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 further liability.
      • Decree that State Farm owed no duty to Clark because the insurance policy was void, and refund their $20k.
    • State Farm used the statutory interpleader rule based on 28 U.S.C. § 1335.
      • There was diversity between State Farm and a defendant, and the amount in controversy was over the $10k minimum.
  • 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.
    • However, the 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 defendants.
      • 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 of peace.”
          • “Bill of peace” is an old English term that basically means a class action lawsuit.