Legal Memorandum: Denial of a Motion for Interpleader

Issue: Should a motion for interpleader be denied because the moving party’s conduct is patently inequitable, barred by both laches and unclean hands?

Area of Law: Litigation & Procedure
Keywords: Motion for interpleader; Laches and unclean hands; Equitable proceeding
Jurisdiction: Virgin Islands
Cited Cases: 514 F.2d 589; 23 F.3d 60; 182 F.3d 201
Cited Statutes: None
Date: 03/01/2006

“[I]nterpleader is an equitable proceeding … subject to dismissal on equitable doctrines.”  U.S. Fire Ins. Co. v. Asbestospray, Inc., 182 F.3d 201, 208 (3d Cir. 1999).  Thus, the equitable defenses of laches and unclean hands may be invoked to dismiss interpleader actions or to deny the stakeholder’s motion for discharge from liability.  See Mendez v. Teachers Ins. & Annuity Ass’n, 982 F.2d 783, 788 (2d Cir. 1992) (retirement fund stakeholder denied discharge from liability based, inter alia, on its unreasonable delay in initiating the interpleader action); Truck-A-Tune v. Re, 856 F. Supp. 77, 81 (D. Conn.) (“An interpleader action is equitable in nature and the doctrine of unclean hands can thus bar a stakeholder from successfully invoking it.”), aff’d on other grounds, 23 F.3d 60 (2d Cir. 1993).

The existence of laches is a question primarily addressed to the discretion of the trial court.  Churma v. U.S. Steel Corp., 514 F.2d 589, 592 (3d Cir. 1975).  In exercising its discretion the court assesses the equitable circumstances by examining two principal factors: (1) whether there was an inexcusable delay in bringing the action; and (2) whether the party asserting laches suffered prejudice.  Id.; see Asbestospray, Inc., 182 F.3d at 208.  Both the length of the delay and the existence of prejudice are questions of fact.  Churma, 514 F.2d at 593.    

The second principal element of laches is prejudice.  In U.S. Fire Ins. Co. v. Asbestospray, Inc., No. C.A. 97-4020 (E.D. Pa. […]

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