## Facts

- 6247 Atlas Corporation, a New York jewelry and precious-stone dealer, maintained jeweler’s block insurance consisting of a primary policy and an excess policy totaling about $3.1 million in coverage, subject to a deductible.
- Atlas reported a theft of more than $6 million in valuables from its business premises, including items allegedly owned by over 50 consignors or other creditors (“memoholders”).
- Atlas and its secured creditor, The Merchants Bank of New York, sued the subscribing insurers in federal court to recover under the policies.
- The insurers denied liability and asserted fraud defenses, while also expressing concern that multiple memoholders and other creditors might later assert competing claims to the same insured property or any insurance proceeds.
- The insurers moved to (1) compel joinder of Atlas’s creditors and memoholders under Federal Rule of Civil Procedure 19 or, alternatively, (2) interplead those claimants under Rule 22.

## Issues

1. Whether creditors and memoholders with potential claims to the stolen property or to insurance proceeds were required parties who must be joined under Federal Rule of Civil Procedure 19.
2. Whether defendant-insurers could invoke Federal Rule of Civil Procedure 22 interpleader by counterclaim to bring in absent claimants when facing potential multiple liability to competing claimants to a limited insurance fund.

## Decision

- The court denied the insurers’ Rule 19 motion to join all creditors and memoholders as necessary or indispensable parties.
- The court granted the insurers’ alternative Rule 22 motion and allowed interpleader by counterclaim to bring in absent claimants to the insurance proceeds.

## Legal Principles

- Rule 19 does not require joinder merely because absent parties may have an economic interest in potential recovery; the movant must show that complete relief among existing parties is not possible without them, that their interests will be practically impaired, or that existing parties face a substantial risk of inconsistent obligations (not just multiple lawsuits).
- In an insured-versus-insurer coverage action, alleged third-party interests in any recovery may be treated as derivative to the coverage dispute and, without more, do not make those third parties indispensable.
- Rule 22 interpleader is available to a defendant as well as a plaintiff, including through a counterclaim, when the stakeholder may be exposed to double or multiple liability arising from competing claims to the same limited fund.
- A defendant-insurer may seek Rule 22 interpleader to manage competing claims to policy proceeds even while contesting coverage, where the interpleader is aimed at preventing multiple liability on the same obligation.

## Conclusion

The court refused to force mandatory joinder of Atlas’s creditors and consignors under Rule 19, but permitted the insurers to use Rule 22 interpleader by counterclaim to consolidate competing claims to limited insurance proceeds and reduce the risk of multiple liability.


6247 Atlas Corp. v. Marine Ins. Co., 155 F.R.D. 454 (S.D.N.Y. 1994)