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Sportsman's Guide, Inc. v. Havana National Bank

December 7, 2009

THE SPORTSMAN'S GUIDE, INC., PLAINTIFF,
v.
HAVANA NATIONAL BANK, SCHMEILSKI OUTDOORS, INC., ALL ABOUT GAME, INC., AND ADVANCED GAME TECHNOLOGY GLOBAL, INC., DEFENDANTS.



The opinion of the court was delivered by: Joe Billy McDADE United States District Judge

OPINION & ORDER

This matter is before the Court on Plaintiff's Second Motion for Order to Deposit Disputed Funds and for Other Declaratory Relief. (Doc. 20). Defendants Schmeilski Outdoors, Inc. ("Schmeilski") and Havana National Bank ("Havana") have consented to this Motion. (Docs. 21 & 22). Defendants All About Game, Inc. ("AAG") and Advanced Game Technology Global, Inc. ("AGT") were both served on May 7, 2009 (Docs. 5 & 6); they have not responded to the Motion, nor have they appeared in this action. For the reasons stated below, Plaintiff's Second Motion is granted.

BACKGROUND

On April 33, 2009, Plaintiff, The Sportsman's Guide, Inc. ("Sportsman's"), filed a Complaint for Interpleader under Federal Rule of Civil Procedure 22.*fn1 (Doc. 1). Sportsman's alleged that it had purchased products from Schmeilski on which Havana claimed a perfected security interest. Sportsman's acknowledged that it owed payment for the products, but was reluctant to pay Schmeilski because of Havana's claimed security interest. It filed this interpleader action in order to prevent multiple litigation and double payment liability. (Doc. 1 at 2-4). After Schmeilski and Havana had answered the Complaint, Sportsman's moved for this Court to order it to deposit the disputed funds and to take the necessary steps to release and protect it from further liability; its motion included a different calculation of the disputed funds from that of the Complaint.*fn2 (Doc. 15). Schmeilski opposed the motion, not because it contested Sportsman's right to deposit the funds and be released from liability, but because it contested the new calculation of the disputed funds by Sportsman's. (Doc. 16). Havana, because of Schmeilski's dispute with Sportsman's, also opposed the motion. (Doc. 17). On October 9, 2009, this Court ordered Sportsman's to amend its Complaint, and to submit a new Motion for Order to Deposit Funds, in order to clarify and give support to its calculation of the disputed funds. Sportsman's submitted an Amended Complaint and a Second Motion for Order to Deposit Funds on November 9, 2009. (Docs. 19 at 20).

In its Amended Complaint, Sportsman's alleges that in February 2009, it ordered hunting products from Schmeilski. These products were shipped directly to Sportsman's by the Chinese manufacturer, Zhejiang Zhongyu Leisure Products ("ZZLP"), from which Schmeilski had ordered them, and were delivered near the end of March 2009. In late March 2009, Sportsman's received notice from Havana informing it that Havana claimed a security interest in the inventory of AAG and AGT. In April, Sportsman's was again notified that Havana claimed a security interest in the some of the products.*fn3 Havana's claimed interest was in products that had allegedly been previously ordered by AAG and AGT, which were labeled with the letters "AGT" or "DOA."

As noted above, Sportsman's acknowledges that it owes payment for the "AGT" and "DOA" products it received to one or more of the Defendants. It filed this interpleader action in order to prevent multiple litigation and double liability.

Sportsman's asks the Court to enjoin the defendants from bringing any actions against Sportsman's for recovery of the disputed funds, the products in question, or the proceeds from the sale of those products; discharge Sportsman's from any further liability on any claim that has or may in the future be made concerning the products or the disputed funds; determine the portion of the disputed funds to which the Defendants are entitled; and award Sportsman's its costs and attorney's fees in this action.

DISCUSSION

In its Second Motion for Order to Deposit Disputed Funds and for Other Declaratory Relief, Sportsman's asks the Court to direct it to deposit $173,084 with the Clerk of the Court. (Doc. 20). As directed by the Court, Sportsman's has clarified its calculation of the disputed funds, and has supported this calculation with documentary evidence and a detailed affidavit. (Doc. 20, Exs. A-C). Sportsman's explains that Schmeilski originally believed that the delivery received by Sportsman's in March 2009 contained "AGT" and "DOA" products worth $199,104.*fn4 However, when Sportsman's conducted an inventory of the packages, it found that they contained only $173,084 worth of "AGT" and "DOA" products.*fn5

Sportsman's represents in its Motion that Schmeilski agrees with its current calculation of the amount of the disputed funds. In its Second Motion for Order to Deposit Disputed Funds, Sportsman's requests that the Court direct it to deposit the disputed funds with the Clerk of the Court; enjoin the Defendants from pursuing claims against Sportsman's arising from the products and funds at issue here; and after Sportsman's deposits the funds and receives an award of attorney's fees and costs, release it from any and all liability arising out of the products and funds at issue here, and dismiss it from this action with prejudice.

Schmeilski submitted a Motion to Adopt and Join Plaintiff's Second Motion for Order to Deposit Disputed Funds on November 11, 2009. (Doc. 21). In its Motion to Adopt and Join, Schmeilski states that, after reviewing the contents and exhibits of the Second Motion by Sportsman's, it believes that the "facts and allegations contained therein are proper and supported by sufficient facts and evidence," and "adopts and joins in" the Second Motion. (Doc. 21 at 1-2). Schmeilski asks the Court to direct Sportsman's to deposit the sum of $173,084 with the Clerk of the Court so that the matter can proceed to litigation as to the distribution of the funds. Havana likewise filed a response to Sportsman's Second Motion, consenting to it, and to the deposit of $173,084 with the Clerk. (Doc. 22). Havana does reserve its right to contest any attorney's fees motion by Sportsman's. As noted above, Defendants AAG and AGT have not responded to the Motion, and have not appeared in this action. Therefore, it will be presumed that they do not oppose the Second Motion by Sportsman's. Local Rule 7.1(B)(2) ("If no response is timely filed, the presiding judge will presume there is no opposition to the motion.").

The purpose of an interpleader action is to protect a plaintiff from incurring expenses associated with double litigation, and to protect it from the risk of double liability. Union Cent. Life Ins. Co. v. Hamilton Steel Prods., Inc., 448 F .2d 501, 504 (7th Cir.1971) (citing Metro. Life Ins. Co. v. Segaritis, 20 F. Supp. 739, 741 (E.D. Pa.1937)). Therefore, an interpleader action is appropriate when a plaintiff possesses a "real and reasonable fear of double liability on conflicting claims." Aaron v. Mahl, 550 F.3d 659, 663 (7th Cir. 2008).

Here, Sportsman's asserts that there is a potential for double liability, and Havana agrees. (Doc. 12 at 2). Schmeilski denies that Sportsman's would be subject to double liability if it pays Schmeilski, as Schmeilski asserts that Havana has no valid claim, though Schmeilski does not dispute that Rule 22 interpleader is appropriate in this case. (Doc. 14 at 2-3). The Court finds that Sportsman's fear of double liability and multiple litigation is real and reasonable. Schmeilski and Havana assert substantial, mutually exclusive claims to payment for the "AGT" and "DOA" products; Sportsman's cannot pay one of them without risking litigation from and liability to the other.

In interpleader actions under Rule 22, the holder of the fund may "put the money.in dispute into court, withdraw from the proceeding, and leave the claimants to litigate between themselves the ownership of the fund in court." Commercial Nat. Bank of Chicago v. Demos, 18 F.3d 485, 487 (7th Cir. 1994) (quoting Commercial Union Ins. Co. v. United States, 999 F.2d 581, 583 (D.C. Cir.1993). Federal Rule of Civil Procedure 67 provides that where a part of the relief sought is the "disposition of a sum of money., a party -- on notice to every other party and by leave of court -- may deposit with the court all or part of the money." As the parties now agree that $173,084 is the proper ...


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