Opinion
Civil Action, No: 99-2866 Section: "T" (4).
May 15, 2001
ORDER AND REASONS
Before the Court for consideration is a Motion for Leave to Intervene (doc. #36), filed by Pedro Cornejo. Mr. Cornejo contends that he is entitled to intervene in these proceedings as a matter of right under Fed.R.Civ.P. 24(a)(2); alternatively, he asks the Court to exercise its discretion and permit intervention under Fed.R.Civ.P. 24(b).
I. Background
Pedro Cornejo is the president and legal representative of Petromixtec S.A. ("Petromixtec"), the plaintiff in this suit. (Complaint in Intervention, ¶ 3). He seeks to intervene in this action in which Petromixtec seeks to recover damages, which includes certain amounts that the Instituto Ecuatoriano de Electrificacion ("INECEL"), an agency of the government of Ecuador, has demanded from Petromixtec for defective parts sold by the defendants, NREC Power System, Inc. and National Railway Equipment Company, Inc. ("defendants"), to Petromixtec for sale and delivery to INECEL. ( Id. at ¶ 5).
Mr. Cornejo alleges that on August 6, 1998, the government of Ecuador obtained an administrative judgment against him in his capacity as the president and legal representative of Petromixtec, for $795,011.77, as a result of the defective parts Petromixtec delivered to INECEL. ( Id. at ¶ 6).
He additionally alleges that in order for Petromixtec to secure the INECEL contract, Petromixtec was required to post a $340,000.00 performance bond. To enable Petromixtec to obtain the bond, Mr. Cornejo alleges that he used his personal property as security for the bond. When INECEL received the defective parts, it executed against the bond and his property. ( Id. at ¶s 9 10).
Mr. Cornejo now seeks to intervene in the proceedings to recover $1,135,011.77 (the amount of the administrative judgment plus the value of his personal property) out of any proceeds that Petromixtec is able to recover from the defendants. Alternatively, he alleges that he is entitled to recover the sum directly from the defendants. ( Id. at ¶s 7, 8, 11).
II. Analysis
The defendants concede that Mr. Cornejo may intervene in the lawsuit for the limited purpose of asserting an interest in any recovery of Petromixtec. They contend, however, that the motion should otherwise be denied, arguing that any direct claims against them are neither timely, nor legally cognizable. Specifically, the defendants suggest that there is no privity of contract between defendants and Mr. Cornejo and any claim sounding in tort has prescribed. Therefore, the defendants contend that at the very most, Mr. Cornejo has asserted an economic interest in the proceeding, which is an inadequate basis for intervention.
Defendants' Opposition, ps. 1 6 n. 1.
Based on the foregoing representations, the Court will allow Mr. Cornejo to intervene for the limited purpose of asserting an interest in any recovery of Petromixtec. The contested issue is whether Mr. Cornejo should be allowed to intervene in the proceedings to assert individual claims against the defendants, either as a matter of right or in the exercise of this Court's discretion.
A. Intervention as of Right
To determine whether Mr. Cornejo may intervene as of right, the Court must decide whether he has met each element of the four-part test stated by the Fifth Circuit in International Tank Terminals, Ltd. v. M/V Acadia Forest, 579 F.2d 964, 967 (5th Cir. 1978): (1) the application must be timely; (2) the applicant must have an interest relating to the property or transaction which is the subject of the action; (3) the applicant must be so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, and; (4) the applicant's interest must be inadequately represented by the existing parties to the suit. See also FED. R. Civ. P. 24(a)(2).
Rule 24(a)(2) provides in pertinent part: "(u)pon timely application anyone shall be permitted to intervene in an action: (2) when the applicant claims an interest relating to the . . . 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 existing parties." FED. R. Civ. P. 24(a)(2). See also, Jones v. Caddo Parish School Board, 735 F.2d 923 (5th Cir. 1985) (en banc).
Because failure to meet any one of the four elements is fatal to intervention as of right, id., the Court need only hold, as it does here, that the intervenor has failed to demonstrate compliance with the second element in order to deny the motion. See, e.g., New Orleans Public Service, Inc. v. United Gas Pipe Line Co., 732 F.2d 452, 463 (5th Cir. 1984) (en banc), cert denied sub nom, Modal v. United Gas Line Co., 469 U.S. 1019 (1984).
In the present case, Mr. Cornejo states that his "interest" in the proceeding arises out of the defendants filing a counterclaim against Petromixtec. He suggests that as a result of the counterclaim, any judgment rendered in favor of Petromixtec may now be offset by a judgment in favor of defendants against Petromixtec. Essentially, he argues that the net result would be that he would be unable to recover what he has actually lost. Mr. Cornejo therefore contends that he has a right to intervene "since the disposition of the action ( i.e. a judgment in favor of Petromixtec offset by a judgment in favor of NREC) may as a practical matter impair or impede his ability to protect that interest and (2) because Petromixtec may not be able to protect his interests as a result of NREC's counterclaim against it." (Motion to Intervene, p. 3-4).
However, it is well established that the term "interest" is narrowly read to mean a direct and substantial interest in the proceedings. New Orleans Public Service, 732 F.2d at 463 (citing United States v. Perry County Board of Education, 567 F.2d 277, 279 (5th Cir. 1978)). The interest has to be "a significantly protectable interest;" in other words the asserted interest must be one that the substantive law recognizes as belonging to or being owned by the party seeking intervention. New Orleans Public Service, 732 F.2d at 464, quoting Donaldson v. United States, 400 U.s. 517, 531 (1971)).
Mr. Cornejo has not demonstrated a separate interest that he could affirmatively and independently assert as a cause of action, or that the substantive law recognizes as his own claim against the defendants. Undisputably, he was not a party to the contract with defendants. He therefore has no standing to independently assert a claim for damages arising out of the breach of that contract. See United States v. Palmer, 578 F.2d 144, 14546 (5th Cir. 1978) (only a corporation and not its officers can complain of any injury sustained by, or a wrong done to, the corporation).
Further, accepting Mr. Cornejo's allegations as true, a claim sounding in tort has prescribed. See Foster v. Gueory, 655 F.2d 1319, 1324 (D.C. Cir. 1981) (all well-pleaded material factual allegations contained in the intervenor's complaint must be accepted as true). Thus, even assuming standing were not an issue, Mr. Cornejo's "interest" is purely economic and a purely economic interest is insufficient to justify intervention under Rule 24(a)(2). See New Orleans Public Service, 732 F.2d at 466.
Cornejo alleges in his proposed complaint-in-intervention that the administrative judgment was rendered on August 6, 1998. (Complaint in Intervention, ¶ 6).
Indeed, if this Court were to recognize Mr. Cornejo's "interest" as one that gives rise to intervention as of right, it would be tantamount to extending the right to any person with a potential claim if the outcome of a lawsuit might increase or decrease the collectibility of his claim. See Hawaii-Pacific Venture Capital Corp. v. Rothbard, 564 F.2d 1343, 1346 (9th Cir. 1977). However, the possibility of a party having more money available at the conclusion of a lawsuit does not constitute a direct, substantial, legally protectable interest under Rule 24(a)(2)). New Orleans Public Service, 732 F.2d at 470. See generally, Heyman v. Exchange National Bank of Chicago, 615 F.2d 1190, 1194 (7th Cir. 1980). The request for leave to assert direct claims against the defendants under Fed.R.Civ.P. 24(a)(2) is therefore denied.
B. Permissive Intervention
In the alternative, Mr. Cornejo requests the Court to exercise its discretion and permit intervention under Fed.R.Civ.P. 24(b), which provides that: "[u]pon timely application anyone may be permitted to intervene in an action . . . 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). Permissive intervention "is wholly discretionary with the [district] court . . . even though there is a common question of law or fact, or the requirements of Rule 24(b) are otherwise satisfied." New Orleans Public Service, 732 F.2d at 471 (citing Wright Miller, Federal Practice and Procedure: Civil § 1913 at 551)).
Rule 24(b) further provides that "[i]n exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties." FED. R. Civ. P. 24(b).
In acting on a request for permissive intervention, it is proper to consider, among other things, "whether the intervenor's interests are adequately represented by other parties, and whether [he or she] "will significantly contribute to full development of the underlying factual issues in the suit." Id. at 472 (citing Spangler v. Pasadena City Bd. of Ed., 552 F.2d 1326, 1329 (9th Cir. 1977)). Also relevant is the "nature and extent of intervenor's interest" and "[his] standing to raise relevant legal issues." Id. at n. 40.
In the present case, although Mr. Cornejo has a real economic interest in the underlying claims, that interest is not a legally cognizable one and he lacks standing to raise relevant legal issues in the proceeding. Further, inadequate representation is not an issue, as the same attorney who represents Mr. Cornejo also represents Petromixtec. See Carroll v. American Federation of Musicians, 33 F.R.D. 353, 353-54 (S.D. N.Y. 1963) (citations omitted). For these reasons, the alternative request for permissive intervention is also denied. Accordingly,
IT IS HEREBY ORDERED that Pedro Cornejo's Motion for Leave to Intervene (doc. #36) is GRANTED IN PART AND DENIED IN PART.
1) The motion is GRANTED to the extent the mover seeks to assert an interest in any recovery of the plaintiff.
2) The motion is DENIED to the extent the mover seeks to assert direct claims against the defendants.