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denying a voluntary dismissal when such a dismissal deprived a purported intervenor of the right to a hearing on the intervention, which had previously been postponed in anticipation of a global resolution
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02 CV 0279 (ILG)
September 3, 2002
MEMORANDUM ORDER
BACKGROUND
On October 2, 1998, plaintiff Fleet Capital Corporation ("Fleet") and defendant Merco Joint Venture, LLC ("Merco") entered into an agreement (the "Lease") pursuant to which Merco leased certain railroad equipment from Fleet. (Compl. ¶ 12.) Merco then took possession of railroad equipment set forth on six schedules annexed to the Lease. (Id. ¶ 12; Proposed Complaint of Intervenor Bombardier Capital Inc. ("Prop. Compl.") ¶ 2.) Pursuant to the terms of the Lease, Merco was forbidden from subleasing any of the railroad equipment to a third party. (Compl. ¶ 17.)
The Lease actually was between Merco and BancBoston Leasing, Inc. ("BancBoston"). (Compl. ¶ 12.) Fleet, however, became the successor by merger to BancBoston, and thus is the current lessor under the Lease. (Id.) For convenience, the Court simply refers to BancBoston as Fleet.
Eagle Land Management, Inc. ("Eagle"), William E. Iorio ("Iorio"), and George G. Zoller ("Zoller") each executed a Guaranty (collectively, the "Guaranties") in which each guaranteed Merco's obligations under the Lease. (Id. ¶¶ 34, 38, 42.) According to Fleet, Eagle is the sole managing and controlling member of Merco; Iorio is Merco's secretary and Eagle's CEO; and Zoller is Eagle's treasurer. (Id. ¶ 3-5.)
On December 30, 1998, Bombardier Capital Inc. ("Bombardier") purchased from Fleet the railroad equipment listed on Schedule 1 to the Lease. (Prop. Compl. ¶ 3.) Fleet assigned its rights in the Lease, and its rights in the Guaranties, to Bombardier as part of that purchase. (Id.)
Unfortunately, Merco failed to make rent payments due under the Lease for the months of July. August, September, October and November of 2001. (Compl. ¶ 25; Prop. Compl. ¶ 6.) In addition, Merco apparently subleased certain of the railroad equipment to Unified Environmental Services Group, LLC ("Unified"), in violation of the Lease. (Compl. ¶ 32.) Accordingly, both Fleet and Bombardier notified Merco that it was in default. Merco, however, failed to cure its default.
Fleet then entered into an agreement with Merco, Eagle, Iorio and Zoller (the "Forbearance Agreement"), pursuant to which Fleet agreed to "temporarily forbear from exercising its rights and remedies" under the Lease or the Guaranties. (Compl. ¶ 28.) Under the Forbearance Agreement, Merco allegedly admitted that it had breached the Lease, and that it had no defense for its breach. (Id. ¶ 29.) The Forbearance Agreement provided Merco a short period of time in which it could attempt to negotiate a sale of the railroad equipment. and then pay Fleet the proceeds of that sale. If Merco was unable to arrange the sale of the equipment, it was obligated to return the equipment to Fleet on December 14, 2001. (See Compl. Ex. C at 3-4.) Merco apparently failed to negotiate a sale, and also failed to return the railroad equipment to Fleet.
Accordingly, on January 15, 2002, Fleet commenced this action against Merco, Eagle, Iorio, Zoller and Unified. In its complaint, Fleet alleges that Merco breached the terms of the Lease, and seeks damages from Merco for that breach, as well as the replevin of the railroad equipment identified on Schedules 2 through 6 to the Lease (i.e., the railroad equipment in which Fleet still maintains an interest). Fleet also seeks to enforce the Guaranties against Eagle, Iorio and Zoller. Finally, Fleet seeks damages from Unified for its "conversion" of the portion of the railroad equipment which Merco subleased to Unified.
On the day Fleet filed its complaint, it moved, by Order to Show Cause, for an Order of Seizure of its railroad equipment, as well as a Temporary Restraining Order enjoining the transfer or sale of that equipment. The Court directed the defendants to appear for a hearing on the Order to Show Cause on January 25, 2002. On the day of the hearing, however, counsel for Merco informed the Court that Merco had filed for bankruptcy, necessitating the automatic stay of this case as against Merco under Section 362(a)(1) of Title 11 of the United States Code (the Bankruptcy Code).
Although this action was stayed as against Merco, Bombardier then sought to intervene as against Eagle, Iorio, Zoller and Unified. Bombardier asserted that, because the Guaranties inure to its benefit as well as Fleet's, it is entitled to intervene with respect to the causes of action against Eagle, Iorio and Zoller. (Supporting Decl. of Robert F. D'Emilia ¶ 3.) Furthermore, Bombardier argued that certain of the railroad equipment subleased to Unified belongs to Bombardier. Accordingly, Bombardier asserted that it should be entitled to intervene in the cause of action asserted against Unified. (Id.)
None of the defendants opposed Bombardier's request; Fleet, however, submitted an opposition. According to Fleet, permitting Bombardier to intervene would unnecessarily complicate this matter because the Forbearance Agreement — which in no way involves Bombardier — "essentially redefined the contractual relationship between Fleet. Merco and the Guarantor Defendants," and therefore the claims raised in its complaint are separate and distinct from Bombardier's. (Objection to Motion to Intervene ("Objection") ¶¶ 2, 5.) Fleet urged the Court to deny Bombardier's motion and require Bombardier "to commence and prosecute its own action against these Defendants." (Id. ¶ 7.)
The Court scheduled oral argument on Bombardier's motion for June 20, 2002. The parties then informed the Court that they were attempting to work out a global resolution of Fleet's claims, as well as Bombardier's, and requested an adjournment; accordingly, the Court adjourned the oral argument to July 16, 2002. Shortly before the July 16 oral argument, the parties once again contacted the Court and, in anticipation of a settlement of all parties' claims, requested that the argument be adjourned sine die. The Court granted that request.
On August 15, 2002, the Court received a copy of Fleet's Notice of Dismissal and Withdrawal of this action. Four days later, however, the Court received a letter from Bombardier's counsel, informing the Court that, although Fleet had settled its claims with the defendants, Bombardier had not. Accordingly, Bombardier objected to Fleet's voluntary dismissal of this action, and argued that, if the Court were inclined to permit Fleet to voluntarily dismiss this case, then the Court should first rule on Bombardier's motion to intervene. (See August 15, 2002 letter from Robert D'Emilia, Esq. to Hon. I. Leo Glasser, at 1.) Fleet has responded to Bombardier's objection, and asserts that it filed its Notice of Dismissal in accordance with a settlement agreement approved by the Bankruptcy Judge overseeing Merco's bankruptcy case. Thus, Fleet asks the Court to accept its voluntary dismissal of this action. (See August 21, 2002 letter from Jane Arnone, Esq. to Hon. I. Leo Glasser, at 2.)
DISCUSSION
I. Rule 41 and the Motion to Intervene
Fleet's Notice of Dismissal invokes Rule 41(a)(1) of the Federal Rules of Civil Procedure. That Rule provides, in pertinent part:
Subject to the provisions of Rule 23(e), of Rule 66, and of any statute of the United States, an action may be dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for summary judgment, whichever first occurs, or (ii) by filing a stipulation of dismissal signed by all parties who have appeared in the action.
Neither an answer nor a motion for summary judgment has been filed in this case, and Rules 23 and 66 are not implicated here. Accordingly, Fleet may, as a matter of right, voluntarily dismiss this case, pursuant to Rule 41(a)(1)(i). This right is "absolute and unconditional." 8 James Wm. Moore et al., Moore's Federal Practice § 41.33[2] (3d ed. 2000). "The plaintiffs motive for filing the notice is irrelevant," and the Court "may not prohibit the filing of a timely notice of dismissal." Id. The Court therefore has no authority to prevent Fleet from voluntarily dismissing this case.
However, the Court finds that Fleet's voluntary dismissal unfairly prejudices Bombardier. If this action is dismissed, Bombardier's motion for intervention will be rendered moot. Yet Bombardier agreed to adjourn the hearing on its motion to intervene only to give the parties an opportunity to reach a global resolution of all the claims arising out of the defendants' actions. While Fleet has resolved its claims against the defendants, Bombardier has not. Thus, allowing Fleet to voluntarily dismiss this case would result in Bombardier being deprived of the opportunity to have its motion for intervention heard, and would force Bombardier to commence its own action — at the expense of drafting a complaint and effecting service — against the defendants. The Court perceives no reason. and Fleet has presented none, to so prejudice Bombardier's rights. Accordingly, the Court addresses below Bombardier's motion for intervention, and, because it finds intervention appropriate, grants the motion nunc pro tunc to June 7, 2002, the date the motion was fully submitted to the Court.
II. Motion to Intervene Principles
Rule 24 of the Federal Rules of Civil Procedure sets out two situations in which a nonparty may intervene in a lawsuit. Under Rule 24(a)(2), a party has a right to intervene when "[u]pon timely application . . . the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties." Thus, in order to intervene as of right, a non-party must (1) timely file an application to intervene, (2) show an interest in the action, (3) demonstrate that the interest may be impaired by the disposition of the action, and (4) show that the interest is not protected adequately by the parties to the action. Brennan v. N.Y.C. Bd. of Educ., 260 F.3d 123, 128-29 (2d Cir. 2001) (quoting N.Y. News, Inc. v. Kheel, 972 F.2d 482, 485 (2d Cir. 1992)). The failure to meet any one of these requirements justifies the denial of a motion under Rule 24(a)(2). Butler, Fitzgerald Potter v. Sequa Corp., 250 F.3d 171, 176 (2d Cir. 2001). "Nevertheless, the test is a flexible and discretionary one, and courts generally look at all four factors as a whole rather than focusing narrowly on any one of the criteria." Tachiona ex rel. Tachiona v. Mugabe, 186 F. Supp.2d 383, 394 (S.D.N.Y. 2002) (citing United States v. Hooker Chems. Plastics, 749 F.2d 968, 983 (2d Cir. 1984)).
Under Rule 24(b)(2), a party may be permitted to intervene when an "applicant's claim or defense and the main action have a question of law or fact in common." A district court has broad discretion to determine whether intervention is appropriate under Rule 24(b)(2). See, e.g.,Restor-A-Dent Dental Labs., Inc. v. Certified Alloy Prods., Inc., 725 F.2d 871, 876 (2d Cir. 1984). In exercising its discretion, a district court "shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties." Fed.R.Civ.P. 24(b).
Intervention is appropriate here under both Rule 24(a)(2) and Rule 24(b)(2). Indeed, the defendants have not challenged Bombardier's right to intervene, only Fleet has. Yet Fleet is no longer involved in this case, thanks to its Notice of Dismissal. In any event, it is clear that (i) Bombardier timely filed a motion for intervention, (ii) Bombardier has an interest in the subject matter of this action, (iii) Bombardier's interest in this action would be impaired by disposition of Fleet's claims, and (iv) Bombardier's interests would not be adequately protected by Fleet. For all these reasons, intervention as of right under Rule 24(a)(2) is proper.
For an interest to be cognizable under Rule 24(a)(2), it must be "direct, substantial, and legally protectable," and not "remote from the subject matter of the proceeding, or . . . contingent upon the occurrence of a sequence of events before it becomes colorable." Brennan, 260 F.3d at 129 (quoting Wash. Elec. Coop., Inc. v. Mass. Mun. Wholesale Elec. Co., 922 F.2d 92, 97 (2d Cir. 1990)). Furthermore, the interest need not be a property interest; rather, "an interest relating to the property or transaction which is the subject of the action" is sufficient. Fed.R.Civ.P. 24(a)(2); accord Brennan, 260 F.3d at 130. Certainly Bombardier has an interest in the very same Guaranties Fleet is seeking to enforce in this action. Indeed, those Guaranties are not specific to certain equipment, but instead relate to Merco's obligations to pay forall the equipment it originally leased from Fleet, including the equipment subsequently sold to Bombardier. Likewise, Bombardier has an interest in the conversion claim alleged against Unified. Even though Fleet's conversion claim concerns different railroad equipment than Bombardier's claim, the same "transaction" gave rise to these claims: the sublease of the equipment by Unified from Merco. Thus, Bombardier has demonstrated a sufficient interest to justify intervention.
Indeed, Fleet has effectively conceded this point by arguing that its claims concern different equipment than Bombardier's claims, and that Bombardier should be required to commence its own action.
One other point bears mentioning. No party has addressed the impact of 28 U.S.C. § 1367(b) on this case. Section 1367(b) makes it clear that, in diversity actions such as this one, a party may not intervene as a plaintiff if such intervention would destroy diversity jurisdiction. Although Bombardier has not articulated its state of citizenship, it appears that it is both a Vermont citizen and a Massachusetts citizen for diversity purposes. Under 28 U.S.C. § 1332(c)(1), a corporation is deemed to be a citizen of (1) the state in which it is incorporated, and (2) the state in which it has its principal place of business. Bombardier's principal place of business appears to be in Vermont (see Ex. 4 to Complaint of Proposed Intervenor Bombardier Capital Inc.), and, according to the Vermont Secretary of State's website, Bombardier is a Massachusetts corporation. This information can be found by accessing the website http://www.sec.state.vt.us/seek/corpseek.htm, and entering "Bombardier Capital" in the search box. Thus, because no defendant is a citizen of either Massachusetts or Vermont (see Compl. ¶¶ 2-6), Bombardier may properly intervene.
Likewise, intervention is appropriate under Rule 24(b)(2). As noted above, intervention under this rule is appropriate where the "applicant's claim or defense and the main action have a question of law or fact in common." The "principal guide" in determining whether to grant permissive intervention is whether doing so "will unduly delay or prejudice the adjudication of the rights of the original parties." United States v. Pitney Bowes, Inc., 25 F.3d 66, 73 (2d Cir. 1994) (quoting Fed.R.Civ.P. 24(b)(2)). Clearly, there are common questions of law and fact between Fleet's claims and Bombardier's claims. For example, both seek to enforce the Guaranties. Thus, there are common questions regarding whether Merco breached those Guaranties, as well as the extent of the obligations of Eagle, Iorio and Zoller thereunder. Likewise, both Fleet and Bombardier seek replevin of railroad equipment which was allegedly unlawfully subleased to Unified in one transaction; thus, there is a factual overlap regarding these claims.
Furthermore, Fleet will not be prejudiced by permitting Bombardier's intervention. In opposition to Bombardier's motion, Fleet argued that Bombardier's intervention would "prejudice and/or unduly delay the adjudication of Fleet's rights." (Objection ¶ 7.) Besides the fact that Fleet in no way detailed how such "prejudice" or "undue delay" was likely to occur, such a concern is now illusory, in light of the fact that Fleet is voluntarily dismissing this action against the defendants.
CONCLUSION
For the foregoing reasons, Bombardier's motion to intervene is granted nunc pro tunc to June 7, 2002. Thus, the action shall continue with only Bombardier as a plaintiff; Fleet's claims against the defendants are dismissed.