Mark Wallach v. Eaton Corp ( 2016 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 15-3320
_____________
MARK S. WALLACH, as Chapter 7 Trustee for the
Bankruptcy Estate of Performance Transportation Services
Inc., on behalf of the estate and all others similarly situated;
TAURO BROTHERS TRUCKING COMPANY;
TOLEDO MACK SALES & SERVICE INC.; JJRS LLC,
Appellants
v.
EATON CORPORATION; DAIMLER TRUCKS NORTH
AMERICA LLC; FREIGHTLINER LLC; NAVISTAR
INTERNATIONAL CORPORATION; INTERNATIONAL
TRUCK AND ENGINE CORPORATION; PACCAR INC.;
KENWORTH TRUCK COMPANY; PETERBILT MOTORS
COMPANY; VOLVO TRUCK NORTH AMERICA;
MACK TRUCKS INC.; NAVISTAR, INC.
_____________
On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-10-cv-00260)
District Judge: Honorable Sue L. Robinson
_____________
Argued: June 7, 2016
Before: CHAGARES, KRAUSE, and SCIRICA, Circuit
Judges
(Opinion filed: September 14, 2016)
_____________
Glen DeValerio, Esq.
Berman DeValerio
One Liberty Square
Boston, MA 02109
Kyle G. DeValerio, Esq.
Marc J. Greenspon, Esq.
Berman DeValerio
3507 Kyoto Gardens Drive
Suite 200
Palm Beach Gardens, FL 33410
Manuel J. Dominguez, Esq.
Cohen Milstein
2925 PGA Boulevard
Suite 200
Palm Beach Gardens, FL 33410
Richard A. Koffman, Esq.
Emmy L. Levens, Esq. (Argued)
Daniel H. Silverman, Esq.
Cohen Milstein
1100 New York Avenue, N.W.
West Tower, Suite 500
Washington, DC 20005
2
Jessica Zeldin, Esq.
Rosenthal Monhait & Goddess
919 North Market Street
Suite 1401
Wilmington, DE 19801
Counsel for Appellants
Erik T. Koons, Esq.
Joseph A. Ostoyich, Esq.
Baker Botts
1299 Pennsylvania Avenue, N.W.
The Warner
Washington, DC 20004
Donald E. Reid, Esq.
Morris Nichols Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899
Benjamin F. Holt, Esq.
John R. Robertson, Esq.
Hogan Lovells
555 Thirteenth Street, N.W.
Columbia Square
Washington, DC 20004
John A. Sensing, Esq.
Potter Anderson & Corroon
3
1313 North Market Street
6th Floor
Wilmington, DE 19801
Corey W. Roush, Esq.
Pratik A. Shah, Esq. (Argued)
James E. Tysse, Esq.
Akin Gump Strauss Hauer & Feld
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, DC 20036
Brian P. Borchard, Esq.
Daniel E. Laytin, Esq.
James H. Mutchnik, Esq.
Kirkland & Ellis
300 North LaSalle Street
Suite 2400
Chicago, IL 60654
Kelly E. Farnan, Esq.
Richards Layton & Finger
920 North King Street
One Rodney Square
Wilmington, DE 19801
Thomas L. Boeder, Esq.
Cori G. Moore, Esq.
Perkins Coie
1201 Third Avenue
Suite 4900
Seattle, WA 98101
4
Jeffrey B. Bove, Esq.
RatnerPrestia
1007 Orange Street
Suite 205
Wilmington, DE 19801
Catherine S. Simonsen, Esq.
Perkins Coie
1888 Century Park East
Suite 1700
Los Angeles, CA 90067
Eric J. Weiss, Esq.
1066 Clifton Avenue
Clifton, NJ 07013
Daniel J. Boland, Esq.
Michael J. Hartman, Esq.
Jeremy D. Heep, Esq.
Pepper Hamilton
18th & Arch Streets
3000 Two Logan Square
Philadelphia, PA 19103
M. Duncan Grant, Esq.
Pepper Hamilton
1313 Market Street
Suite 5100, P.O. Box 1709
Wilmington, DE 19899
Counsel for Appellees
5
_____________
OPINION OF THE COURT
_____________
KRAUSE, Circuit Judge.
In this case, we are called upon to determine, among
other things, the fount and contours of federal common law
applicable to the assignment of federal antitrust claims and
the reach of the presumption of timeliness for motions to
intervene as representatives of a class. Consistent with the
Restatement of Contracts and the doctrines undergirding
federal antitrust law, we hold that an assignment of a federal
antitrust claim need not be supported by bargained-for
consideration in order to confer direct purchaser standing on
an indirect purchaser; such assignment need only be express,
and that requirement was met here. We also hold that the
presumption of timeliness, that is, the presumption that a
motion to intervene by a proposed class representative is
timely if filed before the class opt-out date, applies not only
after the class is certified, as we held in In re Community
Bank of Northern Virginia, 418 F.3d 277, 314 (3d Cir. 2005),
but also in in the pre-certification context. Because the
District Court failed to apply that presumption and the
intervenors’ motion here was timely considering the totality
of the circumstances, we conclude the District Court abused
its discretion in denying their motion to intervene on that
basis. Accordingly, we will reverse and remand for
proceedings consistent with this opinion.
6
I. Background
Appellants seek to certify and represent a class of
Class 8 truck purchasers to challenge an alleged conspiracy to
monopolize among their immediate suppliers and those
further up the market chain. 1 The relevant market can be
envisioned as a three-layer cake, with parts manufacturers at
the top, Original Equipment Manufacturers (OEMs) in the
middle, and Class 8 truck consumers at the base. Parts
manufacturers are companies that make component parts of
trucks, such as the transmissions at issue in this case. These
companies sell their products to OEMs, which, in turn, take
orders from the customers to build trucks customized to the
customers’ needs. OEMs offer what are called “data books,”
which list the various options for each part; the customer
chooses among the parts and options; and the OEM sources
the parts from the manufacturers and uses them to build the
truck then sold to that consumer.
Eaton Corporation—a parts manufacturer—has long
been a near monopolist in the market for supplying Class 8
truck transmissions. In 1989, a company called ZF Meritor 2
emerged as a competitor, offering transmissions that truck
customers could select from the OEMs’ data books.
1
This same alleged conspiracy was the subject of our
opinion in ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d
Cir. 2012), where we explained the relevant market in detail.
As that background is elsewhere available, we provide here a
more limited overview.
2
ZF Meritor began as simply “Meritor” in 1989, not
becoming “ZF Meritor” until a merger in 1999.
7
According to Appellants, Eaton sought to sideline ZF Meritor
and retain its hold on the market by conspiring with the
OEMs to oust ZF Meritor from the market. It purportedly did
so by entering Long Term Agreements with the OEMs that
would offer increasingly large rebates on Eaton transmissions
based on the percentage of transmissions a given OEM
purchased from Eaton as opposed to ZF Meritor. The OEMs
allegedly embraced this plan because, while they would
benefit directly from rebates, they could pass on any increase
in the price of Eaton’s transmissions to their customers
downstream, reaping extra profits without suffering detriment
from monopoly-level prices. Per Appellants, the Long Term
Agreements had their intended effect, ultimately forcing ZF
Meritor to shutter in 2003 and giving Eaton an iron grip on
the market for Class 8 truck transmissions.
But not without repercussions. In 2006, ZF Meritor
sued Eaton for antitrust violations and won. See ZF Meritor,
LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012) (affirming
the jury’s verdict against Eaton). Separately, a group of
indirect purchasers (i.e., customers who bought trucks from
OEMs’ immediate customers) brought a class action against
Eaton; that case was dismissed after the district court
undertook a full class certification analysis pursuant to
Federal Rule of Civil Procedure 23, though an appeal is
pending. See generally In re Class 8 Transmission Indirect
Purchaser Antitrust Litig., 140 F. Supp. 3d 339 (D. Del.
2015). And we now confront on appeal the suit brought on
behalf of the OEMs’ customers—i.e., “direct purchasers” of
the Class 8 trucks—against both the OEMs and Eaton for
damages arising from the alleged monopolization
8
conspiracy. 3 Wallach v. Eaton Corp., 125 F. Supp. 3d 487,
492 (D.N.J. 2015).
3
Specifically, Appellants brought a monopolization
claim against Eaton under § 2 of the Sherman Act, 15 U.S.C.
§ 2, and three claims against both Eaton and the OEMs: a
conspiracy to monopolize claim, id., and two claims for
entering exclusionary contracts, 15 U.S.C. §§ 1, 14.
Importantly, Appellants may still be characterized as “direct
purchasers” in relation to Eaton for purposes of this suit, even
though the OEMs exist as middlemen between Eaton and
Appellants. In 2010, Appellees filed motions to dismiss the
case under Federal Rule of Civil Procedure 12(b)(6) in part
for lack of statutory standing, arguing that because the
putative class representatives (then Wallach and Tauro) did
not directly purchase trucks from Eaton, they lacked standing
under the so-called “direct purchaser rule.” See Ill. Brick Co.
v. Illinois, 431 U.S. 720 (1977) (allowing antitrust suits for
damages only by plaintiffs who directly purchased items from
the alleged violator). The District Court rejected this
argument, determining that Appellants had statutory standing
to sue under the limited co-conspirator exception to the direct
purchaser rule, which allows an entity to sue its supplier and
its supplier’s supplier if (1) it sues both at once, and (2) the
immediate supplier (i.e., the middleman) was so wrapped up
in the conspiracy that it would be barred from seeking
antitrust relief against the top-level supplier in a suit of its
own. Wallach v. Eaton Corp., 814 F. Supp. 2d 428 (D.N.J.
2011); see also Howard Hess Dental Labs. Inc. v. Dentsply
Int’l, Inc., 602 F.3d 237, 258-60 (3d Cir. 2010); Howard Hess
Dental Labs. Inc. v. Dentsply Int’l, Inc., 424 F.3d 363, 378-84
9
Appellants here fall into two categories, each of which
presents a different issue on appeal: those that brought suit as
putative class representatives and those seeking to intervene
to serve in that role. In the first group, the relevant party for
purposes of appeal is Tauro Brothers Trucking Company
(“Tauro”), the putative class representative that the District
Court determined lacked standing. 4 Tauro never directly
purchased a Class 8 truck from the OEMs, but rather
purchased trucks from R&R—a company that was a direct
customer of the OEMs and that expressly assigned Tauro its
direct purchaser antitrust claims stemming from the alleged
conspiracy between the OEMs and Eaton. 5 Before the
District Court, Appellees challenged the propriety and effect
of this assignment, urging that it is invalid for lack of
bargained-for consideration and that Tauro lacks standing to
(3d Cir. 2005). Appellees do not challenge this ruling on
appeal.
4
Performance Transportation Services, Inc. (PTS), a
direct customer of the OEMs and a former putative class
representative in this case, is in bankruptcy and is represented
by Mark Wallach as its Chapter 7 Trustee. While this case
bears Wallach’s name, PTS no longer seeks to represent the
putative class and was dropped as a litigant in the case when
the putative class redefined itself in briefing before the
District Court.
5
It is beyond dispute that a validly assigned antitrust
claim can give direct purchaser standing to an indirect
purchaser. See, e.g., In re Fine Paper Litig. State of Wash.,
632 F.2d 1081, 1090 (3d Cir. 1980).
10
bring this suit or serve as a class representative. The District
Court agreed and dismissed Tauro from the suit.
In the second group are Toledo Mack Sales and
Service, Inc. and JJRS, LLC, both of which directly
purchased trucks from the OEMs. Concerned after Appellees
sought to dismiss Tauro for lack of standing that Tauro could
be dropped from the suit, thereby leaving no named
representative, Toledo Mack and JJRS filed motions under
Federal Rule of Civil Procedure 24 to intervene as putative
class representatives. 6 The District Court denied those
motions, holding that neither entity had moved to intervene in
a timely manner.
Having ejected the named plaintiff on standing
grounds and foreclosed intervention by Toledo Mack and
JJRS, the District Court dismissed the case in its entirety on
August 31, 2015, concluding that the motion for class
certification must be denied for want of a case or controversy
necessary to sustain federal jurisdiction under Article III of
the United States Constitution. On appeal, Appellants argue
that (1) consideration is not required for a valid assignment of
antitrust claims, and (2) the District Court abused its
discretion in denying Toledo Mack and JJRS’s motions to
intervene. For the reasons that follow, we agree with these
6
Toledo Mack and JJRS’s motions to intervene were
brought as “of [r]ight,” Fed. R. Civ. P. 24(a), and, in the
alternative, “[p]ermissive[ly],” Fed. R. Civ. P. 24(b).
11
arguments and conclude that the case should be remanded for
further proceedings consistent with this opinion. 7
II. Standards of Review 8
We first review the District Court’s decision that
Tauro lacked standing 9 de novo, with deference to its factual
7
Appellants argue, in the alternative, that if
consideration is required, R&R’s assignment was supported
by such consideration. Because we conclude consideration is
not required, we do not reach this alternative argument and do
not opine on the District Court’s disposition of it.
8
The District Court had jurisdiction over Appellants’
antitrust claims pursuant to 15 U.S.C. §§ 4 and 15(a) and 28
U.S.C. §§ 1331 and 1337. We have jurisdiction under 28
U.S.C. § 1291 to review the District Court’s conclusions.
9
The standing inquiry in this case centers on the
validity of R&R’s assignment of its antitrust claim to Tauro.
The District Court effectively entertained a 12(b)(1) motion
on this question and treated it as a question of Article III
standing. But because the assignment is relevant to whether
Appellants satisfy the direct purchaser rule, its validity is a
question of statutory standing, not Article III standing.
Hartig Drug Co. v. Senju Pharm. Co., --- F.3d ---, No. 15-
3289, 2016 WL 4651381, at *5-6 (3d Cir. Sept. 7, 2016).
Unlike Article III standing, statutory standing is inherently
non-jurisdictional, and—contrary to Appellants’ assessment
at oral argument, Oral Arg. Tr. 18—challenges to it should be
brought by way of a 12(b)(6) motion, a summary judgment
motion, or arguments on the merits—not by way of a 12(b)(1)
12
findings unless clearly erroneous. White-Squire v. U.S.
Postal Serv., 592 F.3d 453, 456 (3d Cir. 2010). We review
the District Court’s denial of Toledo Mack and JJRS’s Rule
24 motions as untimely for abuse of discretion, Halderman v.
Pennhurst State Sch. & Hosp., 612 F.2d 131, 134 (3d Cir.
1979), which occurs where a “district court’s decision rests
motion. See id. at *4; see also Lexmark Int’l, Inc. v. Static
Control Components, Inc., 134 S. Ct. 1377, 1387 n.4 (2014).
We also disagree with the parties’ suggestion at oral
argument that we can infer the District Court addressed the
validity of the assignment as a matter of statutory standing,
rather than Article III standing. Oral Arg. Tr. 18, 36. Such
an inference is not plausible. The District Court recited and
employed the doctrinal standard applicable to questions of
subject matter jurisdiction, foreclosing the possibility that it
was treating the issue as a non-jurisdictional question of
statutory standing. Wallach v. Eaton Corp., 125 F. Supp. 3d
487, 491-92 (D.N.J. 2015). Moreover, because Appellees
brought a 12(b)(6) motion in 2011, see Wallach, 814 F. Supp.
2d at 432, they were prohibited under Federal Rule of Civil
Procedure 12(g)(2) from bringing their current challenge to
Tauro’s statutory standing as a 12(b)(6) motion in 2014,
accord Leyse, 804 F.3d at 320-21. Despite the District
Court’s procedural error in entertaining Appellees’ statutory
standing challenge as a 12(b)(1) Article III challenge,
however, Appellants failed to object in the District Court or in
their briefs on appeal, and, at oral argument, asserted that the
District Court acted properly, Oral Arg. Tr. 17-19.
Accordingly, we deem any such challenge waived and
address the statutory standing question on the merits.
13
upon a clearly erroneous finding of fact, an errant conclusion
of law or an improper application of law to fact,” In re Gen.
Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig.,
55 F.3d 768, 783 (3d Cir. 1995) (hereinafter “In re GM
Corp.”) (quoting Int’l Union, UAW v. Mack Trucks, Inc., 820
F.2d 91, 95 (3d Cir. 1987)). 10
10
While we have said that denials of motions to
intervene as of right and by permission under Rule 24 for
untimeliness are both reviewed for abuse of discretion,
Mountain Top Condo. Ass’n v. Dave Stabbert Master Builder,
Inc., 72 F.3d 361, 369 (3d Cir. 1995) (reciting standard for
motions to intervene as of right under Rule 24(a)); Del. Valley
Citizens’ Council for Clean Air v. Commonwealth of Pa., 674
F.2d 970, 974 (3d Cir. 1982) (same for motions to intervene
by permission per Rule 24(b)), we have also noted that our
review of denials of motions to intervene as of right under
Rule 24(a) generally “is more stringent than the abuse of
discretion review accorded to denials of motions for
permissive intervention,” meaning we will reverse if the
district 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) (quoting United
States v. Hooker Chems. & Plastics Corp., 749 F.2d 968, 992
(2d Cir. 1984)). We need not delve into how this heightened
standard might affect the “abuse of discretion” relevant to the
District Court’s denial of the intervention motions here
because we conclude the District Court abused its discretion
even under the more forgiving standard generally applicable
to Rule 24(b) motions. See Brody ex rel. Sugzdinis v. Spang,
957 F.2d 1108, 1115 (3d Cir. 1992) (recognizing that rulings
on Rule 24(b) motions are reviewed more deferentially).
14
III. Tauro’s Standing
Tauro’s statutory standing to serve as a named
representative of the putative class of direct purchasers of the
OEMs’ Class 8 trucks hinges on the validity of R&R’s
assignment of such direct purchaser claims to Tauro, and in
particular whether the assignment of a federal antitrust claim
requires consideration. To answer that question, we must
ascertain the federal common law principles that govern such
assignments and then apply those principles to the case at
hand. 11
11
We acknowledge that the term and concept of “federal
common law” may strike some as anathema to federal court
jurisprudence in the wake of Erie Railroad Co. v. Tompkins,
304 U.S. 64 (1938), but in some areas of the law, marked by
pressing interests of the United States or by broad
congressional statutes empowering federal courts to make
governing rules of law, so-called “federal common law” still
exists to provide direction, e.g., Tex. Indus., Inc. v. Radcliff
Materials, Inc., 451 U.S. 630, 641-44 (1981). Federal
antitrust law historically has been one such area. See, e.g.,
Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679,
688 (1978). But cf. Tex. Indus., Inc., 451 U.S. at 641-45
(indicating that while federal common law applies to some
components of antitrust law, it does not apply to remedial
provisions that Congress described with particularity). Here,
we put aside the doctrinal debates that could be had because
we are bound by our precedent, which identifies federal
common law as the governing principle for assessing the
validity of an assignment of a federal antitrust claim.
Gulfstream III Assocs. v. Gulfstream Aerospace Corp., 995
15
A. Guiding Principles
By imposing the “direct purchaser” rule on antitrust
claims and providing that only entities that purchase goods
directly from alleged antitrust violators have statutory
standing to bring a lawsuit for damages, the Supreme Court
sought to avoid the complications that would flow from
allowing suits by indirect purchasers. See generally Ill. Brick
Co. v. Illinois, 431 U.S. 720 (1977). The Court observed that
such indirect purchaser suits would force courts to ascertain
how much of the supracompetitive prices charged by the
violator were passed from the direct purchaser to indirect
purchasers down the market chain, and concluded that “the
antitrust laws will be more effectively enforced by
concentrating the full recovery for the overcharge in the direct
purchasers rather than by allowing every plaintiff potentially
affected by the overcharge to sue only for the amount it could
show was absorbed by it.” Id. at 735.
In reaching this conclusion, the Supreme Court
elucidated three policy rationales, each of which is relevant to
our assessment of whether the assignment of an antitrust
claim necessitates bargained-for consideration. Specifically,
the Court expressed concern regarding: (1) the difficulty
courts (and litigants) would have in parsing how much of the
harm caused by supracompetitive prices charged by an
antitrust violator was incurred by the direct purchaser as
opposed to being passed down to indirect purchasers, id. at
731-32, 741-44; (2) the possibility that multiple lawsuits
could result in inconsistent adjudications of liability or could
F.2d 425, 437 (3d Cir. 1993) (Greenberg, J., concurring and
speaking for the majority).
16
result in an antitrust violator paying more than the injury it
actually inflicted once both direct and indirect purchasers
obtained recovery, id. at 730-31; and (3) the deleterious effect
that the combination of uncertainty around damages and the
likelihood that each individual indirect purchaser’s share of
damages would be small would have on the incentive for
private parties to initiate suits, id. at 745-47. We succinctly
distilled these rationales in Gulfstream III Assocs. v.
Gulfstream Aerospace Corp., explaining that Illinois Brick’s
direct purchaser rule seeks to counteract “the difficulty of
analyzing pricing decisions, the risk of multiple liability for
defendants, and the weakening of private antitrust
enforcement that might result from splitting damages for
overcharges among direct and indirect purchasers.” 995 F.2d
425, 439 (3d Cir. 1993) (Greenberg, J., concurring and
speaking for the majority).
Of particular relevance to this case, an indirect
purchaser may step into the shoes of a direct purchaser and
bring an antitrust suit in that capacity if it receives a valid
assignment of a direct purchaser’s antitrust claims.
Gulfstream, 995 F.2d at 437-40; In re Fine Paper Litig. State
of Wash., 632 F.2d 1081, 1090 (3d Cir. 1980). We have long
required that such assignments be express, Gulfstream, 995
F.2d at 437-39, explaining that, consistent with the rationales
from Illinois Brick, that requirement ensures that only one
party has the authority to bring suit, that the damages
calculations remain relatively straightforward, and that we do
not divvy up damages to the point of reducing the incentive to
bring private antitrust suits in the first place, Gulfstream, 995
F.2d at 439-40.
At issue in this case, however, is not whether the
assignment was express. Rather, we are asked to determine
17
whether an assignment of a federal antitrust claim must also
reflect consideration to be valid. Gulfstream makes clear that,
in answering that question, we must apply federal common
law, as opposed to the law of the state, for two reasons: first,
to ensure the rules governing assignments of federal antitrust
claims accord with the “overall purposes of the antitrust
statutes,” and second, to avoid a patchwork of “differing state
law standards, because such assignments may implicate the
‘direct purchaser’ rule.” Id. at 438. But neither the Supreme
Court nor our Court has defined the federal common law
governing consideration for the assignment of federal
antitrust claims. Thus, we must do so before we can apply it
to the assignment at issue in this case—an undertaking that
requires us first to ascertain the appropriate sources of
authority for federal common law in this context.
B. Source of Federal Common Law
Given that different authorities point to different
outcomes, it is not surprising that the parties are at
loggerheads over which we should consider. Appellees
suggest that we ignore federal common law and simply apply
the law of the state in which the assignment was made, or, in
the alternative, that federal common law requires us to
conduct what amounts to a fifty-state survey of the rules
governing assignments in each state and then apply the most
common rule. In contrast, Appellants urge that we apply the
Second Restatement of Contracts, which they contend does
not require consideration for a valid assignment.
We can dispense with Appellees’ proposed alternatives
in short order: one contravenes our case law and the other is
unworkable. Appellees’ proposal that we apply the law of the
state in which the assignment was made is one we have
18
expressly rejected in the past for reasons that are just as sound
today. As we observed in Gulfstream, “assignments of
antitrust claims cannot appropriately be left to determination
under possibly differing state law standards.” 995 F.2d at
438. There, we declined to apply state law, explaining that
because “federal common law governs the assignment of an
antitrust cause of action, there is no issue as to what state’s
law would apply.” Id. at 437 n.1.
We likewise reject Appellees’ fifty-state survey
approach as inefficient, unreliable, and subject to
manipulation. In practice, it would have litigants and courts
reinvent the wheel for every contract-related question arising
under federal common law by conducting nationwide surveys
and attempting to characterize the vagaries of state law in
existence at any given time. The inconsistent results would
not only generate uncertainty for would-be assignors and
consternation for courts attempting to apply precedent, but
also would run contrary to the twin rationales we identified in
Gulfstream for applying federal common law to antitrust
claim assignments in the first place—ensuring the law
accords with the “overall purposes of the antitrust statutes”
and avoiding a patchwork of standards. Id. at 438. 12
12
Appellees’ reliance on In re Columbia Gas Systems
Inc., 997 F.3d 1039, 1055 (3d Cir. 1993), for the proposition
that we hew closely to state law so as to protect litigants’
“commercial expectations” reflects, at best, a misreading of
that case. The discussion Appellees cite was our recitation of
the Supreme Court’s test for ascertaining when to apply
federal common law in the first instance, id. (citing United
States v. Kimbell Foods, Inc., 440 U.S. 715, 727-78 (1979)),
not a test for how to fashion federal common law thereafter.
19
Indeed, this appeal is illustrative of the shortcomings
of this approach, with both sides having submitted lengthy
and dueling appendices that purport to catalogue the
applicable rule for each state with contradictory results.
Moreover, while the parties and their able counsel here had
the resources to undertake this laborious task, for some
assignees, such a project may prove a disincentive to bringing
suit—one of the very hazards the Supreme Court sought to
avoid in adopting the direct purchaser rule. Ill. Brick, 431
U.S. at 745-47.
In contrast, Appellants’ proposal that we look to the
Restatement of Contracts as a starting point for fashioning
rules of federal common law finds support in our case law
and the twin aims of Gulfstream. As the American Law
Institute explained when it first launched the Restatement of
Contracts in 1932, “the Restatement of this and other
subjects” was designed to serve “as prima facie a correct
statement of what may be termed the general common law of
the United States,” notwithstanding “instances in which the
law in one or more States may vary from the law stated in a
particular section.” Restatement (First) of Contracts,
Introduction (Am. Law Inst. 1932). And in the decades since,
that aspiration has been realized with the Restatement
functioning not only as an authoritative fifty-state survey of
contract law, offering a consistent point of reference to parties
and courts, but also as a proposed “correct statement,”
Here, Gulfstream already dictates that we apply federal
common law, rendering the considerations in Columbia Gas
Systems inapposite.
20
reflecting a synthesis and analysis of that law and the
consensus of the states. 13
For those reasons, we have looked to the Restatement
in the past when applying the federal common law of
contracts generally, and the law of antitrust assignments
specifically. In Livingstone v. North Belle Vernon Borough,
91 F.3d 515, 525-26 & n.11 (3d Cir. 1996), for example, we
applied the federal common law of contracts in a suit brought
under 42 U.S.C. § 1983 and cited to the Restatement (Second)
13
Indeed, the very cases upon which Appellees rely to
advance their fifty-state survey approach cut in favor of
applying the Restatement. As Appellees note, in Smith Land
& Improvement Corp. v. Celotex Corp., 851 F.2d 86, 92 (3d
Cir. 1988), we observed that “[t]he general doctrine of
successor liability in operation in most states should guide
the” district court in defining the federal common law
relevant to that case on remand. While we left it to the
district court to make that determination in the first instance,
we did discuss the general precepts of successor liability and,
in doing so, referenced only treatises on corporate law, id. at
91, close cousins of the Restatement. Moreover, while
Appellees cite to a recent Fifth Circuit case in which the court
described its application of the federal common law of
contracts as adhering to “the core principles of the common
law of contracts that are in force in most states,” Excel
Willowbrook, L.L.C. v. JP Morgan Chase Bank, Nat’l Ass’n,
758 F.3d 592, 597 (5th Cir. 2014) (quoting Smith v. United
States, 328 F.3d 760, 767 (5th Cir. 2003)), the court went on
to identify those very principles by citing directly to the
Restatement of Contracts, id. at 597 n.8.
21
of Contracts for the proposition that the duty of good faith
and fair dealing exists at federal common law. And in In re
Fine Paper Litigation, we concluded that the Restatement of
Contracts was “in accord” with the “general law” applicable
to assessing the effect of one party’s assignment of its
antitrust claims to another. 632 F.2d at 1091. 14
Using the Restatement as a guidepost to define federal
common law concerning the validity of assignments of
antitrust claims also comports with one of the twin aims of
Gulfstream: promoting national uniformity. 995 F.2d at 438.
The Restatement eliminates the risk of courts reaching
inconsistent conclusions about the consensus of state law,
supplants the need for a would-be assignor or assignee to
conduct her own fifty-state survey before assigning an
antitrust claim to ensure it will be enforceable in federal
court, and sets a baseline from which litigants may operate
when challenging or defending the validity of such an
assignment. This state of affairs is exactly what Gulfstream
envisioned a federal rule would provide.
14
Rather than consider the Restatement or the proper
source of federal common law, the District Court noted that
In re Fine Paper Litigation itself cited to a district court case
called Mercu-Ray Industries, Inc. v. Bristol-Myers Co., 392 F.
Supp. 16, 18 (S.D.N.Y.), aff’d, 508 F.2d 873 (2d Cir. 1974),
which posited that consideration may be relevant to the
assignment of an antitrust claim; upon inspection, however,
the district court in that case merely noted that issues such as
the giving of consideration were not even challenged in that
case. In other words, Mercu-Ray Industries sheds no light on
the federal common law of contracts.
22
In sum, we agree with Appellants that the Restatement
carries persuasive force in defining our federal common law,
but we also caution that it serves only as a starting point.
Gulfstream instructs not only that we avoid a patchwork of
state standards, but also that we craft federal common law
that pursues the “overall purposes of the antitrust statutes.”
Id. For that reason, before adopting the Restatement’s
approach to a given legal question as federal common law, we
must confirm that the proposed rule comports with the
underlying purpose and goals of federal antitrust law as
outlined in Illinois Brick. 15 We thus turn to the Restatement
and the policy rationales undergirding the direct purchaser
rule to determine whether bargained-for consideration is
required for an assignment of an antitrust claim to have legal
effect.
C. Defining Federal Common Law
We begin with the Restatement. Consistent with
Gulfstream’s requirement that an “intention” to assign a
federal antitrust claim be manifested expressly, 995 F.3d at
438-39, the Restatement states: “It is essential to an
assignment of a right that the obligee manifest an intention to
transfer the right to another person . . . .” Restatement
(Second) of Contracts § 324 (Am. Law Inst. 1981). And in
discussing “Assignments and Delegation,” the Second
15
We also recognize that the Restatement may lose
some of its persuasive force if it can be demonstrated that
there has been a fundamental shift in the status of the law on a
given topic in the years since the Second Restatement’s
publication in 1981. We have not detected any such tectonic
shift in the law of assignments at issue in this case.
23
Restatement expressly addresses gratuitous assignments—
that is, assignments given without consideration.16
Restatement (Second) of Contracts § 332. Specifically, it
provides: “Unless a contrary intention is manifested, a
gratuitous assignment is irrevocable if . . . the assignment is
in writing.” Id. In other words, so long as an assignment is
written and express, it is valid under the Restatement, even
absent consideration.
Appellees object that the Second Restatement’s
discussion of assignments is “limited to rights, duties, and
conditions arising under a contract or for breach of a
contract” such as “debts, rights to non-monetary performance
and rights to damages and other contractual remedies,” and
does not extend to what were historically known as “choses in
action,” which include “debts of all kinds, tort claims, and
rights to recover ownership or possession of real or personal
property”—i.e., non-contractual causes of action.
Restatement (Second) of Contracts § 316 & cmt. a (“The
16
Appellees’ strained argument that “gratuitous” and
“without consideration” are inherently different is foreclosed
by the Restatement’s description of a gratuitous assignment,
Restatement (Second) of Contracts § 332 (defining a
gratuitous assignment as any assignment “unless it is given or
taken . . . in exchange for a performance or return promise
that would be consideration for a promise”), and by the
definition of “gratuitous” in Black’s Law Dictionary, Black’s
Law Dictionary 143, 816 (10th ed. 2009) (defining
“gratuitous” as “given without consideration in circumstances
that do not otherwise impose a duty” and “gratuitous
assignment” as “[a]n assignment not given for value”).
24
rules stated here may have some application to non-
contractual choses in action, but the transfer of non-
contractual rights is beyond the scope of the Restatement of
this Subject.”).
The Restatement itself, however, makes clear that this
limitation is based on an antiquated distinction between
contractual rights and choses in action that no longer has a
significant effect on the common law. In § 317, which
defines “what can be assigned or delegated,” the Restatement
explains that “the historical common-law rule that a chose in
action could not be assigned has largely disappeared.” Id.
§ 317 cmt. c; accord id. Chapter 15 Introductory Note (“The
historic rule in the common-rule courts of England was that a
‘chose in action’ could not be assigned. The scope of that
rule was progressively narrowed . . . . Little remains of it
today.”). Moreover, while not citing the Restatement for this
purpose, we similarly noted in In re Fine Paper Litigation,
which dealt with the assignment of an antitrust claim, that
“[a]lthough the common law did not favor the assignment of
causes of action, by and large that attitude has been
overcome.” 632 F.2d at 1090. Thus, what Appellees attempt
to erect as a historical and definitional roadblock, we resolve
with a short detour, concluding that the Second Restatement
remains the most persuasive authority for assessing whether
assignment of an antitrust claim requires consideration.
Having concluded that it does not, we proceed to
consider whether such a rule comports with the underlying
purposes of antitrust law generally and the doctrine of direct
purchaser standing specifically. See Gulfstream, 995 F.2d at
438. Illinois Brick directs us to prioritize three goals with
regard to direct purchaser standing: avoiding duplicitous
litigation, streamlining damages calculations, and preventing
25
disincentives for private antitrust suits. 431 U.S. at 730-32,
745-47. While our requirement that assignments of federal
antitrust claims be express advances these goals, see
Gulfstream, 995 F.2d at 440, requiring consideration does
not. As such, adopting the Restatement rule as our federal
common law rule in this context is in line with the “overall
purposes of the antitrust statutes.” Id. at 438.
Conversely, requiring consideration for the assignment
of a federal antitrust claim could discourage private
enforcement of the antitrust laws in derogation of Illinois
Brick. Part of creating incentives for private antitrust suits is
making federal courts a welcome forum for such litigation,
and erecting the barrier of consideration threatens to shut out
otherwise meritorious suits from resolution. True, in some
circumstances, consideration could spur such private suits
because an assignee who pays valuable consideration for the
right to sue might be more likely to actually bring suit in
order to recoup its investment. But in situations like the one
at issue in this case, if a direct purchaser is uninterested in
pursuing its claims, whether because it deems them valueless
or because it cannot afford the expense of litigation, an
otherwise willing and interested assignee might be
discouraged from pursuing the suit in the direct purchaser’s
stead if it were required to provide consideration. Here, for
example, the record reflects that R&R assigned its antitrust
claim to Tauro in part because it believed—in error—that
because it had sold its trucks to Tauro, it no longer had any
claim itself. Had R&R not assigned its claim, it is far from
clear that it ever would have pursued its direct purchaser
claims. In short, because requiring consideration could
hinder the private enforcement of antitrust laws, that rule
would not accord with the goals Illinois Brick.
26
Appellees counter that our requirement in Gulfstream
that assignments be express was intended to “create[] an
additional obstacle for assigning direct-purchaser antitrust
claims,” and, as a result, it would “flout the antitrust policy
considerations animating Gulfstream’s holding” to allow
assignments to proceed absent consideration by “mak[ing] it
easier for a direct purchaser to assign its claims.” Appellees’
Br. 20. Gulfstream, however, is not such a blunt tool. We
imposed the “express assignment” requirement in that case
not to signal that courts should erect as many hurdles to
assigning antitrust claims as possible, but rather in an effort to
bring our case law in line with the rationales underlying
Illinois Brick. See 995 F.2d at 438-40. Specifically, we
reasoned that an effective assignment must directly reference
antitrust claims in order to ensure that any transfer of direct
purchaser status is crystal clear, thereby “eliminat[ing] any
problems of split recoveries or duplicative liability.” Id. at
440. While requiring an express assignment therefore
advances the Supreme Court’s goal to prevent duplicative
liability (and, in so doing, advances another Illinois Brick
goal: streamlining damages calculations), we are not
persuaded that requiring the parties to an assignment to
exchange consideration has the same effect.
On the contrary, while Appellees point out the
possibility of duplicitous liability in federal and state courts if
federal common law does not require consideration yet state
law does, their proposed requirement of consideration only
gives rise to the mirror image of that same problem—i.e., an
assignment given with consideration in a state that does not
require consideration would empower an assignee to bring a
state antitrust claim and an assignor to bring any federal
claims. Our disposition today thus does not eliminate the
27
possibility that an assignment in some instances will be valid
for federal but not for state claims, but that is a necessary
consequence of our federalist system of government, and the
resolution we adopt better comports with the goals of federal
antitrust law. Our task, after all, is to create a federal rule
applicable regardless of the assignment’s state of origin. If
we are constrained to rules that in no way impact or depart
from state law, then federal common law would simply track
state law—an outcome foreclosed by Gulfstream’s
exhortation to national uniformity.
In sum, we conclude that consideration has little role
to play in advancing the goals of Illinois Brick and requiring
it could affirmatively undermine one of them by, in certain
circumstances, discouraging private enforcement of the
federal antitrust laws. We therefore hold, consistent with the
Second Restatement of Contracts, that consideration is not
required under federal common law to give effect to an
otherwise express assignment.
D. Applying Federal Common Law
All that remains as to this issue is the simple matter of
applying the federal common law we announce today to the
facts of this case. Here, there is no dispute that R&R’s
assignment of its antitrust claims to Tauro was both written
and express, meaning that it is valid with or without
consideration. 17 Consequently, the District Court erred in
17
The relevant portion of the written assignment at
issue in this case reads:
R&R hereby conveys, assigns and transfers to
Tauro all rights, title and interest in and to all
28
concluding the absence of consideration invalidated the
assignment upon which Tauros’ standing was predicated.
Accordingly, we will reverse its dismissal of Tauro for lack of
standing and its denial of the motion for class certification for
lack of a named class representative.
IV. Timeliness of Proposed Intervenor’s Motions to
Intervene
We now shift gears to consider the second issue on
appeal: Toledo Mack and JJRS’s motions to intervene. With
the specter of the putative class losing its named
representatives, direct purchasers Toledo Mack and JJRS
filed motions to intervene as representatives of the putative
class both as a matter of right and permissively, pursuant to
Federal Rules of Civil Procedure 24(a)(2) and 24(b),
respectively. The District Court denied these motions as
untimely, concluding that, despite the motions having been
filed only two months after Appellees first asked the District
Court to dismiss Tauro for lack of standing, interrogatories
and depositions posed to Tauro months earlier should have
put Toledo Mack and JJRS on notice of the potential for
causes of action it may have against
Defendants, under the antitrust laws of the
United States or of any State, arising out of or
relating to R&R’s purchases . . . of vehicles
containing Class 8 transmissions which were
subsequently resold to Tauro. This assignment
includes R&R’s status as a direct purchaser of
all vehicles containing Class 8
transmissions . . . .
J.A. 137 (emphasis added).
29
dismissal of the class certification motion and triggered
intervention motions at that time. We agree with Toledo
Mack and JJRS that the District Court’s denial of their
motions to intervene was an abuse of discretion.
A district court’s timeliness inquiry for both types of
Rule 24 motions requires considering the totality of the
circumstances arising from three factors: “(1) the stage of the
proceeding; (2) the prejudice that delay may cause the parties;
and (3) the reason for the delay.” In re Cmty. Bank of N. Va.,
418 F.3d 277, 314 (3d Cir. 2005); In re Fine Paper Antitrust
Litig., 695 F.2d 494, 500 (3d Cir. 1982) (treating the
timeliness inquiry the same for both types of Rule 24
motions). These three factors are necessarily bound up in one
another, see, e.g., Mountain Top Condo. Ass’n v. Dave
Stabbert Master Builder, Inc., 72 F.3d 361, 370 (3d Cir.
1995) (“[T]he stage of the proceeding is inherently tied to the
question of the prejudice the delay in intervention may cause
to the parties already involved.”), and we maintain “a general
reluctance to dispose of a motion to intervene as of right on
untimeliness grounds because the would-be intervenor
actually may be seriously harmed if not allowed to
intervene,” Benjamin ex rel. Yock v. Dep’t of Pub. Welfare of
Pa., 701 F.3d 938, 949 (3d Cir. 2012).
We also have recognized a presumption of timeliness
for intervention motions filed by purported class members—
at least where the class has been certified and before the
court-appointed opt-out deadline has passed, In re Cmty.
Bank, 418 F.3d at 314, although we have not had occasion
before today to opine whether that presumption applies pre-
certification as well. The presumption, in any event, is not
dispositive, and may be rebutted by a contrary determination
30
under the totality of the factors described above. See In re
Cmty. Bank of N. Va., 622 F.3d 275, 312-13 (3d Cir. 2010).
Appellants make two arguments as to why the District
Court abused its discretion in finding their motions untimely.
First, they urge that the District Court should have applied the
presumption of timeliness in this case, even though the
putative class had not yet been certified. Second, they argue
that the District Court erred in its application of the three
timeliness factors, and had it properly applied them in the
context of the presumption, it could not have discarded their
motions as untimely. We are in agreement. 18
18
Our jurisprudence requires a district court to
consider four factors when ruling on a Rule 24(a)(2) motion:
whether “(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. Because Appellees did not dispute
the latter three factors, the District Court disposed of both the
intervenors’ motions solely on the timeliness factor. Wallach,
125 F. Supp. 3d at 495. Timeliness is thus the only issue
presented to us on appeal. Although it may be that Toledo
Mack and JJRS opt to withdraw their motions to intervene in
view of Tauro’s standing to proceed as a class representative,
should they choose to persist in their motions and dispute the
remaining factors on remand, nothing in our opinion should
be taken to suggest that the District Court may not take these
factors into account in ruling on the Rule 24 motions.
31
A. Procedural History
We recount the procedural history of this case in some
detail only because it is necessary for our review of the
District Court’s denial of the motions to intervene. After it
commenced and Tauro became a named representative in
2010, this case wound its way through several years of
litigation, resulting in over 2.5 million pages of discovery.
In August 2014, Appellees served interrogatories on
Tauro that asked, among many other things, about the nature
of the assignment of R&R’s direct purchaser claim, and in
November 2014, Appellees conducted related depositions.
The goal of the assignment-related questions was to ascertain
whether Tauro and R&R exchanged bargained-for
consideration for the assignment in 2010. Appellees urge that
these interrogatories and depositions put Tauro on notice that
its standing in the case—predicated on a valid assignment of
R&R’s claim—was in jeopardy. Also in November 2014,
Appellants filed a Rule 23 motion for class certification, and
the District Court scheduled evidentiary hearings for the
following March.
In early January 2015, Appellees submitted a letter to
the District Court seeking leave to file a motion to dismiss the
case for lack of standing under Federal Rule of Civil
Procedure 12(b)(1) based on their conclusion that R&R’s
assignment of its antitrust claims was ineffective for lack of
consideration. The District Court denied that request two
weeks later, and instructed Appellees to present their standing
arguments in their response brief to Appellants’ motion for
class certification. Appellees submitted that response brief
two days later, which addressed both their standing and class
certification arguments.
32
On March 6, 2015, Tauro filed its reply brief to
Appellees’ brief on class certification and standing, which
also redefined the class to drop PTS from the case. On the
same day, concerned at this point that Tauro could be ousted
and leave the suit without any named representative, Tauro’s
attorney filed a Rule 24 motion on behalf of Toledo Mack,
seeking to intervene as a putative class representative. On
March 24, 2015, the same attorney filed an analogous motion
on JJRS’s behalf, and the District Court held a hearing on all
of the relevant motions the following day. By this point,
discovery had closed, and the deadline for joinder had passed
over a year earlier. The District Court thereafter denied the
motions to intervene as untimely. Wallach, 125 F. Supp. 3d
at 496.
B. Presumption of Timeliness
Appellants protest that the District Court erred in
concluding that the presumption of timeliness announced in
In re Community Bank does not apply to would-be
intervenors where a class has yet to be certified and notice
containing an opt-out date has yet to be mailed to the putative
class members. 19 See Wallach, 125 F. Supp. 3d at 495 n.9.
While it is true that we fashioned this rebuttable presumption
19
While we review the District Court’s denial of the
motions to intervene for abuse of discretion, “[w]hether an
incorrect legal standard has been used is an issue of law to be
reviewed de novo.” In re Hydrogen Peroxide Antitrust Litig.,
552 F.3d 305, 312 (3d Cir. 2008) (quoting In re Initial Pub.
Offering Sec. Litig., 471 F.3d 24, 32 (2d Cir. 2006)).
Whether the presumption applies pre-certification is just such
an issue.
33
in In re Community Bank for a class action at a different stage
than the one before us, we agree with Appellants that the
rationale that animated the presumption in In re Community
Bank applies with equal force in the pre-certification context.
That rationale was that members of a class have no
“duty to take note of the suit or to exercise any responsibility
with respect to it” until “the existence and limits of the class
have been established and notice of membership has been
sent.” 418 F.3d at 314 (quoting McKowan Lowe & Co. v.
Jasmine, Ltd., 295 F.3d 380, 384 (3d Cir. 2002)). Those
concerns for fair notice and the rights of persons who may
otherwise be bound by the judgment in a class action carry
just as much weight for putative class members before a court
has ruled on class certification. We thus decline to adopt the
District Court’s bright-line rule distinguishing between pre-
and post-certification motions to intervene. 20
20
The District Court grounded its distinction between
a putative and a certified class on a 1975 Supreme Court case
in which the Court noted that “[w]hen [a] District Court
certifie[s] the propriety of [a] class action, the class of
unnamed persons described in the certification acquire[s] a
legal status separate from the interest asserted by the
appellant.” Sosna v. Iowa, 419 U.S. 393, 399 (1975). The
Court in Sosna, however, was addressing whether a class
action challenging certain Iowa residency requirements for
divorce was moot once the named plaintiff had satisfied the
residency requirement over the course of the litigation. Its
pronouncements in the context of mootness did not address
the interests that give rise to the presumption of timeliness we
recognized in In re Community Bank and do not suggest that
the interests of putative class members seeking to intervene
34
In addition to relying on In re Community Bank itself,
Appellants contend that American Pipe & Construction Co. v.
Utah, 414 U.S. 538 (1974), supports their position on the
presumption of timeliness. American Pipe established the
rule that statutes of limitations toll while class certification
motions are pending so that putative class members may
await resolution of such motions and retain their ability to
intervene in the event such motions for class certification are
denied after the limitations period would have run on their
individual claims. See Am. Pipe & Constr. Co., 414 U.S. at
545-53. In crafting this rule, the Supreme Court sought to
relieve putative class members of the need “to file earlier
individual motions to join or intervene as parties,” because
such “multiplicity of activity” would run contrary to two key
goals of the class action device: efficiency and judicial
economy. Id. at 551.
While they do not directly cite American Pipe in their
brief, Appellees invoke its reasoning by forewarning that
extending the presumption to the pre-certification context
would expose courts to endless intervention motions,
clogging the courts with the very “multiplicity of activity”
American Pipe sought to avoid. Their point is well taken, and
we cautioned in In re Community Bank that the presumption
of timeliness should not be read to authorize a flurry of
intervention or joinder motions unrelated to the merits of the
class action because such a result would “seriously hamper[]”
the “goals of Rule 23” as outlined in American Pipe. 418
F.3d at 315.
are so different from those of members of a certified class as
to justify altering the presumption’s application.
35
That word of warning, however, did not preclude our
invocation of the presumption in In re Community Bank.
And, as Appellants point out, without the presumption of
timeliness, “class members would be compelled to intervene
in every class action to protect their interests in the event the
proposed class representatives are ultimately deemed
inadequate”—giving rise to inefficiencies “[t]he class action
device was designed to avoid . . . both before and after class
certification.” Reply Br. 16. Denying the presumption to
putative class members also could result in great
inefficiencies and reductions in judicial economy in cases like
the one before us, which would be dismissed after years of
motion practice and discovery, only to be filed anew by
plaintiffs who were unable to simply intervene and carry the
motion for class certification through to its conclusion.
Further, if the presumption of timeliness applied only to
certified classes, then motions to intervene brought prior to
class certification might be deemed untimely, even though
those same motions would be timely if brought years later,
after a class was certified. The illogic of such result and the
goals of efficiency and judicial economy emphasized by the
Supreme Court in American Pipe militate that we extend the
presumption of timeliness from In re Community Bank to the
pre-certification context.
Not having had the benefit of our holding today, the
District Court understandably failed to apply that presumption
to Toledo Mack and JJRS’s motions to intervene. As it turns
out, however, that omission amounted to a misapplication of
the law, which necessarily constitutes an abuse of discretion.
In re GM Corp., 55 F.3d at 783. Under these circumstances,
we could remand for the District Court to apply the
presumption in the first instance and determine whether it was
36
rebutted by the totality of the timeliness factors. See, e.g., In
re Cmty. Bank, 622 F.3d at 312-13. However, where, as here,
the totality of those factors points only to one conclusion—
that the presumption is not rebutted and the District Court
erred in concluding two of the three factors weighed against
timeliness—we may proceed to address those factors here.
See, e.g., Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 712
(3d Cir. 2004) (“Although a district court’s application of an
incorrect legal standard ‘would normally result in a remand,
we need not remand’ if application of the correct standard
could support only one conclusion.” (quoting Duraco Prods.,
Inc. v. Joy Plastic Enters., Ltd., 40 F.3d 1431, 1451 (3d Cir.
1994))). For the sake of efficiency, we will proceed with that
analysis here.
C. The Timeliness Factors
The District Court concluded that all three of the
timeliness factors weigh against Toledo Mack and JJRS’s
motions to intervene. Wallach, 125 F. Supp. 3d at 495-96. In
light of the presumption of timeliness, which necessarily
raises the bar for a motion to intervene to be deemed
untimely, and our conclusion that two of the three timeliness
factors point strongly in favor of granting the motions, we
will reverse the District Court’s denial of those motions.
As a threshold matter, we agree with the District Court
that the first timeliness factor—the stage of the litigation—
counsels in favor of denial. While this factor requires us to
assess “what proceedings of substance on the merits have
occurred,” rather than considering “[t]he mere passage of
time,” Mountain Top Condo. Ass’n, 72 F.3d at 369, we are
satisfied that the proceedings here were advanced. Unlike in
Mountain Top Condominium Ass’n, where there had been “no
37
depositions taken, dispositive motions filed, or decrees
entered during the four year period in question,” id. at 370,
the litigants here had briefed (and resolved) a dispositive
motion to dismiss, undertaken “extensive fact discovery,”
briefed the motion to certify the class, and submitted expert
reports and depositions before the motions to intervene were
filed, see Wallach, 125 F. Supp. 3d at 495. While Appellants
pose some arguments to the contrary, 21 we agree with the
District Court that, on balance, the extensive briefing and
years-long discovery already completed by the time the
motions to intervene were filed rendered the suit sufficiently
advanced to weigh against granting said motions.
However, the other two timeliness factors—reason for
delay and prejudice to the parties—point decisively in the
opposite direction, leading to the inexorable conclusion that
the totality of the circumstances supported granting the
motions to intervene. 22 In assessing whether there was a
legitimate reason for the proposed intervenors’ purported
21
For example, Appellants point out that discovery
was ongoing in some respects, summary judgment had not yet
been briefed, the parties were a year away from trial, and that
they would not request additional discovery; at most, they
argue, “intervention would have required [Appellees] to
produce documents and possibly sit for two depositions.”
Appellants’ Br. 26-27.
22
Although a different sequence than that we provided
in In re Community Bank, 418 F.3d at 314, we opt here to
address the reason for delay factor before the prejudice factor
because our conclusions as to the former inform the latter.
38
delay in filing their motions, we consider the extent of the
delay and whether there was good reason for it.
Our standard to measure any purported delay is clear:
“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.” United
States v. Alcan Aluminum, Inc., 25 F.3d 1174, 1183 (3d Cir.
1994); accord Benjamin, 701 F.3d at 950 (“The delay should
be measured from the time the proposed intervenor knows or
should have known of the alleged risks to his or her rights or
the purported representative’s shortcomings.” (emphasis
added)). Less clear, and the subject of vigorous dispute
between the parties, is when this point occurred.
Appellees insist that Toledo Mack and JJRS knew or
should have known Tauro’s direct purchaser standing was at
risk as of the August 2014 interrogatories that inquired
whether R&R’s assignment was supported by valid
consideration or the November 2014 depositions related to
such interrogatories. The District Court agreed, concluding
that the August interrogatories and November depositions
were the proper “yardstick” from which the assess timeliness
because the “caliber of representation and the significant
amount of discovery” meant that the proposed intervenors
“should have become aware of potential challenges to the
standing of the named class representatives” at that time.
Wallach, 125 F. Supp. 3d at 495-96. Appellees’ argument
relies heavily on the fact that Toledo Mack and JJRS were
represented by the same counsel as Tauro, implying that
counsel’s knowledge of the interrogatories should be imputed
to Toledo Mack and JJRS. Appellees further contend that
39
even if January 2015 is the proper benchmark, two months
was an unreasonable delay.
Appellants, on the other hand, contend that the letter
that Appellees submitted to the District Court in January
2015, seeking leave to file a 12(b)(1) motion to dismiss for
lack of standing, is the moment they were first made aware of
the possibility that Tauro would be dropped from the suit, and
they aver they were confident in the validity of the
assignment until that time. From that vantage point, they
argue, the delay of two months until Toledo Mack’s March 6
motion to intervene—filed on the same day Tauro itself filed
its reply brief to Appellees’ standing challenge—and two-plus
months for JJRS’s March 24 motion were not meaningful
delays.
We agree with Appellants that the interrogatories and
depositions, directed as they were at Tauro, should not be
viewed as having put Toledo Mack and JJRS—or the counsel
they shared with Tauro—on notice of the need to intervene as
class representatives, and thus August and November 2014
did not start the running of the hourglass. Moreover, even
accepting Appellees’ theory of imputed knowledge, the
interrogatories at issue were phrased in general terms, and
only two of the twenty-nine questions posed to Appellants in
August 2014 were related to the validity of R&R’s
assignment; similarly, only a small fraction of the November
depositions raised questions about whether consideration was
exchanged. It cannot be said that general questions about the
assignment should have triggered concerns about Tauro’s
standing sufficient to induce counsel to find alternative
plaintiffs, particularly where Appellees had not challenged
the validity of the assignment over the course of the
preceding five years, including in their 2010 motion to
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dismiss the suit. Cf. Mountain Top Condo. Ass’n, 72 F.2d at
370 (affirming grant of motion to intervene in part where
plaintiffs alleged they had “reasonably concluded” their
money was safe for a long time and took prompt action once
they were informed otherwise, even though it was late in the
grand scheme of the lawsuit (emphasis added)). At base,
timeliness cannot hinge on requiring litigants and their
attorneys to divine the intent behind each of their opponent’s
questions in discovery and defensively file motions based on
conceivable uses their answers might provide. 23 We
23
Appellants make two additional observations, upon
which we need not rely. First, they urge that the
interrogatories and depositions were not public documents,
meaning Toledo Mack and JJRS had no way of being put on
notice regarding their contents (and the concomitant risk to
the class action) and further supporting a later date as the
proper benchmark. While lack of access to these documents
would be a legitimate additional reason to reject the
interrogatories and depositions as the relevant moment in
time, we need not and do not rely on this fact, which was not
made plain in the record. Second, for the first time in their
reply brief on appeal, Appellants assert that Toledo Mack and
JJRS did not retain class counsel until after Appellees filed
their response to Appellants’ motion for class certification in
late January 2015 (which included Appellees’ challenge to
Tauro’s standing), implying that the proposed intervenors
were ignorant of any risk to the litigation until that time.
Appellees retort that Toledo Mack and JJRS fail to explain
whether they had previous contact with Tauro’s counsel
before retaining him for the intervention motions that would
have put them on notice of the risk to Tauro’s standing and
that counsel’s knowledge of the potential risks to Tauro’s
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conclude, therefore, that the earliest moment at which Toledo
Mack and JJRS were on notice of the serious risk that the
named representative might lack standing was the submission
of Appellees’ January 2015 letter advising of their intent to
challenge the validity of R&R’s assignment.
Appellees rely on NAACP v. New York, 413 U.S. 345,
366-67 (1973), to argue that the two months that elapsed
between the January letter and Toledo Mack’s motion to
intervene nonetheless amounted to an unreasonable delay.
We disagree. While the Court there did affirm a denial of a
motion to intervene filed three weeks after the intervenors
claimed to have become aware of the issue in that case, its
rationale was tied more to the stage of the litigation factor,
not the reason for delay factor. In addition, the NAACP in
that case had strong reason to believe the case was going to
imminently come to an end because the United States
government—the opposing party—was expected to consent
to entry of summary judgment. See id. Here, Toledo Mack
and JJRS had no reason to suspect Tauro would capitulate to
the challenge to its standing, and it was therefore reasonable
for them to file their motions to intervene alongside Tauro’s
reply.
Moreover, here, the District Court specifically directed
Appellees to brief their standing challenge in their response to
Appellants’ motion for class certification, making it all the
more reasonable for the proposed intervenors to seek to
intervene in conjunction with Tauro’s reply. Given that
Tauro, Toledo Mack, and JJRS were all represented by the
standing should be imputed to Toledo Mack and JJRS in any
event. We decline to consider these arguments, as they are
not based on facts in the record.
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same counsel and that the District Court had expressed a clear
preference for the issues to be consolidated, intervenors did
not unduly delay in filing their motions in coordination with
Tauro’s reply rather than filing them piecemeal.
The District Court’s erroneous assessment of the
alleged delay in this case also infected its analysis of
prejudice. District Courts are instructed to assess the
prejudice that would befall either party that is “attributable to
any time delay.” Mountain Top Condo. Ass’n, 72 F.3d at
370. Having concluded there was no meaningful delay here,
we are skeptical of the alleged prejudice to Appellees. The
grounds identified by the District Court do not, in any event,
withstand scrutiny.
The District Court concluded that “allowing
intervention at this stage in the litigation would require re-
opening discovery to explore the suitability of the intervening
plaintiffs as a class representatives [sic] and re-briefing class
certification issues specific to the intervening plaintiffs.”
Wallach, 125 F. Supp. 3d at 496. But Appellants have not
sought to re-open discovery or re-brief class certification, and
additional discovery Appellees may require would be limited
to Toledo Mack and JJRS’s standing, typicality, and
adequacy as class representatives. The District Court further
stated that Appellees “would additionally be required to
respond to the proposed complaint. After five years of
litigation, these additional hurdles will result in further delays
as well as burdensome costs to the defendants.” Wallach, 125
F. Supp. 3d at 496. But Appellees did not bring their
challenge to Tauro’s standing until five years into the
litigation, thereby bringing upon themselves any prejudice
stemming from late-arising additional answers and discovery
on Toledo Mack and JJRS’s adequacy to serve as class
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representatives. On balance, then, because there was no
significant delay from which prejudice could stem and
because the nature of the burdens facing Appellees does not
amount to significant prejudice, this factor, too, weighs in
favor of granting the motions to intervene.
For these reasons, we conclude that the totality of the
timeliness factors clearly weighs in favor of granting Toledo
Mack and JJRS’s motions to intervene and cannot rebut the
presumption of timeliness the District Court erroneously
failed to afford to those motions. Because the District Court
applied the wrong legal standard and misapplied the law to
the facts, it abused its discretion in denying them. See In re
GM Corp., 55 F.3d at 783.
V. Conclusion
For the foregoing reasons, we will reverse the District
Court’s decisions to dismiss Tauro for lack of standing,
to deny Toledo Mack and JJRS’s motions to intervene as
class representatives, and to—as a result—dismiss
Appellants’ motion for class certification for lack of Article
III standing. In light of these reversals, we will remand this
case for proceedings consistent with this opinion.
44