Penn-Star Insurance Company v. Maintenance Asset Management Inc. et al

Filing 54

MEMORANDUM & ORDER, For the reasons explained above. Judge Tiscione's (Dkt. 50) R&R is OVERRULED, GNY's (Dkt. 38) motion to intervene is DENIED, and Penn-Star's (Dkt. 35) motion for entry of Judgment is GRANTED. The Clerk of Court is respectfully DIRECTED to enter judgment for Penn-Star in accordance with the terms of the accepted offer of judgment. So Ordered by Judge Nicholas G. Garaufis on 9/24/2019. (fwd'd for jgm) (Lee, Tiffeny)

Vlf
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-X

PENN-STAR INSURANCE COMPANY,
Plaintiff,
MEMORANDUM & ORDER

-against17-CV-5047(NGG)
(ST)
MAINTENANCE ASSET MANAGEMENT

INC.,DANIEL MCELHATTON,and DECLAN
MCELHATTON,
Defendants.

-X

GREATER NEW YORK MUTUAL

INSURANCE COMPANY,

Proposed IntervenorDefendant
-X

NICHOLAS G. GARAUFIS,United States District Judge.
PlaintiffPenn-Star Insurance Company ("Penn-Star") initiated this diversity action on

August 25,2017, seeking rescission of an insurance policy it issued to Defendant Maintenance
Asset Management Inc.("MA")and declaratory relief related thereto. (Compl.(Dkt. 1).)

Before the court is Penn-Star's motion for entry ofjudgment(Penn-Star Mot.for Entry of
J.("Penn-Star Mot")(Dkt. 35))and Greater New York Mutual Insurance Company's("GNY")
motion to intervene(GNY Mot.to Intervene("GNY Mot.")(Dkt. 38)), which the undersigned
referred Magistrate Judge Steven Tiscione for a Report and Recommendation("R&R"). (Nov.6,
2018 Order Referring Mot.) On March 7,2019, Judge Tiscione issued an R&R recommending
that the court grant GNY's motion to intervene. (R&R(Dkt. 50).)

For the following reasons, the court OVERRULES the R&R,DENIES GNY's motion to

intervene, and GRANTS Penn-Star's motion for entry ofjudgment.
1.

BACKGROUND

This case arises out of a fire that occurred on April 11,2017, at 56-11 94th Street,

Elmhurst,NY 11373. (GNY Mem.in Sup. of its Mot. to Intervene("Mem.")(Dkt. 38-12)at 1.)
The fire was allegedly caused by Defendants in this action. (See Am.Compl.(Dkt. 20)

20-

26.) At the time ofthe fire. Defendants were covered by a general liability insurance policy(the
"Policy")issued by Penn-Star. (Id HH 8-9; Mem. at 4.)
A.

Communication between Penn-Star and GNY

Penn-Star and GNY exchanged several items of correspondence between the time ofthe
fire and GNY's motion to intervene. On May 4,2017, GNY tendered a demand for coverage to
Penn-Star related to damages from the fire. (May 4, 2017 Letter from Jim Fitzpatrick(Dkt. 38-

6).) After commencing this proceeding, Penn-Star sent a letter to GNY,dated November 28,
2017, stating:

[Pjlease be advised that . . . [Penn-Star] filed a rescission and
declaratory judgment action titled Penn Star Insurance Comnanv v.
Maintenance Asset Management.Inc. and Declan McElhatton in the
Eastem District of New York under case number l:17-cv-05047-

NGG-ST concerning [Penn-Star's] coverage obligations to our
insured(s), if any, arising out ofthe fire.

(Nov. 28,2017 Penn-Star Letter to GNY("First Penn-Star Letter")(Dkt. 49-1 at 2).)' On
February 6, 2018, GNY tendered a second demand for coverage to Penn-Star. (Feb. 6,2018
Letter from Jim Fitzpatrick (Dkt. 38-7).) On February 21,2018,Penn-Star sent a second letter to

^ GNY did not have an opportunity to respond to the First Penn-Star Letter because it was appended to an affidavit
filed after GNY's reply.(See Affidavit of Randi S. Hoffinan (Dkt. 49).)Because the quoted excerpt was repeated
verbatim in the Second Penn-Star Letter and the existence ofthe earlier letter does not affect the court's analysis, the
court treats the First Penn-Star letter as if it was not received by GNY.

GNY,again giving explicit notice ofthis action. (Feb. 21,2018 Penn-Star Letter to GNY
("Second Penn-Star Letter")(Dkt. 42-2) at 3.) On March 6, 2018, Randi Hof&nan ofPenn-Star
sent an email to James Fitzpatrick at GNY. (See Mar. 6,2018 Email from Randi Hoffman to
James Fitzpatrick("Hoffinan Email")(Dkt. 49-2).) The email stated that "Penn-Star has filed

coverage litigation against Maintenance Asset Management in the LFnited States District Court
for the Eastem District ofNew York." (Id.) On April 30,2018,Penn-Star sent a third letter to
GNY reserving the right to refuse to indemnify MA based on "rulings that may be made in
the ...rescission and declaratory judgment action now pending ... under Action No. 1:17-cv-

05047-NGG-ST." (Apr. 30, 2018 Penn-Star Letter to GNY("Third Penn-Star Letter")(Dkt. 42-

3 at 2).) On September 13, 2019, Fitzpatrick was copied on an email with the accepted offer of
judgment attached. (Sept. 13,2018 Email from Sal DeSantis(Dkt. 38-9).)
As noted above, GNY did not have an opportunity to respond to the First Penn-Star

Letter because it was appended to an affidavit filed after GNY's reply. (See Affidavit of Randi
S. Hoffman.) Additionally, GNY claims that the Second Penn-Star Letter was never received
and the Third Penn-Star Letter was misfiled due to an intemal clerical error and never reviewed.

(See Reply at 2-3; Second Decl. of James V. Fitzpatrick("Second Fitzpatrick Deck")(Dkt. 47-1)

3-5.) Notably, GNY does not dispute receipt ofthe Hoffinan Email; in fact, GNY included a
copy ofthe email as an exhibit. (See Ex. F to the Declaration of James V. Fitzpatrick
("Fitzpatrick Deck")(Dkt. 38-8).)
B.

Relevant Procedural History

Penn-Star initiated this action on August, 25, 2017,seeking to rescind the general liability

insurance policy it issued to MA. (See Compk) MA answered the complaint on November 17,
2017. (Answer(Dkt. 10).) Penn-Star filed an amended complaint on April 10, 2018

(Am. Compl.(Dkt. 20)), which MA answered on April 30,2018.(Answer to Am. Compl.(Dkt.
24).) On September 13,2018, while the parties were engaged in discovery, Perm-Star filed a

notice that it had accepted an offer ofjudgment from MA pursuant to Federal Rule of Civil
Procedure 68. (Notice of Acceptance of Offer of J.("Notice of Acceptance")(Dkt. 33).) On

September 25,2018,Perm-Star filed a motion for entry ofjudgment. (Perm-Star Mot.) On
September 26, 2018,the court ordered MA to file a response to Perm-Star's motion. (Sept. 26,
2018 Order.) On October 9,2018, MA filed a response as ordered, consenting to the entry of
judgement. (See MA Resp. to Perm-Star Mot.(Dkt. 37).)
Also on October 9,2018, GNY filed a motion to intervene. (GNY Mot.) On October 11,

Perm-Star filed a response in opposition to GNY's motion. (Perm-Star Mem.in Opp'n(Dkt.

42).) On October 18, GNY filed a reply. (Reply in Further Supp. of Mot. to Intervene ("Reply")
(Dkt. 47).) With the court's permission(see October 25,2018 Order), Perm-Star filed an
affidavit on October 29,2019. (See Affidavit of Randi S. Hoffrnan.)

On November 6,2018,the undersigned referred GNY's Motion to Magistrate Judge
Steven Tiscione for an R&R. (Nov. 6, 2018 Order Referring Mot.) On March 7,2019, Judge
Tiscione issued an R&R recommending that the court grant GNY's motion to intervene.(R&R.)
On March 19,2019,Perm-Star objected to Judge Tiscione's R&R. (Perm-Star Objs.(Dkt. 51).)

On March 29,2019, GNY responded to Perm-Star's objections. (GNY Resp. to Perm-Star Objs.
(Dkt. 53).)
II.

GNY'S MOTION TO INTERVENE

A.

Legal Standard

In reviewing an R&R from a magistrate judge regarding a dispositive motion,the district
court"may adopt those portions ofthe Report to which no objections have been made and which

are not facially erroneous." Romero v. Bestcare Inc.. No. 15-CV-7397(JS), 2017 WL 1180518,

at *2(E.D.N.Y. Mar. 29, 2017)(internal citation omitted"): see also Impala v. U.S. Den't of
Justice, 670 F. App'x 32,32(2d Cir. 2016)(summary order)("[F]ailure to object timely to a

magistrate's report operates as a waiver ofany further judicial review ofthe magistrate's
decision

"
(internal citation omitted)). The district court must review de novo "those

portions ofthe report...to which objection is made." 28 U.S.C. § 636(b)(1);

Fed. R. Civ. P.

72(b)(3). To obtain de novo review, an objecting party "must point out the specific portions of
the[R&R]" to which it objects. Sleepv's LLC v. Select Comfort Wholesale Corp., 222 F. Supp.
3d 169,174(E.D.N.Y. 2016); see also Fed. R. Civ. P. 72(b)(2)("[A] party may serve and file
specific written objections to the [R&R].").

Here,Penn-Star filed timely objections to Judge Tiscione's R&R. (See Perm-Star Objs.)

Perm-Star objected to Judge Tiscione's finding that GNY's intervention request was timely and
that GNY was reasonable in relying on MA to protect its interests. (See id. at 1-4.) For the
following reasons,the court agrees that GNY's motion to intervene was untimely, overrules
Judge Tiscione's R&R,and denies GNY's motion to intervene.
B.

Discussion

To intervene in a pending matter as ofright under Rule 24(a)(2), the proposed intervener

must "(1)timely file an application,(2)show an interest in the action,(3)show that the interest
may be impaired by the disposition ofthe action, and(4)show that the interest is not protected
adequately by the parties to the action." R Best Produce,Inc. v. Shuhnan-Rabin Mktg. Corp.,
467 F.3d 238,240(2d Cir. 2006)(quoting In re Bank of N.Y. Derivative Litig., 320 F.3d 291,

300(2d Cir. 2003)); see also Fed. R. Civ. Pro. 24(a)(2). "Failure to satisfy any one ofthese four

requirements is a sufficient ground to deny the application." R Best Produce.467 F.3d. at 241

(emphasis omitted)(alterations adopted).

Under Rule 24(b), a court may grant a request for permissive intervention,"on timely
motion," ifthe party either has a conditional statutory right to intervene or "has a claim or
defense that shares with the main action a common question oflaw or fact." Fed. R. Civ. Pro.
24(b). "The principal guide in deciding whether to grant permissive intervention is 'whether the
intervention will unduly delay or prejudice the adjudication ofthe rights ofthe original parties.'"

United States v. Pitnev Bowes.Inc.. 25 F.3d 66,73(2d Cir. 1994)(quoting Fed. R. Civ. Pro.
24(b)(3)).

Judge Tiscione correctly observed that ofthe four requirements noted above,the parties
primarily dispute whether GNY's motion to intervene was timely. (R&R at 4-5.) "A district
court has broad discretion in assessing the timeliness of a motion to intervene, which defies

precise definition." In re Holocaust Victim Assets Litig.. 225 F.3d 191,198(2d Cir. 2000)

(quotation marks and citation omitted). Relevant factors for determining timeliness include:"(a)
the length oftime the applicant knew or should have known ofits interest before making the

motion;(b) prejudice to existing parties resulting from the applicant's delay;(c)prejudice to the

applicant if the motion is denied; and(d)the presence of unusual circumstances militating for or
against a finding oftimeliness." Flovd v. Citv of New York. 770 F.3d 1051, 1058(2d Cir. 2014)

(quoting MasterCard Int'l Inc. v. Visa Int'l Serv. Ass'n. Inc.. 471 F.3d 377,390(2d Cir. 2006)).
The court will address each factor in turn.

1.

GNY knew or should have known ofits interest for at least seven months
before making its motion.

"Among the most important factors in a timeliness decision is the length oftime the
applicant knew or should have known of his interest before making the motion." Catanzano bv

Catanzano v. Wing, 103 F.3d 223,232(2d Cir. 1996)(quotation marks omitted). In considering
this factor,"the clock for intervening starts to run from the moment that a proposed intervenor
becomes aware or should have become aware that he or she had interests in the subject matter of

the litigation not otherwise protected by the existing parties to the lawsuit. Sec. & Exch.
Comm'n v. Callahan. 193 F. Supp. 3d 177,202(E.D.N.Y. 2016)(emphasis in original).
Here,Penn-Star repeatedly informed GNY ofthe rescission action. Between November
28,2017, and April 30, 2018,Penn-Star sent at least three letters and one email notifying GNY
ofthe present action. rSee First Penn-Star Letter; Second Perm-Star Letter; Third Perm-Star
Letter; Hof&nan Email.) The first and second letters state:

[P]lease be advised that . . . [Perm-Star] filed a rescission and
declaratory judgment action titled Perm Star Insurance Comnanv v.
Maintenance Asset Management Inc. and Declan McElhatton in the
Eastem District of New York imder case number l:17-cv-05047-

NGG-ST concerning [Perm-Star's] coverage obligations to our
insured(s), if any, arising out ofthe fire.

(First Perm-Star Letter at 2; Second Perm-Star Letter at 3.) The Third Perm-Star Letter explicitly
refers to the "rescission and declaratory judgment action now pending in the United States
District Court for the Eastem District of New York under Action No. 1:17-cv-05047-NGG-ST."

(Third Perm-Star Letter at 2.) Finally, in an email sent from Randi Hof&nan to James Fitzpatrick
on March 6,2018,Perm-Star informed GNY that "Perm-Star has filed coverage litigation against

Maintenance Asset Management in the United States District Court for the Eastem District of
New York." (Hoffman Email.)

GNY argues that its "clock for intervening" should not begin until September 13, 2018,
the day that Perm-Star filed notice ofthe accepted offer ofjudgement. rSee Reply at 3; Notice of
Acceptance.) GNY states that the Second Perm-Star Letter was never received and the Third
Perm-Star Letter was misfiled due to an intemal clerical error and never reviewed. CSee Reply at

2-3; Second Fitzpatrick Decl.

3-5.) GNY argues that the email did not constitute notice ofthis

action because "[rjescission is the antithesis to coverage because rescission is voiding ofthe
policy ab initio as if it never existed." (Mot. at 8.)

GNY's arguments are unpersuasive. First, GNY seems to concede that it had notice of

the action well before September 13, 2018:"GNY's Cross-Motion[,] filed 25 days after its
interests were no longer being represented, within 7 months offirst being notified[,] is timely."

(Reply at 4.) Second,the record demonstrates that even if GNY wasn't aware ofthis action prior
to learning ofthe accepted offer ofjudgment,it should have been. Penn-Star sent multiple letters
to GNY declaring that Penn-Star was seeking to rescind the Policy. GNY concedes to receiving
the Third Penn-Star Letter, which establishes that GNY had notice ofthe rescission action by

April 30, 2018. (Third Penn-Star Letter at 2.) Moreover, GNY received earlier notice ofthe
matter on March 6,2018, when Fitzpatrick received an email from Penn-Star informing him of
the ongoing litigation. fSee Hoffinan Email.) GNY argues that Hoffman's phrasing
insufficiently identified the precise nature ofthe action. However,Penn-Star's complaint is

publicly available on the court's docket fsee generallv Compl.), and a few minutes ofinquiry in
response to the Hoffinan Email would have revealed to GNY that its interest was in jeopardy. It
is reasonable to expect an insurance company to promptly investigate any indication that a
second insurance company—against whom it is seeking an equitable right of contribution—^was
litigating the policy under which the right was available. It is also reasonable to expect that an
insurance company has notice ofthe contents of a letter received by the company. Here,Penn-

Star did not "conceal[] its rescission claim fi-om GNY"as GNY contends. (Mem. at 7). Instead,
through a lack of due diligence and mismanagement ofits incoming mail, GNY failed to apprise
itself ofreadily available information concerning Penn-Star's attempt to rescind the Policy.

8

For the above reasons, the court finds that GNY was or should have been aware ofits

interest in this case by March 6,2018, and that it waited over seven months before filing its
motion to intervene.
2.

The existing parties would be substantiallv prejudiced bv GNY's late
intervention.

The court next assesses the "prejudice to existing parties resulting from the applicant's

delay." Flovd. 770 F.3d 1058. This analysis also weighs in favor of denying GNY's motion to
intervene.

The Second Circuit has cautioned against allowing intervention in a matter that has been

otherwise resolved. See, e.g.. id. at 1058-59 (denying intervention sought after district court

issued liability and remedial orders); Farmland Dairies v. Comm'r of N. Y. State Dep't of Aerie.
& Markets. 847 F.2d 1038, 1044(2d Cir. 1988)("[I]f Appellants were permitted to intervene at

this late date, there is no question that the settlement concluded by [the plaintiff] and the
[defendant] would be jeopardized."); United States v. Yonkers Bd. of Educ.. 801 F.2d 593,596
(2d Cir. 1986)("[P]ost-judgment intervention ... is generally disfavored because it usually
creates delay and prejudice to existing parties."); see also Pitnev Bowes. 25 F.3d at 73 (finding
no abuse of discretion in denying a motion for permissive intervention when "the parties to the

action had already agreed to the terms ofthe consent decree, and...intervention would require
renegotiation[] and delay"). Specifically, the Second Circuit has repeatedly affirmed decisions
denying intervention "where intervention would jeopardize a settlement between the existing
parties and the proposed intervenor's explanation for the delay was inadequate." D'Amato v.
Deutsche Bank. 236 F.3d 78, 84(2d Cir. 2001)(citing Holocaust Victim Assets Litig.. 225 F.3d
at 198-99); see also Levin v. United States. 633 F. App'x 69, 71 (2d Cir. 2016)(summary order)

(affirming denial ofintervention based in part on a finding "that [the] intervention would
prejudice the current plaintiffs in that it would complicate the current settlement agreement").
Here, Penn-Star would be substantially prejudiced by GNY's delayed intervention. After

nearly two years of litigation, Penn-Star and MA agreed upon a resolution and sought entry of
judgment. (See Penn-Star Mot.) Allowing GNY to intervene at this late stage, when the only
remaining step is the entry ofthe agreed-upon judgment, would "wast[e] the fruits oflengthy
negotiations that had culminated in agreement." Pitnev Bowes,Inc.. 25 F.3d at 72. Allowing
intervention would also cause the existing parties to incur substantial additional litigation
expenses. Finally, Penn-Star faces additional prejudice in that allowing intervention would

require Penn-Star to "continue providing[MA]with a defense in the underlying tort actions,
where it may actually have no obligation to do so if the policy is declared void ad initio." (PennStar Objs. at 10.) If GNY intervenes, Penn-Star will have to provide MA with a defense
throughout this litigation, which would otherwise end upon the entry ofthe agreed-upon

judgment. Further, if GNY were to succeed in preventing Penn-Star from rescinding the Policy,
Penn-Star would face a continuing obligation not only to defend MA,but potentially also to
indemnify MA in the underlying tort actions related to the fire.
For the reasons stated above,the court finds that allowing intervention would

substantially prejudice the existing parties.
3.

GNY also faces substantial prejudice if it is not permitted to intervene.

GNY counters that it would also face substantial prejudice if the court were to deny its

motion to intervene(GNY Mot. at 7), and Penn-Star fails to refute this claim. The court agrees
with GNY. If GNY is unable to intervene, the Policy will be rescinded ab initio imder the terms

10

ofthe accepted offer ofjudgment and GNY's ability to seek an equitable right of contribution
will be severely compromised,if not eliminated.

The court is sympathetic to GNY's position, but GNY had the opportunity to avoid this
outcome and failed to do so. GNY claims that "[h]ad GNY been noticed about a rescission

action, it would have authorized counsel to intervene immediately." (Fitzpatrick Decl. K 13.)

However, GNY was notified ofthe action. GNY does not dispute receipt ofthe Hoffinan Email,
which informed it oflitigation surrounding the policy. (GNY Mot. at 7). Nor does GNY dispute
receipt ofthe Third Penn-Star Letter(GNY Reply at 3); instead, it states that the letter was

misfiled and not reviewed. (Id). Once GNY was made aware ofthe existence oflitigation
surrounding the Policy,"it was incumbent upon [it]... to take immediate affirmative steps to

protect [its] interests." NAACP v. New York. 413 U.S. 345, 367 G973k see also Tununino v.
Hamburg.260 F.R.D. 27, 36(E.D.N.Y. 2009).

The court finds that GNY would be prejudiced if it is not allowed to intervene, but that
the weight ofthe prejudice is lessened by GNY's failure to take affirmative steps to protect its
ovm interests.

4.

GNY's argument that it would have been unable to successfullv intervene
does not weigh against a finding of untimeliness.

Finally, GNY argues that its motion should be considered timely because "[i]t was not
until GNY's interests were no longer being represented [by MA]that GNY was permitted to
intervene as a matter ofright." (Reply at 4.) Judge Tiscione found this argument to be

compelling, and his R&R largely turned on the fmding that GNY "could not have successfully
moved to intervene until[MA]submitted its Offer of Judgment."(see id. at 7-8.)

This question is most appropriately considered under the final factor ofthe timelines

inquiry: an "unusual circumstance[] militating for ... a finding oftimeliness." Flovd. 770 F.3d
11

at 1058. The court is unpersuaded by GNY's argument for two reasons. First, GNY moved for
permissive intervention imder Rule 24(b)(1)(B) as well as intervention as ofright under Rule
24(a)(2). (GNY Mot. at 8-10.) A party seeking permissive intervention is not required to show
inadequacy ofrepresentation. Sqq Pitnev Bowes. 25 F.3d at 73(discussing the standard for
permissive intervention); compare Fed. R. Civ. Pro. 24(b)(1)(B) with Fed. R. Civ. Pro. 24(a)(2).
Therefore, even ifthe court were to agree that MA was adequately representing GNY's interests
until they tendered an offer ofjudgment, GNY could still have sought permissive intervention
well before October 9, 2018.

Second,the court does not agree that GNY was, as a matter oflaw, unable to seek
intervention as ofright prior to the offer ofjudgment. In general, the burden to show that an
existing party inadequately represents a potential intervener's interests "should be treated as
minimal." Trbovich v. United Mine Workers of Am..404 U.S. 528, 538 n.lO (1972). See also

Chao V. Local 1104 Commc'ns Workers of Am.. No. 06-CV-5896(LDW). 2007 WL 1231616, at

*2(E.D.N.Y. Apr. 26,2007)("[T]he burden on an intervenor is to show that such representation
may be inadequate and,therefore, should be treated as minimal."(quotation marks and citations
omitted)).
It is true that the Second Circuit has "demanded a more rigorous showing ofinadequacy

in cases where the putative intervenor and a named party have the same ultimate objective."
Butler. Fitzgerald & Potter v. Sequa Corp.. 250 F.3d 171,179(2d Cir. 2001). This increased

burden applies to cases with a true identity ofinterests. S^ Travis v. Navient Corp.. 284 F.

Supp. 3d 335,345-46(E.D.N.Y. 2018)(finding identity ofinterests when the putative class
included the proposed interveners); see also Ferguson v. Ruane Cuniff& Goldfarb Inc.. No. 17CV-6685(ALC),2019 WL 1434435, at *5 (S.D.N.Y. Mar. 29, 2019)(holding that, for two

12

participants in the same retirement plan,"Plaintiffs and [the proposed intervenor] share an
identity ofinterest and the same ultimate objective to recover losses from the Plan caused by
Defendants' alleged breach offiduciary duties" (quotation marks omitted)).

Judge Tiscione reasoned that "there are two possible positions in this litigation: the policy
should be rescinded or it should not be rescinded" and, until the offer ofjudgment, GNY and

MA advocated the same position.(R&R at 7.) However,the analysis for intervention ofas right
queries whether the proposed intervenor shares an identity ofinterest, not an identity of position.
See Butler. Fitzgerald & Potter. 250 F.3d at 179. Here,there is no identity ofinterest between
GNY and MA because they have different ultimate objectives. In simple terms, MA seeks(or

sought prior to the offer ofjudgment)to uphold the Policy in order to protect itselffrom potential
liability while GNY seeks to establish MA's liability for the fire and pursue a right of
contribution under the Policy. CSee Answer(Dkt. 24); Mem. at 1-3.) While both objectives

require the Policy be in force, this similarity is not akin to the identity of interests oftwo
members of a putative class, Travis. 284 F. Supp. 3d at 346, or two participants in a retirement

plan seeking to recover losses caused by the plan administrator's alleged breach offiduciary
duties. Ferguson. 2019 WL 1434435, at *5. In both Travis and Ferguson the proposed

intervenor had the same ultimate objective as the existing parties. Here, on the other hand, GNY
ultimately seeks to establish the very liability from which MA wishes to protect itself.

The court is skeptical of GNY's argument that its reliance on a third party to protect its
interests was not only justified, but required. The Second Circuit considered a similar situation
in Flovd. and rejected the argument that a motion to intervene was timely when,
"notwithstanding their awareness oftheir interests,[the proposed intervenors] did not know that
the [existing party] would not be protecting those interests." Flovd. 770 F.3d at 1059. GNY's

13

purported reliance on MA is especially unwarranted considering GNY's assertion that "[a]s a
result of[MA's] work, it is alleged that a fire occurred causing significant property damage
resulting in lawsuits by multiple plaintiffs for well over $1,000,000" against GNY's insured.
(Mem. at 2.) It would be strange indeed for the law to require GNY to rely on a third party to

protect its interests when that same party may cause GNY to pay more than $1,000,000 in
damages. As with the proposed intervenors in Floyd,"it should have been readily apparent to
[GNY]that their interest diverged from [MA's]long before[GNY]filed for intervention."

Floyd, 770 F.3datl059.2
Had GNY actually attempted to intervene prior to the offer ofjudgment, it would have
needed to show only that MA might not adequately represent GNY's interests. See Chao.2007

WL 1231616, at *2. GNY might have been able to sustain this burden simply by demonstrating

that it ultimately sought to recover money from Penn-Star based on MA's alleged actions leading
to the fne. In any event, GNY did not attempt to intervene before the offer ofjudgment and it
has not unequivocally shown that it could not have successfully done so. Therefore, the court
fmds that GNY was not precluded, as a matter oflaw,from seeking to intervene before MA's
offer ofjudgment and GNY's assertion that it was unable to seek intervention earlier is not an
"imusual circumstance^ militating for ... a finding oftimeliness." Flovd. 770 F.3d at 1058.

^ The Second Circuit noted that Flovd presented "particular and highly unusual facts and circumstances." Flovd.
770 F.3d at 1059. The panel stressed that its opinion should not be read to "encourage premature intervention in
cases of public concern where government defendants have discretion to settle." Id at 1054. This instant dispute
between private insurance companies is not a "case[] of public concern" involving government defendants with
"discretion to settle." Id Also, the facts Flovd resemble those at hand. In Floyd, public sector unions sought to
intervene in an otherwise-resolved lawsuit after New York City entered into a settlement agreement that the unions

believed implicated their interests. Id at 1056-57. The unions argued that "they did not become aware oftheir
interests" prior to the district court issuing a Liability Order and Remedial Order, id at 1058, and also that they had
expected the City to protect their interests. Id at 1059. The panel rejected both ofthese arguments. Id Because
the unions' arguments are similar to GNY's arguments here, the court finds Flovd instructive in considering the
reasonableness of GNY's reliance on an otherwise adverse third party to protect its interests.

14

C.

Conclusion

The timeliness of a motion to intervene "must be evaluated against the totality ofthe
circumstances before the court." Farmland Dairies. 847 F.2d at 1044. After considering the

totality ofthe circumstances, the court finds that GNY's application to intervene under Rule
24(a)(2) was untimely. GNY knew or should have known ofPenn-Star's rescission claim at
least six months before Penn-Star filed the Notice of Acceptance, but did not file its motion

seeking intervention until approximately one month later. The existing parties would face
substantial prejudice iftheir agreement to resolve this litigation was upended at this late stage.
In contrast, GNY could have avoided the prejudice it faces by promptly seeking to intervene

upon notice ofthis action. Finally, GNY has not demonstrated that it would have been unable to
intervene as a matter oflaw prior to MA's offer ofjudgment.

Additionally, because the court fmds that GNY's motion to intervene pursuant to Rule
24(a)(2) was untimely, it also fails under Rule 24(b)(1)(B).

MasterCard Int'l Inc.,471 F.3d

at 391 ("A motion for permissive intervention, like one for intervention of right, must be timely."
(quoting Catanzano, 103 F.3dat234)).
"Failure to satisfy any one of[the] four requirements is a sufficient ground to deny" a

motion to intervene. R Best Produce.. 467 F.3d. at 241 (emphasis omitted)(alterations adopted).
Because the court finds that GNY's intervention request not timely, its motion to intervene is
DENIED.

m.

PENN-STAR'S MOTION FOR ENTRY OF JUDGMENT

A.

Legal Standard

Under Federal Rule of Civil Procedure 68(a), when a party files an offer ofjudgment
together with the notice of acceptance and proof of service,"[t]he clerk must then enter

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judgment." Fed. R. Civ. Pro. 68(a). The mandatory language ofthe rule generally leaves a court
"no choice about entering the agreed judgment." Charles Alan Wright & Arthur R. Miller, 12

Federal Practice & Procedure § 3005(3d ed. 2019). While the Second Circuit has not directly
addressed whether a court is required to enterjudgment after parties file an accepted Rule 68

offer, it noted in 1948 that "acceptance ofan offer ofjudgment under rule 68" was one of"only
two occasions when the clerk may enter finaljudgment without action ofthe judge or jury."
Bowles V. J.J. Schmitt & Co.. 170 F.2d 617,620(2d Cir. 1948). More recently, the other circuits
that have considered this issue have uniformly held that a district court has little or no discretion

to not enter the agreed-upon judgment.

White v. Nat'l Football League. 756 F.3d 585,595-

96(8th Cir. 2014)("[A]n offer ofjudgment... requires the clerk to enter a formaljudgment in
favor ofthe plaintiff,[but] the court itself exercises no review over the judgment. Rather, the
court's involvement is limited to filing the judgment on the docket...."); Ramming v. Nat. Gas

Pipeline Co. of Am.. 390 F.3d 366, 370(5th Cir. 2004)("The court generally has no discretion
whether or not to enter the judgment. A Rule 68 Offer of Judgment is usually considered selfexecuting."); Webbv. James. 147 F.3d 617,621 (7th Cir. 1998)("[The Rule 68]language
removes discretion from the clerk or the trial court as to whether to enter judgment upon the

filing ofthe accepted offer."); Mallorv v. Evrich, 922 F.2d 1273,1279(6th Cir. 1991)("[0]nce
the parties agree on the terms of a Rule 68 judgment,the court has no discretion to withhold its
entry or otherwise to fimstrate the agreement.").
Also, district courts in this circuit have found that "the entry offmaljudgment pursuant to
Rule 68 is a ministerial act that does not require the action ofthe judge." Harris v. Citv of New
York.No.03-CV-8767(RWS),2004 WL 1555194, at *1 (S.D.N.Y. July 12, 2004); see also

Christian v. R. Wood Motors. Inc.. No.91-CV-1348,1995 WL 238981, at *5 (N.D.N.Y. Apr.

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21, 1995)("Once the parties agree on the terms of a Rule 68judgment,the court has no
discretion to withhold its entry or otherwise to fmstrate the agreement."(quotation marks
omitted)(alterations adopted)).

There are exceptions to this rule. Courts have found that a Rule 68 offer made in the
class-action context is subject to a post-acceptance fairness hearing, see, e.g.. Blair v. Shanahan.
38 F.3d 1514,1517-18 (9th Cir. 1994)(affirming district court that conducted hearing before
entering judgement for an accepted Rule 68 offer), and that Rule 68 offers made in bankruptcy
proceedings are still subject to Bankruptcy Court approval. See, e.g.. Gordon v. Gouline. 81
F.3d 235,240(D.C. Cir. 1996). Further, while not precisely on point, courts have allowed offers

ofjudgment to be revoked, but only in exceptional circumstances. For example, a Rule 68 offer
may be revoked "where a defendant expresses its intent to make a Rule 68 offer by telephone,

subsequently makes a Rule 68 offer containing an obvious but significant clerical mistake, and
defendant's counsel conveys the mistake to the plaintiffs counsel on the very same day." Cesar
V. Ruble's Costume Co.. 219 F.R.D. 257, 261 (E.D.N.Y. 2004)(Garaufis, J.). The Fourth Circuit

held that a party may rescind a Rule 68 offer where the plaintiffs,"while seeking to enforce a

judgment against their insurer for the burning oftheir house, have actually confessed in their
criminal trial to complicity in the burning of the house." Colonial Penn Ins. Co. v. Coil. 887
F.2d 1236, 1240(4th Cir. 1989).
B.

Discussion

On September 13, 2018,Penn-Star filed MA's offer ofjudgement, notice ofits
acceptance ofthe offer, and proofof service. fSee Notice of Acceptance.) On September 25,
2018,Penn-Star moved for entry ofjudgment. rSee Penn-Star Mot.) Pursuant to a court order,

MA filed a response noting that"ajudgment on specified terms was offered, accepted, and filed

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pursuant to Rule 68" and consenting to the entry ofjudgment. (MA Resp. at 2.) Additionally,
this case is neither a class action nor a bankruptcy proceeding, and the parties to the Rule 68

offer are not seeking to revoke it. Because the requirements of Rule 68 have been met and the
aforementioned exceptions are not applicable, the mandatory language ofthe Rule requires that
the court direct the Clerk to enterjudgment on the terms within the offer.

GNY argues against the entry ofjudgment. GNY states that Penn-Star "failed to cite one

case in which an insurer was permitted to rescind a policy with its insured when other parties had
an interest to the policy." (Reply at 5.) In support ofits argument, GNY cites one case from the
Middle District of Georgia. Id (citing Acceptance Indem. Ins. Co. v. Se. Forge. Inc.. 209 F.R.D.

697(M.D. Ga. 2002)). GNY's reliance on Acceptance is misplaced. In that case, unlike here,
the concemed party had intervened prior to the Rule 68 offer and the intervention was not
objected to by any ofthe existing parties. Acceptance Indem. Ins. Co.. 209 F.R.D. at 699-700.
While GNY correctly notes that the Acceptance court found "that in order for finaljudgment to

be entered in this case pursuant to the offer ofjudgment, all ofthe parties must agree to it or any
objecting party must be dismissed from the case prior to the entry ofthe final judgment," id at

700,the resolution ofthat issue does not help GNY's case:
Allowing JSL to intervene initially was not an abuse of discretion.
However,the Court finds that in light ofthe changed circumstances,
permitting JSL to remain as a permissive intervenor would rmduly
delay or prejudice the adjudication of the rights of the original
parties. Accordingly, JSL is hereby dismissed as a party without
prejudice.
Id at 701 (internal quotation marks omitted). Here, unlike in Acceptance, it is not necessary for
the court to dismiss GNY prior to directing the Clerk to enterjudgment because here, unlike in
Acceptance. GNY did not intervene before the acceptance ofa Rule 68 offer.

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In sum, GNY's only support for its opposition to the entry ofjudgment is a single nonbinding district court case where the concerned party had successfully intervened prior to the

offer ofjudgment and whose intervention was insufficient to prevent the entry ofjudgment
pursuant to Rule 68. This is not sufficient to overcome the mandatory language of Rule 68.

Because the Notice of Acceptance meets the Rule 68 requirements and none ofthe
exceptions are applicable, Penn-Star's motion for entry ofjudgment is GRANTED.
IV.

CONCLUSION

For the reasons explained above. Judge Tiscione's(Dkt. 50)R&R is OVERRULED,
GNY's(Dkt. 38) motion to intervene is DENIED,and Penn-Star's(Dkt. 35)motion for entry of

Judgment is GRANTED. The Clerk of Court is respectfully DIRECTED to enter judgment for
Penn-Star in accordance with the terms ofthe accepted offer ofjudgment.

SO ORDERED.

s/Nicholas G. Garaufis

Dated: Brooklyn,New York
September

NICHOLAS G. GARAUFIS

2019

United States District Judge

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