Broccolino v. Third Avenue Management Company LLC et al

Filing 21

MEMORANDUM AND ORDER: The Proposed Intervenors motions to intervene (16 cv 1118, Dkt. No. 27-29) are denied. Plaintiff Broccolino's motion to consolidate is denied (16 cv 1118, Dkt. No. 53.), and the Broccolino Action (16 cv 2436) is stayed pending resolution of the Engel Action. (As further set forth in this Order.) (Signed by Judge P. Kevin Castel on 4/20/2016) (spo)

USPCSDNY
DOCUMENT
ELECTRONICALLY FILED

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

DOC#: _ ___,.....,....,.~-·n

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WILLIAM ENGEL,

'DATE FILED: .f-J-t-/G'
.
.
l 6-cv-1118 (PKC)

Plaintiff,
-against-

MEMORANDUM
AND ORDER

THIRD AVENUE MANAGEMENT LLC, et al.,
Defendants.

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LIVIO BROCCOLINO,
Plaintiff,

16-cv-2436 (PKC)

-against-

THIRD A VENUE MANAGEMENT LLC, et al.,
Defendants.

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CASTEL, U.S.D.J.
Plaintiff William Engel, a shareholder of the Third Avenue Focused Credit Fund
(the "Fund"), brought this shareholder derivative action on behalf of the Third Avenue Trust (the
"Trust"), of which the Fund is a unit. Subsequently, three shareholders of the Fund-Daniel
Krasner, Avi Wagner, and Miranda Zuber-sought leave to intervene in the action ("Proposed
Intervenors"). (Dkt. No. 27-29.) A second derivative action has been brought and is pending
before this Court. Broccolino v. Third Avenue Management LLC, 16 cv 2436 (PKC). The plaintiff

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in Broccolino seeks to consolidate his action with the present action pursuant to Rule 42(a), Fed. R. Civ. P. 1
With respect to the motions to intervene, the Proposed Intervenors are
shareholders of the Fund, a unit of the Trust at issue in the Engel derivative action. Because the
Proposed Intervenors have the same "ultimate objective" as Engel, they "must rebut the
presumption of adequate representation by the party already in the action." Butler, Fitzgerald &
Potter v. Sequa Corp., 250 F.3d 171, 179 (2d Cir. 2001). Here, the Proposed Intervenors have
failed to overcome the presumption of adequate representation. While the Proposed Intervenors
allege that Engel is an inadequate representative because he failed to request the defendant's
books and records prior to bringing his claim, such a request is by no means a prerequisite for
relief in a derivative action. More importantly, the Proposed lntervenors have failed to
demonstrate that their books and records request did in fact uncover any significant additional
information and that, therefore, the plaintiff is not an adequate representative because he did not
obtain this information. Although the Proposed lnte1venors' complaint raises additional
allegations, "[t]he mere fact that plaintiffs also assert additional and different claims from those
asserted by the Proposed Inte1venors does not render the former inadequate to represent the
interests of the latter, particularly where, as here, the suit is brought derivatively on behalf of the
- corporation." In re Ambac Fin. Grp., Inc., Derivative Litig., 257 F.R.D. 390, 394 (S.D.N.Y.
2009). The Proposed Intervenors' motions to intervene as of right are denied. For the same
reasons, the Proposed Intervenors' motions to permissibly intervene are also denied. In re Bank
of New York Derivative Litig., 320 F.3d 291, 300 n. 5 (2d Cir. 2003) (''Substantially the same

I The other four related cases (16 CV 02760 (PKC), 16 CV 02761(PKC),16
assert claims under the Securities Act of 1933 ("Securities Class Action").

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CV

02759 (PKC), 16 CV 02758 (PKC))

factors are considered in determining whether to grant an application for permissive intervention
pursuant to Rule 24(b)(2). ").
With respect to consolidation, plaintiff Broccolino seeks to consolidate his action
with the Engel action. (Dkt. No. 53.) Rule 42(a) grants the di~trict court discretion to
consolidate actions that "involve a common question of law or fact." While the Broccolino and
Engel actions involve common questions of law and fact, the Court concludes that consolidation
is unnecessary. Derivative actions are brought on behalf of the entity, in this case, the Trust.
Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 522 (1947). Because plaintiff Engel
"fairly and adequately represent[s] the interests of shareholders,". Rule 23.l; Fed. R. Civ. P., any
award that plaintiff Engel ultimately receives on behalf of the Trust will inure to the benefit of all
shareholders. Therefore, consolidating the two actions is unnecessary to ensure a recovery on
behalf of the Trust, and will not result in any additional benefit for the Trust or its shareholders.
Of course, plaintiff Broccolino and the Proposed Intervenors have a right to notice and an
opportunity to object to any settlement of the Engel action. Rule 23. l(c), Fed. R. Civ. P.; Blatt v.
Dean Witter Reynolds InterCapital, Inc., 732 F.2d 304, 307 n.1 (2d Cir. 1984) (noting that any
settlement of a derivative action must be submitted to the Court, which "then must schedule a
hearing and notify all shareholders of their right to object to the terms of the proposed
settlement").
Accordingly, the Proposed Intervenors motions to intervene (16 cv 1118, Dkt. No.
27-29) are denied. PlaintiffBroccolino's motion to consolidate is denied (16 cv 1118, Dkt. No.
53.), and the Broccolino Action (16 cv 2436) is stayed pending resolution of the Engel Action.

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SO ORDERED.

P. Kevin Castel
United States District Judge
Dated: New York, New York
April 20, 2016

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