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Usaa Investment Management Co. v. Connell

United States District Court, N.D. New York

May 22, 2014

USAA INVESTMENT MANAGEMENT COMPANY, Plaintiff/Third-Party Defendant,
v.
JOHN CONNELL, Defendant/Third-Party Defendant,
v.
JANICE CONNELL, Defendant/Cross/Counter Claimant.

The Law Office of Steven D. Greenblatt, STEVEN D. GREENBLATT, ESQ., Saratoga Springs, NY, for the Plaintiff.

John Connell, Hiscock, Barclay Law Firm, JOHN M. NICHOLS, ESQ., Syracuse, NY.

Janice Connell, Ganz, Wolkenbreit Law Firm ROBERT E. GANZ, ESQ., Albany, NY, for the Defendants.

MEMORANDUM-DECISION AND ORDER

GARY L. SHARPE, Chief Judge.

I. Introduction

Plaintiff USAA Investment Management Company (USAA) commenced this statutory interpleader action pursuant to 28 U.S.C. §§ 1335 and 2361, naming defendant John Connell and defendant and cross/counter claimant Janice Connell as adverse claimants. (Compl., Dkt. No. 1.) Pending are USAA and John's motions to dismiss the complaint, amended counterclaim, and crossclaim pursuant to Fed.R.Civ.P. 12(b)(1), (6) and 12(c). (Dkt. Nos. 22, 23.) For the reasons that follow, the motions are granted.

II. Background[1]

USAA, a Texas financial services company, and the purported stakeholder here, held assets from an Individualized Retirement Account (IRA), [2] which was previously owned by decedent Owen Connell-John's father and Janice's ex-husband. (Compl. ¶¶ 1, 2, 6, 7, 8.) While the primary beneficiary designated on the IRA is Janice, by letter dated May 5, 2013, John instructed USAA not to transfer the funds to Janice, because, according to John, Janice's rights to the IRA were revoked when Owen and Janice's divorce was finalized in 2002. ( Id. ¶¶ 8, 10.) On May 17, 2013, USAA received a letter from Janice's attorney, asserting that Janice was entitled to the funds. ( Id. ¶ 11; Dkt. No. 24, Attach. 1 at 16.) As a result, USAA believed that it may be subject to adverse claims for the same IRA from both John and Janice. (Compl. ¶ 12.)

On August 2, 2013, under the belief that it had not yet disbursed the funds, USAA filed its complaint in interpleader, seeking to deposit the disputed funds with the face value of the IRA into the court's registry, or to provide a bond made payable to the Clerk of the Court, and, in turn, be granted an order restraining defendants from instituting further proceedings against USAA. ( Id. at 4.) In the alternative, USAA sought a declaration as to which defendant is entitled to the funds, or a declaration that neither defendant is entitled to the funds. ( Id. ) John filed an answer, (Dkt. No. 9), and Janice filed an answer, (Dkt. No. 11), a crossclaim, and an amended counterclaim, (Dkt. No. 16), seeking a judgment declaring her to be the proper beneficiary and ordering USAA to pay her the disputed funds, ( id. ).

After initiating this action, USAA discovered that, prior to filing its complaint in interpleader, it paid the disputed funds to Jeremy Connell, another child of Owen Connell. ( Id. ¶¶ 16-19; Dkt. No. 22, Attach. 1 at 2; Dkt. No. 25 at 3 n.2.) USAA and John then filed motions to dismiss, primarily arguing that the court lacks subject matter jurisdiction. (Dkt. Nos. 22, 23.) Janice opposes both motions. (Dkt. No. 24.)

III. Standard of Review

The standards of review under Rules 12(b)(1) and 12(b)(6), which are "substantively identical, " Lerner v. Fleet Bank, N.A., 318 F.3d 113, 128 (2d Cir. 2003), are well settled and will not be repeated. For a full discussion of those standards, the parties are referred to the court's decisions in Unangst v. Evans Law Associates, P.C., 798 F.Supp.2d 409, 410 (N.D.N.Y. 2011), and Ellis v. Cohen & Slamowitz, LLP, 701 F.Supp.2d 215, 218 (N.D.N.Y. 2010), respectively.

IV. Discussion

Despite the peculiar procedural posture of this case-plaintiff and one defendant seeking dismissal, while another defendant fights to remain in federal court-the question presented is relatively simple: whether there is any basis for subject matter ...


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