United States District Court, W.D. Arkansas, Fayetteville Division
OPINION AND ORDER
TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE.
before the Court are a Motion for Leave to File Original
Counterclaim (Doc. 60) and a Motion for Modification of Order
to Distribute Interpleader Funds (Doc. 61), both filed by
Defendant Larry Walther in his Official Capacity as Director
of the Arkansas Department of Finance and Administration
("the DFA"). Also before the Court is a Joint
Motion for Dismissal of United States' Amended
Counterclaim (Doc. 64) filed by Plaintiff Arvest Bank
("Arvest") and Defendant United States. For the
reasons given below, all three Motions are
filed this case as an interpleader action in the Circuit
Court of Washington County, Arkansas, on October 11, 2017.
See Doc. 3. The United States removed the case to
this Court the following month. See Doc. 1. As this
Court previously explained:
Arvest is the Trustee of the John C. Guilds, Jr. Revocable
Trust, u/t/a August 24, 2012 ("the Trust").
See Doc. 3, ¶ 2. John C. Guilds, Jr. passed
away in March 2014. See Id. at ¶ 8. When this
action was filed three and a half years later, he still had
outstanding tax liabilities to both the Internal Revenue
Service ("IRS") and the Arkansas Department of
Finance and Administration ("DFA"). See
Id. at ¶ 9. At that time, the Trust owned a trust
account at Arvest with a balance of $114, 421.50, see
Id. at ¶ 2, which was subject not only to Mr.
Guild's outstanding tax liabilities but also to the
interest of the Estate of Gertrud B. Pickar ("the Pickar
Estate"), as successor in interest to Gertrud B. Pickar,
see Id. at ¶ 13. Arvest filed this action
because it could not determine without hazard to itself which
portion, if any, of the Trust's balance should be
allocated to each of the Defendants. See Id. at
(Doc. 49, pp. 1-2).
United States filed cross-claims against the DFA and the
Pickar Estate, and a counterclaim against Arvest, alleging
that Arvest was indebted to the United States in the amount
of $214, 250.76, plus interest, on account of its failure to
pay Mr. Guild's outstanding federal income tax
liabilities from the Trust. See Doc. 14,
¶¶ 19-21. None of the other defendants filed any
counterclaims against Arvest. All three defendants eventually
reached an agreement as to how the interpleaded funds should
be distributed between them, and moved this Court to so
distribute the monies. See Doc. 34. Arvest opposed
that motion, arguing that it was entitled to some portion of
the interpleaded funds to cover its administrative expenses.
See Docs. 37, 42. On October 24, 2018, this Court
held a hearing on the motion, and ultimately granted the
motion on that same day. See Doc. 49.
that October 24 hearing, the Court filed an Amended Case
Management Order, setting a deadline of November 8, 2018 for
the parties to seek leave to amend pleadings. See
Doc. 52, § 3. The United States filed an amended
counterclaim against Arvest on October 30. See Doc.
50. Then on November 7, the DFA filed a Motion for Leave to
File Original Counterclaim, seeking leave to file a
counterclaim against Arvest to enforce its own tax lien,
similar to the counterclaims that the United States had
previously filed. See Doc. 60. On that same day, the
DFA filed a Motion for Modification of Order to Distribute
Interpleader Funds, seeking modification "only to the
extent that the Order terminates DFA from this case."
See Doc. 61, ¶ 1 (emphasis removed). Both of
these motions were timely filed under the Amended Case
Management Order, and no party ever filed any response in
opposition to them; accordingly, both of these Motions will
be GRANTED. See Local Rule 7.2(f). The DFA may file
its original counterclaim by no later than the close of
business on January 14, 2019.
December 12, 2018, Arvest and the United States jointly moved
for the United States' Amended Counterclaim to be
dismissed, on the grounds that they had settled the matter.
Accordingly, that request will be GRANTED.
Court's review of the DFA's proposed counterclaim,
see Doc. 60-1, leaves the Court unsure of whether it
may, or should, continue to exercise jurisdiction over this
case in light of the foregoing rulings. This Court's
jurisdiction was initially predicated on the United
States' status as a party. See Doc. 1, ¶ 4
(citing 28 U.S.C. §§ 1442(a)(1), 1444, 2410(a)(5)).
But in light of the United States' dismissal from this
action, that basis for federal jurisdiction no longer exists.
Accordingly, if the DFA files its proposed counterclaim, then
the Court will require Arvest and the DFA each to brief the
issue of whether this Court should remand the matter to state
court, or continue to exercise jurisdiction over this case
under 28 U.S.C. § 1367 (or on any other basis). The
parties will be required to file those briefs by no later
than the close of business on January 18, 2019.
THEREFORE ORDERED that Defendant Larry Walther's Motion
for Leave to File Original Counterclaim (Doc. 60) and Motion
for Modification of Order to Distribute Interpleader Funds
(Doc. 61), and Plaintiff Arvest Bank's and Defendant
United States' Joint Motion for Dismissal of United
States' Amended Counterclaim (Doc. 64) are all GRANTED.
Defendant United States' Amended Counterclaim (Doc. 50)
is DISMISSED WITH PREJUDICE.
FURTHER ORDERED that Defendant Larry Walther may file his
original counterclaim by no later than the close of
business on January 14, 2019. If no such counterclaim is
filed before the expiration of that deadline, then the Clerk
of the Court will be directed to close this case.
FURTHER ORDERED that if Defendant Larry Walther files his
original counterclaim before the expiration of his deadline
to do so, then by no later than the close of business on
January 18, 2019, he and Plaintiff Arvest Bank must each
state their respective positions on whether this Court ...