FRCP Rule 22 Interpleader Guide

What Interpleader Is and When to Use It

Interpleader is most commonly used by insurance companies, banks, escrow agents, trustees, and other entities that hold funds subject to competing claims. Classic situations include: a life insurance company receiving conflicting claims to a policy's death benefit from a spouse and an ex-spouse named in an old policy; an escrow agent holding a real estate deposit disputed by both buyer and seller after a deal falls apart; a bank holding accounts that are claimed by multiple creditors under competing garnishments.

The key feature of interpleader is that the stakeholder does not have to take a position on which claimant is right. The stakeholder just files the action, deposits or offers to deposit the contested funds with the court, and asks the court to determine rightful ownership. Once the court accepts the deposit and the interpleader proceeds, the stakeholder is typically discharged from liability and dismissed from the case, leaving the claimants to litigate against each other.

Interpleader is a defensive tool for the stakeholder. It converts multiple potential lawsuits — each claimant suing the stakeholder separately in different courts — into one proceeding where all claims are resolved together. This protects the stakeholder from paying out more than the total fund and from receiving inconsistent judgments in different courts.

Rule 22 Interpleader vs. Statutory Interpleader

There are two federal interpleader mechanisms: Rule 22 interpleader (under FRCP Rule 22) and statutory interpleader (under 28 U.S.C. § 1335). They have different jurisdictional requirements and practical implications, and choosing between them matters.

Rule 22 interpleader uses regular federal jurisdiction rules. The court must have subject matter jurisdiction either through diversity of citizenship (complete diversity between the stakeholder and all claimants, with the amount in controversy exceeding $75,000) or through federal question jurisdiction if the underlying dispute involves federal law. Personal jurisdiction over each claimant must be established through normal means under Rule 4.

Statutory interpleader under § 1335 has more favorable jurisdictional rules specifically designed for interpleader situations. Jurisdiction is proper if the amount at stake is $500 or more and two or more adverse claimants are citizens of different states — only minimal diversity is required, not complete diversity. Service of process is authorized nationwide, and the venue rules are more flexible. For most insurance and banking interpleader situations, statutory interpleader under § 1335 is the preferred vehicle because of these broader jurisdictional hooks.

Rule 22 interpleader is still useful when the amount involved is large, when federal question jurisdiction exists independently, or when all parties happen to satisfy the complete diversity requirements needed for regular diversity jurisdiction.

The Deposit Requirement

In both Rule 22 and statutory interpleader, the stakeholder is expected to deposit the disputed funds or property with the court or post a bond. The purpose is to ensure that the money is preserved and available for distribution to whoever the court determines is entitled to it. Courts may require deposit before they will issue an order restraining the claimants from pursuing separate suits.

Under statutory interpleader, the deposit requirement is more formal. Section 1335 requires the stakeholder to deposit the amount due or the thing in controversy or a bond with adequate surety into the registry of the district court before service of process can issue. The deposit is a condition precedent to the court granting interpleader relief.

One practical consideration: once funds are deposited, the court controls them. The stakeholder no longer has access to the funds until the interpleader is resolved. For insurance companies or financial institutions, this means the funds are locked up for the duration of the litigation. Factor in this timing when deciding whether interpleader is the right strategy.

How Interpleader Proceeds: The Two-Stage Process

Federal interpleader generally proceeds in two stages. In the first stage, the court determines whether the stakeholder is entitled to interpleader relief — whether there are indeed conflicting claims to the same fund and whether the stakeholder has a genuine concern about being exposed to multiple liability. If interpleader is proper, the court discharges the stakeholder and issues an injunction restraining the claimants from suing the stakeholder elsewhere.

In the second stage, the court adjudicates the merits between the competing claimants. The claimants litigate against each other to establish who has the superior right to the deposited funds. This second stage proceeds under normal litigation rules — pleadings, discovery, and trial or summary judgment.

After the first stage, the stakeholder's attorneys often withdraw from active participation, and the claimants' counsel takes over the litigation. The stakeholder's legal fees incurred in bringing the interpleader are sometimes paid from the interpleaded fund as costs of administration, especially when the interpleader was clearly necessary and appropriate.

Common Interpleader Mistakes

• ✗Choosing Rule 22 when statutory interpleader is better: For many insurance and banking disputes, 28 U.S.C. § 1335 provides easier access to federal court through minimal diversity and nationwide service. Defaulting to Rule 22 without comparing the two frameworks misses a better option.
• ✗Filing interpleader when the stakeholder has its own liability exposure: If the stakeholder is accused of wrongdoing that contributed to the dispute, a claimant can assert affirmative claims against the stakeholder even in interpleader. Interpleader does not automatically shield a stakeholder who has independent liability.
• ✗Forgetting the deposit requirement under § 1335: Failing to deposit the funds before seeking process under statutory interpleader can result in the interpleader being dismissed because the deposit is a jurisdictional condition precedent.
• ✗Waiting too long to bring interpleader: If you delay filing interpleader while one claimant obtains a judgment and starts collecting, the interpleader remedy becomes much harder. File early, before any claimant gains a significant procedural advantage.

Frequently Asked Questions About Interpleader