An interpleader is a way for a party who holds property (a stakeholder) to initiate a suit between all claimants, who are parties claiming a right to that property. An interpleader allows the stakeholder to bring all claimants into the same action, instead of litigating against claimants in separate actions. By bringing an interpleader action, a stakeholder can have claimants litigate among themselves, determine which claimants have a rightful claim to the property, and avoid multiple liability.
For example, A holds one million dollars. B and C each claim to be the sole owner of the money that A possesses. Without an interpleader, A could be sued by B and C in two separate actions, potentially losing both actions, and incurring double liability to a total of two million dollars (one million to B and one million to C). An interpleader brings B and C into the same action where B and C would litigate who the rightful sole owner of the money is, and A would only have to face either B or C.
In federal actions, interpleader actions are governed by either Rule 22 of the Federal Rules of Civil Procedure or 28 U.S. Code §1335, depending on the amount in controversy and the diversity of citizenship among the parties and claimants. State procedure rules and laws govern interpleader actions for state actions.
[Last updated in April of 2023 by the Wex Definitions Team]