Ace Business Solutions, LLC v. Global Marketing & Development, Inc., et al.

Filing 30

ORDER Denying 21 Motion to Intervene. Signed by Judge Michael M. Anello on 4/14/2016. (rlu)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ACE BUSINESS SOLUTIONS, LLC,

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Plaintiff,

Case No. 15cv1464-MMA (NLS)

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vs.

ORDER DENYING MOTION TO
INTERVENE

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GLOBAL MARKETING &
DEVELOPMENT, INC., and
AWESOME ENTERPRISES, LLC,

[Doc. No. 21]

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Defendants.

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GLOBAL MARKETING &
DEVELOPMENT, INC.,
Counterclaimant,

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vs.

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ACE BUSINESS SOLUTIONS, LLC,

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Counter-Defendant.

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Third parties TDL Global Ventures (“TDL”) and Losany Enterprises, LLC

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(“Losany”) (collectively, “the Intervenors”) move to intervene in this action pursuant to

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Federal Rule of Civil Procedure 24. [Doc. No. 21.] The Court found the matter suitable

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for determination on the papers and without oral argument pursuant to Civil Local Rule

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7.1(d)(1). For the reasons set forth below, the Court DENIES TDL’s and Losany’s

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motion to intervene.
BACKGROUND

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On July 2, 2015, Plaintiff Ace Business Solutions, LLC (“Ace”) filed this

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interpleader action pursuant to 28 U.S.C. § 1335. [Doc. No. 1.] Plaintiff requests the

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Court determine, as between Defendants Global Marketing & Development, Inc.

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(“GMD”) and Awesome Enterprises, LLC (“Awesome”), the rights to a particular sum of

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money (“Net Distribution”) that Plaintiff has collected. Plaintiff Ace is a debt processing

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company that provides processing services for GMD pursuant to an agreement between

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the two entities. [Doc. Nos. 1, 24.] Ace, as part of its services, collects payments from

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consumers and pays portions of those funds to GMD. Plaintiff also used to provide

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processing services to a company called 5STAR, Inc. (“5STAR”), which was originally

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owned by Awesome. [See Doc. Nos. 1, 21.] At some point,1 GMD acquired 5STAR and

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thereby acquired 5STAR’s servicing obligations. [See Doc. Nos. 1, 21.] Awesome

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disputes the propriety of this transaction and as a result, Awesome and GMD allegedly

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began to give Ace conflicting instructions regarding to whom Ace should distribute

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collected funds.

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Specifically, on June 17, 2015, Ace alleges it received notice from attorneys who

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represent organizations2 that were previously affiliated with 5STAR, who asserted there

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were certain “improprieties related to the transfer of ownership of 5STAR to GMD

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and/or parties affiliated with GMD,” which affected GMD’s entitlement to funds that Ace

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would typically transfer to GMD. On June 26, 2015, Plaintiff received notice from GMD

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requesting Plaintiff transfer to it the entire Net Distribution. Awesome claims a portion

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of the Net Distribution, and asserts GMD is entitled to none of it because GMD

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The particular facts surrounding 5STAR’s relationship to Awesome are unclear, but it appears that at this time, Awesome
was still affiliated with 5STAR.
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The Complaint indicates that Awesome was one of these organizations. [See Doc. No. 1, ¶ 20.]

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committed fraud and “misappropriate[d] companies and assets belonging to Awesome

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and businesses related to Awesome, [and] the revenue from debt invalidations businesses

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belonging to businesses related to Awesome.” [Doc. No. 26.]

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Both GMD and Ace have filed counterclaims against one another regarding the

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agreement between them. [Doc. Nos. 9, 16.] GMD has filed a counterclaim against Ace

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alleging breach of contract and conversion. Ace has filed a counterclaim against GMD

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asserting claims for breach of contract and the covenant of good faith and fair dealing.
LEGAL STANDARD

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Federal Rule of Civil Procedure 24 governs motions to intervene in federal court.

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Rule 24 states that a court must, upon a timely motion, allow intervention of right where

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the movant:

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(1) is given an unconditional right to intervene by a federal
statute; or (2) claims an interest relating to the property or
transaction that is the subject of the action, and is so situated
that disposing of the action may as a practical matter impair or
impede the movant’s ability to protect its interest, unless
existing parties adequately represent that interest.

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Fed. R. Civ. P. 24(a). The Ninth Circuit has interpreted Rule 24(a) as requiring an

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applicant meet all of the following four factors:

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(1) the application for intervention must be timely; (2) the
applicant must have a ‘significant protectable’ interest relating
to the property or transaction that 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 the
applicant’s ability to protect that interest; and (4) the applicant’s
interest must not be adequately represented by the existing
parties in the lawsuit.

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Arakaki v. Cayetano, 324 F.3d 1078, 1084 (9th Cir. 2003), as amended (May 13, 2003);

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Southwest Center for Biological Diversity v. Berg, 268 F.3d 810, 817–18 (9th Cir. 2001);

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C.S. ex rel. Struble v. California Dep’t of Educ., No. 08-CV-0226-W(AJB), 2008 WL

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962159, at *2 (S.D. Cal. Apr. 8, 2008). An applicant has a significant protectable interest

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where its interest is protected under some law, and there is a relationship between its

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legally protected interest and the plaintiff’s claims. Donnelly v. Glickman, 159 F.3d 405,

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409 (9th Cir. 1998). The resolution of the plaintiff’s claims must actually affect the

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applicant, but if there would be a substantial effect, the applicant “should, as a general

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rule, be entitled to intervene.” Id.; Southwest Center for Biological Diversity v. Berg, 268

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F.3d 810, 822 (9th Cir. 2001).
In the alternative, courts may allow permissive intervention under Rule 24(b). The
court may allow anyone to permissively intervene who:

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(A) is given a conditional right to intervene by a federal statute;
or (B) has a claim or defense that shares with the main action a
common question of law or fact. [. . .] (3) Delay or Prejudice. In
exercising its discretion, the court must consider whether the
intervention will unduly delay or prejudice the adjudication of
the original parties’ rights.

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Fed. R. Civ. P. 24(b). Further, a party seeking to permissively intervene must establish

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that their motion was timely and that the court has an independent jurisdictional basis for

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the party’s claims. See C.S. ex rel. Struble, 2008 WL 962159 at *2.
DISCUSSION

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A.

TDL’s and Losany’s Grounds for Intervention

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TDL and Losany move to intervene as of right, or in the alternative, seek

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permissive intervention. TDL asserts that, based on a written agreement between TDL

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and GMD, it is entitled to 25% of the money that GMD would receive as a result of this

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interpleader action. Specifically, on March 8, 2015, TDL and GMD entered into a

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contract concerning services TDL would provide to GMD and the payment TDL would

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receive in exchange. [Doc. No. 21.] Under the contract, TDL obtained a 25% ownership

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in GMD. TDL alleges GMD has “disavowed [this agreement] altogether,” which has

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prompted TDL to sue GMD in Maryland District Court.3 TDL asserts that if it wins its

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case in the Maryland District Court, it would be entitled to 25% of the funds at issue in

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this case.
Losany claims it is entitled to between 7.5–14% of the money due to Awesome,

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depending on the source of the funds. In July 2011, a company called Another

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Beginning, Inc. (“ABI”) entered into an agreement with a debt validation operation called

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Debt Defense Services (“DDS”) whereby ABI was to receive 30% of DDS’s revenue.

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DDS sold debt modification paperwork. The owners of DDS then organized Awesome.

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[Doc. No. 21.] ABI had been receiving portions of the income of companies that

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Awesome eventually purportedly sold to GMD, i.e., in the sale at issue in this

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interpleader action. In 2013, the owner of ABI started Losany and “folded all of ABI’s

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commission rights into Losany, including all commission rights under the ABI/DDS

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Agreement.” [Doc. No. 21.] In March 2014, “the commissions due to ABI under the

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ABI/DDS Agreement were assigned to Losany and it received all of the revenue from the

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ABI/DDS Agreement . . . until the alleged purchase by GMD and the dispute between

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GMD and Awesome arose.” [Doc. No. 21.]

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B.

Plaintiff Ace’s and Defendant GMD’s Arguments in Opposition

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Ace and GMD oppose the motion to intervene. [See Doc. Nos. 24, 25.] Awesome

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did not file a response.

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//

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//

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Losany is also a plaintiff in the pending Maryland District Court case, Case No. 15CV1738-GLR. Awesome is not a party
to that case.

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i.

Ace’s Arguments

Ace argues that neither TDL nor Losany meet the requirements to intervene as a

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matter of right because neither have a protectable interest in the interpleader action.

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Neither TDL nor Losany are parties to, or have a legally recognized interest in the

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agreement between Ace and GMD that is at issue here. To the extent that TDL and

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Losany have any stake in the outcome of this proceeding, it is an artifact of their

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independent and unrelated contractual relationships with Awesome and GMD. The

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Intervenors merely claim money from the claimants in this action. If successful in the

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lawsuit pending in Maryland, the Intervenors may obtain a judgment against GMD and

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attach its assets. Ace argues that the Intervenors are not yet judgment creditors, and even

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judgment creditors do not have the right to intervene in lawsuits in order to ensure a

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judgment will be satisfied.

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Further, Ace argues that even if the Court were to find this action affects the

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Intervenors, their interests are not impaired because there are other means by which the

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Intervenors can protect their interests, such as a prejudgment writ of attachment or lien.

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Moreover, if the Court finds the Intervenors do have a legally protectable interest in this

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action, their interests are adequately protected. GMD and Awesome will each advocate

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for as large of a portion of the Net Distribution as they can obtain.

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As for permissive intervention, Ace argues that the Intervenors have not articulated

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any common question of law or fact that they share with the parties to this action. The

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interpleader pertains to the agreement between Ace and GMD, but the basis for TDL’s

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intervention is an agreement between TDL and GMD. Losany’s basis for intervention

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arises from the assignment of commissions due to ABI under the ABI/DDS contract.

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Ace argues it would not be judicially economical to adjudicate all of these disputes in the

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same action, especially considering the pending Maryland litigation.

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Lastly, Ace contends that it would suffer prejudice if the Intervenors are allowed to

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intervene as parties. Ace would be required to participate in discovery on issues that Ace

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has no interest in, such as issues pertaining to Losany’s contract with GMD and TDL’s

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assignment. Ace argues that the addition of the issues surrounding these new potential

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parties and other agreements would increase Ace’s costs and delay the litigation.
ii.

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GMD’s Arguments

GMD reiterates that neither TDL nor Losany are parties to the agreement between

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GMD and Ace, which is at the heart of the interpleader action, and that the Intervenors

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are already involved in pending litigation in Maryland regarding their relationship with

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GMD. GMD argues that intervention would be inappropriate and premature, and that

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TDL and Losany should seek a writ of attachment if and when they prevail against GMD

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in the Maryland lawsuit. GMD argues that the Intervenors have not indicated why

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intervention would be efficient here. Further, GMD notes that Todd Lubar, whose

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declaration Intervenors submitted in support of their motion, stated he is uncertain as to

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whether GMD has other income or assets it could put toward satisfying a potential

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judgment resulting from the Maryland litigation. Accordingly, GMD argues, the

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Intervenors’ interest in this action is speculative. GMD concludes that, for those reasons,

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the Intervenors are not entitled to intervention as of right or permissive intervention.
C.

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Analysis4
i.

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Intervention of Right

The Intervenors have not pointed the Court to any federal statute that mandates

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their intervention into this action. See Fed. R. Civ. P 24(a)(1). Thus, to intervene as of

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right, the Intervenors must show they have a significant protectable interest related to the

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property or transaction underlying the litigation, and are “so situated that disposing of the

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action may as a practical matter impair or impede [their] ability to protect [their] interest,

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unless existing parties adequately represent [those] interest[s].” Fed. R. Civ. P. 24(a)(2).

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The Intervenors have not done so.

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Although both intervention of right and permissive intervention require a timely motion by the applicant, the timeliness of
the Intervenors’ motions is not at issue here. For that reason, the Court need not address timeliness.

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To have a significant protectable interest, a movant’s interest must itself be

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affected by the resolution of the litigation. Based on the facts presented to the Court, the

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Intervenors’ interests are entirely derivative of Defendants’ claims in this action, and are

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wholly based on contracts not at issue here. Thus, the validity of the Intervenors’ rights

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to some portion of funds that Defendants’ will potentially recover as a result of this

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litigation will not be affected by the Court’s determination of Defendants’ rights to the

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Net Distribution. Accordingly, while the Intervenors may have contractual rights under

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contracts outside the scope of this litigation which are protected by law, the Intervenors

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have not shown that “there is a relationship between [those rights] and the claims at

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issue” here. See Donnelly, 159 F.3d at 409; Arakaki v. Cayetano, 324 F.3d 1078, 1084

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(9th Cir. 2003), as amended (May 13, 2003). Moreover, the Intervenors do not claim to

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be third-party beneficiaries of the GMD/Ace contract, which would potentially render

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their interests related to the claims at issue in this interpleader action. See Hook v. State

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of Arizona, 972 F.2d 1012, 1015 (9th Cir. 1992).

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The Intervenors’ circumstances are comparable to those of potential judgment

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creditors. Courts have found that an impaired ability to collect on potential future

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judgments does not amount to a legally protectable interest. See U.S. v. Alisal Water

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Corp., 370 F.3d 915, 920 (9th Cir. 2004) (holding an “interest in the prospective

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collectability of [a] debt [. . .] [was] not sufficiently related” to the action because the

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interest was “several degrees removed” from the policies at issue). The Ninth Circuit has

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stated that holding otherwise would “create an open invitation for virtually any creditor

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of a defendant to intervene in a lawsuit where damages might be awarded.” Id. Further,

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where potential financial loss is merely speculative or amounts to a bare expectation of

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economic recovery, courts have found applicants have no legally protectable interest.

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Portland Audubon Soc’y v. Hodel, 866 F.2d 302, 309 (9th Cir. 1989); Medical Protective

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Co. v. Pang, 2006 WL 1544192 at *4 (D. Ariz. June 1, 2006).

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Here, the Intervenors’ interests are both speculative and similar to potential

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judgment creditors’ interests because, by the Intervenors’ own admissions, they are only

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entitled to a portion of the money, if any, which may be due to Defendants, depending on

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the outcome of this interpleader action. The Intervenors have not yet been denied funds

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they claim they will be owed. Further, TDL states that it is only due money if it prevails

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in its litigation against GMD in Maryland. See Pang, 2006 WL 1544192 at *4 (finding

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no substantial protectable interest where the “economic interest [was] based upon an

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uncertain expectation [of a future judgment],” and “[b]ecause [the applicant] [did] not

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currently hold a judgment against Dr. Pang, her interest [was] not only purely economic,

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but also theoretical”).
Lastly, Ace argues that the Intervenors have not shown that their claimed interests

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would not be adequately protected by Defendants. The Intervenors’ interests appear to be

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essentially the same as GMD’s and Awesome’s interests. GMD has an interest in

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obtaining as much money as possible, thereby indirectly increasing the net gain TDL

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would enjoy based on its 25% interest it may have in GMD’s recovery. Losany’s interest

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likewise comports with Awesome’s. Awesome wishes to obtain the maximum portion of

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the Net Distribution, increasing Losany’s derivative portion. There is no indication that

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either of the defendants plan to seek smaller amounts than they believe they are entitled

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to in order to minimize the amounts they would be potentially required to pay either of

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the Intervenors.

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For the foregoing reasons, the Intervenors do not have significant protectable

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interests that are at risk of being impaired or impeded by the resolution of this action, and

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which would not already be adequately protected. Therefore, the Intervenors are not

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entitled to intervene as a matter of right in this action.

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ii.

Permissive Intervention

TDL and Losany do not claim to have a conditional right to intervene under a
federal statute. See Fed. R. Civ. P. 24(b). Accordingly, the Intervenors must show they

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have a claim or defense that shares a common question of law or fact with this action. Id.

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Also, the Court is required to determine whether intervention would unduly delay or

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prejudice the adjudication of the current parties’ rights. Id. In the Intervenors’ reply

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brief, they contend that the common question they share with the parties is “who is

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entitled to receive what portion of the interplead funds and any future processed funds by

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Ace.” [Doc. No. 27.]
However, such a question is well beyond the scope of this interpleader action. Ace

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has only requested this Court determine, as between Defendants Awesome and GMD

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only, who is entitled to the interpleaded funds.5 Ace has not requested the Court

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determine whether Defendants owe anyone else money based on other contracts

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Defendants are parties to—contracts that have no bearing on Defendants’ claims to the

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Net Distribution. Similarly, Ace has not requested the Court determine who has rights to

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“any future processed funds by Ace.”
Further, elsewhere in their briefing, the Intervenors frame their claims much more

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narrowly. For example, in their motion, the Intervenors state they “seek to intervene in

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the complaint to protect their interest in the monies being interpled by Ace and to ensure

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that the judicial determination reach concerning the distribution of the monies includes

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their interests.” [Doc. No. 21.] However, as discussed, the Intervenors’ interests arise

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out of contracts with the claimants that are not at issue in the underlying dispute.

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Accordingly, based on the facts presented to the Court, the Intervenors’ claims regarding

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rights they have to money Defendants will potentially obtain as a result of this action

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share no common questions of law or fact with the underlying action.
Lastly, GMD and Ace argue that intervention will unduly delay or prejudice the

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adjudication of their rights. The Court agrees. To allow intervention would be to

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TDL and Losany indicate they understand the limited nature of Ace’s action. They state, “Ace [has interpleaded] the
monies and seek[s] a judicial determination from this Court as to what portion of the monies, if any, is due to GMD and what
portion, if any, is due to Awesome.” [Doc. No. 21.]

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significantly increase the scope of this litigation, undoubtedly delaying the resolution of

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this case. Intervention would result in the addition of two parties and a multitude of

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issues, such as the issues surrounding the ABI/DDS contract and the GMD/TDL contract,

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the validity of which is disputed. Further, allowing intervention has a significant risk of

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prejudicing the parties because the validity of the GMD/TDL contract is currently being

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litigated in Maryland. Thus, GMD would be put at risk of inconsistent judgments if the

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same issues are adjudicated in two different courts.

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Accordingly, the Court finds no basis to allow the Intervenors to permissively
intervene.
CONCLUSION

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For the foregoing reasons, the Court DENIES the Intervenors’ motion to intervene.
[Doc. No. 21.]
IT IS SO ORDERED.

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Dated: April 14, 2016

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Hon. Michael M. Anello
United States District Judge

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