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Legal Memorandum: Requisites of an Interpleader Action

Issue: In Virgin Islands court, must a plaintiff’s motion be denied because the amount of its interpleader bond fails to meet the requirements of 28 U.S.C. 1335?

Area of Law: Litigation & Procedure
Keywords: Interpleader action; A proper deposit or bond
Jurisdiction: Federal, Virgin Islands
Cited Cases: 502 F.2d 506
Cited Statutes: 28 U.S.C. 1335
Date: 03/01/2006

In an interpleader action, the burden is on the stakeholder bringing the action to demonstrate each of the elements that may entitle him to it.  Dunbar v. U.S., 502 F.2d 506, 511 (5th Cir. 1974).  A proper deposit or bond is one of the elements prerequisite to maintaining an interpleader action.  28 U.S.C. § 1335; Asbestospray, Inc., 182 F.3d at 210; 7 Wright & Miller, supra, § 1716, at 645-46.  Without full compliance with this requirement, the court must dismiss the suit, although, generally, it will give the stakeholder a second opportunity to deposit the proper amount.  See General Accident Group v. Gagliardi, 593 F. Supp. 1080, 1087 (D. Conn. 1984).  A fortiori, without a proper deposit, a stakeholder’s motion for discharge should be denied.

The “proper amount” that the stakeholder must deposit is “the largest amount for which it may be liable in view of the subject matter of the controversy.”  Asbestospray, Inc., 182 F.3d at 210.  In this regard, the largest amount for which the stakeholder may be liable is the gross amount of the fund held by the stakeholder; it is not net of setoffs or deductions claimed by the stakeholder.  Emmco Ins. Co. v. Frankford Trust Co., 352 F. Supp. 130, 132 (E.D. Pa. 1972); 7 Wright & Miller, supra, § 1716, at 649.  Thus, a stakeholder is not entitled to a credit or deduction for amounts it previously paid from the fund when those amounts were improperly paid as, for example, in furtherance […]

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