Case of the Day: Hudson Insurance Co. v. Klamath Superior Motor Co.

The case of the day is Hudson Insurance Co. v. Klamath Superior Motor Co. (D. Or. 2019). Hudson brought an interpleader action to resolve competing claims to a $40,000 motor vehicle dealer bond that it held. One of the claimants was Zachary Taylor, on active duty abroad with the Air Force. After the action was filed, Hudson emailed Hudson’s lawyer and stated that he was owed $6,000 and that he was interested in pursuing the matter, but that he was overseas and that regular communication would be difficult. He eventually stopped responding to emails. He was never served with process. The court ordered Taylor to file his claim within 90 days or else face dismissal of the claim. The magistrate judge recommended that the claim be dismissed.

The district court judge declined to adopt the report and recommendation. While he noted that in some circumstances a court can adjudicate rights in rem in an interpleader action where it is impossible to obtain jurisdiction over a claimant, there had been no showing of impossibility here.

One point the judge didn’t address, and which I wonder about but don’t know the answer to, is whether Taylor’s status as a servicemember on active duty gives him protection from what would in effect be a default judgment. On the one hand, the relevant provision of the Servicemember Civil Relief Act, 50 U.S.C. § 3931, refers to a “defendant” who is on active duty, and a claimant is not a defendant. On the other hand, the statute has a broad remedial purpose.

The court ordered Hudson to serve process on Taylor or else to show cause why it could not.

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