As to the identity of issues requirement, the issue necessarily decided in the prior action was defendant's guilt of the depraved mind murder of the insured. No one contests the fact that the same issue is dispositive of the present action. Therefore, we conclude that the plaintiffs and defendants O'Reilly, Eidel, Spots, and Ferguson have met their burden of establishing the identity of issues.
However, as to the second requirement, Cole contends that he has not yet had a full and fair opportunity to litigate whether or not he is guilty of depraved mind murder because his appeal from his conviction is pending. See Duverney v. State of New York, 96 Misc. 2d 898, 410 N.Y.S.2d 237, 245-46 (Ct. Cl. 1978) (stating in dictum that the existence of an appeal is a factor to be considered in determining whether a party had a full and fair opportunity to litigate an issue), aff'd, 76 A.D.2d 962, 429 N.Y.S.2d 70 (3d Dep't 1980). In New York, unlike other jurisdictions, the rule is that "the mere pendency of an appeal does not prevent the use of the challenged judgment as the basis of collaterally estopping a party to that judgment in a second proceeding." Matter of Amica Mut. Ins. Co., 85 A.D.2d 727, 445 N.Y.S.2d 820, 822 (2d Dep't 1981). Although Duverney, 410 N.Y.S.2d at 245-46, indicates that the existence of an appeal should be considered in determining whether a full and fair opportunity to litigate the issue existed, it emphasizes that this is but one of the factors to be considered. The other factors to be considered include: "the size of the claim, the forum of prior litigation, the use of initiative, the extent of the litigation, the competence and experience of counsel, the availability of new evidence, indications of a compromise verdict, differences in the applicable law and foreseeability of future litigation." Schwartz v. Public Adm'r of County of Bronx, 24 N.Y.2d 65, 298 N.Y.S.2d 955, 961, 246 N.E.2d 725 (Ct. App. 1969). Further, in Matter of Amica, 445 N.Y.S.2d at 822, the court stated in dictum that it would not apply collateral estoppel to a judgment if that judgment was substantially likely to be reversed on appeal because of a change in the applicable law.
In In re Professional Fin. Management, Ltd., 692 F. Supp. 1057, 1063 (D. Minn. 1988), a Minnesota court applying New York law weighed the pendency of an appeal along with other factors delineated in Schwartz to determine whether or not a defendant could be collaterally estopped from relitigating in a subsequent civil proceeding an issue necessarily decided in his criminal conviction. The court held that, despite his pending appeal, the defendant was precluded from relitigating the issue necessarily decided by his criminal conviction because he did not present any "compelling reason why it would be unfair to rely on the lengthy trial, and a conviction based on the strictest standard of proof." Id. Similarly, in the case before us, Cole has not articulated any compelling reason why it would be unfair to rely on his criminal conviction; Cole has not claimed that his counsel was incompetent or inexperienced, nor has he claimed that the magnitude of the charge or the forum of litigation discouraged him from vigorously contesting his guilt. Cf. Gilberg v. Barbieri, 53 N.Y.2d 285, 441 N.Y.S.2d 49, 51, 423 N.E.2d 807 (Ct. App. 1981) (which held that collateral estoppel would not be applied to the defendant's conviction of a petty offense in City Court because the relative insignificance of the charge and the brisk and informal manner by which such charges are tried in City Court would discourage a defendant from vigorously contesting his guilt). Moreover, Cole has not claimed that he was convicted by a compromise verdict. See generally Grand, 344 N.Y.S.2d at 941-42 ("It is well recognized that there are rigorous safeguards imposed to insure against unjust conviction in a criminal action. . . . [Thus] no injustice is committed if defendants are estopped from relitigating issues determined in conformity with those safeguards.")
Further, Cole asserts no change in the applicable law since his conviction. Cole does argue that he will win on appeal because of his "two Constitutional points". (See def. Cole's Reply Mem. of Law of 8/23/92, at 7.) However, since he has not discussed what these points are nor indicated how they would probably result in his conviction being reversed on appeal, his conclusory allegation cannot prevent the application of collateral estoppel in this case. See Cerbone, 508 F. Supp. at 785 (stating that it would weaken the doctrine of collateral estoppel if a defendant's "unsupported and conclusory allegations could call into question [his] past opportunity to fully and fairly litigate [his] case"). Similarly, while Cole claims to have new evidence, (def. Cole's Reply Mem. of Law of 8/23/92, at 7), he has not stated what this evidence is nor indicated how it would lead to reversal on appeal. Thus, after evaluating all of the factors delineated by the New York courts we conclude that Cole has not met his burden of establishing that he lacked a full and fair opportunity to litigate his guilt.
As the two requirements under New York law for the application of collateral estoppel have been met, we conclude that Cole is collaterally estopped from relitigating in this declaratory judgment action the issue of whether or not he is guilty of the depraved mind murder of the insured.
D. Defendants Eidel, Spots, and Ferguson are Entitled to Receive Prejudgment Interest on the Basic and Supplemental Life Insurance Proceeds
As Cole's conviction of depraved mind murder precludes him from recovering the basic and supplemental life insurance proceeds, we direct Connecticut General to pay these proceeds directly to the contingent beneficiaries: defendant's Eidel, Spots, and Ferguson. Defendants Eidel, Spots, and Ferguson contend that they are entitled to receive interest on these proceeds from December 28, 1989, the day they filled out a claim for the basic and supplemental life insurance proceeds. (See Defs.' Answer, Countercl., and Cross-cl. P 25.)
"The question of whether interest is to be allowed, and also the rate of computation, is a question of federal law where the cause of action arises from a federal statute." Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1218 (8th Cir. 1981), cert. denied, 454 U.S. 968, 70 L. Ed. 2d 384, 102 S. Ct. 512 (1981). The cause of action in the present case arises from a federal statute because subject matter jurisdiction over this case is premised on the defendants' right to sue under ERISA, a federal statute, for the benefits they believe are due to them. Therefore, we will look to federal law to determine whether the above-mentioned defendants are entitled to prejudgment interest on the basic and supplemental life insurance proceeds and to determine the appropriate interest rate if prejudgment interest is granted.
While ERISA is silent on the issue of prejudgment interest, see id. at 1219, the Second Circuit has allowed prejudgment interest to be awarded in cases arising under ERISA. Mendez v. Teachers Ins. and Annuity Ass'n and College Retirement Equities Fund, 982 F.2d 783, 790 (2d Cir. 1992). However, prejudgment interest should not be awarded to a party merely because that party is found to be entitled to the proceeds. Id. Instead, the award of prejudgment interest in a case arising under ERISA "is a discretionary matter for the court and should be awarded only in cases where such an award is 'fair, equitable, and necessary to compensate the wronged party fully.'" Id. (quoting Wickham Contracting v. Local Union No. 3, IBEW, 955 F.2d 831, 835 (2d Cir. 1992), cert. denied, 121 L. Ed. 2d 302, 1992 U.S. Lexis 6733, 113 S. Ct. 394).
Because the present case involves an insurance company's request for interpleader, we also look to interpleader cases to determine whether an award of prejudgment interest would be equitable here. Prejudgment interest will be awarded in an interpleader action if the party seeking to deposit the funds into court has "improperly and excessively delayed the filing of the interpleader action." Avant Petroleum, Inc. v. Banque Paribas, 652 F. Supp. 542, 544 (S.D.N.Y. 1987), aff'd, 853 F.2d 140 (2d Cir. 1988); see John Hancock Mut. Life Ins. Co. v. Doran, 138 F. Supp. 47, 49-50 (S.D.N.Y. 1956). In John Hancock, 138 F. Supp. at 48-50, an insurance company delayed filing a bill of interpleader until ten months after the company was notified of an adverse claim to the proceeds of a life insurance policy. The claimant who was eventually found to be entitled to the proceeds requested prejudgment interest on the proceeds from the date the adverse claim was filed. Id. at 48-49. The court held that the insurance company should have commenced the interpleader action within one month of receiving the adverse claim. Id. at 49. Accordingly, the court awarded to the prevailing claimant prejudgment interest dating from one month after the insurance company was notified of the adverse claim to the life insurance proceeds. Id.
Similarly, in the present case, Connecticut General did not commence this interpleader action until twenty-one
months after defendants Eidel, Spots, and Ferguson notified the company of their adverse claim to the life insurance proceeds. Therefore, we hold that Connecticut General improperly delayed the commencement of this interpleader action and we award defendants Eidel, Spots, and Ferguson prejudgment interest dating from January 28, 1990, which is one month after these defendants notified Connecticut General of their adverse claim to the life insurance proceeds.
As we have determined that defendants Eidel, Spots, and Ferguson are entitled to receive prejudgment interest, we must now determine the interest rate to be applied. District courts generally have discretion in deciding what interest rate to apply in ERISA cases where prejudgment interest is awarded. Cefali v. Buffalo Brass Co., Inc., 748 F. Supp. 1011, 1025 (W.D.N.Y. 1990). Moreover, "the Second Circuit has not expressly endorsed any particular prejudgment interest rate." Id. In awarding prejudgment interest in an ERISA case, the Court in Cefali applied the rate for postjudgment interest provided by 28 U.S.C. § 1961(a) (1988), which is tied to the rate of interest on Treasury bills. Id. Accordingly, we find the rate provided by 28 U.S.C. § 1961(a) to be appropriate in the present case.
E. Defendants Eidel, Spots, and Ferguson are Not Entitled to Receive the Costs and Disbursements of this Action
Defendants Eidel, Spots, and Ferguson request that this Court award them the costs and disbursements of this action. (See Defs.' Answer, Countercl., and Cross-cl. P 25.) Title 29 U.S.C. § 1132(g)(1) (1988 & Supp. II 1990) provides that in an ERISA action brought under subchapter I (other than an action described in § 1132(g)(2)) "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." In deciding whether to award attorney's fees or costs the court must consider the following factors: "'(1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) the relative merits of the parties' positions, and (5) whether the action conferred a common benefit on a group of pension plan participants.'" Mendez, 982 F.2d at 788 (quoting Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 971 (2d Cir. 1987)).
Applying this five-factor test to the present case, we conclude that defendants' request for the costs and disbursements of this action should be denied. As to the first factor, Connecticut General did act in bad faith by failing to timely commence this interpleader action. Moreover, the second factor is met because Connecticut General can afford to pay the costs and disbursements of this action. Further, we recognize that an award of costs against an insurance company that excessively delayed the commencement of an interpleader action may deter other companies from delaying in the future. However, we do not feel that these factors are dispositive in the present case because our award of prejudgment interest fully compensates the defendants for Connecticut General's delay and will discourage other insurance companies from excessively delaying the commencement of interpleader actions.
Moreover, factor five has not been met here because this action does not confer a common benefit on a group of pension plan participants. Nor has factor four been met here because the relative merits of the parties' positions was unclear under Missouri law. Cf. Mendez, 982 F.2d at 787-89 (where the court awarded costs and disbursements because the insurance company delayed filing the interpleader action even though it was clear which of the two claimants was entitled to the proceeds). Because two factors of the five-factor test for awarding costs and disbursements have not been met in the present action, and because the award of prejudgment interest in this case fully compensates the defendants for the insurance company's delay and will sufficiently discourage other insurance companies from delaying the filing of interpleader actions in the future, defendants' request for the costs and disbursements of this action is denied.
LICONY's motion for summary judgment is granted and we declare that LICONY's payment of the entire proceeds of the accident insurance policy to defendant O'Reilly was proper. Defendant O'Reilly's motion for summary judgment on the same ground is also granted. Moreover, we direct Connecticut General to pay the proceeds of the basic and supplemental life insurance policies directly to defendants Eidel, Spots, and Ferguson. Further, we direct Connecticut General to pay the above-mentioned defendants insurance policy to defendant O'Reilly was proper. Defendant O'Reilly's motion for summary judgment on the same ground is also granted. Moreover, we direct Connecticut General to pay the proceeds of the basic and supplemental life insurance policies directly to defendants Eidel, Spots, and Ferguson. Further, we direct Connecticut General to pay the above-mentioned defendants prejudgment interest on the basic and supplemental life insurance proceeds, dating from January 28, 1990, at the interest rate provided by 28 U.S.C. § 1961(a). Upon such payment, Connecticut General shall be discharged of any liability under the basic and supplemental life insurance policies and defendants shall be permanently enjoined from instituting any action against Connecticut General for the recovery of the basic and supplemental life insurance proceeds. Eidel, Spots, and Fergusons' request for the costs and disbursements of this action is denied.
DATED: New York, New York
May 7, 1993
KENNETH CONBOY, U.S.D.J.