Interpleader can a powerful tool to protect insurers and sureties from double or multiple liabilities. In December 2020, the Oregon Council on Court Procedures unanimously approved amendments to Oregon’s interpleader rule, ORCP 31. The amendments, which go into effect on January 1, 2021, significantly change the procedure for recovering attorney fees in interpleader actions.
I. The Current Rule
Interpleader is not as complicated as its name suggests. It is a procedure used to resolve conflicting claims to the same money or property, held by a third party. Interpleader allows the holder of the money or property to avoid “picking sides” between claimants. It can also be used to prevent the holder of the money or property from being subjected to multiple lawsuits at the same time.
The steps for using interpleader are spelled out in ORCP 31, and the procedure is available to both plaintiffs and defendants. For example, a surety facing competing claims to bond funds can file an interpleader lawsuit naming all the claimants against the bond as defendants. Similarly, if a claimant sues a surety for bond funds, the surety can join other claimants to the lawsuit using an interpleader.
An interpleader proceeds in two basic steps. First, the party filing the interpleader deposits the contested funds or property with the court, and the court discharges the party from liability. After the party filing the interpleader is dismissed, the claimants then litigate their entitlement to the money or property between themselves.
ORCP 31 C provides that a party filing the interpleader shall “shall be awarded a reasonable attorney fee” and court costs. An award of fees and costs is mandatory and is assessed against the money or property deposited with the court. Notably, ORCP 31 C expressly provides that sureties cannot recover their fees and costs for bringing an interpleader.
II. The Upcoming Amendments
After January 1, the recovery of fees will no longer be mandatory in an interpleader action. The amendments provide that the court “may” decide to award fees based on several factors, including the conduct of the party bringing the interpleader. The amendments will not affect the rights of sureties however—sureties will continue to bear their own fees and costs under the amended rule.
Admittedly, it is somewhat surprising the Council on Court Procedures chose to amend this rule. ORCP 31 is used far less often than the rules governing subpoenas, motions to strike, and court-appointed guardians, which were also amended. With that said, the amendments bring ORCP 31 more in line with interpleader practice in federal court, where the award of attorney fees is discretionary.
In light of the upcoming amendments to ORCP 31, insurers and sureties should consider whether Oregon is the best forum to file an interpleader. Since the federal court rules do not bar sureties from recovering attorney fees, it may be advantageous for sureties to file there instead of state court. Insurers and sureties may also benefit from the streamlined case management process in federal court, depending on the number of parties and amount in controversy.
While interpleader will continue to be a powerful tool for insurers and sureties, it will become somewhat less powerful on January 1.