Patel Family Trust et al v. AMCO Insurance Company

Filing 24

ORDER granting in part and denying in part 19 Belfor's Motion to Intervene and to File Answer, Counterclaim and Cross Claim Instanter; Belfor is now aligned as an Intervenor Plaintiff and is ORDERED to file a new pleading, as outlined in this opinion, within seven days from the date of this order. Signed by Judge Gregory L Frost on 4/17/12. (sem1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
PATEL FAMILY TRUST, et al.,
Plaintiffs,

Case No. 2:11-cv-1003
JUDGE GREGORY L. FROST
Magistrate Judge Norah McCann King

v.
AMCO INSURANCE COMPANY,
Defendant.

OPINION AND ORDER
This matter is before the Court on the Motion of Belfor USA Group, Inc. (“Belfor”) to
Intervene and to File Answer, Counterclaim, and Cross-Claim Instanter (ECF No. 19), Defendant
AMCO Insurance Company’s Memorandum in Opposition (ECF No. 21), and Belfor’s Reply in
Support (ECF No. 23). For the reasons set forth below, Belfor’s Motion to Intervene is
GRANTED. The Motion to File Answer, Counterclaim, and Cross-Claim Instanter is DENIED
and Belfor is ordered to file a new pleading within seven days in accordance with the Court’s
ruling below.
I. Background
In July 2010, an apparent act of vandalism caused damage at a Holiday Inn Express hotel
owned and operated by Plaintiffs Patel Family Trust (the “Trust”) and KNT LLC. (Compl., ECF
No. 3, at ¶¶ 1, 5-8.) At the time the property damage occurred, the hotel was covered by an
insurance policy issued by Defendant AMCO Insurance Company (“AMCO”). (Id., ¶ 3.)
Plaintiffs commenced this lawsuit against AMCO in state court, asserting claims for breach of
contract, promissory estoppel, and bad faith arising out of AMCO’s alleged refusal to compensate

Plaintiffs fully under the insurance policy. (Id. at ¶¶ 13-28.) AMCO removed the action to this
Court based on federal diversity jurisdiction. (ECF No. 1.)
Belfor moves to intervene in this action. Belfor claims an interest in the insurance
proceeds due to its performance of property restoration services at the hotel property. (Mot. to
Intervene, ECF No. 19, at 3.) Pursuant to its contract with the Trust, Belfor acquired “right, title,
and interest in and to the insurance policy proceeds and all drafts for work performed or to be
performed by Belfor.” (Id.) Belfor alleges that it has completed its work under the contract but
has yet to be compensated by the Trust.
Belfor filed a mechanic’s lien with the Franklin County (Ohio) Recorder’s Office in June
2011. Two months later, Belfor commenced a state court action against the Trust (through its
trustee) for foreclosure of the mechanic’s lien, breach of contract, unjust enrichment, and relief on
account. (ECF No .19, Ex. 1.) At the time Belfor filed its Motion to Intervene in this Court, the
state court case had not progressed beyond initial pleadings and initial discovery and disclosure of
witnesses. (ECF No. 19, at 4.) Belfor’s counsel received notice of the case pending before this
Court on January 3, 2012 (Harley Decl., ECF No. 19-2, ¶ 6) and filed Belfor’s Motion to
Intervene eight weeks later.
II. Discussion
Belfor seeks to intervene in this action as of right under Fed. R. Civ. P. 24(a)(2), which
states that a court “must permit anyone to intervene who . . . claims an interest relating to the
property or transaction that is the subject of the action, and is so situated that disposing of the
action may as a practical matter impair or impede the movant’s ability to protect its interest,
unless existing parties adequately represent that interest.” To intervene of right under this rule,

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Belfor must show that (1) it timely sought intervention, (2) it has a substantial legal interest in the
case, (3) its ability to protect its interests will be impaired without intervention, and (4) the
existing parties do not adequately represent its interests. Blount-Hill v. Zelman, 636 F.3d 278,
283 (6th Cir. 2011). Failure to satisfy any one of the elements will defeat intervention under the
Rule. Id.
A.

Timeliness of the Intervenor’s Application

As to the first requirement, the Court considers five factors in determining whether a
proposed intervenor has timely applied to intervene:
(1) the point to which the suit has progressed; (2) the purpose for which intervention
is sought; (3) the length of time preceding the application during which the proposed
intervenors knew or should have known of their interest in the case; (4) the prejudice
to the original parties due to the proposed intervenors’ failure to promptly intervene
after they knew or reasonably should have known of their interest in the case; and (5)
the existence of unusual circumstances militating against or in favor of intervention.

Id. at 284 (quoting Jansen v. City of Cincinnati, 904 F.2d 336, 340 (6th Cir. 1990)). “No one factor
is dispositive, but rather the ‘determination of whether a motion to intervene is timely should be
evaluated in the context of all relevant circumstances.’” Id. (quoting Stupak-Thrall v. Glickman, 226
F.3d 467, 472-73 (6th Cir. 2000)). Applying these factors, the Court finds Belfor’s Motion to
Intervene timely in this case.
As to the first factor, the case before this Court is still in its early stages. The case was not
commenced in this Court until November 2011 and there is no indication that the case has
progressed beyond initial discovery. The only significant proceeding in the case thus far was the
motion to intervene filed by GE Capital Corporation (“GE Capital”), a motion that was later

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withdrawn by stipulation of GE Capital Corporation, Plaintiffs, and AMCO. (ECF Nos. 8, 17,
and 18).
Second, taking into account Belfor’s purpose for intervening (i.e., to obtain declaratory
relief as to whether it is entitled to be a payee for any insurance proceeds payable from AMCO to
the Trust), there is no indication that Belfor should have filed its motion earlier. Stupak-Thrall,
226 F.3d at 479 n.15 (“The ‘purposes of intervention’ prong of the timeliness element normally
examines only whether the lack of an earlier motion to intervene should be excused, given the
proposed intervenor’s purpose . . . .”). Belfor first learned of this lawsuit on January 3, 2012, and
filed its Motion to Intervene eight weeks later. Under the circumstances, the Court does not find
an undue delay (and neither Plaintiffs nor AMCO argues that there is).
Third, there is no evidence that the proposed intervenors’ failure to file their motions
earlier has resulted in prejudice to the current parties. The prejudice inquiry is narrow: the Court
looks only to the prejudice attributable to the movant’s failure to act more promptly, not to the
broader question of whether any prejudice flows from the intervention itself. See Stotts v.
Memphis Fire Dep’t, 679 F.2d 579, 592 (6th Cir. 1982). None of the parties identified any
prejudice in this regard and this Court finds none.
Finally, the Court is unaware of the existence of unusual circumstances militating against
intervention. Accordingly, under these circumstances, a balancing of the timeliness factors favors
Belfor, particularly given the early stage of this case.
B.

Belfor’s “Substantial Legal Interest” in the Case

Next, Belfor must establish that it has a “substantial legal interest” in the case. BlountHill at 283. The Sixth Circuit has interpreted this requirement broadly, with close cases to be

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resolved in favor of recognizing an interest under Fed. R. Civ. P. 24(a). See Michigan State AFLCIO v. Miller, 103 F.3d 1240, 1247 (6th Cir. 1997). Belfor contends that it has a substantial legal
interest in the case, namely, potential recovery of insurance proceeds that Plaintiffs seek from
AMCO.
AMCO disputes Belfor’s interest, claiming that the only remaining issue in its case
against the Plaintiffs is the amount of the Trust’s alleged loss of Business Income and Extra
Expense (“BI/EE”) coverage under the terms of the insurance policy in dispute. (Deft. Opp. to
Mot. to Intervene, ECF No. 21, at 1.) Because BI/EE coverage is the only matter left at issue
between AMCO and the Plaintiffs, AMCO contends that Belfor’s legal interest in this case is
nonexistent. Under the terms of the Trust’s contract with Belfor, AMCO argues that Belfor is
only a payee for insurance proceeds paid for remediation of building damage; it is not a payee for
any BI/EE recovery. (Id. at 2.) Thus, AMCO contends that Belfor has no claim against it for
insurance proceeds and that Belfor’s real dispute is with the Trust — a dispute for which the
proper forum is “clearly the state court mechanic’s lien foreclosure action” pending in state court.
(Id. at 3.)
While AMCO’s argument might conceivably carry the day when the Court adjudicates
this case on the merits, it does not undercut Belfor’s “substantial legal interest” for purposes of
intervening as of right. AMCO’s only support for its assertion is a footnote in Magistrate Judge
King’s preliminary pretrial order that states: “Apparently, losses associated with personal
property or property damages have been paid.” (ECF No. 9, at footnote.) But this statement by
Magistrate King is not a conclusive statement about what is at stake in this case. And the

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Plaintiffs’ Complaint, on its face, does not purport to limit Plaintiffs’ causes of action to recovery
of BI/EE insurance proceeds.
For these reasons, the Court finds that Belfor has asserted a substantial legal interest in
this case.
C.

Belfor’s Ability to Protect its Interest Absent Intervention

The third showing a potential intervenor must make under Fed. R. Civ. P. 24(a) is that its
ability to protect its interests will be impaired without intervention. The movant’s burden on this
element is “minimal”: “a would-be intervenor must show only that impairment of its substantial
legal interest is possible if intervention is denied.” Miller at 1247 (emphasis added).
Belfor meets its minimal burden on this element. The Plaintiffs’ Complaint in this case
alleges an entitlement to insurance proceeds to which Belfor (assuming the truth of Belfor’s
allegations) has an interest by virtue of its contract with the Trust. Although AMCO contends
that only BI/EE coverage is at issue and Belfor is not entitled to be a payee for BI/EE proceeds,
this is, once again, a merits issue and not an issue that should bar Belfor’s intervention. If
AMCO’s contention is correct, Belfor will not prevail on the merits. But that is an issue to be
resolved down the road and not on a motion to intervene. For now, based on the allegations in the
Plaintiffs’ Complaint, it is possible that Belfor’s claim to insurance proceeds will be impaired if
this case is litigated without Belfor in it.
D.

Adequate Representation of Belfor’s Interests

The would-be intervenor satisfies the final requirement for intervention of right when it
can show that representation of its interests may be inadequate. Blount-Hill, 636 F.3d at 485.
The Court finds that this element is also satisfied in favor of intervention.

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As alluded to previously, GE Capital filed a motion to intervene in this case in late
December 2011. (ECF No. 8.) GE Capital withdrew the motion after reaching a stipulation with
the Plaintiffs and AMCO. (ECF Nos. 17 and 18.) According to the terms of the stipulation, “in
the event AMCO makes any additional payment(s) in connection with the Loss, the Claim, or this
Litigation (including, but not limited to, any payments of a judgment or a settlement and also
including any payments in consideration of actual or alleged coverage under the Policy for
business income and extra expense), GE Capital shall be included as a co-payee on any check or
draft issued by AMCO for such payments.” (Stipulation, ECF No. 17, at ¶ 2.) In light of the
Stipulation, it would appear that the Trust’s interest is directly contrary to Belfor’s interest.
Because of its agreement to include GE Capital as a payee, it would appear that the Trust has
every incentive not to recover proceeds to which Belfor would be entitled as an additional payee.
Of course, the merits of the case may ultimately show what AMCO is arguing now — that
only BI/EE coverage is at issue. But that possibility is not a reason that Belfor should be
excluded from the case at this point.
E.

Belfor is Not an Intervening “Defendant”

In addition to moving to intervene, Belfor also asks the Court to allow it to file a
counterclaim and cross-claim instanter.1 The Court denies this branch of Belfor’s Motion,
however, because the Court does not view this as a correct pleading. Belfor is more properly
characterized as a plaintiff in this case, not a defendant.

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Belfor styles its Motion as one “to Intervene and to File Answer, Counterclaim, and
Cross-Claim Instanter.” (ECF No. 19, at 1.) The proposed pleading attached to Belfor’s Motion
pursuant to Fed. R. Civ. P. 24(c), however, does not include an “Answer”; it includes only a
Counterclaim and Cross-Claim.
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The proposed “Counterclaim and Cross-Claim” alleges one count for a declaratory
judgment, seeking this Court’s declaration of Belfor’s rights relating to the question of whether
the damage to the hotel property is covered under the policy and whether AMCO is obligated to
pay insurance proceeds directly to Belfor, per the terms of Belfor’s contract with the Trust. (Mot.
to Intervene, ECF No. 19, Ex. A, at ¶¶ 24-25.) Accordingly, Belfor is intervening in this case to
assert its own affirmative claim for declaratory relief as against AMCO and the Trust. A party
that voluntarily chooses to intervene in ongoing federal litigation to assert its own affirmative
claims is to be aligned as a party plaintiff. MCI Telecommunications Corp. v. Logan Group Inc.,
848 F.Supp. 86 (N.D. Tex. 1994). An intervenor is properly aligned as a defendant only if it has
potential liability to the plaintiff on the primary claim. Id. at 88-89; see also Siteworks
Contracting Corp. v. Western Sur. Co., 461 F. Supp. 2d 205, 209-10 (S.D.N.Y. 2006). That is not
the case here. Accordingly, the Court aligns Belfor as an intervening plaintiff in this action.
More specifically, Belfor is both a “plaintiff” and “cross-plaintiff,” insofar as it intends to assert
claims against both Defendant AMCO and Plaintiff Trust. See City and County of San Francisco
v. Exxonmobil Oil Corp., No. C 08-03490, 2009 U.S. Dist. LEXIS 37620, at *11-12 (N.D. Calif.
May 4, 2009) (aligning intervenor as a “plaintiff and cross-plaintiff” due to intervenor’s intent to
assert claims against both the defendant and the plaintiffs).
When aligned as such, Belfor’s proposed pleading, as currently styled, is not accurate.
Accordingly, this Court orders Belfor to file a new pleading in accordance with this Opinion and
Order within seven days.

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III. Conclusion
For the foregoing reasons, Belfor’s Motion to Intervene and to File Answer,
Counterclaim, and Cross Claim Instanter (ECF No. 19) is GRANTED IN PART AND DENIED
IN PART. This Court GRANTS the Motion to Intervene and aligns Belfor as an intervening
Plaintiff in this action. The Court DENIES the Motion to File Answer, Counterclaim, and CrossClaim Instanter and hereby ORDERS BELFOR TO FILE WITHIN SEVEN DAYS of the date
this Opinion and Order is filed an intervening complaint that comports with the Court’s ruling
above.
IT IS SO ORDERED.
/s/ Gregory L. Frost
GREGORY L. FROST
UNITED STATES DISTRICT JUDGE

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