Kleeberg et al v. Eber et al

Filing 200

OPINION AND ORDER re: 187 MOTION to Intervene , dated February 5, 2019. (Motion has been re-filed per 2/15/19 notice to attorney to re-file document). filed by Canandaigua National Bank & Trust Company. The Court grants CNBs motio n for permissive intervention. The Court finds there is no need to reach the issue of whether CNB met the standard for intervention as of right. The Court finds it need not reach the issue of whether CNB has a right to interplead in this action be cause CNB is already a party to this action by virtue of the Court granting its Motion to Intervene and, thus, already has the right to fully litigate its position in this action. See, e.g., Krishna v. Colgate Palmolive Co., No. 90-cv-4116 (CSH), 1991 WL 125186, at *3 (S.D.N.Y. July 2, 1991) ("An intervenor has equal standing with the original parties and is entitled to litigate fully on the merits.") (internal quotation marks omitted). For the sake of achieving a comprehensive resolution of this Motion, CNB is hereby directed to file a proposed pleading addressing the relief it seeks in this action by no later than April 17, 2019. SO ORDERED. (Signed by Magistrate Judge Katharine H. Parker on 3/28/19) (yv)

Case 1:16-cv-09517-LAK-KHP Document 200 Filed 03/28/19 Page 1 of 7

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------------X

03/28/2019

DANIEL KLEEBERG, et al.,
Plaintiffs,
-against-

16-CV-9517 (LAK) (KHP)
OPINION AND ORDER

LESTER EBER, et al.,
Defendants.
-----------------------------------------------------------------X
KATHARINE H. PARKER, United States Magistrate Judge:
Canandaigua National Corporation d/b/a Canandaigua National Bank & Trust (“CNB”) is
a former co-trustee of the testamentary trust created upon the death of Allen Eber (the
“Trust”). The Trust holds certain assets, including all of the remaining shares of stock in Eber
Bros. & Co., Inc. (“EB&C”). (Dkt. No. 188 ¶¶ 3-4, Ex. 2.) Defendant Lester Eber (“Defendant
Eber”) and Plaintiffs Audrey Hays, Lisa Stein, and Daniel Kleeberg are the Trust beneficiaries.
(Id. at Ex. 1.)
On June 1, 2017, the Monroe County Surrogate’s Court issued an Order for Judicial
Settlement of Final Account of Successor Co-Trustee, Resignation and Discharge of Co-Trustee
and Termination of Trust (the “Order”), which discharged CNB as co-trustee of the Trust and
instructed CNB to distribute the remaining Trust assets among the Trust beneficiaries. (Id.)
Pursuant to the Order, Defendant Eber and Plaintiff Hays each were entitled to receive a onethird share of the remaining assets of the Trust and Plaintiffs Stein and Kleeberg each were
entitled to receive a one-sixth share. (Id.)

Case 1:16-cv-09517-LAK-KHP Document 200 Filed 03/28/19 Page 2 of 7

CNB is now in the midst of attempting to distribute the remaining Trust assets among
the Trust beneficiaries pursuant to the Order. (Id. at ¶6.) On October 31, 2018, Defendant
Eber’s counsel sent CNB a Notice of Intent to Purchase Shares on Defendant Eber’s behalf
seeking to acquire all shares of EB&C stock pursuant to EB&C’s bylaws. (Id. at Ex. 4.) That same
day, counsel for Plaintiffs instructed CNB to “disregard Lester’s notice” and argued that
Defendant Eber’s request was ineffective pursuant to EB&C’s bylaws and that the Surrogate’s
Court Order had, in effect, already allocated the shares of EB&C stock among the Trust
beneficiaries. (Id. at Ex. 5.) Plaintiffs’ counsel also averred that CNB’s “continued resistance [to
implementing the Order] constitutes contempt of court, in addition to a continuing breach of
fiduciary duty.” (Id.) On December 17, 2018, Defendant Eber sent CNB another request,
through counsel, that all remaining shares of EB&C stock be transferred to him for no
consideration. (Id. at Ex. 6.) CNB again declined to grant that request. (Id. at ¶ 12.)
CNB was originally a defendant in this action because Plaintiffs alleged that CNB
breached its fiduciary duty to them and engaged in fraudulent concealment while acting as cotrustee of the Trust. (Dkt. No. 88 ¶¶ 119-61.) Although Plaintiffs ultimately dismissed those
claims against CNB with prejudice (Dkt. No. 117), the current dispute between the Trust
beneficiaries threatens to expose CNB to new liability from both Defendant Eber and Plaintiffs.
Accordingly, CNB now makes the instant unopposed Motion to Intervene, pursuant to
Federal Rule of Civil Procedure (“Rule”) 24(a) or (b), and for Interpleader, pursuant to Rule
22(a), to allow the Court to resolve the dispute between Plaintiffs and Defendant Eber
regarding how CNB should distribute the remaining shares of EB&C stock among the Trust
2

Case 1:16-cv-09517-LAK-KHP Document 200 Filed 03/28/19 Page 3 of 7

beneficiaries. (Dkt. No. 188 ¶ 3; see also Dkt. Nos. 187 and 189.) For the reasons set forth
below, CNB’s Motion is GRANTED.
DISCUSSION
A party may join an action by moving to intervene either as of right pursuant to Rule
24(a) or permissively pursuant to Rule 24(b). As an initial matter, the Court notes that CNB did
not submit a proposed pleading with its motion “that sets out the claim or defense for which
intervention is sought,” as required by Rule 24(c). See generally N. Shore-Long Island Jewish
Health Sys., Inc. v. MultiPlan, Inc., No. 12-cv-1633 (JMA) (AKT), 2015 WL 777248, at *17
(E.D.N.Y. Feb. 13, 2015), adopted by No. 12-cv-1633 (JMA) (AKT), 2015 WL 1345814 (E.D.N.Y.
Mar. 25, 2015) (citing Bano v. Union Carbide Corp., No. 99-cv-11329 (JFK)(HBP),
2005 WL 6800401, at *14 (S.D.N.Y. Aug. 12, 2005), adopted as modified by No. 99-cv-11329
(JFK), 2005 WL 2464589 (S.D.N.Y. Oct. 5, 2005)). However, the failure to submit a pleading
pursuant to Rule 24(c) is not fatal to CNB’s motion. Indeed, where the position of the movant is
apparent from other filings, and where the parties to the litigation will not be prejudiced, “Rule
24(c) permits a degree of flexibility with technical requirements.” Tachiona ex rel. Tachiona v.
Mugabe, 186 F. Supp. 2d 383, 393, 393 n.8 (S.D.N.Y. 2002) (permitting party to intervene
without filing a formal motion or proposed pleading where its position had already been set
forth in the proceeding and did not come as a surprise).
Although CNB failed to submit a proposed pleading with its Motion to Intervene, the
Court is, nonetheless, inclined to consider CNB’s Motion because none of the parties to this
action object to the Motion and the relief CNB seeks is clear from its Motion. Indeed, in the
3

Case 1:16-cv-09517-LAK-KHP Document 200 Filed 03/28/19 Page 4 of 7

Declaration submitted in support of its Motion to Intervene, CNB asserts that it requests the
Court to:
(1) [D]irect the parties to (A) refrain from commencing any
independent actions against CNB to address Mr. Eber’s
efforts to purchase the stock in Eber Bros.; (B) require
the parties to litigate any issues relating to the
disposition of the stock in this action;
(2) adjudicate those issues in this action; and
(3) provide CNB with guidance as to what steps, if any, CNB
needs to take to implement the final determination of
the Court in that regard.
(Dkt. No. 188 ¶ 16.) CNB’s position is also apparent in Plaintiffs’ proposed Third Amended
Complaint, which seeks, among other relief, a declaration stating that: “Plaintiffs as
shareholders of record in EB&C, together hold[] two-thirds of the shares previously held by the
Trust.” (Dkt. No. 174, Ex. 1 ¶ 349.) Accordingly, the Court will consider CNB’s Motion to
Intervene despite its failure to submit a proposed pleading.
Intervention is granted as of right pursuant to Rule 24(a)(2) where the applicant:
(1) [F]iles a timely motion; (2) asserts an interest relating to
the property or transaction that is the subject of the action;
(3) is so situated that without intervention the disposition
of the action may, as a practical matter, impair or impede
its ability to protect its interest; and (4) has an interest not
adequately represented by the other parties.
United States v. Pitney Bowes, Inc., 25 F.3d 66, 70 (2d Cir. 1994) (internal citations omitted).
Permissive intervention, on the other hand, is discretionary and may be allowed if the
intervenor “has a claim or defense that shares with the main action a common question of law
or fact” and intervention would not “unduly delay or prejudice the adjudication of the original
4

Case 1:16-cv-09517-LAK-KHP Document 200 Filed 03/28/19 Page 5 of 7

parties’ rights.” Fed. R. Civ. P. 24(b)(1)(B), (b)(3). Courts consider among the following factors
when determining whether a party is entitled to permissive intervention:
(1) [T]he nature and extent of the intervenors’ interests; (2)
the degree to which those interests are adequately
represented by other parties; and (3) whether parties
seeking intervention will significantly contribute to full
development of the underlying factual issues in the suit and
to the just and equitable adjudication of the legal questions
presented.
New York v. Pruitt, No. 18-cv-1030 (JPO), 2018 WL 1684341, at *1 (S.D.N.Y. Apr. 5, 2018)
(internal quotation marks omitted). “[T]he standard for permissive intervention is more liberal
than that for intervention as of right, and requires at a minimum that the proposed intervenor
has ‘a claim or defense that shares with the main action a common question of law or fact.’” N.
Shore-Long Island Jewish Health Sys., 2015 WL 777248, at *24 (quoting Fed. R. Civ. P.
24(b)(1)(B)) (granting non-party’s motion to permissively intervene where it sought to shield
itself from potential liability arising from breach of contract claims brought in the case-in-chief).
Here, the Court finds that CNB’s request to permissively intervene as a defendant in this
action is appropriate. First, none of the parties to this proceeding oppose intervention by CNB
and, thus, will not be prejudiced if the Motion is granted. (Dkt. Nos. 181, 3; 184; 190.) Second,
CNB’s interests are not represented by any of the existing litigants because CNB is a neutral
party that has been thrust in the middle of the Trust beneficiaries’ dispute regarding who is
legally entitled to acquire the remaining shares of EB&C stock. (Dkt. No. 189 3-4.) Third, as
discovery is ongoing, allowing CNB to intervene at this juncture will not unreasonably delay this
action. (Dkt. No. 173.) Fourth, the question of whether CNB can legally transfer 100 percent of
5

Case 1:16-cv-09517-LAK-KHP Document 200 Filed 03/28/19 Page 6 of 7

the remaining shares of EB&C stock to Defendant Eber is germane to Plaintiffs’ allegations that
Lester Eber breached his fiduciary duty to Plaintiffs and engaged in self-dealing. (See generally
Dkt. No. 88.) Indeed, in their Motion for Leave to File a Third Amended Complaint, which is
currently pending before this Court, Plaintiffs now expressly seek to enjoin Defendant Eber
from acquiring all shares of EB&C voting stock from CNB. (Dkt. No. 174 ¶¶ 306-331, ¶ 347.)
Additionally, the question of to whom CNB can transfer shares of EB&C stock is similar
to a question underlying Plaintiffs’ original cause of action against CNB – that CNB was complicit
in the allegedly fraudulent transfer of stock to Lester Eber. (Dkt. No. 88 ¶¶ 86-90.) As
Defendant Eber’s requests to CNB that all of the remaining shares of EB&C stock be transferred
to him post-date CNB’s voluntary dismissal from this proceeding, this issue could pose a new
source of liability for CNB.
CONCLUSION
Accordingly, the Court grants CNB’s motion for permissive intervention. The Court finds
there is no need to reach the issue of whether CNB met the standard for intervention as of
right. The Court finds it need not reach the issue of whether CNB has a right to interplead in
this action because CNB is already a party to this action by virtue of the Court granting its
Motion to Intervene and, thus, already has the right to fully litigate its position in this action.
See, e.g., Krishna v. Colgate Palmolive Co., No. 90-cv-4116 (CSH), 1991 WL 125186, at *3
(S.D.N.Y. July 2, 1991) (“An intervenor has equal standing with the original parties and is
entitled to litigate fully on the merits.”) (internal quotation marks omitted).

6

Case 1:16-cv-09517-LAK-KHP Document 200 Filed 03/28/19 Page 7 of 7

For the sake of achieving a comprehensive resolution of this Motion, CNB is hereby
directed to file a proposed pleading addressing the relief it seeks in this action by no later than
April 17, 2019.
SO ORDERED.
DATED:

March 28, 2019
New York, New York

______________________________
KATHARINE H. PARKER
United States Magistrate Judge

7