What is Interpleader?

Legal Definition
Interpleader is civil procedure that allows a plaintiff to initiate a lawsuit in order to compel two or more other parties to litigate a dispute. An interpleader action originates when the plaintiff holds property on behalf of another, but does not know to whom the property should be transferred. It is often used to resolve disputes arising under insurance contracts.
-- Wikipedia
Legal Definition
A way for a holder of property to initiate a suit between two or more claimants to the property. If, for example, A holds property that he knows he does not own, but that both B and C are claiming, A can sue both B and C in an interpleader action, where B and C could litigate who actually owns the property. Interpleader avoids the problem of A being sued separately by both B and C, and potentially losing the same piece of property twice.
Legal Definition
Practice. Interpleaders may be had at law and in equity.

2. An interpleader at law a proceeding in the action of detinue, by which the defendant states the fact that the thing sued for is in his hands, and that it is claimed by a third person, and that whether such person or the plaintiff is entitled to it, is unknown to the defendant, and thereupon the defendant prays, that a process of garnishment may be issued to compel such third person, so claiming, to become defendant in his stead. 3 Reeves, Hist. of the Eng. Law, ch. 23; Mitford, Eq. Pl. by Jeremy, 141; Story, Eq. Jur. 800, 801, 802. Interpleader is allowed to avoid inconvenience; for two parties claiming adversely to each other, cannot be entitled to the same thing. Bro. Abr. Interpleader, 4. Hence the rule which requires the defendant to allege that different parties demand the same thing. Id. pl. 22.

3. If two persons sue the same person in detinue for the thing, and both action; are depending in the same court at the same time, the defendant may plead that fact, produce the thing (e. g. a deed or charter in court, and aver his readiness to deliver it to either as the court shall adjudge; and thereupon pray that they may interplead. In such a case it has been settled that the plaintiff whose writ bears the earliest teste has the right to begin the interpleading, and the other will be compelled to answer. Bro. Abr. Interpl. 2.

4. In equity, interpleaders are common. Vide Bill of Interpleader, and 8 Vin. Ab. 419; Doct. Pl. 247; 3 Bl. Com. 448; Com. Dig. Chancery, 3 T; 2 Story, Eq. Jur. 800.
-- Bouviers Law Dictionary
Legal Definition
When two or more persons claim the same thing (or fund) of a third, and he, laying no claim to it himself, is ignorant which of them has a right to it, and fears he may be prejudiced by their proceeding against him to recover it, he may file a bill in equity against them, the object of which Is to make them litigate their title between themselves, instead of litigating it with him, and such a bili is called a "bill of interpleader." Brown. By the statute 1 & 2 Wm. IV. c. 58, summary proceedings at law were provided for the same purpose, In actions of assumpsit, debt, detinue, and trover. And the same remedy is known, in one form or the other, in most or all of the United States. Under the Pennsylvania practice, when goods levied upon by the sheriff are claimed by a third party, the sheriff takes a rule of interpleader on the parties, upon Which, when made absolute, a feigned issue is framed, and the title to the goods is tested. The goods, pending the proceedings, remain in the custody of the defendant upon the execution of a forthcoming bond. Bou-vier.
-- Black's Law Dictionary
Legal Definition
Wherein the plaintiff says, “I have a fund in my possession in which I claim no personal interest and to which you, the defendants, set up conflicting claims; pay me my costs and I will bring the fund into court and you shall contest it between yourselves.” See 35 Am. Dec. 701, note.
-- Ballentine's Law Dictionary