Business Partnership Disputes | What Is An Interpleader?
August 4, 2022
Business Partnership Disputes | What Is An Interpleader?
Interpleader. It may be a word you keep hearing if you’re currently in a partnership dispute. But what does it mean?
When an Asset Holder such as a bank, insurance company, escrow company, or business has stewardship of an asset that is owned by a business, and the business partners are fighting over who should get the asset, how does the Asset Holder determine who should get it?
In these situations, the Asset Holder can file an Interpleader action with the Court to determine what to do with the asset.
If you find yourself in this situation, here are some guidelines to consider during interpleader action.
1. What are the rules for Interpleader actions?
The Arizona Rules of Civil Procedure, Rule 22, shows when an Interpleader action is appropriate and its purpose. Specifically, the rule says:
Generally, interpleader is a procedure where one holds money or property and is subject to adverse claims.
2. Did the Asset Holder who filed an Interpleader action commit wrong before the Interpleader action?
One issue that often arises in an Interpleader is whether the Asset Holder is responsible for doing something wrong before filing the Interpleader action. When an Interpleader is filed, the Asset Holder will usually request to be released from any wrongdoing relating to the asset as allowed under Rule 22 B.
Rule 22 B: Release from Liability upon Deposit or Delivery. A party requesting Interpleader under Rule 22(a) may move the Court for an order discharging that party from liability to the claimants.
If the Asset Holder is partially to blame for the issues with the asset, then you do not want to allow them to be released from wrongdoing by the Court.
3. Can one of the business partners file an Interpleader on their own instead of waiting for the Asset Holder?
Rule 22 allows for any person involved in litigation to file an Interpleader action. Specifically, the rule says:
By a Plaintiff. A plaintiff may join as a defendant anyone who asserts or may assert a claim to the money or property.
By a Defendant. A defendant may seek Interpleader through a crossclaim or counterclaim.
4. Who gets the asset?
Two options can occur when an Interpleader action arises. First, the Court can require either the Asset Holder to deposit the asset at issue with the Court or the Asset Holder delivers the asset as the Court directs.
This means that the Court can either hold the assets in its possession or direct that the assets be delivered to one of the parties claiming ownership.
5. What to be aware of?
Interpleader actions are often part of a much bigger legal dispute between business partners. For example, one business partner may allege fraud, breach of fiduciary duty, embezzlement, or any number of claims against the other. In these events, you may have “mandatory claims” that must be raised at the Interpleader stage, or they are lost.
You may have also heard the expression that possession is 9/10ths of the law. While it is not quite that dramatic, when an individual gains possession of an asset from an Interpleader action, this can be a huge victory. Because of this, fighting over the deposit of funds in an Interpleader action is critical to the potential success of a matter.
Contact Counxel Legal Firm
We are here to simplify your legal experience. We understand that Interpleader actions are complicated. If you have an issue where an asset (including money) is subject to an Interpleader action, then give the Counxel Legal Firm team a call at 480-536-6122 or email us at intake@wordpress-457010-3165254.cloudwaysapps.com.
This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Using and accessing this article does not create an attorney-client relationship between you and Counxel Legal Firm.