State Farm Fire & Casualty v. Tashire
386 U.S. 523, 87 S. Ct. 1199, 18 L.Ed.2d 270 (1967)
As the result of a bus crash,
a bunch of people sued. Four California residents sued in California
State Court. They sued Greyhound, which was a California corporation, the
bus driver (Nauta), the truck driver (Clark), and the truck owner
(Glasgow), who were all Oregon residents. More lawsuits were pending,
including some by Canadian citizens.
State Farm, who insured Clark,
preempted everything by starting an interpleader action in the Federal Court in Oregon. Tashire and
some other claimants moved to dismiss the action.
State Farm argued that they
insured Clark for a maximum of $20k. They put $20k in escrow and asked
the Court to:
Force all claims into this
single Federal case.
Discharge State Farm from
Decree that State Farm owed
no duty to Clark because the insurance policy was void, and refund their
State Farm used the statutory
interpleader rule based on 28 U.S.C.
There was diversity between
State Farm and a defendant, and the amount in controversy was over the
The Federal Trial Court
rejected the motion to dismiss the case. Tashire appealed.
At the same time, Greyhound
and Nauta joined with State Farm, hoping that all claims against them
would be heard in the same interpleader action with State Farm.
The Federal Appellate Court
reversed. State Farm appealed.
The Federal Appellate Court
looked to Oregon State law (since the suit was brought in Oregon). In
Oregon, you can't sue an insurance company until a judgment is obtained
from the insured party. Therefore, until the case against Clark had been
settled, State Farm didn't count as a claimant under 28 U.S.C. § 1335 or Rule 22. They had no standing to sue!
The US Supreme Court reversed
the Appellate Court and allowed the case to proceed.
The US Supreme Court found
that the language of the latest version of 28 U.S.C. § 1335 allowed for interpleader
lawsuits to start when parties "may claim" liability. State Farm was
potentially liable, if Clark was found liable. Therefore, they could
proceed with their interpleader
motion even though the case against Clark wasn't adjudicated yet.
If, as the Appellate Court
suggested, State Farm had to wait until two claims had been adjudicated against
Clark, the first claimant might already get all the $20k, leaving
nothing left for other claimants.
Court found that 28 U.S.C. § 1335
cannot be used to both stop all lawsuits against them outside of this one
action and extend that protection to all the other
Basically, Greyhound and
Nauta were arguing that if a claimant wanted to sue Greyhound (which was
not insured by State Farm), they would have to do it in Federal Court in
Oregon as part of State Farm's single action.
28 U.S.C. § 1335 can only be used to join all
lawsuits against State Farm's interests. Other lawsuits that didn't
involve State Farm's interest could proceed separately.
28 U.S.C. § 1335 is not to be used as an "all-purpose bill
"Bill of peace"
is an old English term that basically means a class action lawsuit.