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Simmons Perrine Moyer Bergman Plc and Gordon F. Johnson v. Charles Joseph Coleman

April 15, 2013

SIMMONS PERRINE MOYER BERGMAN PLC AND GORDON F. JOHNSON, PLAINTIFFS,
v.
CHARLES JOSEPH COLEMAN, JR. ET AL., DEFENDANTS.



ORDER

TABLE OF CONTENTS

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 II. RELEVANT FACTUAL AND PROCEDURAL HISTORY . . . . . . . . . . . . 2 A. Sharon Coleman's Motion for Partial Summary Judgment . . . . . . . 3 B. State Farm's Motion for Summary Judgment . . . . . . . . . . . . . . . . 4 C. United States' Motion for Summary Judgment . . . . . . . . . . . . . . . . 4 D. Report and Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 III. SUBJECT MATTER JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . 5 IV. STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 V. SUMMARY JUDGMENT STANDARD . . . . . . . . . . . . . . . . . . . . . . . . . 6 VI. ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 A. Colemans' Objection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1. Colemans' and the United States' arguments . . . . . . . . . . . . 8 2. Applicable law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 B. United States' Objection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1. United States' arguments . . . . . . . . . . . . . . . . . . . . . . . . 14 2. Applicable law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 C. Iowa Department of Revenue's Objection . . . . . . . . . . . . . . . . . . 18 D. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

I. INTRODUCTION

The matters before the court are Defendants Charles Joseph Coleman, Jr. ("Joe Coleman") and Sharon A. Coleman's ("Sharon Coleman") (collectively, "Colemans") Objection (docket no. 60), Defendant United States of America's Objection (docket no. 61) and Defendant Iowa Department of Revenue's Objection (docket no. 63) to United States Magistrate Judge Jon S. Scoles's Report and Recommendation (docket no. 59), which recommends that the court deny Sharon Coleman's "Motion for Partial Summary Judgment" (docket no. 35), grant Defendant State Farm Mutual Insurance Company's ("State Farm") "Motion for Summary Judgment" (docket no. 36) and grant in part and deny in part the United States' "Motion for Summary Judgment" (docket no. 37).

II. RELEVANT FACTUAL AND PROCEDURAL HISTORY*fn1

On November 22, 2005, Joe Coleman was in a motor vehicle accident. The Colemans retained Simmons Perrine Moyer Bergman PLC ("SPMB") and Gordon F. Johnson to initiate a lawsuit seeking recovery for Joe Coleman's injuries and Sharon Coleman's loss of consortium. The Colemans ultimately settled with the tortfeasors for $1,900,000.00. Of this amount, $633,333.33 was designated as attorneys' fees and $73,161.93 was designated as out-of-pocket expenses. Thus, after deducting attorneys' fees and out-of-pocket expenses, the net proceeds of the settlement totaled $1,193,505.74.

State Farm, the United States and the Iowa Department of Revenue each claim an entitlement to some or all of the net proceeds of the settlement. State Farm claims that it is entitled to $69,095.69, which represents reimbursement for medical costs State Farm paid pursuant to its insurance policy with Joe Coleman. The United States claims that it is entitled to the total net proceeds of the settlement to satisfy unpaid federal taxes, which, as of January 7, 2013, totaled $1,538,540.48. Finally, the Iowa Department of Revenue claims that it is entitled to a portion of the settlement proceeds to satisfy unpaid state taxes, which, as of February 11, 2013, totaled $453,313.57. The Iowa Department of Revenue, however, acknowledges that State Farm and the United States' claims have priority.

On December 6, 2011, SPMB filed a two-count Complaint. Count I of the Complaint is for interpleader, in which SPMB asks the court to determine the respective rights of the Colemans, State Farm, the United States and the Iowa Department of Revenue to the net proceeds of the settlement and to discharge SPMB from further liability regarding those funds. On about February 21, 2012, SPMB deposited $1,243,377.87-the funds at issue in Count I-with the Clerk of Court. Count II of the Complaint, which is not at issue in the instant Order, seeks a declaratory judgment regarding SPMB's right to $233,333.33, which is a portion of the original $633,333.33 designated as attorneys' fees and which SPMB continues to hold in its trust account.

A. Sharon Coleman's Motion for Partial Summary Judgment

On January 18, 2013, Sharon Coleman filed her Motion for Partial Summary Judgment alleging that forty to fifty percent of the settlement proceeds belong to her because such portion is traceable to her loss of consortium claim. Sharon Coleman further alleges that her portion of the settlement proceeds is not subject to the United States' and the Iowa Department of Revenue's tax liens because she was an "innocent spouse" during the relevant time period. Sharon Coleman's Motion for Partial Summary Judgment at 1-2. On February 11, 2013, the United States filed a Resistance (docket no. 42) to Sharon Coleman's Motion for Partial Summary Judgment. On that same date, the Iowa Department of Revenue filed a Resistance (docket no. 45) to Sharon Coleman's Motion for Partial Summary Judgment. On February 18, 2013, Sharon Coleman filed a Reply (docket no. 50) to the Iowa Department of Revenue's Resistance to Sharon Coleman's Motion for Partial Summary Judgment. That same date, Sharon Coleman filed a Reply (docket no. 51) to the United States' Resistance to Sharon Coleman's Motion for Partial Summary Judgment.

B. State Farm's Motion for Summary Judgment

On January 18, 2013, State Farm filed its Motion for Summary Judgment seeking "the immediate release to State Farm of $69,095.69 of the total amount on deposit with the [c]court in satisfaction of [State Farm's] contractual subrogation interests." State Farm's Motion for Summary Judgment at 3. On February 11, 2013, the United States filed a Resistance (docket no. 43) to State Farm's Motion for Summary Judgment. On that same date, the Colemans filed a Response (docket no. 44) indicating that they do not resist State Farm's Motion for Summary Judgment. On February 18, 2013, State Farm filed a Reply (docket no. 49) to the United States' Resistance to State Farm's Motion for Summary Judgment.

C. United States' Motion for Summary Judgment

On January 18, 2013, the United States filed its Motion for Summary Judgment, requesting that the court "grant summary judgment in favor of the United States, reduce the federal tax assessments to judgment and enter an order directing the distribution of the interpled funds currently being held by the Clerk of Court to the United States Treasury to apply to [Joe Coleman] and Sharon Coleman's unpaid federal tax liabilities." United States' Motion for Summary Judgment at 1. On February 6, 2013, State Farm filed a Resistance (docket no. 39) to the United States' Motion for Summary Judgment. On February 11, 2013, the Colemans filed a Resistance (docket no. 41) to the United States' Motion for Summary Judgment.

D. Report and Recommendation

On March 6, 2013, the undersigned referred Sharon Coleman's Motion for Partial Summary Judgment, State Farm's Motion for Summary Judgment and the United States' Motion for Summary Judgment to Judge Scoles for a report and recommendation. See March 6, 2013 Order (docket no. 54). On March 13, 2013, Judge Scoles heard oral arguments on the motions. See Minute Entry (docket no. 58). On March 14, 2013, Judge Scoles issued the Report and Recommendation.

On March 28, 2013, the Colemans, the United States and the Iowa Department of Revenue filed their objections to the Report and Recommendation. On April 4, 2013, the United States filed a Response (docket no. 67) to the Colemans' Objection.*fn2

The court finds that the matter is fully submitted and ready for decision.

III. SUBJECT MATTER JURISDICTION

The court has subject matter jurisdiction over Count I, the interpleader action, pursuant to 28 U.S.C. § 1335(a), which provides that a district court has original jurisdiction of any civil action of interpleader where: (1) the money or property at issue is valued at $500 or more; (2) two or more of the adverse claimants are of diverse citizenship; and (3) the plaintiff deposits the money or property into the registry of the court. 28 U.S.C. § 1335(a); see also State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530 (1967) (discussing the minimal diversity requirement under 28 U.S.C. § 1335(a)). In this case, all three requirements are satisfied. SPMB had in its custody $1,243,377.87, which it deposited with the Clerk of Court. Minimal diversity exists because the Colemans are citizens of the State of Iowa and State Farm is a citizen of the State of Illinois. Accordingly, the court has subject matter jurisdiction over Count I pursuant to 28 U.S.C. § 1335(a). The court reserves ruling on whether it has subject matter jurisdiction over Count II, which is not at issue in the instant Order.

IV. STANDARD OF REVIEW

The standard of review to be applied by the district court to a report and recommendation of a magistrate ...


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