736 Building Owner, LLC et al v. Regions Bank et al
Filing
126
MEMORANDUM OPINION AND ORDER denying 113 Motion to Intervene. Signed by District Judge Keith Starrett on 5/31/2016 (scp)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
736 BUILDING OWNER, LLC, et al.
V.
PLAINTIFFS
CIVIL ACTION NO. 3:14-CV-222-KS-MTP
REGIONS BANK
DEFENDANT
MEMORANDUM OPINION AND ORDER
For the reasons provided below, the Court denies the Motion to Intervene [113]
filed by Carlisle 2010 Historic Tax Credit Fund II Limited Partnership.
A.
Background
This is a breach of contract case arising from loans for a development project.
Plaintiff 736 Building Owner, LLC (“Owner”) was established by a group of investors
to renovate a building in downtown Jackson. Owner entered into a promissory note and
loan contract with Defendant Regions Bank in the amount of $2.1 million. The loan
was guaranteed by Plaintiff Oscar De Leon, one of Owner’s initial members, and
secured by the building itself and certain asserts owned by Plaintiff Cytec Software
Systems, Inc. (“Cytec”). The loan was not enough to finish the project, and Plaintiffs
had to seek other financing. Accordingly, Regions agreed to increase Plaintiffs’ line of
credit from $2.1 million to $2.4 million, and Carlisle 2010 Historic Tax Credit Fund II
Limited Partnership (“Carlisle”) agreed to contribute $788,480.00 of tax credit
financing. Carlisle then became a member of one of Owner’s member LLC’s.
Regions subsequently declined to advance further funds on the line of credit, and
Carlisle and De Leon filled the gap, providing additional funds. De Leon eventually
filed this lawsuit on behalf of himself, Owner, and Cytec, alleging that Regions
breached the loan commitment. On May 4, 2016 – over two years after this case had
begun, after discovery had concluded and dispositive motions had been briefed, and
approximately one month before trial – Carlisle filed a Motion to Intervene [113]. The
motion is ripe for the Court’s review.
B.
Rule 24(a)(2)
First, Carlisle argues that it is entitled to intervention of right pursuant to Rule
24(a)(2). An applicant for intervention under Rule 24(a)(2) must satisfy four
requirements:
(1) the application for intervention 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; (4) the applicant’s interest must be
inadequately represented by the existing parties to the suit.
Entergy Gulf States La., LLC v. United States EPA, 817 F.3d 198, 203 (5th Cir. 2016)
(citing FED. R. CIV. P. 24(a)(2)). “Failure to satisfy any one requirement precludes
intervention of right.” Id. The Court’s analysis is pragmatic and flexible, focusing “on
the particular facts and circumstances surrounding each application . . . .” Id. “The rule
is to be liberally construed, with doubts resolved in favor of the proposed intervenor.”
Id.
Among other things, Defendant argues that Carlisle’s application for
intervention was not timely. The Court evaluates the timeliness of an intervention
motion by examining four factors: “(1) the length of time applicants knew or should
2
have known of their interest in the case; (2) prejudice to existing parties caused by
applicants’ delay; (3) prejudice to applicants if their motion is denied; and (4) any
unusual circumstances.” LULAC v. City of Boerne, 659 F.3d 421, 434 (5th Cir. 2011).
1.
Timeliness
After consideration of the record, the Court concludes that Carlisle knew or
should have known of its interest in this case months – perhaps years – ago. Plaintiffs
filed their Complaint [1-1] against Defendant on February 27, 2014. Therein, they
alleged that Defendant issued a written loan commitment after Carlisle committed to
contribute tax credit funding, but later refused to advance additional funds. Plaintiffs
alleged that Defendant’s refusal was “willful and malicious.”
It is undisputed that Carlisle owns an interest in Owner, and that Carlisle
entered into an Agreement and Resolution Concerning Litigation [122-2] with Owner
on January 12, 2015 – almost a year after this lawsuit started. In the Agreement,
Carlisle consented to Owner’s retention of counsel and pursuit of this litigation “based
on the limited information known to [it] regarding the Lawsuit.” Carlisle’s consent
covered “the claims currently asserted in the lawsuit,” and Plaintiffs were not
authorized to pursue additional claims without Carlisle’s consent. Plaintiffs agreed to
not settle any claims without Carlisle’s “express written consent,” and the Agreement
provided that Carlisle would receive twenty percent of any settlement after fees and
costs.
Plaintiffs also agreed to provide Carlisle “and its counsel copies of all material
pleadings, motions, orders, discovery and communications relating to the Lawsuit . .
3
. ,” and to keep Carlisle and its counsel “fully informed of all material developments in
the Lawsuit.” The documents [113-2] which Carlisle claims provided notice of its
potential claim – internal e-mails produced by Defendant during discovery – were first
produced to Plaintiff on August 12, 2015 [47]. Therefore, either Carlisle received them
at approximately the same time pursuant to its litigation agreement [122-2] with
Plaintiffs or it had access to them.
“Actual knowledge is not required” to satisfy this first factor. Stallworth v.
Monsanto Co., 558 F.2d 257, 264 (5th Cir. 1977). The Court should consider the
sophistication of the party seeking intervention. Id. Here, the litigation agreement
[122-2] demonstrates that Carlisle was aware of the nature of this litigation, and that
it knew or should have known of all material developments. Indeed, Carlisle’s 30(b)(6)
representative testified [122-1] that he knew Defendant had declined to advance
further funds, and the litigation agreement demonstrates that Carlisle wields
significant control over Plaintiffs’ actions in this lawsuit. Therefore, Carlisle knew or
should have known about the documents which it claims provided notice of its claims
no later than August 2015, but it did not file a Motion to Intervene [113] until over
eight months later in May 2016. This factor weighs heavily in favor of denying the
motion to intervene.
2.
Prejudice to Defendant
As for the second factor,“the prejudice to the original parties to the litigation
that is relevant to the question of timeliness is only that prejudice which would result
from the would-be intervenor’s failure to request intervention as soon as he knew or
4
reasonably should have known about his interest in the action.” Id. The prejudice to
existing parties caused by the delay in seeking intervention, “must be measured by the
delay in seeking intervention, not the inconvenience to the existing parties of allowing
the intervenor to participate in the litigation.” Sierra Club v. Espy, 18 F.3d 1202, 1206
(5th Cir. 1994).
If Carlisle is permitted to intervene, the parties would have to conduct
additional discovery, and the trial would be delayed for months. Carlisle asserts that
a delay of “a few months” is not “unduly prejudicial.” However, Carlisle is
underestimating the amount of delay that its intervention would likely cause. Carlisle
will presumably want to serve discovery requests on Defendant, and Defendant will
likely reciprocate with its own discovery requests. Depositions would likely be noticed
or, at least, reconvened, and Carlisle would retain an expert to calculate its damages,
as Plaintiff has done. Defendant would be entitled to depose that expert and designate
its own rebuttal expert, who would then be subject to deposition by Carlisle. In the end,
Carlisle’s intervention would essentially restart the discovery period, pushing the trial
of this case back six or seven months.
When Carlisle filed its motion to intervene, discovery had concluded, the
dispositive motions were fully briefed, and trial was only a month away. In contrast,
if it had sought intervention in August 2015, the parties would have had three to four
months left in the discovery period, and Carlisle could have participated in the ongoing
discovery without as much additional cost in time and money to the parties.
Furthermore, the Court assumes that Carlisle would want a chance to weigh in on the
5
pending motions and file its own dispositive motions, rendering the time and money
that the parties have already spent on briefing at least partially wasted. For these
reasons, the Court concludes that Defendant would be prejudiced by Carlisle’s delay
in requesting intervention. This factor weighs in favor of denying the motion to
intervene.1
3.
Prejudice to Carlisle
Carlisle argues that it has a substantial interest in this litigation that could be
impaired by its disposition, but it provided very little discussion on this factor in
briefing. In fact, the portions of its initial [114] and reply [123] briefs addressing this
factor are less than one page combined. The Court is not inclined to accept Carlisle’s
bare, conclusory statement that a judgment in Defendant’s favor would impair its
interests in any separate litigation against Defendant. The Court also notes that
Carlisle is aware of everything that occurs in this case and exercises a degree of control
over Plaintiffs’ actions. Nevertheless, for the purpose of addressing the current motion,
the Court will assume that this factor weighs in favor of granting the motion to
intervene.
1
Carlisle briefly argues that Defendant is precluded from arguing that it
would be prejudiced by Carlisle’s intervention at this point in the litigation because
it filed a Motion to Dismiss [9] in July 2014 for failure to join Carlisle as a party. As
noted above, the prejudice to existing parties caused by the delay in seeking
intervention is “measured by the delay in seeking intervention . . . ,” rather than
“the inconvenience to the existing parties of allowing the intervenor to participate
in the litigation.” Sierra Club, 18 F.3d at 1206. Therefore, Defendant’s motion to
dismiss is irrelevant because the pertinent question is whether Defendant would be
prejudiced by Carlisle’s intervention at this point in time.
6
4.
Unusual Circumstances
The parties have not highlighted any “unusual circumstances” relevant to this
issue. The fourth factor is neutral.
5.
Conclusion
The Court’s Rule 24(a)(2) analysis is pragmatic and flexible, focusing “on the
particular facts and circumstances surrounding each application . . . .” Entergy, 817
F.3d at 203. Likewise, the Court’s timeliness determination “is not limited to
chronological considerations but is to be determined from all the circumstances.”
Stallworth, 558 F.2d at 263. After considering the parties’ briefing and the record, the
Court concludes that Carlisle has been or should have been aware of its interest in this
litigation for longer than it claims. The Court also concludes that Carlisle – through
its ownership interest in one of the Owner’s members and through the litigation
agreement with Plaintiffs – has had and continues to have some degree of influence
over Plaintiffs’ actions in these proceedings. Carlisle’s intervention would require a
continuance of six to seven months, which would prejudice Defendant, and Carlisle’s
claim of prejudice if intervention is denied is vague, at best.
Therefore, the Court finds that the first two factors of the timeliness analysis
outweigh the third factor. Carlisle’s Motion to Intervene [113] was not timely, as
required by Rule 24(a)(2), and “[f]ailure to satisfy any one requirement precludes
intervention of right.” Id.
C.
Rule 24(b)
Next, Carlisle argues that the Court should permit it to intervene pursuant to
7
Rule 24(b). “On timely motion, the court may permit anyone to intervene who . . . has
a claim or defense that shares with the main action a common question of law or fact.”
FED. R. CIV. P. 24(b)(1). “In exercising its discretion, the court must consider whether
the intervention will unduly delay or prejudice the adjudication of the original parties’
rights.” FED. R. CIV. P. 24(b)(3). “Permissive intervention is wholly discretionary with
the district court . . . even though there [may be] a common question of law or fact, or
the requirements of Rule 24(b) are otherwise satisfied.” New Orleans Public Service,
Inc. v. United Gas Pipe Line Co., 732 F.2d 452, 471 (5th Cir. 1984).
For the reasons provided above, the Court finds that Carlisle’s motion was
untimely, and that its intervention would “unduly delay or prejudice the adjudication
of the original parties.” FED. R. CIV. P. 24(b)(3). For all these reasons, the Court denies
Carlisle’s Motion to Intervene [113].
SO ORDERED AND ADJUDGED, on this, the 31st day of May, 2016.
s/ Keith Starrett
UNITED STATES DISTRICT JUDGE
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?