Surf's Up Legacy Partners, LLC v. Virgin Fest, LLC ( 2021 )


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  •       IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
    SURF’S UP LEGACY PARTNERS, LLC               )
    (f/k/a KAABOO, LLC), et. al.,                )
    )
    Plaintiffs-Counterclaim Defendants, )
    )
    v.                                     )         C.A. No. N19C-11-092
    )         PRW CCLD
    VIRGIN FEST, LLC, et. al.,                   )
    )
    Defendants-Counterclaim Plaintiffs, )
    )
    VIRGIN FEST INVESTCO, LLC,                   )
    )
    Defendant-Counterclaim Plaintiff-   )
    Counterclaim Defendant.             )
    Submitted: November 17, 2021
    Decided: December 16, 2021
    Upon Proposed Intervenor Lewis Brisbois Bisgaard & Smith LLP’s
    Motion to Intervene,
    DENIED.
    MEMORANDUM OPINION AND ORDER
    Cheneise V. Wright, Esquire, LEWIS BRISBOIS BISGAARD & SMITH LLP,
    Wilmington, Delaware, Attorneys for Proposed Intervenor Lewis Brisbois Bisgaard
    & Smith LLP.
    Theodore A. Kittila, Esquire, James G. MacMillan, III, Esquire, HALLORAN
    FARKAS + KITTILA LLP, Wilmington, Delaware, Attorneys for Plaintiffs-
    Counterclaim Defendants Surf’s Up Legacy Partners, LLC, et al., Counterclaim
    Plaintiff-Counterclaim Defendant Bryan Gordon, and Counterclaim Defendants
    Robert Walker and Seth Wolkov.
    Eric M. George, Esquire (pro hac vice), Kim S. Zeldin, Esquire (pro hac vice),
    BROWNE GEORGE ROSS LLP, Los Angeles, California, Attorneys for Plaintiffs-
    Counterclaim Defendants Surf’s Up Legacy Partners, LLC, et al.
    Robert K. Beste, Esquire, Jason Z. Miller, Esquire, SMITH, KATZENSTEIN &
    JENKINS LLP, Wilmington, Delaware, Attorneys for Defendants-Counterclaim
    Plaintiffs Virgin Fest, LLC, et al., and Defendant-Counterclaim Plaintiff-
    Counterclaim Defendant Virgin Fest Investco, LLC.
    Marvin S. Putnam, Esquire (pro hac vice), Jessica Stebbins Bina, Esquire (pro hac
    vice), R. Peter Durning, Jr., Esquire (pro hac vice), LATHAM & WATKINS LLP,
    Los Angeles, California, Attorneys for Defendant-Counterclaim Plaintiff-
    Counterclaim Defendant Virgin Fest Investco, LLC.
    WALLACE, J.
    Lewis Brisbois Bisgaard & Smith (“LBBS”) is a Limited Liability Partnership
    law firm with offices located throughout the United States.1 Members of its
    Colorado-based office were hired by Kaaboo—Surf’s Up Legacy Partners’
    predecessor—to provide legal services and representation in the matter of Kaaboo,
    LLC v. Pilsl, Pilsl, & Wingerd.2 The parties’ relationship was memorialized by an
    engagement agreement that includes an attorney’s lien provision.3 That provision
    permits LBBS to attach “a lien on any and all claims or causes of action that are the
    subject of the representation under th[at] Agreement.”4 The legal services rendered
    pursuant to that engagement agreement are wholly unrelated to the facts and
    transactions that have spawned this litigation.5
    LBBS rendered the agreed-upon legal services and advanced associated legal
    costs, but Kaaboo, now an insolvent organization, never fully paid its bill.6 LBBS
    successfully obtained a judgment for its unpaid legal fees in the Superior Court of
    California in the amount of $348,356.43,7 which was then domesticated in this Court
    1
    LBBS’s Mot. to Intervene, Sept. 10, 2021, ¶ 2 (D.I. 161).
    2
    Id., Ex. A, Engagement Agreement.
    3
    Engagement Agreement, ¶ 8.
    4
    Id. (emphasis added).
    5
    Tr. of Hr’g at 4, Nov. 17, 2021 (D.I. 184).
    6
    Mot. to Intervene, ¶ 3; Tr. of Hr’g at 4.
    7
    Tr. of Hr’g at 4; see also Mot. to Intervene, Ex. B, Cal. Super. Ct. Judgment.
    -1-
    on June 30, 2021.8 Citing the attorney’s lien provision in its Kaaboo engagement
    agreement, LBBS seeks intervention in this present action to try to collect on its
    California-made-Delaware judgment from any funds that may be awarded to Surf’s
    Up (f/k/a Kaaboo) here.9
    For the reasons explained below, LBBS’s Motion to Intervene is DENIED.
    I. PARTIES’ CONTENTIONS
    LBBS incants 10 Del. C. §§ 4781-4787, Delaware’s Uniform Enforcement of
    Foreign Judgments Act (“UEFJA”), to try to satisfy Delaware Superior Court Civil
    Rule 24’s intervention requirements.10 According to LBBS, its now-domesticated
    Delaware judgment—stemming from its unpaid legal fees earned elsewhere in a
    wholly unrelated case—provides the requisite standing needed to intervene in this
    lawsuit.11 For the sake of judicial efficiency, says LBBS, it opted to enter into this
    8
    Mot. to Intervene, Ex. C, Del. Super. Ct. execution of foreign judgment.
    9
    Tr. at 4.
    10
    LBBS cites 10 Del. C. §§ 4781-4787 in its written motion but referenced 10 Del. C. § 4809—
    which governs recognition of a foreign-country judgment—at the motion’s hearing. Tr. at 5-6. No
    doubt, this was just one of those inadvertences that oft happens during the back-and-forth of oral
    argument. So, the Court will address LBBS’s arguments under the legal authority cited in its
    written submission.
    11
    Mot. to Intervene, ¶¶ 8-9. LBBS argues that though it might be similarly situated to any other
    unsecured creditor, it is preserving its rights under its “engagement letter that the plaintiff entered
    into willingly, which may not be the case with any other unsecured creditor.” Tr. at 5-6.
    -2-
    active, pending litigation rather than file a separate Delaware action to enforce its
    judgment.12
    Surf’s Up contends that LBBS, as a general judgment creditor, lacks any legal
    basis to intervene here because it has no direct interest in the subject matter of the
    present action.13 Though the defendants in this matter, Virgin Fest, LLC, et al., did
    not file a responsive pleading to LBBS’s motion, they asserted the same position as
    Surf’s Up—opposing the motion—at the hearing.14
    II. APPLICABLE LEGAL STANDARDS
    Delaware Superior Court Civil Rule 24 permits a party to intervene in a
    pending matter either by right or by permission upon a timely application.15 An
    intervention as a matter of right permits a party to intervene when (1) an
    unconditional right is granted by statute; or, as invoked here, (2) “when an applicant
    claims an interest relating to the property or transaction which is the subject matter
    of the action and applicant is so situated that the disposition of the action may as a
    practical matter impair or impede the applicant’s ability to protect that interest,
    12
    Tr. at 6.
    13
    Id. at 8-9; see also Pl.’s Opp’n to Mot. to Intervene, ¶¶ 1-4.
    14
    Tr. at 9 (“The parties are aligned opposing the intervention, although I did not put in any
    papers.”).
    15
    Del. Super. Ct. Civ. R. 24.
    -3-
    unless the applicant’s interest is adequately represented by existing parties.”16 And
    when looking at a motion to intervene under Rule 24(a)—seeking intervention of
    right— “the Court must focus on the particular facts and procedural posture of the
    application.”17       Under the less exacting standards of Rule 24(b)—governing
    permissive intervention—a party may intervene “when an applicant’s claim or
    defense and the main action have a question of law or fact in common.”18
    For the Court to grant a Rule 24(a) request, the third-party movant “must have:
    (a) timely moved to intervene, (b) in order to protect a property interest at issue in
    this case, (c) that would be impaired by the disposition of this action, (d) under
    circumstances where their interests are not adequately represented by Defendants.”19
    The movant must also have standing to intervene.20 “The interest that an intervenor
    claims must be one cognizable by law; therefore, if the intervenor lacks standing to
    assert the claim, ipso facto, the intervenor’s interest cannot be recognized.”21
    16
    Del. Super. Ct. Civ. R. 24(a).
    17
    Wilmington Trust Co. v. Lucks, 
    1999 WL 743255
    , at *6 (Del. Super. Ct. June 18, 1999).
    18
    
    Id.
    19
    Carlyle Investment Management, LLC v. Moonmouth Co. S.A., 
    2015 WL 778846
    , at *3 (Del.
    Ch. Feb. 24, 2015).
    20
    Flynn v. Bachow, 
    1998 WL 671273
    , at *4 n.15 (Del. Ch. Sept. 18, 1998).
    21
    
    Id.
    -4-
    III. DISCUSSION
    A. LBBS’S INTEREST IS NO MORE THAN THAT OF A GENERAL UNSECURED
    CREDITOR AND LACKS ANY LEGAL BASIS FOR INTERVENTION.
    At bottom, LBBS suggests that because it has a valid, but unrelated, judgment
    against Kaaboo (now Surf’s Up), it has an interest in any monies Surf’s Up might be
    awarded here. And without intervention,22 LBBS says, it will lose its opportunity to
    get to any monies that might be awarded in this case to satisfy that unassociated
    judgment. But neither Delaware’s Uniform Enforcement of Foreign Judgments Act
    nor LBBS’s engagement letter with Kaaboo provide a basis for LBBS’s intervention
    in this action under Rule 24.
    22
    Intervention which, in LBBS’s view, would include being able to have significant say in the
    disposition of Surf’s Up’s claims here:
    THE COURT: [LBBS Counsel], let me just get this straight. Basically, what
    you do want to do is your firm wishes to intervene, but [ ] then kind of wait it
    out. You wouldn’t want to have any decision making, any type of . . . litigation-
    or [] strategic-decision making in this case or take any individual position. It
    is, if they get a judgment, we want to get part of it?
    [LBBS Counsel]: I would say -- I would go beyond that and say any discussions
    regarding settlement or dismissal of the action, we also want to be part of those
    discussions and have some opinion weight with that respect for the limited
    purpose of that. I would not say for the general expanse of the litigation we
    want to be involved in the decision making or strategy, but for the limited
    purpose of settlement and dismissal of the action, we would want essentially a
    seat at the table.
    Tr. at 10 (cleaned up).
    -5-
    1. Delaware’s Uniform Enforcement of Foreign Judgments Act
    Does Not Provide LBBS Standing to Intervene.
    LBBS tries to use the UEFJA as its vehicle to intervene in this lawsuit.23
    Under Delaware’s UEFJA, a foreign judgment is defined as “any judgment, decree
    or order of a court of the United States or of any other court which is entitled to full
    faith and credit in this State.”24 Any foreign judgment may be filed in any court in
    Delaware and will be given “the same effect and is subject to the same procedures,
    defenses and proceedings for reopening, vacating or staying, as a judgment of the
    Superior Court of this State and may be enforced or satisfied in like manner.”25
    Accordingly, a judgment creditor’s right “to bring an action to enforce a judgment,
    instead of proceeding under [Subchapter V of Chapter 47 of Title 10], remains
    unimpaired.”26 LBBS argues that, under the UEFJA, its Delaware-domesticated-
    California-judgment is entitled to the same effect as any other judgment originating
    from and entered in Delaware.27 So it must follow then, posits LBBS, it has standing
    to intervene because its unimpaired right under the UEFJA to enforce its judgment
    23
    Mot. to Intervene, ¶ 8 (citing DEL. CODE ANN. tit. 10, §§ 4781-4787 (2021) (Enforcement of
    Foreign Judgments).
    24
    DEL. CODE ANN. tit. 10, § 4781 (2021) (“Foreign judgment” defined).
    25
    Id. § 4782 (Filing and status of foreign judgments).
    26
    Id. § 4786 (Right to enforce judgment unimpaired).
    27
    Tr. at 8-9.
    -6-
    satisfies the Rule 24(a) requirement that a proposed intervenor’s claim “must be one
    cognizable by law.”28
    LBBS is correct that its right under the UEFJA to enforce its judgment is
    unimpaired. But when divining standing for intervention, whether LBSS’s judgment
    originated elsewhere or in a Delaware action is of no moment. For whatever right
    LBBS may have gained via the UEFJA certainly does nothing to ease its burden to
    demonstrate Rule 24 standing.
    In determining whether a movant has standing to intervene, our Court of
    Chancery has observed that the standing requirement is harmonious with, rather than
    independent from, the Rule 24 requirements: “[t]his is not to imply that the standing
    is separate from the motion-to-intervene analysis. It is subsumed within the court’s
    analysis of whether ‘the applicant claims an interest relating to the property or
    transaction which is the subject of the action . . . .’”29 Thus, under Rule 24, the
    interest that a proposed intervenor claims in a pending action must be one cognizable
    by law.30 So, LBBS’s standing under Rule 24 turns on whether its claimed interest
    is one that is legally enforceable.
    28
    Id. at 8.
    29
    Bachow, 
    1998 WL 671273
    , at *4 n.15 (emphasis added).
    30
    
    Id.
    -7-
    As one sister state’s commentary on this subject explains:
    The exact boundaries of what constitutes a “legally enforceable
    interest” for purposes of intervention, however, are not clear
    since the question depends upon the careful exercise of discretion
    and a consideration of all the circumstances involved in a
    particular case. The term owes its origin to the desire of the
    courts to prevent the curious and the meddlesome from
    interfering with litigation not affecting their rights. Thus, a mere
    general interest in the litigation, or an interest in an issue that is
    collateral to the basic issues in the case, or an indirect economic
    interest or motive with respect to the litigation, is not a sufficient
    basis for intervention pursuant to the “legally enforceable
    interest” standard. The fact that a civil proceeding may in some
    way affect a proposed intervenor is not sufficient to invoke a
    “legally enforceable interest” entitling such person to
    intervention. Furthermore, a legally unenforceable interest that
    in the future may become enforceable does not provide for its
    holder an absolute right to intervene.31
    Here, LBBS asserts that its “legally enforceable interest” is its California-
    based judgment now domesticated in Delaware under the UEFJA. The judgment is
    for LBBS’s unpaid legal fees of $348,356.43, stemming from LBBS’s representation
    of Kaaboo under the parties’ engagement agreement.32 LBBS acknowledged that
    the subject matter of those legal services performed had nothing to do with this
    litigation whatsoever.33 So LBBS’s unpaid invoice/judgment is nothing more than
    31
    7 Goodrich-Amram 2d § 2327:8 (2021) (Person possessing a legally enforceable interest as
    permissible intervenor, generally) (internal citations omitted) (emphasis added).
    32
    Tr. at 3-4; see also Mot. to Intervene, Ex. B, Cal. Super. Ct. Judgment.
    33
    Tr. at 4-5.
    -8-
    an indirect economic interest wholly unrelated to this litigation.
    LBBS does not have a sufficient basis for intervention under the “legally
    enforceable interest” standard. LBBS’s status as a general unsecured creditor,
    having a mere coincidental interest in the outcome of this litigation—
    notwithstanding its rights afforded by the UEFJA—is not enough to overcome Rule
    24’s standing requirement.34
    2. LBBS’s Status as a General Creditor Is Not a Sufficient Interest
    Relating to the Property or Transaction Which Is the Subject Matter
    of this Action.
    The standing obstacle aside, LBBS still cannot carry its burden under
    Rule 24(a). Delaware Superior Court Civil Rule 24(a) allows a party to intervene in
    a pending action when the moving party “claims an interest relating to the property
    or transaction which is the subject matter of the action . . . .”35 On limited occasion
    intervention is permissible “where, a discrete, distinguishable fund exists and where
    the intervenor has some presently, legally enforceable interest in that fund or where
    his claim against that fund arises from the same factual basis as does the claim in the
    original action.”36 But the mere fact that a pending, separate action may hinder a
    34
    See e.g., The Follieri Group, LLC v. Follieri/Yucaipa Investments, LLC, 
    2007 WL 2459226
    ,
    at *1 (Del. Ch. 2007) (A general creditor has no right to intervene under Rule 24(a) because “it
    has no interest in ‘the property or transaction that is the subject of th[is] action.’”).
    35
    Del. Super. Ct. Civ. R. 24(a).
    36
    Jet Traders Inv. Corp. v. Tekair, Ltd, 
    89 F.R.D. 560
    , 570 (D. Del. 1981).
    -9-
    proposed intervenor’s ability to enforce its previously obtained unconnected
    judgment—i.e. because judgment in that later case may diminish funds to pay the
    bill incurred in the first or because the funds gained by judgment in that later case
    aren’t encumbered to the proposed intervenor—“is insufficient to be considered a
    substantial impairment of an interest for the purposes of Rule 24(a)(2).”37 This is so
    because a rule allowing easy intervention “would abandon completely the general
    notion that a plaintiff may control his action and the [ ] Rule 24(a)(2) requirement
    that an unrepresented petitioner must show an interest in the underlying transaction
    to support an absolute right of intervention.”38
    LBBS has acknowledged forthrightly that the subject matter of the legal
    services performed under its Kaaboo engagement agreement had nothing to do with
    the subject matter of this litigation.39 And the very language of its engagement
    agreement limits any lien it may attach to “claims or causes of action that are the
    subject of the representation under [that] Agreement.”40 So given LBBS’s frank
    37
    
    Id.
    38
    Id. at 570. Because “[t]he Superior Court’s Rules of Civil Procedure closely track the Federal
    Rules of Civil Procedure, cases interpreting the federal rules are persuasive authority for our
    construction purposes.” Appriva S’holder Litig. Co., LLC v. EV3, Inc., 
    937 A.2d 1275
    , 1286 (Del.
    2007) (citing Hoffman v. Cohen, 
    538 A.2d 1096
     (Del. 1988)); Unbound Partners Ltd. P’ship v.
    Invoy Holdings Inc., 
    251 A.3d 1016
    , 1028 (Del. Super. Ct. Mar. 17, 2021) (“[C]ommon are
    Delaware courts’ references to federal precedent interpreting analogue federal rules of civil
    procedure when speaking on our own.”).
    39
    Tr. at 4-5.
    40
    Mot. to Intervene, Ex. A, Engagement Agreement, ¶ 8.
    -10-
    concession that its representation of Kaaboo was based on circumstances unrelated
    to those giving rise to this litigation, both Rule 24(a) and the limiting language of
    LBBS’s engagement agreement weigh heavily against allowing intervention here.
    LBBS fares no better under Rule 24(b)’s less-exacting standards. A party may
    intervene under Rule 24(b) “when an applicant’s claim or defense and the main
    action have a question of law or fact in common.”41 For the reasons already
    mentioned, LBBS seeks to intervene for the sole purpose of collecting on its foreign
    money judgment from any award that might befall Surf’s Up in this case. LBBS’s
    assertion that intervention is necessary to collect its legal fees for work performed
    in an unrelated matter in no way shares a common question of law or fact with any
    of the parties or events involved in this action. So LBBS fails also to meet that Rule
    24(b) requirement.
    IV. CONCLUSION
    LBBS may have a money judgment against Surf’s Up (f/k/a Kaaboo). And
    that judgment may be proving difficult for LBBS to collect on. But LBBS has failed
    to show that it has any right to intervene in this legal proceeding that is entirely alien
    to it. Indeed, its right in this regard is no greater than that of any other unpaid creditor
    who provided unrelated services to Surf’s Up (f/k/a Kaaboo) in the past. That is why
    41
    
    Id.
    -11-
    LBBS has no right to a seat at the table in this litigation merely so it might get a cut
    of whatever Surf’s Up (f/k/a Kaaboo) could be awarded here.42
    Because LBBS’s interest is no more than that of a general unsecured creditor,
    its Motion to Intervene fails under Rule 24 and is, therefore, DENIED.
    IT IS SO ORDERED.
    _______________________
    Paul R. Wallace, Judge
    42
    See Smith v. George T. Smith Mfg. Co., 
    77 N.W. 308
    , 310 (Mich. 1898) (“The petitioner has
    not shown that it has any other greater rights than any other creditor, or any specific right in the
    thing which forms the subject of the controversy. General creditors are not permitted to intervene
    in such cases.”); Welborn et al. v. Eskey, 
    40 N.W. 959
     (Neb. 1888) (“A mere general creditor of a
    debtor, having no claim or interest in the goods, cannot intervene in an action between lienholders
    or owners of the goods.”); Bank of America v. McCauley, 
    23 Pa. D. & C.2d 362
    , 364 (Pa. Comm.
    Pl. 1961) (“If petitioner is a general creditor, she merely has an inchoate right, not yet enforceable
    in law or equity, and she has no right to intervene in a legal proceeding entirely alien to her,
    regardless of the fact that she has a claim against funds which might be reduced by a judgment in
    favor of another general creditor.”).
    -12-
    

Document Info

Docket Number: N19C-11-092 PRW CCLD

Judges: Wallace J.

Filed Date: 12/16/2021

Precedential Status: Precedential

Modified Date: 12/16/2021