stated that,

[t]he defendant, by his default, admits the plaintiff's well-pleaded

allegations of fact . . . A default judgment is unassailable on the

merits but only so far as it is supported by well-pleaded allegations,

assumed to be true. Thus, a default judgment cannot stand on a

complaint that fails to state a claim. Rather, before entering a

default judgment for damages, the district court must ensure that

the well-pleaded allegations of the complaint . . . actually state a

cause of action and that there is a substantive, sufficient basis in

the pleadings for the particular relief sought.

GlobeNet Metals, LLC v. Fid. Oil Field Servs., LLC, No. CIV.A. 13-0282-WS-B, 2013 WL 5529607, at

*1 (S.D. Ala. Oct. 7, 2013) (internal citations and quotations omitted). Prudential’s Interpleader

Complaint alleges, inter alia, that it will be “expos[ed] [ ] to double or multiple liability on account

of the potential competing claims made by or available to defendants. Prudential has no means

other than this Interpleader action of protecting itself against multiple conflicting or potentially

conflicting claims and/or possible multiple litigation on the part of the defendants as to the Death

2 See Doc. 53-2, pp. 3 – 5; 50 U.S.C. § 521(a), (b).

Benefit.” (Doc. 1, pp. 5 – 6). 3 Further, Prudential is not seeking damages. There is no question

that Prudential’s Complaint states a substantive, sufficient basis for the relief sought.

Accordingly, the Court must determine whether it may grant Prudential a final judgment as to

Madison pursuant to Rule 55 of the Federal rules of Civil Procedure.

Default judgment may be entered by the Court pursuant to Fed. R. Civ. P. 55(b). There is

no rigid formula that can be applied to determine whether a party is entitled to default judgment.

Instead, Rule 55(b) provides (in pertinent part pertaining to these proceedings),

“The court may conduct hearings or make referrals – preserving

any federal statutory right to a jury trial – when, to enter or

effectuate judgment, it needs to: (A) conduct an accounting; (B)

determine the amount of damages; (C) establish the truth of any

allegation by evidence; or (D) investigate any other matter.

Fed. R. Civ. P. 55(b)(2)(A) – (D). However, such hearings are not universally required. See

GlobeNet Metals, LLC v. Fid. Oil Field Servs., LLC, No. CIV.A. 13-0282-WS-B, 2013 WL 5529607, at

*2 (S.D. Ala. Oct. 7, 2013) (relying on Securities and Exchange Commission v. Smyth, 420 F.3d

1225, 1232 n. 13 (11th Cir.2005)). Prudential filed this action in order to fulfill its contractual

obligations to pay life insurance on the death of the Insured, and Prudential does not request a

hearing; Defendants were afforded the opportunity to contest this Motion and did not.

Accordingly, no hearing will be held. For those reasons, Prudential’s Motion for Default Judgment

against Madison Brown is granted.

3 The Court notes, too, that interpleader is an appropriate remedy in this matter, as the amount

in controversy exceeds $500, two or more adverse claimants of diverse citizenship claim to be

entitled to the proceeds at issue (Doc. 55, p. 5), and Prudential seeks to deposit the proceeds

with the Court. See 28 U.S.C. § 1335; Usable Life Co. v. Gann, No. 1:09-CV-77, 2009 WL 4348588,

at *1 (E.D. Tenn. Nov. 24, 2009).

II. Prudential may deposit the policy’s proceeds with the Court.

In its second motion, Prudential asks this Court to order it to deposit with the Court the

full amount of the death benefit of the Insured’s life insurance policy, along with any accrued

interest, pursuant to Fed. R. Civ. P. 67 and Civil L.R. 67.1.4 Rule 67(a) of the Fed. R. Civ. P. states

the following: “a party . . . may deposit with the court all or part of the money or thing, whether

or not that party claims any of it.” Considering Prudential’s request, its purported inability to

determine the proper beneficiary of the policy, Rule 67(a) Fed. R. Civ. P., and Civ. L.R. 67,

Prudential’s motion is granted.

Prudential is directed to deposit the funds at issue, $100,000, along with any accrued

interest owed by Prudential to the rightful beneficiary of the Insured’s policy, into the Court’s

registry. Prudential shall present a copy of this order at the time it deposits said funds. It is

further ordered that upon receipt of said sum from Prudential, the Clerk of the Court is directed

to deposit the funds into the Registry of the Court, and then, as soon as the business of the Court

allows, the Clerk is directed to deposit these funds into the CRIS (Court Registry Interest) account

under the terms and conditions set forth in Fed. R. Civ. P. 67 and Civ L.R. 67(d)(1).

III. Prudential is entitled to the interpleader relief requested.

In its final motion, Prudential requests that the Court: (1) restrain defendants from

initiating or prosecuting any proceedings relating to or arising out of the Death Benefit and/or

the Group policy at issue; (2) direct the Defendants to interplead their rights to such sum; (3)

discharge Prudential from further liability; and (4) dismiss Prudential with prejudice from this

4 To the extent that Prudential relies of Civil L.R. 67.1, the Court shall interpret this request as

one made under Civil L.R. 67, “Deposit Into Court; Withdrawal of Monies; Registry Fee,” which

governs, inter alia, how parties may deposit money with the Court.

action. In support of this Motion, Prudential provides the jurisdictional predicate by which the

Court may entertain this action, demonstrates how Prudential has satisfied the requirements of

statutory interpleader (Doc. 55, pp. 4 – 6), and cites several authorities that stand for the

proposition that Prudential should be discharged from this action and not be held liable by

Defendants from any claims arising from the policy at issue. (Id. pp. 6 – 8).

a. Prudential shall be dismissed with prejudice from this action.

To begin, the Court notes that Prudential will satisfy the statutory interpleader standard

once it deposits the policy’s proceeds, along with any accrued interest, to the Clerk of the Court.

(See n. 3). Generally, Rule interpleader plaintiffs are “entitled to be discharged from any and all

liability to the claimants/defendants where there is no longer any material controversy

concerning its obligations to those claimants.” Am. Gen. Life Ins. Co. v. Jones, No. 08-0211-WS-

B, 2008 U.S. Dist. LEXIS 92850, at *3 (S.D. Ala. Nov. 13, 2008); see also Chase Manhattan Bank v.

Mandalay Shores Coop. Hous. Ass'n (In re Mandalay Shores Coop. Hous. Ass'n), 21 F.3d 380, 383

(11th Cir. 1994) (“A successful interpleader suit results in the entry of a discharge judgment on

behalf of the stakeholder; once the stakeholder turns the asset over to the registry of the court,

all legal obligations to the asset's claimants are satisfied.”).5 However, at least one district court

5 Relying on Standard Ins. Co. v. Nelson, 2007 U.S. Dist. LEXIS 36197, 2007 WL 1453099, *1 (W.D.

Wash. May 17, 2007) ("Once it has been determined that an interpleader action is appropriate,

federal courts are entitled to discharge a disinterested stakeholder in an interpleader action.");

General Elec. Capital Assur. v. Van Norman, 209 F. Supp.2d 668, 670 (S.D. Tex. 2002) (discharging

plaintiff in rule interpleader action where defendants did not oppose discharge and there was no

longer any material controversy involving plaintiff); General Acci. Group v. Gagliardi, 593 F. Supp.

1080, 1087 (D. Conn. 1984) (in rule interpleader context, "the general equitable powers of the

court permit, if not invite, the court to receive a deposit and thereafter discharge the

stakeholder")).

The Court notes that Prudential relies, not insignificantly, on authorities dealing with the

Rule interpleader standard, as articulated in Rule 22 of the Federal rules of Civil Procedure, for

in this circuit has found interpleader-plaintiff dismissals inappropriate where the interpleader-

plaintiff was an insurance company responsible for bringing the interpled defendants to court.6

Here, however, the facts are dissimilar than those relied upon by the district court in Hauger.

dismissal in its Motion now before the Court. (see, e.g., Prudential’s reliance on Wells Fargo Bank,

Nat. Ass’n v. PACCAR Fin,. Corp., 2009 WL 211386 (N.D. Cal. Sept. 22, 203), Doc. 55, p. 6). Despite

this reliance, Prudential argues predominantly under the statutory interpleader umbrella. (See,

e.g., p. 4, n. 1, p. 7).

6 The Hauger court purported to rely on the Eleventh Circuit’s decision in Chase Manhattan Bank

v. Mandalay Shores Coop. Hous. Ass'n (In re Mandalay Shores Coop. Hous. Ass'n), 21 F.3d 380

(11th Cir. 1994), to stand for the proposition that an insurance company can never be a

disinterested stakeholder in an interpleader action. (“In Mandalay Shores, the court also stated

that insurance companies are not innocent stakeholders who unwittingly come into possession

of the disputed asset. Id. Rather, where multiple claimants are disputing the ownership of

insurance proceeds, the chief beneficiary of an interpleader action is the insurance company.

Campbell v. North American Co., No. 3:04-cv-1118-J-TEM, 2007 U.S. Dist. LEXIS 54886 at * 17

(M.D. Fla. July 30, 2007). Moreover, when an interpleader action is brought by an insurance

company in response to a suit against the insurance company, an insurance company is not a

disinterested, innocent stakeholder.”). Hauger v. John Hancock Life Ins. Co., (U.S.A.), No. 8:07-

CV-1711-T-EAJ, 2008 U.S. Dist. LEXIS 8413, at *10 (M.D. Fla. Feb. 5, 2008) (internal citations and

quotations included).

However, a closer reading of Hauger reveals that the district court did not directly rely on

Mandalay Shores for the proposition that an insurance company could never be an innocent,

disinterested stakeholder in an interpleader action. Instead, the Hauger court relied on Campbell

v. N. Am. Co. for Life & Health Ins., No. 3:04-cv-1118-J-TEM, 2007 U.S. Dist. LEXIS 54886 (M.D. Fla.

July 30, 2007), for that proposition. In Campbell, the district court found that an insurance

company was not an innocent, disinterested stakeholder because it filed its interpleader action

in response to a breach of contract claim filed against it by the purported policy beneficiary and

faced additional adverse claims from another purported beneficiary. The insurance company in

Campbell was not interested merely by virtue of the type of business it conducted. Instead, the

insurance company was interested because it faced the possibility of damages under the related

breach of contract claim. Such facts are not present in this case.

Moreover, Mandalay Shores does not appear to stand for the proposition cited by the

Hauger court. Instead, in Mandalay Shores, the Eleventh Circuit focused on whether banks were

universally barred from receiving attorneys’ fees and costs in interpleader suits arising from

bankruptcy actions. See Chase Manhattan Bank v. Mandalay Shores Coop. Hous. Ass'n (In re

Mandalay Shores Coop. Hous. Ass'n), 21 F.3d 380, 382 – 83 (11th Cir. 1994).

Prudential was not facing a suit from the parties contesting the proper beneficiary of the policy’s

proceeds. Neither is Prudential seeking attorneys’ fees and costs related to this suit. Rather, the

record shows that Prudential is entirely disinterested and unable to determine the correct party

to whom the proceeds at issue are owed. Accordingly, upon consideration of the facts and

circumstances of this case, the Court finds that Plaintiff shall be dismissed with prejudice from

this action after it deposits the proceeds at issue, along with any accrued interest, to the Clerk of

the Court. Plaintiff is directed to provide notice to the Court once it deposits said funds.

b. Enjoining Claimants from bringing other claims

Section 2361 of Title 28 authorizes district courts to enter an order restraining all

claimants from instituting a proceeding in any state or federal court affecting the property

involved in an interpleader initiated pursuant to Section 1335. Podhurst Orseck, P.A. v. Servicios

Legales De Mesoamerica S. De R.L., 699 F. Supp. 2d 1344, 1350 (S.D. Fla. 2010). However, the

statute does not articulate the precise standard for framing a § 2361 injunction. Instead, district

courts have "extensive discretion under Section 2361 with regard to the issuance and the scope

of the order." Id. Having considered the facts and circumstances of the instant case and the

purpose of the federal interpleader injunction statute, the Court finds that a § 2361 injunction

should issue following Prudential’s deposit of the proceeds, along with any accrued interest, with

the Clerk of the Court.

IV. Conclusion

The Court GRANTS Plaintiff’s Motions for Default Judgment against Madison Brown and

to Deposit Funds with the Court. (Docs. 53 and 54). Further, Plaintiff is directed to deposit said

funds with the Clerk of the Court and present a Copy of this Order when making such deposit.

Plaintiff is further directed to file notice with this Court when the deposit takes place. Upon

receipt of this notice, Plaintiff shall be DISMISSED WITH PREJUDICE from this action, and all

remaining defendants shall be ENJOINED from initiating any other actions against Prudential

regarding this action.

DONE and ORDERED this 22nd day of August, 2019.

/s/ JEFFREY U. BEAVERSTOCK

UNITED STATES DISTRICT JUDGE