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Stuck Between Disputing Parties Who Want What You're Holding? Consider An Interpleader Action

What happens when your business is holding onto money or goods and two different people lay claim to it? If you surrender whatever it is to either person, you run the risk of having to defend yourself in a lawsuit. If you keep holding onto it, you'll probably eventually get sued by both as they try to force you to turn it over. To avoid ending up in the middle of a legal quagmire, the best thing to do is to file an interpleader action with the court. Here's what you should know about this somewhat curious legal process.

What does an interpleader action do?

By taking an interpleader action, you essentially step out of the middle of the situation. First, you have to acknowledge to the court that you have the disputed items or funds. Legally, you become the stakeholder and the money or property that's in dispute is called the res. The two people arguing over the res are called claimants.

You also have to disavow your potential rights to the object or funds if you don't want to be involved any further in the dispute. When an object or funds have no clear owner, your physical possession of them does confer the potential of ownership. In other words, if neither of the people who claim ownership can prove their claim, the res could be yours. However, if you choose to keep you claim to the item open, you have to involve yourself in the lawsuit as one of the claimants. If you don't, you get to neatly sidestep the whole mess.

When do interpleader actions commonly occur?

Interpleader actions occur in all sorts of industries for a variety of reasons:

  • a mechanic repairs a car but two different drivers, perhaps a married couple, each claims to be the rightful owner of the car
  • a storage company has objects in its possession worth a great deal of money and the original owner dies -- and two people claim to be the new owners
  • a web designer is paid to design a website for a small company and the two owners have a falling-out and each demand exclusive control of the site
  • someone dies leaving behind an insurance policy in which the originally named beneficiary is already deceased and two other relatives step forward to claim that they are subsequent heirs

Once you get the court's permission for an interpleader action, you typically have no further involvement in the suit between the two claimants -- and no more liability. You should be allowed, however, to claim your attorney fees and filing costs out of the res or from the claimants. Because interpleader actions are complicated by a number of procedural rules, make sure to consult an attorney, such as those at http://wfactorlaw.com, before trying to proceed with this action.