## Facts

- Paragon Molding, Ltd. (Paragon) operated a duck-call manufacturing facility that suffered a fire, causing extensive damage to the real estate and surrounding structures.
- The property was insured under a fire insurance policy issued by American Economy Insurance Company (AEIC), though the insurer was mislabeled in the caption as Safeco Insurance Company.
- When AEIC refused to provide funds under the policy, Paragon filed suit seeking payment of insurance proceeds.
- After the coverage dispute began, multiple parties asserted claims to portions of the expected policy proceeds, including:
  - Miller Industries, L.L.C. (Miller), the owner of the real estate occupied by Paragon (represented by the same counsel as Paragon);
  - The Alex N. Sill Company (Sill), a consultant/appraiser that assisted in preparing the fire-loss claim;
  - Roy Rhodes, who had sold a business to Paragon and retained a financial interest connected to Paragon;
  - Jimmie Rhodes, who also asserted a vested financial interest connected to Paragon; and
  - JPMorgan Chase Bank, N.A. (Chase), which held multiple state-court judgments against Paragon totaling more than $500,000.
- To avoid competing demands and possible multiple liability over a single pool of proceeds, the parties agreed that the insurer would deposit more than $1.3 million in policy proceeds into the court registry for later distribution.
- With the proceeds on deposit, the court addressed whether the matter could proceed as an interpleader-type action and whether the court could exercise jurisdiction over the claimants seeking payment from the fund.

## Issues

1. When multiple parties claim rights to the same insurance proceeds deposited into the federal court registry, may the case proceed in the nature of interpleader so the competing claims can be resolved in one action?
2. Does the district court have jurisdiction to determine the competing claimants’ rights to the deposited insurance proceeds?
3. After depositing the proceeds into the court registry, may the insurer be discharged from further liability and participation concerning the fund?

## Decision

- The court treated the dispute over the deposited policy proceeds as proceeding in the nature of interpleader, because a single identified fund was subject to competing claims.
- The court concluded it had authority to exercise jurisdiction over the parties asserting claims to the fund so it could determine entitlement and direct distribution of the proceeds.
- The court explained that in distributing interpleaded funds it sits as a court of equity, with discretion to craft fair relief among the competing claimants to the stake.
- Because the insurer deposited the proceeds into the registry and no longer needed to litigate entitlement to the deposited funds, the court permitted the insurer to be released from further liability and participation as to the fund, leaving the claimants to litigate allocation among themselves.

## Legal Principles

- Interpleader permits a stakeholder facing multiple claims to a single fund to deposit the fund with the court and require claimants to litigate entitlement in one proceeding, reducing the risk of multiple suits and inconsistent obligations.
- In an interpleader proceeding involving a deposited fund, the district court acts as a court of equity in resolving and distributing the stake, and may fashion equitable remedies appropriate to the competing claims.
- Once a stakeholder deposits the disputed funds with the court and does not contest distribution, the court may discharge the stakeholder from further liability regarding the deposited funds.
- A federal court administering a deposited stake may determine jurisdiction over claimants who assert rights to that stake so the court can decide entitlement and distribute the fund in a single forum.

## Conclusion

In *Paragon Molding, Ltd. v. Safeco Insurance Company*, the court addressed a fire-loss proceeds dispute in which the insurer (AEIC, though mislabeled as Safeco) deposited more than $1.3 million into the court registry after multiple parties asserted competing claims; the court proceeded in the nature of interpleader, confirmed jurisdiction to adjudicate the claimants’ rights, noted that distribution of interpleaded funds is an equitable function, and discharged the insurer from further involvement concerning the deposited fund.


Paragon Molding, Ltd. v. Safeco Insurance Company, 2010 WL 2386355 (2010)