Opinion
CAUSE NO. IP00-0201-C-M/S.
April 11, 2001
ORDER ON BLISS GREEN'S MOTION TO INTERVENE
This cause is before the Court on a motion by Mr. Bliss Green ("Mr. Green") to intervene in the consolidated class actions (the "securities litigation") that allege violation of federal securities laws, and allege that defendants, Analytical Surveys, Inc. ("Analytical Surveys") and certain officers and directors of Analytical Surveys (the "Individual Defendants") (collectively the "Defendants"), made material representations and/or omissions that artificially inflated the price of Analytical Surveys' stock. Mr. Green seeks to intervene in this case pursuant to Federal Rule of Civil Procedure 24 ("Rule 24"). For the reasons discussed herein, Mr. Green's motion to intervene is DENIED.
Mr. Green's motion to intervene only recites the standard for intervention of right pursuant to Rule 24(a)(2). Mot. for Order Granting Pl. Bliss H. Green Intervention, at 1-2 ("Green Mot. to Intervene"). However, some of the language in Mr. Green's motion suggests that he seeks to intervene under either the intervention of right standard or the intervention by permission standard. See id. at 5. Therefore, the Court will address the merits of Mr. Green's request under both standards.
I. BACKGROUND
Analytical Surveys is a Colorado corporation with its executive offices in Indianapolis, Indiana. Am. Compl. ¶¶ 9, 12. The company provides data conversion and digital mapping services for the geographic information systems market. Id. ¶¶ 12, 26. A geographic information system ("GIS") is a high-resolution, large-scale, richly detailed "intelligent map" that allows users to input, update, query, analyze and display detailed information about a geographic area. Id. ¶ 26. These types of systems are used by utilities, state and local governments, federal agencies and commercial business to manage large infrastructures effectively, to improve operating efficiencies and to analyze future demand for facilities. Id. Analytical Surveys uses long-term, fixed contracts in doing business with its customers. Id. ¶ 28. During the period from 1993 to 1998, the company posted sales figures that grew at an annual compound average rate of 57.5%. Id. ¶ 27. Similarly, Analytical Surveys' posted net income figures grew at an annual compound average rate of 71.5% during that period. Id.
In March 2000, Analytical Surveys revealed that its previously reported operating results for fiscal 1999 were erroneous. Id. ¶ 30. The company stated that actual results would reduce reported revenues by 9% and net income by 70%. Id. Moreover, Analytical Surveys would report a loss for the fourth quarter of 1999. Id.
On February 2, 2000, the plaintiffs, persons who purchased or otherwise acquired the common stock of Analytical Surveys between January 25, 1999 and January 27, 2000 (collectively the "Class"), filed a class action complaint (the "Class Complaint") against the Defendants alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. Compl. ¶ 3. Those sections of the Security Exchange Act of 1934 prohibit fraud in connection with the purchase or sale of securities. 15 U.S.C. § 78j(b); S.E.C. Rule 10(b)-5; 17 C.F.R. § 240.10b-5. The Class Complaint states that the Defendants
carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including plaintiffs and other Class members . . .; (ii) artificially inflate and maintain the market price of Analytical Surveys' common stock; and (iii) cause plaintiffs and other members of the Class to purchase Analytical Surveys' common stock at artificially inflated prices.
Id. ¶ 54. The Class seeks compensatory damages for the harm they suffered as a result of the Defendants' acts. Id. at 27.
On June 30, 2000, Mr. Green, acting pro se, filed what he entitled a further complaint and cross complaint (the "Green Complaint"). The Green Complaint sought to add plaintiffs, persons who had traded Analytical Surveys stock at times prior to January 25, 1999, and to add defendants, consultants that Analytical Surveys used to make acquisitions during a period of time from 1995 to 1997. Green Compl., at 1. In addition, the complaint asserted a Fourteenth Amendment Due Process claim because there had been no elections of directors or annual meetings of the company, because the directors of the company had mis-judged certain business decisions, and because the directors of Analytical Surveys had profited from the sale of their own stock to the detriment of minority shareholders and Analytical Surveys itself. Id. at 1-2. The Green Complaint also alleged violations of Colorado statutory law. Id. at 1. Finally, the Green Complaint asked the Court to dismiss Analytical Surveys as a defendant because the actions of the Board of Directors and its consultants damaged the corporation. Id. at 2.
In an entry dated July 13, 2000, the Court acknowledged receipt of the Green Complaint, but stated that "Mr. Green's document is of no effect, as presented, though the Lead Plaintiffs shall give due regard to the allegations in such document in preparing the Consolidated Amended Complaint." Entry Directing Further Proceedings, July 13, 2000. The Class filed an amended complaint on July 26, 2000 ("Amended Complaint"). The amended complaint specified the plaintiffs as "persons who purchased or otherwise acquired the common stock of Analytical Surveys between January 25, 1999 and March 7,
2000, inclusive (the `Class Period')." Am. Compl. ¶ 2. The Amended Complaint does not incorporate any of Mr. Green's additional allegations.
On September 6, 2000, Mr. Green filed a motion for summary judgment on the issues in the Green Complaint; then, on November 1, 2000, Mr. Green filed a motion to intervene in the consolidated class action. The Court notified the parties in the class action to respond to Mr. Green's motion to intervene by December 14, 2000. Entry Directing Further Proceedings, Nov. 9, 2000. Both the Class and the Defendants filed briefs in opposition to Mr. Green's motion. The Court has reviewed the briefs; Mr. Green's motion to intervene is ripe for ruling.
II. STANDARD
Rule 24(a) states in pertinent part:
Upon timely application anyone shall be permitted to intervene in an action: . . . when the applicant claims an interest relating to the property or transaction which is the subject of the action and the 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, unless the applicant's interest is adequately represented by exiting parties.
Fed.R.Civ.P. 24(a). The Seventh Circuit has enunciated four requirements that must be met for intervention of right to be proper: "(1) timely application; (2) an interest relating to the subject matter of the action; (3) potential impairment, as a practical matter, of that interest by the disposition of the action, and (4) lack of adequate representation of the interest by the existing parties to the action." Meridian Homes Corp. v. Nicholas W. Prassas Co., 683 F.2d 201, 203 (7th Cir. 1982) (citing Federal Deposit Ins. Corp. v. Hanrahan, 612 F.2d 1051, 1053 (7th Cir. 1980); Central States, Southeast Southwest Areas Health Welfare Fund v. Old Sec. Life Ins. Co., 600 F.2d 671, 679 (7th Cir. 1979)). See also Sokaogon Chippewa Comty. v. Babbitt, 214 F.3d 941, 945-46 (7th Cir. 2000). Intervention is only proper where every element is met. See Sokaogon Chippewa, 214 F.3d at 946.
What qualifies as "an interest"has been subject to some debate; however, the Seventh Circuit advises that the interest must be direct and substantial. See Meridian Homes, 683 F.2d at 204. Or, in the words of the Supreme Court, the interest must be "significantly protectable." Donaldson v. United States, 400 U.S. 517, 531 (1971). Similarly, the standard for whether an interest could be impaired or impeded by the ongoing action is somewhat rigorous: "`impairment' depends on whether the decision of a legal question involved in the action would . . . foreclose rights of the proposed intervenors in subsequent proceedings." Meridian Homes, 683 F.2d at 204.
In its discretion, a court may also allow a party to intervene "when an applicant's claim or defense and the main action have a question of law or fact in common." Fed.R.Civ.P. 24(b). When exercising its discretion, a court must consider "`whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.'" Security Ins. Co. v. Schipporeit, Inc., 69 F.3d 1377, 1381 (7th Cir. 1995) (quoting Fed.R.Civ.P. 24(b)).
With these standards in mind, the Court will address the merits of Mr. Green's motion.
III. DISCUSSION A. INTERVENTION OF RIGHT
Apparently, Mr. Green is arguing to intervene in this case in the capacity of both plaintiff and defendant. His argument to intervene as a plaintiff seems to be that the Class attorneys cannot adequately represent his interests in prosecuting his constitutional and tort claims against the directors and officers of Analytical Surveys. Green Mot. to Intervene, at 3. As a defendant, it seems that Mr. Green seeks to intervene on behalf of Analytical Surveys because of a potential conflict in interest between the company and its directors and officers. The Court will address each of Mr. Green's bases to intervene in turn.
1. As Plaintiff
Mr. Green's motion to intervene as a plaintiff as of right is defeated by his very own arguments. Mr. Green asserts that his claims regarding the failure of the Board of Directors to hold annual meetings and their failure to allow shareholders to elect directors is separate from the securities claims alleged by the Class. Id. at 2-3. In fact, Mr. Green asserts that because the claims are distinct, the class attorneys cannot adequately represent his interests. Id. at 3. To the extent that the Green Complaint alleges wrongdoing other than securities violations, the Court agrees that Mr. Green's claims are separate and distinct. In fact, they are brought in terms that put them squarely in a category of derivative claims on behalf of the corporate entity, Analytical Surveys. Although Mr. Green's interest in bringing the derivative claims might be substantial, he presents no evidence that his derivative interests relate to the securities fraud allegations in the Amended Complaint.
Moreover, disposition of the securities litigation would not, as a practical matter, impair Mr. Green's interest in his derivative claims. Mr. Green is free to bring his claims in a separate suit. Under those circumstances, Mr. Green cannot say that his interest in the derivative claims have been impaired by the securities litigation.
The Class asserts that Mr. Green has already filed a separate action; however, it does not give the court or cause number where such a suit has been filed. Pls.' Opp. to Bliss Green's Mot. to Intervene, at 2 n. 2. If Mr. Green has in fact filed such a suit, it is clear that his interest in bringing his derivative claims or his constitutional claim has not been impaired.
To the extent that the Green Complaint alleges violations of the Securities Exchange Act, Mr. Green has not shown that his interests as a class member are not being adequately represented by the class representatives. Mr. Green makes no argument that his interests in the securities fraud litigation are identical to those of the Class. However, apparently Mr. Green disagrees with the class representatives about the importance of litigating the derivative claims and the securities fraud claims at the same time. But, this type of disagreement alone cannot rebut the presumption of adequate representation when the interests of the parties are identical. See United States v. City of Chicago, 897 F.2d 243, 244 (7th Cir. 1990).
Moreover, as the Class asserts in its brief, to the extent that Mr. Green's interests in the derivative claims conflict with those of the Class in the securities litigation, the Court would be hard pressed to allow both types of litigation to proceed simultaneously. See Ryan v. Aetna Life Ins. Co., 765 F. Supp. 133, 135 (S.D.N.Y. 1991) (citing Kamerman v. Steinberg, 113 F.R.D. 511 (S.D.N.Y. 1986) (class certification denied where plaintiffs also brought derivative claims); Petersen v. Federated Development Co., 416 F. Supp. 466, 475 n. 6 (S.D.N.Y. 1976) (assumption that plaintiff bringing individual and derivative claims cannot fairly represent shareholders); Caan v. Kane-Miller Corp., No. 71 Civ. 878 (S.D.N.Y. Dec. 12, 1974) (individual and derivative actions may not be maintained simultaneously); Ruggiero v. American Bioculture, Inc., 56 F.R.D. 93 (S.D.N.Y. 1972) (class and derivative actions may not be pursued simultaneously)). Disagreement over litigation strategy to bring only securities fraud allegations will not overcome the presumption that Mr. Green's interests in the securities litigation are adequately represented by the named plaintiffs.
Mr. Green has not met his burden to show that his interests as a plaintiff in the securities litigation are not adequately represented. In addition, Mr. Green has not met his burden to show that his interest in the derivative claims and his constitutional claim, that he could bring in another suit, will be impaired by the securities litigation. As a result, Mr. Green's motion to intervene as a plaintiff as of right in the securities litigation fails.
2. As Defendant
Arguably, Mr. Green's motion could be construed as one to intervene as a defendant on behalf of the corporate entity, Analytical Surveys. The Green Complaint proposes to bring claims against the directors and officers of the corporation for violations of trust. Green Compl., at 1-2. In addition, Mr. Green's brief on the current motion expresses concern that the defense attorneys in the securities litigation have not served him with documents in this litigation as ordered by the Court. Mr. Green alleges that this act is another example of the breach of trust by the directors and officers against Analytical Surveys. Green Mot. to Intervene, at 2-3. Moreover, Mr. Green seems to assert that the Individual Defendants, who are controlling Analytical Surveys, will not make decisions in the securities litigation that are in the best interests of the corporation as a separate entity. Id. at 4. Apparently Mr. Green is arguing that his interest in Analytical Surveys will be impaired unless he is allowed to intervene as a defendant in the securities litigation to assert claims for breach of trust on behalf of Analytical Surveys against the Individual Defendants.
Although the Court recognizes that Mr. Green sees the securities litigation as a threat to his interest in Analytical Surveys, his derivative breach of trust claims are not the type of direct and substantial interests that are at issue in the current action. The Amended Complaint is clearly focused on the actions of the corporation and its directors and officers to falsify earnings and misrepresent the financial status of the company to investors during a specific period of time. In other words, the entirety of the Amended Complaint is focused on securities fraud. On the other hand, the Green Complaint alleges violations of trust on the part of certain directors and officers of Analytical Surveys, or derivative claims on behalf of Analytical Surveys. Therefore, Mr. Green's interest is in protecting the rights of shareholders and Analytical Surveys as an entity against wrongdoing by the directors and officers of the company. The only possible connection between Mr. Green's derivative interests and the securities litigation is if Analytical Surveys' resources were depleted during the securities litigation to an extent that a derivative suit on its behalf against the directors and officers would be moot. However, this is hardly the kind of "direct and substantial" interest in the ongoing proceedings that the Seventh Circuit discussed in Meridian Homes. 683 F.2d at 204.
Moreover, Mr. Green has not shown how his interest in bringing the derivative claims will be impaired by resolution of the securities litigation. Mr. Green merely argues that the Individual Defendants should not be allowed to ignore his allegations. But, nothing precludes Mr. Green from asserting his breach of trust claims in an independent action; in such a case, the Individual Defendants cannot avoid addressing those issues in that action. Further, Mr. Green does not argue that disposition of the securities litigation would preclude him from bringing the derivative claims against the directors and officers or that the current action would preclude him from litigating fully the issues of a derivative suit. Mr. Green does not even allude to any financial hardship that would result from the two types of litigation proceeding separately. In addition, there is no evidence that Analytical Surveys' assets have been sold or that the company's resources have been depleted to an extent that the interests of the Class in the securities fraud suit and the interests of Mr. Green in a derivative suit are coterminous. See Kane Assocs. v. Clifford, 80 F.R.D. 402, 408 (E.D.N.Y. 1978) (allowing simultaneous litigation of securities fraud claims and derivative suit because the corporation had been completely liquidated and the derivative action would serve to "fill the coffers" of the corporation to fund the class recovery on the securities fraud claims). Finally, Mr. Green himself suggests that the breach of trust claims are separate and distinct from the securities claims. Under such circumstances, it is difficult to see how Mr. Green can assert that he has an interest that will be impaired by the securities litigation.
For the foregoing reasons, Mr. Green has failed to show that he has an interest in the securities litigation as a defendant that will be impaired if the suit is allowed to go forward without his intervention. Therefore, Mr. Green's motion to intervene as of right should be DENIED.
B. PERMISSIVE INTERVENTION
As either plaintiff or defendant, Mr. Green's arguments for permissive intervention also fail. In its discretion, a court may also allow a party to intervene "when an applicant's claim or defense and the main action have a question of law or fact in common." Fed.R.Civ.P. 24(b). When exercising its discretion, a court must consider "`whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.'" Security Ins. Co., 69 F.3d at 1381 (quoting Fed.R.Civ.P. 24(b)). The Green Complaint alleges violations of trust by the board of directors and officers of Analytical Surveys because of the failure to hold annual meetings and to allow for shareholders to elect board members. Green Compl., at 1. The complaint also alleges violation of Mr. Green's civil rights for the same reasons. Id. 1-2. However, Mr. Green never alleges that the facts of his derivative claims and his civil rights claim are the same as those of the fraud alleged in the securities litigation. To the contrary, Mr. Green asserts that those claims are separate from the securities claims. Green Mot. to Intervene, at 2-3.
In addition, the prompt resolution of the securities litigation may be impaired by addition of Mr. Green's derivative claims and his civil rights claims because it would add complexity to an already difficult set of facts and legal issues. Moreover, the securities litigation has made significant progress toward settlement, which will surely be impeded and delayed if the Court allows Mr. Green to intervene with additional claims as to certain defendants.
Under these circumstances, in its discretion, the Court DENIES Mr. Green's request for permission to intervene in the securities litigation.
IV. CONCLUSION
For the reasons discussed herein, Mr. Bliss Green's motion to intervene is hereby DENIED. All other motions that Mr. Green has filed in this litigation are deemed MOOT.
IT IS SO ORDERED this _____ day of April, 2001.