The Penn Mutual Life Insurance Company, v. Kehoe et al

Filing 106

ORDER. For the reasons in this Order, Seehawer's motion to intervene is GRANTED. His request to stay the briefing on Universitas's motion to confirm the settlement is denied as moot. Opposition to that motion shall be due by September 8, 20 16, and any reply shall be due by September 15, 2016. This resolves Docket Nos. 93 and 104. SO ORDERED. Granting 93 Motion to Intervene; Denying as moot 104 LETTER MOTION to Stay re: (101 in 1:15-cv-01111-AJN) Declaration in Support of Motion, ( 100 in 1:15-cv-01111-AJN) Memorandum of Law in Support of Motion, (99 in 1:15-cv-01111-AJN) MOTION to Enforce Settlement Agreement addressed to Judge Alison J. Nathan from Jamie C. Smith dated August 22, 2016. Document filed by R. Aaron Seehawer, as Trustee of the B.A. Fisher Sales, Inc. Trusted Cross-Purchase Agreement. (Signed by Judge Alison J. Nathan on 8/30/2016) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

USDCSDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#:

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DATE FILED:JOG

3 Q2.Q 1 ~

The Penn Mutual Life Insurance Company,
Plaintiff,
15-cv-1111 (AJN)

-vORDER
Kathy Kehoe as Trustee of the Sickness, Accident
& Disability Indemnity Trust 2005, et al.,

Defendants.

ALISON J. NATHAN, District Judge:
Before the Court is R. Aaron Seehawer's ("Seehawer") motion to intervene in this action,
pursuant to Rule 24 of the Federal Rules of Civil Procedure. For the reasons that follow, the
motion is granted.

I.

BACKGROUND
This is an interpleader action concerning three life insurance policies whose proceeds

were placed on deposit with the Court. See Dkt. Nos. 13, 14; see also Life Insurance Company
of the Southwest v. Kehoe, No. 15-cv-4594, Dkt. No. 14. 1 It was commenced on February 17,

2015. Dkt. No. 1. The parties subsequently resolved the dispute over the proceeds from one of
the life insurance policies, see Dkt. Nos. 75, 79, and the remaining dispute concerns two policies
purchased by the Grist Mill Employee Welfare Benefit Plan ("Grist Mill"). Kathy Kehoe, an
interpleader defendant, is the trustee for Grist Mill. Universitas Education LLC ("Universitas"),
the other interpleader defendant, claims an interest in the proceeds from the two life insurance

1

Pursuant to a stipulation between the parties, this Court consolidated The Penn Mutual Life Insurance
Company v. Kehoe, No. 15-cv-1111, and L{fe Insurance Company of the Southwest v. Kehoe, No. 15-cv-4594. See
Dkt. No. 27. Unless otherwise noted, all citations to the docket in this order are to the first-filed case (No. 15-cv1111 ).

policies by virtue on an outstanding judgment against Grist Mill. On June 15, 2016, Universitas
and Grist Mill (acting through Kehoe) reached a settlement and placed that settlement on the
record before this Court. See Colbath Deel., Ex. B, Dkt. No. 97-2. One provision of the
settlement agreement is that the proceeds from the life insurance policies on deposit with the
Court will function as security in the event Grist Mill cannot make the payments required under
the settlement. Id. at 3.
Seehawer, the would-be intervenor, is a trustee for the B.A. Fischer Agreement, which is
the designated beneficiary of the two policies purchased by Grist Mill. See Seehawer Br. 3-4,
Dkt. No. 94. Seehawer filed a separate suit against Kehoe, again in her capacity as trustee for
Grist Mill, and Universitas in the District ofldaho on February 24, 2016, raising claims relating
to his interest (as a trustee) in the policies, including a claim for breach of fiduciary duty against
Grist Mill. Smith Deel., Ex. 3, Dkt. No. 95-3. He filed a motion to intervene in this action on
July 27, 2016. Dkt. No. 88. Universitas, the only party to oppose the motion, filed its response
on August 10, 2016, Dkt. No. 96, and Seehawer filed a reply on August 16, 2016, Dkt. No. 98.

II.

DISCUSSION
Federal Rule of Civil Procedure 24 outlines the requirements for intervention as ofright

and for permissive intervention. Fed. R. Civ. P. 24(a), (b ). "In order to intervene as ofright
pursuant to Rule 24(a)(2), the applicant must: (1) file a timely motion; (2) show an interest in the
litigation; (3) show that its interest may be impaired by the disposition of the action; and (4)
show that its interest is not adequately protected by the parties to the action." In re Holocaust

Victim Assets Litig., 225 F.3d 191, 197 (2d Cir. 2000). Courts generally consider "substantially
the same factors whether the claim for intervention is 'ofright' under Fed. R. Civ. P. 24(a)(2), or
'permissive' under Fed. R. Civ. P. 24(b)[]." R Best Produce, Inc. v. Shulman-Rabin Mktg. Corp.,
467 F.3d 238, 240 (2d Cir. 2006). But a district court has "considerable discretion" in deciding a
motion for permissive intervention. AT & T Corp. v. Sprint Corp., 407 F.3d 560, 562 (2d Cir.

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2005). Here, although the Court has serious concerns about the timeliness of Seehawer's motion
to intervene, it will exercise its discretion to permit him to intervene under Rule 24(b). 2
As an initial matter, Universitas does not challenge that Seehawer has an interest in this
litigation or that his interest may be impaired by the disposition of the action. See Seehawer Br.
10-11 (noting that Seehawer claims an interest in the insurance proceeds on deposit with the
Court and that Universitas may acquire some or all of those proceeds if it prevails).
Accordingly, the only two factors at issue here are whether Seehawer's motion was timely and
whether his interest is not adequately protected by the current parties (namely, by Grist Mill).
Turning first to the question of timeliness, the Court has "broad discretion in assessing
the timeliness of a motion to intervene." Holocaust Victim Assets, 225 F.3d at 198. The factors
courts consider when assessing timeliness include "how long the motion to intervene was
delayed, whether the existing parties were prejudiced by that delay, whether the movant will be
prejudiced if the motion is denied, and unusual circumstances militating either for or against a
finding of timeliness." Butler, Fitzgerald & Potter v. Sequa Corp., 250 F .3d 171, 182 (2d Cir.
2001 ). Here, Seehawer filed his motion to intervene more than seventeen months after this
litigation commenced and after the parties and the Court invested substantial resources in the
litigation and settlement effort. He justifies that delay on the grounds that he "took steps to
intervene as soon as it became apparent that Grist Mill was no longer representing [his] interests"
and filed the motion to intervene "as soon as [he] was able." Seehawer Br. 8. But that claim is
belied by the fact that Seehawer filed suit against Grist Mill in Idaho in February 2016, five
months before Seehawer moved to intervene in this action. Moreover, Seehawer's complaint in
the Idaho action raises the specter that Grist Mill failed to comply with its fiduciary duties, see
Smith Deel., Ex. 3 ~ 84, further demonstrating that he was on notice of a potentially adverse
outcome in this case but nonetheless intentionally sat on his hands until that adverse outcome
was realized.
2
Because the motion to intervene is granted, the Comt does not decide whether Seehawer could also
intervene under Rule 24(a)(2).

3

Despite the Court's concerns about Seehawer's tactics, it nonetheless holds that
Seehawer' s intervention is timely within the meaning of Rule 24(b), given the wide latitude
afforded district courts in assessing timeliness and given the stage of these proceedings. There is
currently a motion to enforce the June 15 settlement pending before the Court. Dkt. No. 99.
Pursuant to Local Rule 6.1 (b ), opposition to that motion is due September I, 2016. The Court
will extend that deadline by only a week, thereby minimizing any prejudice to Universitas. See
Long Island Trucking, Inc. v. Brooks Pharmacy, 219 F.R.D. 53, 55 (E.D.N.Y. 2003) (noting that
"prejudice to the existing parties" is the most important factor in assessing the timeliness of a
motion to intervene). And although Seehawer plainly could have (and likely should have)
intervened at least in advance of the settlement conference, denying Seehawer' s motion would
prejudice him by preventing him from raising arguments as to why the settlement is not
enforceable. Universitas contests the notion that denying Seehawer's motion would cause him
prejudice on the grounds that he can continue to litigate his claims against Grist Mill in the Idaho
action. See Opp. Br. 13, Dkt. No. 96. But whether Seehawer can prevail on those claims is
separate from the issue of whether Grist Mill and Universitas can enforce their settlement in this
action, and Universitas does not dispute that the answer to the latter question may affect
Seehawer's interests. Accordingly, the Court deems Seehawer's intervention timely enough.
Universitas's remaining challenge to Seehawer's motion is that Grist Mill, which owes a
fiduciary duty to Seehawer, has adequately represented his interests. This contention hinges on
two premises: first, that Grist Mill can use the proceeds from the two life insurance policies at
issue here to satisfy Universitas's judgment, and second, that using those proceeds as security for
the settlement agreement was consistent with Grist Mill's fiduciary obligations. Although those
may well be winning arguments, they are also arguments that Seehawer seeks to challenge
through his intervention. In other words, the question of whether Grist Mill has adequately
represented Seehawer's interests turns on the legal issues that Seehawer may raise if he is a
paiiy. In light of that fact, the Court will permit Seehawer to intervene.

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III.

CONCLUSION
For the foregoing reasons, Seehawer's motion to intervene is GRANTED. His request to

stay the briefing on Universitas's motion to confirm the settlement is denied as moot.
Opposition to that motion shall be due by September 8, 2016, and any reply shall be due by
September 15, 2016.
This resolves Docket Nos. 93 and 104.

SO ORDERED.

Dated:

August~,

2016
New York, New York
ALISON J. NATHAN
United States District Judge

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