Executive Risk Specialty Insurance v. Rutter Hobbs & Davidoff, Inc. ( 2014 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAR 19 2014
MOLLY C. DWYER, CLERK
EXECUTIVE RISK SPECIALTY No. 12-56862 U.S. COURT OF APPEALS
INSURANCE COMPANY, a Connecticut
corporation, D.C. No. 2:11-cv-04828-GAF-
FFM
Plaintiff - Appellee,
v. MEMORANDUM*
RUTTER HOBBS AND DAVIDOFF,
INC., a California corporation; et al.,
Defendants - Appellees.,
V.
J. P. HYAN,
Intervenor - Appellant.
Appeal from the United States District Court
for the Central District of California
Gary A. Feess, District Judge, Presiding
Argued and Submitted February 14, 2014
Pasadena, California
Before: FARRIS, N.R. SMITH, and WATFORD, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
“We review the denial of a motion to intervene as of right de novo.” Citizens
for Balanced Use v. Mont. Wilderness Ass’n, 647 F.3d 893, 896 (9th Cir. 2011).1
However, factual findings made by the district court (in resolving the motion) are
reviewed for clear error. See Ritter v. Morton, 513 F.2d 942, 949 (9th Cir. 1975)
(per curiam) (articulating general standard under Fed. R. Civ. P. 52(a)); accord
Defenders of Wildlife v. Perciasepe, 714 F.3d 1317, 1322 (D.C. Cir. 2013)
(reviewing district court’s factual findings respecting motion to intervene as of
right for clear error); Woolen v. Surtran Taxicabs, Inc., 684 F.2d 324, 334 (5th Cir.
1982) (same). On the other hand, “[p]ermissive intervention is committed to the
broad discretion of the district court and is therefore reviewed by this court for
abuse of discretion.” Orange Cnty. v. Air Cal., 799 F.2d 535, 539 (9th Cir. 1986).
Finally, in reviewing a district court’s order denying a motion to intervene, “we
look at the procedural posture of the case as it existed on that date.” League of
United Latin Am. Citizens v. Wilson, 131 F.3d 1297, 1303 n.2 (9th Cir. 1997).
I.
Of the four requirements to grant intervention as of right, Fed. R. Civ. P.
24(a), the parties only dispute whether “the existing part[y] may not adequately
1
Whether a motion to intervene was timely filed is reviewed for abuse of
discretion. Citizens for Balanced Use, 647 F.3d at 896. Here, the district court
concluded that the motion was timely; no party challenges that holding on appeal.
-2-
represent the applicant’s interest.” Citizens for Balanced Use, 647 F.3d at 897(internal quotation marks omitted). Adequacy of representation is determined by
considering whether (1) “the interest of a present party is such that it will
undoubtedly make all of a proposed intervenor’s arguments;” (2) “the present party
is capable and willing to make such arguments; and” (3) “a proposed intervenor
would [not] offer any necessary elements to the proceeding that other parties would
neglect.” Arakaki v. Cayetano, 324 F.3d 1078, 1086 (9th Cir. 2003). Further,
“[w]hen an applicant for intervention and an existing party have the same ultimate
objective, a presumption of adequacy of representation arises,” and “a compelling
showing should be required to demonstrate inadequate representation.” Id.The district court concluded that Rutter Hobbs & Davidoff (“RHD”)
“adequately protected” Hyan’s interests. Specifically, it found that
RHD and Hyan share the same ultimate objective: first, to satisfy
Hyan’s judgment as fully and expediently as possible, and second, to
satisfy that judgment from the same source of funds—the ERSIC
insurance proceeds. The Settlement Agreement by its very terms
obligates RHD to “use its best efforts to obtain the ERSIC Payment”
on Hyan’s behalf. That RHD is capable and willing to make Hyan’s
arguments is demonstrated by the fact that the arguments asserted in
the present overlap in nearly every respect. Indeed, Hyan has not
described what “necessary elements” he would bring to these
proceeding[s] that RHD would neglect.
-3-
These factual findings created a presumption of adequacy, which Hyan failed to
rebut. Contemporaneous with Hyan’s motion to intervene, RHD moved to disperse
the interpleaded funds to Hyan. Their motions included arguments before the
district court that “overlap[ped] in nearly every respect,” answering the Arakaki
factors in favor of denying intervention. Not only was RHD capable and willing to
make Hyan’s arguments, but RHD “undoubtedly” did make all of Hyan’s
arguments. The district court also found that Hyan would not add any “necessary
elements” to the proceeding. Hyan has failed to rebut these findings, which are not
clearly erroneous. Therefore, RHD did adequately represent Hyan when he moved
to intervene, and Hyan failed to meet all four requirements necessary to intervene
as of right.2
To overcome this conclusion, Hyan requests that we consider events
following the district court’s denial of its motion to intervene. However, we must
consider the motion to intervene under “the procedural posture of the case as it
existed” on the date the district court considered the motion. League of United
2
Although the dissent articulates a plausible alternative view of the
settlement agreement, it is no more plausible than the district court’s view. As a
result, the district court’s view “cannot be clearly erroneous.” Anderson v. City of
Bessemer, 470 U.S. 564, 574 (1985) (“Where there are two permissible views of
the evidence, the factfinder’s choice between them cannot be clearly erroneous.”).
-4-
Latin Am. Citizens, 131 F.3d at 1303 n.2.3 If there has been a change of
circumstances, Hyan may bring his motion to intervene again. However, this court
should not consider those circumstances before giving the district court the
opportunity to do so.
II.
The Federal Rules of Civil Procedure vest discretion in a district court to
permit intervention: “On timely motion, the court may permit anyone to intervene
who . . . has a claim or defense that shares with the main action a common question
of law or fact.” Fed. R. Civ. P. 24(b)(1)(B). The court must also have “an
independent basis for jurisdiction over the applicant’s claims.” Donnelly v.
Glickman, 159 F.3d 405, 412 (9th Cir. 1998). However, even if these requirements
are met, “the district court has discretion to deny permissive intervention.” Id.The district court did not abuse its discretion in denying Hyan’s motion to
intervene under Rule 24(b)(1)(B), because, as concluded by the district court,
Hyan’s “participation [would] not contribute to the development of the underlying
factual issues or the equitable adjudication of the legal issues involved”; “Hyan’s
3
The dissent’s citation to United States v. Washington, 86 F.3d 1499, 1505
(9th Cir. 1996), is unpersuasive. See dissent op. at 2. The purported intervenor in
Washington sought, for the first time on appeal, “limited intervention” to appeal.
Id. at 1505. This new attempt at intervention put the purported intervenor’s
conduct following the district court’s decision at issue. Such is not the case here.
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intervention would [only] add . . . emphasis to the position taken by RHD”; and
“Hyan’s interests are adequately protected by RHD.” These reasons suffice. See,
e.g., Dep’t of Fair Emp’t & Hous. v. Lucent Techs. Inc., 642 F.3d 728, 742 (9th
Cir. 2011) (permitting a district court to preclude intervention on issues where
intervenor-in-part was adequately represented by another party); Perry v.
Schwarzenegger, 630 F.3d 898, 906 (9th Cir. 2011) (per curiam) (finding no abuse
of discretion where district court denied permissive intervention because purported
intervenors had no new arguments or evidence to contribute); Donnelly, 159 F.3d
at 412 (upholding denial of permissive intervention where “allowing intervention
would only serve to undermine the efficiency of the litigation process” (internal
quotation marks omitted)).4
AFFIRMED.
4
Hyan also argued below and now argues on appeal (primarily in his Reply
Brief) that Federal Rule of Civil Procedure 19 also necessitates his intervention.
However, no party has sought Hyan’s joinder under Rule 19, and the district court
has made no decision under Rule 19. As a result, we do not consider Hyan’s
arguments citing Rule 19. Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999).
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FILED
Executive Risk Specialty Insurance Co. v. Hyan, No. 12-56862 MAR 19 2014
MOLLY C. DWYER, CLERK
WATFORD, Circuit Judge, dissenting: U.S. COURT OF APPEALS
In my view, the district court erred in concluding that J. P. Hyan and Rutter
Hobbs and Davidoff (“RHD”) share the same ultimate objective as a result of their
settlement agreement. It’s true that both RHD and Hyan want the interpleaded
funds paid to Hyan, but their interests are not identical. Under the settlement
agreement, RHD is obligated to use its “best efforts” to secure payment of the
funds to Hyan, but if those efforts prove unsuccessful, RHD will not have to pay
Hyan any portion of the $5 million at issue. RHD has no direct claim of its own to
the $5 million res, but Hyan does. If the $5 million res is depleted by the
competing claims of Hummer and Peterson, only Hyan will be injured, not RHD.
Thus, RHD and Hyan do not share the same ultimate objective—RHD’s interest is
limited to complying with its obligations under the settlement agreement, while
Hyan’s ultimate interest is actual receipt of the res. Under these circumstances, I
would hold that the district court erred by applying a presumption of adequate
representation and requiring Hyan to make a compelling showing that RHD’s
representation was inadequate.
Since there’s no dispute that Hyan meets the other requirements of
Rule 24(a)(2), absent the presumption of adequate representation, Hyan is entitled
to intervene if he can show that RHD’s representation of his interests “may be”
Page 2 of 3
inadequate. Arakaki v. Cayetano, 324 F.3d 1078, 1086 (9th Cir. 2003). I would
hold that Hyan has made this “minimal” showing here. Id. Adequate
representation requires, among other things, that the representative “will
undoubtedly make all of a proposed intervenor’s arguments,” and that the
representative is “capable and willing to make such arguments.” Id. The
divergence between RHD’s and Hyan’s interests created by the settlement
agreement raises the potential that RHD may not make all of Hyan’s arguments.
Events following the district court’s ruling on Hyan’s intervention motion
confirm this to be the case. (Even though these events occurred after the district
court’s ruling, they are the proper subject of judicial notice and are relevant to our
de novo assessment of Hyan’s right to intervene. See United States v. Washington,
86 F.3d 1499, 1505 (9th Cir. 1996) (considering effect of appeal taken after district
court’s ruling on motion to intervene); 21B Charles Alan Wright & Kenneth W.
Graham, Jr., Federal Practice and Procedure § 5106.4, at 244–45 (2d ed. 2005).)
The district court granted a stay of the interpleader action pending the outcome of
state-court litigation against Hummer and Peterson stemming from their work at
RHD. This ruling may result in the depletion of the $5 million res before the
parties’ competing claims to the funds are resolved in the interpleader action.
Despite this clear potential for impairment of Hyan’s interest in the res, RHD did
Page 3 of 3
not appeal the ruling. Hyan contends that, had he been a party to the interpleader
action, he would have sought appellate review of the district court’s ruling granting
the stay.
Because intervention is justified when the representative party doesn’t make
all of a proposed intervenor’s arguments, it follows that failure to appeal a ruling
adverse to the would-be intervenor’s interest may constitute inadequate
representation. See Pellegrino v. Nesbit, 203 F.2d 463, 468 (9th Cir. 1953)
(shareholder entitled to intervene in securities action against directors after
corporation decided not to appeal); see also Americans United for Separation of
Church and State v. City of Grand Rapids, 922 F.2d 303, 306 (6th Cir. 1990);
7C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure
§ 1909, at 438–39 (3d ed. 2007). In Spangler v. Pasadena City Bd. of Ed., 427
F.2d 1352 (9th Cir. 1970), we held that failure to appeal did not amount to
inadequate representation, but in that case the decision not to appeal was made by
an elected school board representing the proposed intervenor. Id. at 1354.
Because RHD’s failure to appeal the district court’s order staying the case
demonstrated that RHD was not, in fact, capable and willing to make all of Hyan’s
arguments, I believe its representation was inadequate.