Legal Definitions - interplead

To interplead is a legal action or process that occurs in two primary situations:

• When an individual or entity, who believes they have a legitimate claim to property or an issue already being disputed in a court case, formally asserts their own interest within that existing lawsuit.
• When a neutral party, known as a "stakeholder," holds property or funds that are subject to competing claims from two or more other parties. In this scenario, the stakeholder initiates a legal action (an "interpleader action") to ask the court to decide who the rightful owner is. This allows the stakeholder to deposit the disputed property with the court and be relieved of responsibility, preventing them from being sued by multiple claimants.

Here are some examples to illustrate how "interplead" works:

• Example 1 (Stakeholder Scenario - Insurance Company):

  Imagine a life insurance policy where the deceased policyholder had named their spouse as the primary beneficiary. However, after the policyholder's death, their adult child from a previous marriage presents a document claiming they were intended to be the sole beneficiary. The insurance company, as the neutral party holding the policy payout, faces conflicting claims. To avoid the risk of paying the wrong person and being sued by the other claimant, the insurance company would interplead the funds. They would deposit the insurance payout with the court and ask the court to decide which party is the rightful beneficiary according to the law.

• Example 2 (Claimant Scenario - Disputed Inheritance):

  A family is involved in a probate case concerning their deceased parent's estate. The will specifies that a valuable antique watch should go to one sibling. However, a cousin steps forward, claiming that the watch was a personal gift to them from the deceased years ago and was merely being stored at the parent's home. The cousin would interplead their claim into the ongoing probate case, asserting their ownership interest in the watch that is already part of the estate's assets being adjudicated by the court.

• Example 3 (Stakeholder Scenario - Bank with Disputed Account):

  A bank holds a joint savings account for two business partners. After a serious dispute, one partner sends a letter to the bank demanding that all funds be frozen and transferred solely to their name, alleging the other partner committed fraud. Simultaneously, the second partner instructs the bank to release half of the funds to them, citing their equal ownership. Faced with these contradictory demands and potential liability to both parties, the bank would interplead the funds. They would deposit the money into the court's registry and ask the court to determine the rightful distribution, thereby protecting the bank from legal action by either partner.