United States District Court, C.D. Illinois
December 22, 2005.
STIFEL, NICOLAUS & CO., INC., Plaintiff,
ELIZABETH B. ALEXANDER and GARY HOUDEK, Defendants.
The opinion of the court was delivered by: HAROLD BAKER, District Judge
On June 27, 2005, the plaintiff, Stifel Nicolaus & Co.
("Stifel"), filed a complaint for interpleader against defendants
Elizabeth Alexander ("Mrs. Alexander") and Gary Houdek
("Houdek"). Stifel alleges that Houdek represented himself as
president of the Denton E. Alexander and Elizabeth B. Alexander
Foundation ("the Foundation"). Houdek then opened a Stifel
investment account on behalf of the Foundation and deposited into
the account several checks that had been made payable to the
Foundation. At Houdek's direction, Stifel invested some or all of
the proceeds in certain stocks.
In May 2005, an attorney for Mrs. Alexander informed Stifel
that (1) the account was funded with proceeds from the sale of
AlexGen, Ltd., a company owned by Mrs. Alexander and her late
husband ("Mr. Alexander"), (2) Houdek had no authority to
transfer these funds into the account, and (3) the Foundation for
which Houdek purported to act did not exist. The attorney
informed Stifel that the account might be subject to future
Stifel then contacted Houdek to ascertain his authority to act
on behalf of the Foundation, and in response it received a copy
of Mr. Alexander's will. The will directs the creation of a
charitable foundation from the remainder of the marital estate
upon the death of Mrs. Alexander. Shortly after it received a
copy of the will, Stifel received a request by Houdek to transfer
the account assets to another broker-dealer. The equity positions
in the account were liquidated and the funds frozen pending
resolution of this action.
Mrs. Alexander has filed an answer to the complaint. On June
30, 2005, Houdek signed a waiver of service of summons (see
docket entry #4), but he has not appeared in this case.*fn1 There are two motions pending. Mrs. Alexander has filed a
motion to join necessary parties [#8], and Stifel has filed a
motion for summary judgment [#10].
Mrs. Alexander seeks to join AlexGen, Ltd. ("AlexGen") and the
Alexander Foundation ("the Alexander Foundation"). She states she
cannot obtain complete relief if these two entities are not
joined in the litigation. Stifel does not oppose the motion (see
docket entry #12).
Federal Rule of Civil Procedure 19 "permit[s] joinder of all
materially interested parties to a single lawsuit so as to
protect interested parties and avoid waste of judicial
resources." Davis Companies v. Emerald Casino, Inc.,
268 F.3d 477, 481 (7th Cir. 2001) (quoting Moore v. Ashland Oil, Inc.,
901 F.2d 1445, 1447 (7th Cir. 1990)). Under Rule 19(a), the court
must determine "(1) whether complete relief can be accorded
without joinder, (2) whether [a party's] ability to protect [its]
interest will be impaired, and (3) whether the existing parties
will be subjected to a substantial risk of multiple or
inconsistent obligations unless [the new party] is joined." See
Davis, 268 F.3d at 481 (quoting Thomas v. United States,
189 F.3d 662, 667 (7th Cir. 1999)).
Mrs. Alexander states that the Foundation is a nonexistent
entity. She further states that Houdek transferred into the
Stifel account funds belonging to AlexGen. Mrs. Alexander adds
that the 100% shareholder of AlexGen is the Alexander Foundation,
an entirely different foundation than the one for which the
Stifel account was created. AlexGen and the Alexander Foundation
must be joined in this action, Mrs. Alexander argues, because
those entities have a direct and substantial interest in this
This court agrees with Mrs. Alexander that AlexGen and the
Alexander Foundation should be joined in this action. Without
their participation, complete relief cannot be accorded, the
named parties may be unable to protect their interest, and Stifel
and/or one or more of the defendants could be subjected to
multiple or inconsistent obligations. Therefore, the motion to
join necessary parties [#8] is granted.
Stifel has filed a motion for summary judgment. Stifel states
that it has deposited into the district court's account the sum
of $113,595.65, representing all funds in the disputed account;
therefore, Stifel seeks dismissal from this action. Stifel
further states that it is an innocent party in this proceeding
and as such it is entitled to an award of $2,500.00 in attorney
fees, citing Johnson v. Electrolux Corp. 763 F. Supp. 1181 (D.
Conn. 1991); Life Ins. Co. of North Am v. Neva,
667 F. Supp. 279 (M.D. La. 1987) and Beyers v. Sheets, 643 F. Supp. 695
(W.D. Mo. 1986).
It is true that "courts usually make such an award to a
disinterested stakeholder who concedes liability in full,
deposits the disputed funds with the court, and seeks discharge
from the litigation." 4 James Wm. Moore et al., Moore's Federal
Practice § 22.06 (3d ed.). However, such an award is within the
court's discretion. Moore's Federal Practice § 22.06. Mrs.
Alexander opposes the motion, arguing that Stifel is not an
innocent party because it opened the investment account without
proper documentation. She further suggests that the newly joined
parties may have claims against Stifel. Consequently, she argues,
the motion for summary judgment is premature.
The court agrees with Mrs. Alexander; Stifel's motion is
premature. The newly joined parties should have an opportunity to
weigh in on the issue. Therefore, the court denies the motion
with leave to refile the motion once the newly joined parties
have been served and entered an appearance in this case.
The motion to join necessary parties [#8] is granted. Mrs.
Alexander is ordered to provide Stifel with the address of the
newly joined parties within ten days of the date of this order.
Stifel shall thereafter promptly effect service of process on
AlexGen and the Alexander Foundation. The motion for summary
judgment [#10] is denied, with leave to refile once the newly
joined parties have been served and entered an appearance. A
status conference is scheduled for Thursday, January 19, 2006 at
9:45 a.m. by telephone conference call. The court will initiate
the call. The clerk is directed to send a copy of this order to
Gary Houdek, 7111 Williams Creek Drive, Indianapolis, IN 46240,
and Houdek is directed to contact the clerk of this court with a
telephone number at which he can be reached on January 19, 2006
at 9:45 a.m. Houdek's failure to provide the clerk with a
telephone number or appear for the hearing may result in an entry
of default against him.
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