CX Reinsurance Company Limited v. Leader Realty Company et al

Filing 74

MEMORANDUM AND ORDER granting 36 Motion of Natasha Johnson to Intervene; granting 37 Motion of Katiara Harper to Intervene; the intervenors SHALL BE DESIGNATED as Defendants; Attachment 1 to ECF No. 36 SHALL BE DOCKETED as Defendant Natash a Johnsons answer to the amended complaint; Attachment 2 to ECF No. 37 SHALL BE DOCKETED as Defendant Katiara Harpers answer to the amended complaint and counterclaim; Responses to Harpers counterclaim SHALL BE FILED within twenty-one days of the date of this memorandum and order. Signed by Judge James K. Bredar on 1/10/2017. (jnls, Deputy Clerk) Modified on 1/11/2017 (jnls, Deputy Clerk).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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CX REINSURANCE COMPANY LTD.,

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Plaintiff

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v.

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LEADER REALTY COMPANY et al.,
Defendants
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CIVIL NO. JKB-15-3054

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MEMORANDUM AND ORDER
Pending before the Court are motions to intervene by Natasha Johnson and Katiara
Harper. (ECF Nos. 36 & 37.) Plaintiff opposes the motions in their entirety (ECF Nos. 43 &
44), and Defendants oppose the motions in part (ECF No. 42), as explained infra. No hearing is
required. Local Rule 105.6 (D. Md. 2016).
Movants indicate they resided in properties owned or operated by Defendants and, during
the time of their residence, they suffered lead-paint poisoning; consequently, they have filed
separate, personal injury lawsuits against Defendants in state court. Movants indicate that, in the
event of judgments entered in their favor against Defendants in the state forum, they would look
to Defendants’ liability insurance policy, issued by CX Re or its predecessor, for satisfaction of
their judgments. Thus, they seek to intervene in this federal case to protect their contingent
interests in the proceeds of the policy—a policy with respect to which CX Re has filed this
action for rescission and damages based upon CX Re’s contention that Defendants made material
misrepresentations in their application for insurance.

Movants assert they are entitled to intervene as of right pursuant to Federal Rule of Civil
Procedure 24(a)(2); failing that, they request permissive intervention under Rule 24(b). The
Court concludes Movants may not intervene as of right but they will be granted permissive
intervention.
I.
Rule 24(a)(2) provides that upon “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.” Plaintiff and Defendants oppose Movants’ intervention of right.
“To intervene as a matter of right under Fed. R. Civ. P. 24(a)(2), the moving party must
show that (1) it has an interest in the subject matter of the action, (2) disposition of the action
may practically impair or impede the movant's ability to protect that interest, and (3) that interest
is not adequately represented by the existing parties.” Newport News Shipbuilding & Drydock
Co. v. Peninsula Shipbuilders' Ass'n, 646 F.2d 117, 120 (4th Cir. 1981). According to the United
States Court of Appeals for the Fourth Circuit, a contingent interest in the outcome of other
pending litigation constitutes a significantly protectable interest that satisfies Rule 24(a)(2).
Teague v. Bakker, 931 F.2d 259, 261 (4th Cir. 1991). That requirement is satisfied here by
Movants’ interest in their pending litigation against Defendants.
The Court can find no basis, however, for finding that Movants have adequately shown
the second required element of Rule 24(a)(2), i.e., that “disposition of the action may practically
impair or impede the movant’s ability to protect that interest.” In the Teague case, the Court
noted that if the insurance company there were to prevail in its declaratory action against the

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defendant insureds such that the court were to rule against the defendants on the question of
coverage, then the intervenors would have to satisfy any judgment against the defendants from
assets other than the policy proceeds, “and the existence and amount of such assets are
questionable” due to defendants’ poverty. Id. Movants here have made no similar showing that
the existence and amount of Defendants’ assets are questionable and, therefore, have not
established the second element for intervention as of right.
As for the third element, whether Movants’ interest will be adequately represented by
Defendants, Plaintiff and the Defendants dispute the notion that they are not representing the
interest they share with Movants in having the insurance proceeds available to satisfy any
judgment. They point to what the Court agrees is vigorous defense litigation as proof. Because
Movants and Defendants share the same ultimate objective—payment of insurance proceeds,
Defendants enjoy a presumption of adequate representation, which Movants have failed to rebut
by demonstrating adversity of interest, collusion, or nonfeasance. See Virginia v. Westinghouse
Elec. Corp., 542 F.2d 214, 216 (4th Cir. 1976). Intervention of right will be denied.
II.
Although Defendants opposed intervention of right in the instant suit by Movants,
Defendants have not opposed Movants’ permissive intervention under Rule 24(b)1, which
provides in pertinent part,
(1) In General. On timely motion, the court may permit anyone to intervene who:
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(B) has a claim or defense that shares with the main action a common
question of law or fact.
...

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Plaintiff opposes Movants request to intervene under any authority, including Rule 24(b).

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(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.
Here, the common question of fact is whether Defendants made material
misrepresentations on the application for liability insurance. If so, then CX Re is entitled to
rescission. If the policy is rescinded, then neither Defendants nor Movants will benefit from its
liability coverage, assuming arguendo that Movants’ claims fall within the parameters of the
policy. The Court can discern no delay or prejudice occasioned by Movants’ intervention
(particularly given the discovery restriction imposed below). Thus, the motions will be granted
on this basis, and Movants will intervene as Defendants.
III.
The Court finds credible CX Re’s assertion that limits must be placed on Movants’
discovery requests to prevent duplication. Defendants, through their previously noted active
litigation efforts, are driving the defense bus, so to speak. Movants are effectively passengers on
the defense bus and they would only move into the driver’s seat if and when Defendants did not
continue in their active litigation role. To ensure an efficient discovery process, this case will be
referred for discovery matters to a magistrate judge, who will rule on any request by Movants to
propound discovery separate from that propounded by Defendants. Thus, Movants will be
forbidden from taking discovery except to the extent they can establish to the satisfaction of the
magistrate judge that it will be nonduplicative of what the other parties are already taking and
otherwise within the scope of established discovery rules.2

See generally Fed. R. Civ. P.

26(b)(2)(C)(i).
IV.
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The Court’s ruling only applies to this case, JKB-15-3054. However, some procedures adopted in the
instant case may be applied to other CX Re cases pending before other judges, as those judges deem appropriate.

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Accordingly, for the foregoing reasons, IT IS HEREBY ORDERED:
1. The motions to intervene by Natasha Johnson and Katiara Harper (ECF Nos. 36 & 37)
ARE GRANTED.
2. The intervenors SHALL BE DESIGNATED as Defendants in this action.
3. Attachment 1 to ECF No. 36 SHALL BE DOCKETED as Defendant Natasha Johnson’s
answer to the amended complaint.3
4. Attachment 2 to ECF No. 37 SHALL BE DOCKETED as Defendant Katiara Harper’s
answer to the amended complaint4 and counterclaim.
5. Responses to Harper’s counterclaim SHALL BE FILED within twenty-one days of the
date of this memorandum and order.
6. By separate order, this matter will be referred to a magistrate judge to manage and rule on
discovery issues arising.
7. Movants are forbidden from taking discovery except to the extent they can establish to
the satisfaction of the magistrate judge that it will be nonduplicative of what the other
parties are already taking and otherwise within the scope of established discovery rules.
DATED this 10th day of January, 2017.

BY THE COURT:

______________/s/____________________
James K. Bredar
United States District Judge

3

After Movants filed their motions to intervene, CX Re filed a second amended complaint.

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See note 3, supra.

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