Mountain Top Condominium Ass'n v. Dave Stabbert Master Builder, Inc. , 72 F.3d 361 ( 1995 )

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
12-18-1995
Mountain Top Condo. Assn. v. Dave Stabbert
Master Builder, Inc.
Precedential or Non-Precedential:
Docket 95-7031
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Recommended Citation
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 95-7031
___________
MOUNTAIN TOP CONDOMINIUM ASSOCIATION
vs.
DAVE STABBERT MASTER BUILDER, INC.; JOSEPH
HUFFMAN
WALTER SEIPEL; SUSAN SEIPEL,
Proposed Intervenors in D.C./Appellants.
___________
APPEAL FROM THE DISTRICT COURT
OF THE VIRGIN ISLANDS
(D.C. Civil No. 90-00215)
___________
ARGUED AUGUST 15, 1995
BEFORE: STAPLETON, LEWIS and WEIS, Circuit Judges.
(Filed December 18, 1995)
___________
Joseph B. Arellano (ARGUED)
Campbell, Arellano & Rick
4 A & B Kongens Gade
P. O. Box 11899
Charlotte Amalie, St. Thomas
USVI, 00801
1
Attorney for Appellants
Adam G. Christian (ARGUED)
Hodge & Francois
1340 Taarnederg Road
Charlotte Amalie, St. Thomas
USVI, 00802
Sandra N. Younger
Tom Bolt & Associates
Corporate Place
Royal Dane Mall
Charlotte Amalie, St. Thomas
USVI, 00802
Attorneys for Appellees
___________
OPINION OF THE COURT
___________
LEWIS, Circuit Judge.
In this appeal, Walter Seipel and Susan Seipel
("appellants") seek the reversal of a district court order
denying their motion to intervene in a proceeding pending in that
court. The district court held that while the appellants' motion
may be timely, "[t]he plain fact is that they have no interest at
stake in the litigation, and no standing to become involved in
it." Mountain Top Condominium Association v. Stabbert, et. al.,
No. 1990/215, slip op. at 4 (D. V.I. Dec. 9, 1994). Appellants
argue that as a matter of law, their interest in the litigation
is sufficient to support intervention as a matter of right under
Fed. R. Civ. P. 24(a)(2). We agree, and will reverse the
district court's denial of appellants' motion to intervene.
2
I.
A.
The Seipels allege the following facts in their motion
to intervene and their proposed "Complaint in Intervention."
These facts are not disputed in the present record and appear to
have been accepted by the district court in ruling on the motion
to intervene.
On September 17, 1989, Hurricane Hugo struck the Virgin
Islands and wreaked tremendous destruction. Included in this
natural disaster was the damage and destruction of several
buildings which comprised the Mountain Top Condominiums, located
on the island of St. Thomas. The Mountain Top Condominiums are
governed by the Mountain Top Condominium Association ("MTCA"),
which is comprised of all of the condominium owners in the
development. The owners had delegated certain powers and duties,
including the repair and restoration of the condominiums, to the
MTCA's Board of Directors (the "Board") pursuant to the MTCA's
bylaws and Virgin Islands law, Title 28 V.I.C. Chapter 33.
Pursuant to Article V, Sections 2 and 3 of the MTCA's
By-laws, the MTCA's Board was required to appoint an Insurance
Trustee to approve the adjustment of any loss, and to receive all
insurance proceeds for losses in excess of $50,000. There is no
dispute that the Board did not comply with these requirements.
Instead, the Board took it upon itself to approve the
insurance adjustment and to determine how the reconstruction and
repair proceeds were to be distributed. As a result, the Board
adjusted the hurricane loss and received $1,538,613 from its
3
insurance carrier. The Board then deposited this fund into a
separate account specifically designated for hurricane
reconstruction. Rather than apply all of the insurance proceeds
to repair the damage caused by Hurricane Hugo, however, the Board
decided to distribute some of the proceeds to the individual
condominium owners according to the size of the various
condominium units,0 minus fifteen percent (15%) for the Board's
supervision of the individual owners' reconstruction efforts.
Under this plan, a larger unit would receive more from the fund
than a smaller unit regardless of the damage sustained, and there
was no requirement that the money be used to benefit the
condominium units. The appellants allege that this in turn has
provided certain unit owners with a cash windfall. The Board
also included in the repair costs the reconstruction of five
"deck extensions" which were not covered by the MTCA's insurance
policy.0 Finally, in order to receive any money from the
hurricane restoration fund, the Board required unit owners to
sign general releases. Apparently, the appellants are the only
owners who refused to sign a release.
0
$20,593 were allotted to two small units. $21,482 were
allotted to 14 medium units, and $24,251 were allotted for three
large units. The Seipels' unit at issue in this case was
classified as a medium unit. The Seipels' second unit was
purchased after the distribution of $21,482 had been made to the
Seipels' predecessors in interest.
0
Three of the five units with "deck extensions" are owned by
members of the Board.
4
B.
As part of its reconstruction plan, the Board entered
into an agreement with David Stabbert Master Builder, Inc., for
construction work on the condominiums.0 The Board, however, was
dissatisfied with the quality of the work performed by Stabbert
and its subcontractors, and a dispute arose between the parties.
As a result of this dispute, Huffman and Stabbert filed
construction liens against the condominiums in the hope of
recovering payment for their work. The Board responded by filing
a complaint against Stabbert and Huffman, alleging fraudulent
misrepresentation, negligent misrepresentation, unfair trade
practices, slander of title, injunctive relief, breach of
contract, and damages. Huffman and Stabbert filed counterclaims
against the MTCA.
Later, Huffman and Stabbert agreed to release the
liens. In return, the Board deposited $250,000 of the insurance
proceeds in escrow in the registry of the district court. This
sum represented all that remained of the hurricane reconstruction
fund. In February, 1994, pursuant to the district court's order,
this dispute proceeded to mediation.
C.
Appellants own two condominiums that were heavily
damaged during Hurricane Hugo. They believed that the
distribution of funds for the reconstruction of their
condominiums was not being accomplished in good faith. Thus, on
0
Defendant, Joseph Huffman, was a subcontractor hired by
Stabbert to fix the plumbing in the condominiums.
5
March 20, 1992, they instituted a civil action against the MTCA
in the Territorial Court of the Virgin Islands. The basis of the
Seipels' complaint was that the MTCA violated the by-laws of the
Mountain Top Condominiums by, inter alia, failing to appoint an
Insurance Trustee to manage the distribution of the insurance
proceeds. This civil action is presently pending in the
Territorial Court.0
When it became apparent that any settlement between
MTCA, Stabbert and Huffman might deplete all of the remaining
funds allocated for repairing the damage caused by Hurricane
Hugo, the Seipels decided to intervene in the mediation process
between the MTCA, Stabbert and Huffman. On February 7, 1994, the
day the mediation was to occur, counsel for the Seipels sent a
written request to MTCA that he be allowed to attend the
mediation. When this request was denied, the Seipels filed a
motion to intervene pursuant to Rule 24 of the Federal Rules of
Civil Procedure, claiming that if the litigation between the MTCA
and its contractor is successfully mediated, the entire $250,000
escrow deposit may be lost.0 Both parties to the mediation
opposed the proposed intervention.
0
At oral argument both parties informed the court that the
Territorial Court had ordered the MTCA to appoint an Insurance
Trustee as required under the By-laws. As of this date, the MTCA
has failed to successfully appoint an Insurance Trustee.
0
Stabbert's and Huffman's claims amounted to more than the
remaining $250,000 held in escrow, and prior to the litigation,
the unit owners were informed that the board had depleted all
money allocated for operating expenses so the insurance proceeds
appeared to be the MTCA's only remaining funds.
6
The district court denied the Seipels' motion to
intervene. The court held that the appellants', "only
conceivable interest in this lawsuit lies in the fact that, if
plaintiff [the MTCA] is successful, plaintiff may be in a
somewhat better position to satisfy any judgment which the
Seipels may succeed in obtaining in Territorial Court, than would
be the case if plaintiff loses this lawsuit." Mountain Top, slip
op. at 5. This appeal followed.
II.
The District Court of the Virgin Islands had subject
matter jurisdiction over this case pursuant to 4 V.I.C. § 32,0
and Section 22 of the Revised Organic Act, 48 U.S.C. § 1611.0 We
While they contend that their damages are greater, at the
very least the Seipel's claim an interest in the $21,482
allocated to them under the Board's plan.
0
4 V.I.C. § 32 provides in pertinent part:
(a) Under section 22 of the Revised Organic Act,
approved July 22, 1954, the district court has the
original jurisdiction of a district court of the
United States in all causes arising under the
Constitution, treaties and laws of the United States,
regardless of the sum or value of the matter in
controversy, and has general original jurisdiction in
all other causes in the Virgin Islands, where
exclusive jurisdiction is not conferred upon the
territorial court, as the inferior court of the
Territory, by section 23 of the Revised Organic Act.
When it is in the interest of justice to do so the
district court may on motion of any party transfer to
the district court any action or proceeding brought
in the territorial court, and the district court
shall have jurisdiction to hear and determine such
action or proceeding.
0
48 U.S.C. § 1611 provides in pertinent part:
(a) . . . The judicial power of the Virgin
Islands shall be vested in a court of record
designated the "District Court of the Virgin Islands"
7
have jurisdiction over this appeal under 28 U.S.C. § 1291. In
reviewing a district court's decision denying intervention as a
matter of right, we will reverse a district court's determination
only if the court "has applied an improper legal standard or
reached a decision that we are confident is incorrect." Harris
v. Pernsley, 820 F.2d 592, 597 (3d Cir. 1987) (citations
omitted).
III.
We have stated that a non-party is permitted to
intervene under Fed. R. Civ. P. 24(a)(2) only if:
(1) the application for intervention is
timely; (2) the applicant has a sufficient
interest in the litigation; (3) the interest
may be affected or impaired, as a practical
matter by the disposition of the action; and
(4) the interest is not adequately
represented by an existing party in the
litigation.
Harris, 820 F.2d at 596. Each of these requirements must be met
to intervene as of right. Id. The district court denied
appellants' motion because it found that they did not have a
sufficient interest in the litigation, and thus had failed to
satisfy subsection (2) of section 24(a). Appellants argue that
established by Congress, and in such appellate court
and lower local courts as may have been or may
hereafter be established by local law.
(b) . . . The legislature of the Virgin Islands
may vest in the courts of the Virgin Islands
established by local law jurisdiction over all causes
in the Virgin Islands over which any court
established by the Constitution and laws of the
United States does not have exclusive
jurisdiction. . . .
8
because a specific fund is at issue, they have a sufficient
interest in the litigation pending in the district court.
While we will address each of Rule 24(a)'s
requirements, we first turn to whether the appellants have a
sufficient interest in the litigation.
A.
Rule 24(a)(2) requires the intervenor to
demonstrate "an interest relating to the property or transaction
which is the subject of the action . . ." Fed. R. Civ. P.
24(a)(2). While the precise nature of the interest required to
intervene as of right has eluded precise and authoritative
definition, Harris, 820 F.2d at 596; 3B Moore's Federal Practice,
¶ 24.07[2], at 24-57 (2d ed. 1982); 7C Wright, Miller & Kane,
Federal Practice & Procedure § 1908, at 263 (1986), some general
guidelines have emerged. According to the Supreme Court, an
intervenor's interest must be one that is "significantly
protectable." Donaldson v. United States, 400 U.S. 517, 531
(1971). In defining the contours of a "significantly
protectable" legal interest under Rule 24(a)(2), we have held
that, "'the interest must be a legal interest as distinguished
from interests of a general and indefinite character.' * * * The
applicant must demonstrate that there is a tangible threat to a
legally cognizable interest to have the right to intervene."
Harris, 820 F.2d at 601 (citations omitted). This interest is
recognized as one belonging to or being owned by the proposed
intervenor. United States v. Alcan Aluminum, Inc., 25 F.3d 1174,
1185 (3d Cir. 1994) (quoting New Orleans Public Service, Inc. v.
9
United Gas Pipe Line Co., 732 F.2d 452, 464 (5th Cir. 1984)). We
must therefore determine whether the proposed intervenors are
real parties in interest. Harris, 820 F.2d at 596-598.
In general, a mere economic interest in the outcome of
the litigation is insufficient to support a motion to intervene.
See, e.g., Alcan Aluminum, 25 F.3d at 1185 ("Some courts have
stated that a purely economic interest is insufficient to support
a motion to intervene."); New Orleans Public Service, Inc. v.
United Gas Pipe Line Co., 732 F.2d at 464 (in banc) ("It is plain
that something more than an economic interest is necessary.").
Thus, the mere fact that a lawsuit may impede a third party's
ability to recover in a separate suit ordinarily does not give
the third party a right to intervene. See Hawaii-Pacific Venture
Capital Corp. v. Rothbard, 564 F.2d 1343, 1346 (9th Cir. 1977).
If the appellants' only interest in the present case was to
ensure that the MTCA would have sufficient resources to satisfy
any judgment they may be able to obtain in the territorial court
action, the district court's reasoning and conclusion would be
sound. The district court's holding, however, does not recognize
that the appellants claim an interest in a specific fund being
held in the district court's registry.
While a mere economic interest may be insufficient to
support the right to intervene, an intervenor's interest in a
specific fund is sufficient to entitle intervention in a case
affecting that fund. See, e.g., Gaines v. Dixie Carriers, Inc.,
434 F.2d 52, 53-54 (5th Cir. 1970) (holding that a law firm could
intervene in a former client's action to protect its interest in
10
its contingency fee); Hardy-Latham v. Wellons, 415 F.2d 674 (4th
Cir. 1968) (holding that finders who supplied a broker with the
name of a seller were allowed to intervene in the broker's case
against the seller for a broker's fee because "[t]hey claim an
interest in both the transaction and the fund which are the
subject of the main action, and if the entire amount were paid
directly to [the broker] their ability to collect their proper
share would as a practical matter be impaired"); United States v.
Eilberg, 89 F.R.D. 473 (E.D. Pa. 1980) (holding that two
attorneys who claimed an interest in the same funds sought by the
United States in a suit against a Congressman were entitled to
intervene "whether their claim sounded in contract or tort, in
law or equity."); Peterson v. United States, 41 F.R.D. 131 (D.
Minn. 1966) (holding that the trust remaindermen had a sufficient
interest to intervene in an action by the trust executors for a
tax refund); see generally, Wright & Miller, supra, § 1908, at
272-74 (and cases cited therein) ("``Interests in property are the
most elementary type of right that Rule 24(a) is designed to
protect,' and many of the cases in which a sufficient interest
has been found under amended Rule 24(a)(2) have been cases in
which there is a readily identifiable interest in land, funds, or
some other form of property."). Thus, when a particular fund is
at issue, an applicant claims an interest in the very property
that is the subject matter of the suit.
The $250,000 held in the district court registry
represent all that remains of the hurricane reconstruction fund
that the MTCA received to cover the cost of repairing the
11
condominiums in the aftermath of Hurricane Hugo. According to
Virgin Islands law and the MTCA's By-laws, this money is held in
trust for each of the apartment owners under the supervision of
an Insurance Trustee. See 28 V.I.C. §924 ("Such insurance
coverage shall be written on the property in the name . . . of
the Board of Directors of the Association of Apartment Owners, as
trustee for each of the apartment owners . . .") (emphasis
added). Similarly, Article V Section 2 of the MTCA's By-laws,
requires the Board of Directors to obtain this insurance and
appoint an Insurance Trustee to manage the funds. App., Vol I.,
at 58. Thus, the Seipels have a right to have an independent
trustee appointed and to have that trustee "disburse the proceeds
of all insurance policies to the contractors engaged in such
repairs or restoration in appropriate progress payments." App.,
Vol. I at 59.0
We agree with the Seipels that the funds deposited with
the district court are assets of an express trust, of which the
individual apartment owners are the intended beneficiaries. Like
all beneficiaries of an express trust, these beneficiaries have a
property interest in the trust res that is enforceable either in
law or in equity. See generally, Restatement (2d) of Trusts,
§§198-99 (1959). Like all other beneficiaries of an express
trust, they have an interest in seeing that the assets of the
0
While the By-laws do not explicitly instruct the trustee as
to how to set priorities among competing contractors, it seems
implicit in the By-laws that the trustee would be required to
distribute the proceeds in accordance with the By-laws, Virgin
Islands law, and in the best interest of the beneficiaries (i.e.,
the condominium owners).
12
trust are not diverted in a manner that will defeat the purpose
of the trust.0
The MTCA urges us to accept the district court's
finding that the Seipels' "concession" that they have no interest
in the merits of the litigation leads inexorably to the
conclusion that they lack a sufficient stake in the litigation.
According to the MTCA, by their own admission:
[t]he Seipels have no interest in the merits
of the Board's lawsuit against these
Defendants; they are not privy to the
underlying documents, and have no personal
knowledge of the merits of that case, or the
grounds for the dispute, other than that
their 2 units were not repaired and restored.
And accordingly, they did not then, and they
do not now, seek to intervene so as to
litigate the merits of the underlying suit.
App., Vol. III, at 605. The district court found this and
similar statements sufficient to support its conclusion that,
"[i]n essence, the Seipels wish merely to have a voice in
controlling the timing and processing of this lawsuit (which is
no concern of theirs) in the hope that, if they succeed in
obtaining a judgment in the Territorial Court, they can satisfy
it by recourse to the $250,000." Mountain Top, slip op. at 4.
This argument fails to recognize the scope of interests
encompassed in Rule 24(a)(2). Proposed intervenors need not have
an interest in every aspect of the litigation. They are entitled
to intervene as to specific issues so long as their interest in
those issues is significantly protectable. See, e.g., Harris 820
0
Judge Weis believes that the contractors who performed the
work that provided the underlying basis for the insurance
adjustment are beneficiaries as are the apartment owners.
13
F.2d at 599; Howard v. McLucas, 782 F.2d 956, 962 (11th Cir.
1986) (holding that non-minority employees had the right to
intervene to challenge the promotional remedy, but not to contest
the existence of past discrimination); Bradley v. Milliken, 620
F.2d 1141, 1142 (6th Cir. 1980) (holding that a representative of
the Hispanic community has the right to intervene for the limited
purpose of presenting evidence on the question of de jure
segregation of Hispanics). In this case, while the Seipels may
not have an interest in the merits of the claims pending between
MTCA and Huffman and Stabbert, they do have an interest in the
property over which the court has taken jurisdiction. Clearly
they have an interest in being heard with respect to the
disposition of that fund.0 As we have observed, such an interest
is sufficient to support an applicant's intervention as of right.
Accordingly, we find the appellants' interest in the litigation
sufficient to support intervention as of right under Rule
24(a)(2).0
0
We do not say that the Seipels have a right to participate
in a mediation of the claims between MTCA and Huffman and
Stabbert insofar as that mediation is directed solely to the
resolution of those claims and not to the disposition of the
funds in the court's registry. We do hold, however, that the
Seipels have a right to participate in any proceeding that may
result in the disbursement of those funds other than to a duly
appointed independent trustee.
0
MTCA also argues that the appellants' interest is
contingent upon the outcome of the case pending in the
territorial court. Appellees rely on decisions denying a third
party's motion to intervene when the party's interest depended
upon prevailing on a tort claim in a separate action. See, e.g.,
Liberty Mut. Ins. Co. v. Pacific Indemnity Co., 76 F.R.D. 656(W.D. Pa. 1977); Independent Petrochemical Corp. v. Aetna Cas.
and Sur. Co., 105 F.R.D. 106, 110 (D.D.C. 1985). But see,
Continental Casualty Co. v. SSM Group, Inc., No. CIV.A. 94-7789,
14
B.
In order to meet the requirements of Rule 24(a)(2),
proposed intervenors must also demonstrate that their interest
might become affected or impaired, as a practical matter, by the
disposition of the action in their absence. Alcan Aluminum, 25
F.2d at 1185 n.15. The contractors' claims against the MTCA in
this case are in excess of $250,000. Presumably, the MTCA could
settle the case by paying the full $250,000 to the contractors,
thus depleting the hurricane reconstruction fund. If that were
to occur, appellants would be the beneficiaries of an empty and
worthless trust. Similarly, if the MTCA were allowed to disburse
the funds, most of the appellants' claims against the MTCA would
become moot, including the claim that only a trustee should
"receive all insurance proceeds following a loss." App., Vol. I,
at 39. Moreover, any distribution, even a distribution which
does not exhaust the fund, presumably usurps the authority of the
trustee. Accordingly, we conclude that appellants' interest in
the fund as a practical matter may, indeed, become affected or
impaired in their absence.
C.
We must now determine whether the appellants' interests
in the litigation are adequately represented. Harris, 820 F.2d
at 596. As the Supreme Court stated, "[t]he requirement of the
Rule is satisfied if the applicant shows that representation of
1995 WL 422780 (E.D. Pa. 1995). These cases simply do not apply
here. As we discuss above, appellants interest in the fund is
clearly established by 28 V.I.C. § 924 and Article V § 2 of the
MTCA's By-laws.
15
his interest ``may be' inadequate; and the burden of making that
showing should be treated as minimal." Trbovich v. United Mine
Workers, 404 U.S. 528, 538 n.10 (1972). It has been noted that,
The most important factor in determining
adequacy of representation is how the
interest of the absentee compares with the
interest of the present parties. If the
interest of the absentee is not represented
at all, or if all existing parties are
adverse to him, then he is not adequately
represented. If his interest is identical to
that of one of the present parties, or if
there is a party charged by law with
representing his interest, then a compelling
showing should be required to demonstrate why
this representation is not adequate.
Wright & Miller, supra, § 1909, at 318-19; see generally Alcan
Aluminum, 25 F.3d at 1185-86. We therefore must determine
whether the MTCA would adequately represent the appellants'
interest in the district court action by comparing their
respective interests.0
As we have noted, the Seipels wish to have the funds in
the district court placed in the hands of an independent trustee
so that the terms of the trust can be carried out. It is
apparent from the prior conduct of MTCA that it will not
represent that point of view in this proceeding. If an
independent trustee is appointed and intervenes in this
proceedings, the Seipels' interest will be adequately
represented, but until that time, the Seipels must be permitted
to advocate for implementation of the trust.
0
There is no contention that the appellants are adequately
represented by the contractors given that they are in fact
competing over the funds deposited in the district court.
16
D.
The final requirement for intervention is that
application for intervention be timely. We review a district
court's determination as to the timeliness of an intervention
motion only for abuse of discretion. Halderman v. Pennhurst
State School & Hosp., 612 F.2d 131 (3d Cir. 1979). In
determining whether an application for intervention as of right
is timely, we are reminded that, "[s]ince in situations in which
intervention is of right the would-be intervenor may be seriously
harmed if he is not permitted to intervene, courts should be
reluctant to dismiss a request for intervention as untimely, even
though they might deny the request if the intervention were
merely permissive." Wright & Miller, supra, § 1916 at 424.
Appellees contend not only that the Seipels' motion was untimely,
but that because the district court did not reach the issue, it
is not properly before us. (Appellees Brief at 20).
In its opinion, the district court stated that:
The proposed intervenors are correct, in my
view, in arguing that intervention is not
precluded merely because of the passage of
time between the filing of this lawsuit and
the application for intervention: From their
perspective they did seek intervention
promptly upon learning of the existence of
the $250,00 escrow deposit, and upon becoming
aware that their alleged interests might be
in jeopardy in this litigation.
Mountain Top, slip op., at 3-4. We agree.
The timeliness of a motion to intervene is "``determined
from all the circumstances' and, in the first instance, ``by the
[trial] court in the exercise of it sound discretion.'" In re
17
Fine Paper Antitrust Litigation, 695 F.2d 494, 500 (3d Cir. 1982)
(citing NAACP v. New York, 413 U.S. 345, 366 (1973)). To
determine whether the intervention motion is timely, we have
listed three factors for courts to consider: (1) the stage of
the proceeding; (2) the prejudice that delay may cause the
parties; and (3) the reason for the delay. In re Fine Paper
Antitrust Litigation, 695 F.2d at 500.
1.
The MTCA argues that intervention at this stage is
untimely and would prejudice them because the case is in an
advanced stage. The mere passage of time, however, does not
render an application untimely. Bank of America Nat. Trust and
Sav. Ass'n v. Hotel Rittenhouse Associates, 844 F.2d 1050, 1056
(3d Cir. 1988); Wright & Miller, supra, § 1916 at 425-26. While
four years had elapsed before the Seipels filed their motion to
intervene, the critical inquiry is: what proceedings of
substance on the merits have occurred? See In re Fine Paper
Antitrust Litigation, 695 F.2d at 500 ("a motion to intervene
after an entry of a decree should be denied except in
extraordinary circumstances.") (emphasis added). Cf. Hicks v.
Miranda, 422 U.S. 332, 349 (1975) (holding that, "where state
criminal proceedings are begun against the federal plaintiffs
after the federal complaint is filed but before any proceedings
of substance on the merits have taken place . . . the principles
of Younger v. Harris apply in full force."). This is because the
stage of the proceeding is inherently tied to the question of the
prejudice the delay in intervention may cause to the parties
18
already involved. See generally Wright & Miller, supra, § 1916
at 435-456. As a result, intervention has been allowed even
after the entry of a judgment. See, e.g., SEC v. United States
Realty & Improvement Co., 310 U.S. 434, 458-461 (1940); Wright &
Miller, supra, § 1916 at 20 (cases cited therein).
The record before us reveals that while some written
discovery and settlement negotiations had occurred between the
MTCA and the contractors prior to the Seipels' motion, there were
no depositions taken, dispositive motions filed, or decrees
entered during the four year period in question. Under these
circumstances, we cannot say that intervention at this stage of
the litigation would prejudice the current parties.
2.
The heart of the MTCA's objection is that intervention
would "essentially ``deep six' any possible settlement."
(Appellees brief at 21). Even if we were to accept the MTCA's
argument that intervention would prejudice settlement
negotiations, that prejudice would not be attributable to any
time delay. Indeed, the only threat to settlement negotiations
between the MTCA and the contractors that the intervention might
pose would be that the MTCA and the contractors might have to
consider the Seipels' legitimate interest in the funds at issue.
But we do not see how this in any way dilutes our practice of
encouraging the private settlement of disputes, see, e.g.,
Edwards v. Born, Inc., 792 F.2d 387, 390 (3d Cir. 1986), any more
than recognizing the fundamental principal that an injured party
has a legitimate right to redress.
19
3.
Finally, appellees argue that the Seipels have not
expressed adequate reasons for their delay. Again, we disagree.
We have held that, "to the extent the length of time an applicant
waits before applying for intervention is a factor in determining
timeliness, it should be measured from the point at which the
applicant knew, or should have known, of the risk to its rights."
Alcan Aluminum, 25 F.3d at 1183. The Seipels first learned that
the $250,000 had been deposited with the court in a March 8, 1991
memorandum from the Board. At that time, however, the Board also
predicted that the $250,000 would be returned to the MTCA, and
that there would be a $130,000 surplus after reconstruction was
completed. When the Seipels filed suit in the Territorial Court
in March of 1992, the Board informed the association members that
the contractors would not release their interest in the $250,000.
The Seipels claim that they reasonably concluded that the money
would remain in the district court's registry throughout the
litigation, beyond the reach of both the MTCA and the
contractors. They only became aware that the fund was in
jeopardy by a memorandum dated February 2, 1994, when the Board
informed the association members that the district court had
ordered the parties to mediate. The Seipels immediately sought
to attend the mediation, which was scheduled for February 7,
1994. When they were not allowed to attend, they sought to
intervene by motion filed on March 11, 1994. There is,
therefore, sufficient evidence in the record to support the
district court's determination that the appellants "promptly"
20
sought intervention upon learning that their interests were in
jeopardy.
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IV.
For the foregoing reasons, we will reverse the district
court's denial of appellants' motion to intervene, and order the
district court to grant the motion.
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