Colorado Casualty Insurance Company v. S&S Joint Venture et al

Filing 20

ORDER granting 11 Motion to Intervene as a Party Defendant Pursuant to F.R.C.P. 24. The Clerk of Court is directed to add Fidelity and Deposit Company of Maryland as a Defendant in this matter. Fidelity and Deposit Company of Maryland Answer due 01/06/2012. Scheduling Conference set for 12/14/2011 at 10:30 AM is vacated and reset to 2/13/2012 at 11:00 AM in Courtroom C204 before Magistrate Judge Kristen L. Mix, by Magistrate Judge Kristen L. Mix on 12/06/2011.(wjc, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 11-cv-02182-MSK-KLM
COLORADO CASUALTY INSURANCE COMPANY,
Plaintiff,
v.
S&S JOINT VENTURE,
WHITE RIVER VILLAGE, LLP, and
WHITE RIVER TOWNHOMES, LLC,
Defendants.
FIDELITY AND DEPOSIT COMPANY OF MARYLAND,
Interested Party.
_____________________________________________________________________
ORDER
_____________________________________________________________________
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Fidelity and Deposit Company of Maryland’s
(“F&D”) Motion to Intervene as a Party Defendant Pursuant to F.R.C.P. 24 [Docket No.
11; Filed October 25, 2011] (the “Motion”). At the time the Motion was filed, Plaintiff took
no position on the Motion; Defendants White River Village, LLP, and White River
Townhomes, LLC (collectively, “White River”), were unresponsive to communications from
F&D regarding the Motion; and counsel for Defendant S&S Joint Venture (“S&S”), which
had not yet entered an appearance in the matter, was unopposed to the Motion. See
Motion [#11] at 1-2; see also Notice of Erratum [#14] at 1 (clarifying the status of the
representation of Defendant S&S). No party has filed a Response to F&D’s Motion. The

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Court has reviewed the Motion and the applicable case law and is fully advised in the
premises. For the reasons stated below, the Court GRANTS F&D’s Motion to Intervene.
Background
On August 22, 2011, Plaintiff filed this lawsuit against Defendants S&S and White
River. See Complaint [#1] at 1. According to Plaintiff, the primary controversy is between
it and Defendant S&S, the general contractor for the construction of White River Village
(the “Project”) in Rifle, Colorado, regarding the coverage afforded under the insurance
policies issued on the Project. See id. at 2. The White River Defendants are named as
“interested parties” pursuant to Fed. R. Civ. P. 57. See id.
Defendant S&S was terminated from the Project on March 15, 2006, due to
construction deficiencies. See id. at 2-3. On July 12, 2006, F&D, as the surety for
Defendant S&S, agreed to assume responsibility for the completion of the Project. See id.
at 3. In response to the alleged defects in the Project, the White River Defendants later
filed lawsuits against F&D (the “Underlying Litigation”), because it had issued performance
bonds to Defendant S&S. See id. F&D also filed a Third Party Complaint against
Defendant S&S in the Underlying Litigation. See id.
The only claim in the present litigation is for declaratory relief by Plaintiff, which had
also issued multiple insurance policies to Defendant S&S in connection with the Project.
See id. at 4. Plaintiff seeks a declaration by the Court that: (1) “Plaintiff has no obligation
to indemnify [Defendant S&S] with respect to the allegations made against [Defendant
S&S] in the Underlying Litigation;” (2) “the Policies afford no coverage to [Defendant S&S]
for any damage to the work of [Defendant S&S] or the work of [Defendant S&S’s]

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subcontractors;” (3) “the Policies afford no coverage to [Defendant S&S] for any contractual
liability as set forth in Exclusion 2.b;” and (4) “the Policies afford no coverage to [Defendant
S&S] for any alleged ‘property damage’ or ‘bodily injury’ that was not caused by an
‘occurrence.’” Id. at 9. F&D now seeks leave to intervene in this declaratory judgment
action, based on its asserted right “to recovery from [Plaintiff] on the policies at issue
herein.” See Motion [#11] at 4.
Legal Standard
Pursuant to Fed. R. Civ. P. 24(a)(2), “[o]n timely motion, the court must permit
anyone to intervene who . . . 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.” The Tenth Circuit Court of Appeals has interpreted
Rule 24(a)(2) to contain four discrete elements that must be met by the movant: 1) the
motion must be timely; 2) the movant must claim an interest related to the property or
transaction which is the subject of the action; 3) the movant’s interest may be impaired or
impeded if intervention is not permitted; and 4) the existing parties must not adequately
represent the movant’s interest. Elliott Indus. Ltd. P’ship v. BP Am. Prod. Co., 407 F.3d
1091, 1103 (10th Cir. 2005). “The Tenth Circuit generally follows a liberal view in allowing
intervention under Rule 24(a).” Id.
Analysis
I. Timeliness
Whether a motion pursuant to Rule 24(a) is timely filed falls within the Court’s
discretion.

Capitol Indem. Corp. v. Heckel, No. 11-cv-00340-CMA-CBS, 2011 WL
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2883467, at *2 (D. Colo. July 15, 2011) (citing Sanguine, Ltd. v. U.S. Dep’t of the Interior,
736 F.2d 1416, 1418 (10th Cir. 1984)). The Court looks to “all of the circumstances,
especially (1) the length of time since the movant knew of its interests in the case; (2)
prejudice to the existing parties; and (3) prejudice to the movant.” Id. (internal quotation
omitted).
The timeliness of F&D’s Motion is not disputed.1 This case commenced on August
22, 2011, and F&D filed its Motion only two months later. The Court finds that the Motion
is timely filed.
II. Movant’s Interest in the Subject Transaction
The Court next considers whether F&D has an “interest” in the case. The interest
test under Rule 24(a)(2) is “primarily a practical guide to disposing of lawsuits by involving
as many apparently concerned persons as is compatible with efficiency and due process.”
Utah Assn. of Counties v. Clinton, 255 F.3d 1246, 1251-52 (10th Cir. 2001). F&D’s interest
must be “‘direct, substantial, and legally protectable.’” City of Stilwell v. Ozarks Rural Elec.
Coop. Corp., 79 F.3d 1038, 1042 (10th Cir. 1996) (quoting Alameda Water & Sanitation
Dist. v. Browner, 93 F.3d 88, 90 (10th Cir. 1993)).
The Tenth Circuit has advised that “the interest requirement is not a mechanical rule.
It requires courts to exercise judgment based on the specific circumstances of the case.”
United States v. Albert Inv. Co., Inc., 585 F.3d 1386, 1392 (10th Cir. 2009) (citing San

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Additionally, there is no argument against F&D’s standing to intervene. Nevertheless, the
Court finds that F&D has standing to intervene as a defendant alongside Defendant S&S. See San
Juan Cnty. v. United States, 503 F.3d 1163, 1172 (10th Cir. 2007) (“parties seeking to intervene
under Rule 24(a) or (b) need not establish Article III standing so long as another party with
constitutional standing on the same side as the intervenor remains in the case”) (internal quotations
and citation omitted).

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Juan Cnty., 503 F.3d at 1199) (internal quotations omitted). “At minimum, the applicant
must have an interest that could be adversely affected by the litigation.” Id. “The threat
of economic injury from the outcome of litigation undoubtedly gives a petitioner the requisite
interest.” Id. at 1393 (citing WildEarth Guardians v. U.S. Forest Serv., 573 F.3d 992, 996
(10th Cir. 2009)).
Here, F&D contends that it is entitled to recovery from Plaintiff on the policies at
issue based on four separate theories of liability.2 Motion [#11] at 4. Should the Court
determine that Plaintiff is obligated to indemnify Defendant S&S or that the policies afford
some coverage for the damages at issue in the Underlying Litigation, then, pursuant to the
Complaint [#1] in conjunction with F&D’s representations, F&D could recover from Plaintiff.
This clearly constitutes the requisite economic interest.
F&D’s interest is contingent upon the outcome of this litigation, and the potential for
economic injury is thus more than speculative, considering the insurance contract-based
nature of the lawsuit. In light of the above-stated jurisprudence, the Court finds that the
threat of economic injury against F&D resulting from a potential decision adverse to
Defendants in this case states the requisite interest pursuant to Rule 24(a)(2).
III. Possible Impairment of Movant’s Interest
“To satisfy the impairment element of the intervention test, a would-be intervenor

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The four theories of recovery asserted by F&D are: (1) Defendant “S&S’s rights against
[Plaintiff] have been contractually assigned to F&D;” (2) Defendant “S&S’s rights against [Plaintiff]
are owned by F&D pursuant to the doctrine of equitable subrogation;” (3) “any rights [the] White
River [Defendants] may have against [Plaintiff] are also owned by F&D by virtue of its performance
and the doctrine of equitable subrogation;” and (4) Defendant “S&S is liable to F&D for, inter alia,
the damages covered by [Plaintiff’s] policies, including those incurred as a result of [Defendant]
S&S’s liability for covered property damage, and [Defendant] S&S’s liability to F&D under its
contract of indemnity.” Motion [#11] at 4-5.

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must show only that impairment of its substantial legal interest is possible if intervention is
denied. This burden is minimal.” WildEarth Guardians, 573 F.3d at 995 (quoting Utah
Ass'n of Counties, 255 F.3d at1253 (10th Cir. 2001)).
The Court is not limited to consequences of a strictly legal nature and thus may
consider impairment as a practical matter. See Utah Ass’n of Counties, 225 F.3d at 1253.
Although F&D could commence a separate suit for subrogation once this matter has
concluded, if necessary, this proposition is contrary to the purpose of Rule 24(a)(2). As
explained in San Juan County, “the factors mentioned in the Rule are intended to capture
the circumstances in which the practical effect on the prospective intervenor justifies its
participation in the litigation. Those factors are not rigid, technical requirements.” 503 F.3d
at 1195. The practical effect here of granting leave to intervene would allow F&D to
preserve its right to defend its economic interest related to the underlying state court
lawsuit in the immediate action, rather than duplicating proceedings by forcing the future
initiation of a subrogation suit. “[W]here a proposed intervenor's interest will be prejudiced
if it does not participate in the main action, the mere availability of alternative forums is not
sufficient to justify denial of a motion to intervene.” Utah Ass’n of Counties, 225 F.3d at
1254 (quoting Commodity Futures Trading Comm'n v. Heritage Capital Advisory Serv., 736
F.2d 384, 387 (7th Cir. 1984)). Thus, the Court finds that F&D has met the “minimal”
showing required for demonstrating that its interests may be impaired or impeded by the
disposition of this lawsuit.
IV. Adequate Representation of Movant’s Interest
“Even if an applicant satisfies the other requirements of Rule 24(a)(2), it is not
entitled to intervene if its ‘interest is adequately represented by existing parties.’” San Juan
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Cnty., 503 F.3d at 1203 (quoting Fed. R. Civ. P. 24(a)(2)). However, consistent with the
liberal standards explained herein regarding the first three factors prescribed by Rule
24(a)(2), the burden of showing that the representation by existing parties may be
inadequate is minimal. Utah Ass’n of Counties, 225 F.3d at 1254 (citing Sanguine, 736
F.3d at 1419)). “The possibility that the interests of the applicant and the parties may
diverge need not be great in order to satisfy this minimal burden.” Id. (quoting Natural Res.
Def. Council v. United States Nuclear Regulatory Comm'n, 578 F.2d 1341, 1346 (10th Cir.
1978)) (internal quotation omitted). The general presumption is that “representation is
adequate when the objective of the applicant for intervention is identical to that of one of
the parties.” Id. at 1204 (citation and internal quotations omitted). This presumption is
rebutted by merely a “possibility of inadequate representation.” WildEarth Guardians, 573
F.3d at 996 (citing Utah Ass’n of Counties, 225 F.3d at 1254) (emphasis in original).
F&D asserts that Defendant S&S is “completely defunct,” and thus that Defendant
S&S’s “interest in seeing F&D made whole is in no way substantial, and may not in fact
exist at all . . . . [T]here is no way to guarantee [Defendant] S&S will even show-up to
defend against this action, let alone defend F&D’s interests.”3 Motion [#11] at 16. Further,
F&D asserts that the potential for a settlement to occur between Plaintiff and Defendant
S&S means that Defendant S&S “could receive payment for these claims without
consideration as to F&D’s claims or obligation to relinquish the proceeds from such a
payment to F&D.” Id.
Recognizing the minimal burden necessary to show inadequate representation, the

3

Since the filing of this Motion, Defendant S&S has filed an Answer [#19] to the Complaint.

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Court finds that F&D has sufficiently demonstrated the possibility that the named
Defendants will not adequately represent its interests. Thus, this fourth and final factor
weighs in favor of granting leave to intervene.
Accordingly, the Court finds that F&D satisfies the four requisite factors articulated
by Rule 24(a)(2). F&D is therefore entitled to intervene as a defendant in this lawsuit, as
a matter of right.
V. Subject Matter Jurisdiction
Even though F&D may intervene as a matter of right pursuant to Rule 24(a)(2), the
Court must satisfy itself of subject matter jurisdiction at all stages of litigation. See Fed. R.
Civ. P. 12(h)(3); see also Shaw v. AAA Engineering & Drafting Inc., 138 F. App’x 62, 67
(10th Cir. 2005) (citation omitted) (“[I]t has long been recognized that a federal court must,
sua sponte, satisfy itself of its power to adjudicate in every case and at every stage of the
proceeding.”). The Court may exercise subject matter jurisdiction over this lawsuit pursuant
to 28 U.S.C. § 1332. Section 1332 governs diversity jurisdiction. Section 1332 requires
an amount in controversy exceeding $75,000, and that the matter be a “controversy
between citizens of different states, all of whom on one side of the controversy are citizens
of different states from all parties on the other side.” City of Indianapolis v. Chase Nat’l
Bank of City of New York, 314 U.S. 63, 69 (1941) (citation omitted).
According to the Complaint, Plaintiff is a New Hampshire corporation with its
principal place of business in Boston, Massachusetts.

See Complaint [#1] at 1.

Additionally, Plaintiff attests that “the amount in controversy exceeds the sum of $75,000,
exclusive of interest and costs.” Id. at 2. In its Motion, F&D fails to state where it is
incorporated or where its principal place of business is. However, the plain language of 28
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U.S.C. § 1367 “permits intervention as a defendant without destroying subject matter
jurisdiction.” Id.
“[T]he jurisdiction of the Court depends upon the state of things at the time of the
action brought, and ... after vesting, it cannot be ousted by subsequent events.” Price v.
Wolford, 608 F.3d 698, 702 (10th Cir. 2010) (citation omitted). “Once a district court has
jurisdiction, additional claims and parties can be added under the supplemental-jurisdiction
statute, 28 U.S.C. § 1367(a), which grants the district courts jurisdiction ‘over all other
claims that are so related to claims in the action within such original jurisdiction that they
form part of the same case or controversy under Article III of the United States
Constitution.’” Id. (quoting 28 U.S.C. § 1367(a)). The Court has no question as to its
subject matter jurisdiction over the Complaint pursuant to 28 U.S.C. § 1332, nor as to
whether F&D’s defense arises from the same facts as the present declaratory judgment
action or the underlying state court lawsuit.
Section 1367(a) prescribes that “supplemental jurisdiction shall include claims that
involve the joinder or intervention of additional parties.” Section 1367(b) articulates
exceptions to the exercise of supplemental jurisdiction over the following categories: 1)
“claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 . . .”; 2)
“claims by persons proposed to be joined as plaintiffs under Rule 19 . . .”; or 3) persons
“seeking to intervene as plaintiffs under Rule 24 . . . .” None of these exceptions are
present here. F&D intervenes as a defendant, not a plaintiff, and Plaintiff asserted no
claims against F&D in the original Complaint. See Price, 608 F.3d at 703-04. Accordingly,
the Court is satisfied that it may exercise subject matter jurisdiction over this case, inclusive
of F&D as an Intervenor-Defendant, pursuant to 28 U.S.C. § 1367(a) and (b).
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Conclusion
IT IS HEREBY ORDERED that F&D’s Motion to Intervene [#11] is GRANTED.
IT IS FURTHER ORDERED that the Clerk of Court is directed to add “Fidelity and
Deposit Company of Maryland” as a Defendant in this matter.
IT IS FURTHER ORDERED that F&D must file an answer or other response to the
Complaint [#1] no later than January 6, 2012.
IT IS FURTHER ORDERED that the Scheduling Conference set for December 14,
2011 at 10:30 a.m. is VACATED and RESET to February 13, 2012 at 11:00 a.m. in
Courtroom C-204 of the Byron G. Rogers United States Courthouse, 1929 Stout Street,
Denver, Colorado.
IT IS FURTHER ORDERED that the parties shall submit their proposed scheduling
order pursuant to the District of Colorado Electronic Case Filing (“ECF”) Procedures. The
parties shall submit the proposed scheduling order no later than February 8, 2012.

Dated: December 6, 2011

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