Opinion
02 Civ. 9796 (JCF)
December 3, 2003
MEMORANDUM AND ORDER
Taniya Seay previously moved to intervene in this action. That motion was denied and Ms. Seay appealed. She now moves for a stay of the proceedings in this Court pending the determination of her appeal. Because the balance of hardships tips decidedly in favor of the movant, her application is granted.
Background
Taniya Seay is a child who was injured as a result of ingesting lead paint in her apartment. Her mother and guardian, Denaki Seay, brought a personal injury action on her behalf in New York State Supreme Court against Gail Greenidge and Geary Greenidge, the landlords. The Greenidges were insured by Allstate Insurance Company ("Allstate"). The limit of liability for the Allstate policy was $300,000 per occurrence per year.
Prior to and during trial, the parties engaged in settlement discussions. Ms. Seay's attorney offered to settle for $600,000 on the theory that the child had ingested lead over a two-year period such that the policy limits for two separate years would be applicable. Allstate rejected this argument and declined to offer more than $300,000. Counsel for Ms. Seay then proposed that Allstate commence a declaratory judgment action to determine the applicable limit of liability and further agreed to settle for either $300,000 or $600,000 depending on the outcome of that proceeding. Allstate rejected this proposal as well and maintained its position that it would offer no more than $300,000.
The personal injury trial proceeded to conclusion, and the jury returned a verdict against the Greenidges for more than $2 million. They then commenced an action against Allstate in state court contending that it had acted in bad faith by failing either to settle for $600,000 or to proceed with a declaratory judgment action. Allstate removed the case to this Court on the basis of diversity jurisdiction.
Once the case had been removed, Denaki Seay, on behalf of Taniya, moved for intervention as a matter of right pursuant to Rule 24(a)(2) of the Federal Rules of Civil Procedure, and, alternatively, for permissive intervention pursuant to Rule 24(b)(2). In a decision issued from the bench on May 2, 2003, the Honorable Sidney H. Stein, U.S.D.J., denied the motion. Judge Stein rejected the application to intervene as of right on the grounds that Ms. Seay's interest in the pending litigation was contingent rather than direct and her interests were adequately represented by the Greenidges. Judge Stein went on to deny permissive intervention, reasoning that because Ms. Seay could not proceed against Allstate directly, she did not present questions of law or fact in common with the Greenidges' claims. He also found that denial of intervention would not unduly prejudice Ms. Seay, since she could garnish any damages that might be awarded to the Greenidges in their suit against Allstate. On May 30, 2003, Ms. Seay filed a Notice of Appeal from the order denying intervention.
Thereafter, the Greenidges and Allstate consented to proceed before me for all purposes, including trial, pursuant to 28 U.S.C. § 636 (c). Discovery was completed, Allstate moved for summary judgment, and that motion is now fully submitted.
On October 15, 2003, Ms. Seay moved pursuant to Rule 62(d) of the Federal Rules of Civil Procedure for a stay of the proceedings before me until the United States Court of Appeals for the Second Circuit renders its decision on her appeal. Oral argument is scheduled in the Circuit on December 5, 2003. Allstate has opposed the application for a stay.
Discussion
Four factors inform a decision whether to grant a stay pending appeal: "the likelihood of success on the merits, irreparable injury if a stay is denied, substantial injury to the party opposing a stay if one is issued, and the public interest." Mohammed v. Reno, 309 F.3d 95, 100 (2d Cir. 2002) (citing Hilton v. Braunskill, 481 U.S. 770, 776 (1987)). Although historically there has been much uncertainty about how likely the movant's chances of success must be to warrant a stay, the Second Circuit has recently approved an approach that relates the likelihood of prevailing to the other considerations: "`[t]he necessary "level" or "degree" of possibility of success will vary according to the court's assessment of the other [stay] factors.'" Mohammed, 309 F.3d at 101 (quotingWashington Metropolitan Area Transit Commission v. Holiday Tours, Inc., 559 F.2d 841, 843 (B.C. Cir. 1977). In other words, "`[t]he probability of success that must be demonstrated is inversely proportional to the amount of irreparable injury plaintiff will suffer absent the stay. Simply stated, more of one excuses less of the other.'"Mohammed, 309 F.3d at 101 (quoting Michigan Coalition of Radioactive Material Users, Inc. v. Griepentroa, 945 F.2d 150, 153 (6th Cir. 1991)).
In Mohammed, the court also noted that Judge Richard Posner in the Seventh Circuit has articulated a more precise method for relating the likelihood of success to the balance of hardships. He suggests that injunctive relief such as a stay should be granted:
"only if the harm to the plaintiff if the injunction is denied, multiplied by the probability that the denial would be an error (that the plaintiff, in other words, will win at trial), exceeds the harm to the defendant if the injunction is granted, multiplied by the probability that granting the injunction would be an error."Mohammed, 309 F.3d at 101 n. 10 (quoting American Hospital Supply Corp. v. Hospital Products Ltd., 780 F.2d 589, 593 (7th Cir. 1986)). Judge Posner's model is often difficult to apply because of the hazards of assigning probabilities of success. However, it is helpful in analyzing a case such as this where, as will be discussed below, one of the terms in the equation — the potential harm to Allstate — is zero. That being the case, the harm to Allstate if the stay is granted, multiplied by the probability that Allstate will prevail on appeal, no matter how large, is still zero. On the other hand, as long as Ms. Seay has some small chance of succeeding on her appeal and can demonstrate some harm if the stay is denied, then the product of these two factors will be a finite number greater than zero, and the stay should be granted.
Let us turn, then, to an evaluation of each of the factors. First, Ms. Seay's chances of winning a reversal of Judge Stein's order are slim. In part, this is a function of the standard of review. The Court of Appeals reviews "`a District Court's denial of a motion to intervene, whether as of right or by permission, for abuse of discretion.'" Patricia Hayes and Associates, Inc. v. Cammell Laird Holdings U.K., 339 F.3d 76, 80 (2d Cir. 2003) (quoting In re Holocaust Victim Assets Litigation, 225 F.3d 191, 197 (2d Cir. 2000)). Nonetheless, Ms. Seay's prospects on appeal are not hopeless. For example, although Allstate argues persuasively that her claim is too contingent to constitute a sufficient interest in the pending action, it has identified no Second Circuit decision based on a similar fact pattern: that is, one in which a judgment creditor has been denied the right to intervene in an action between the judgment debtor and the debtor's insurer. (Brief for Defendant-Apellee, attached as Exhibit A to Memorandum of Law on Behalf of Allstate Insurance Company in Opposition to Applicant's Order to Show Cause to Stay Consideration of the Pending Summary Judgment Motion, at 6-9).
At the same time, the harm to Ms. Seay if no stay is granted could be significant: she would have been denied any opportunity to be heard in the bad faith action against Allstate. As a consequence, she would be deprived of the chance to influence the outcome of a case of great practical significance to her. If the Greenidges prevail in underlying litigation, Ms. Seay may be able to recover a substantial portion of the judgment she has won; if not, the Greenidges may prove to be largely judgment proof.
By contrast, Allstate has demonstrated no prejudice that would result from granting the stay. While it complains that it would be placed at a tactical disadvantage and would incur additional litigation costs if the stay is granted and Ms. Seay were subsequently permitted to intervene, these harms would flow from the reversal of Judge Stein's order, not from the stay itself. The only real consequence for Allstate is that the determination of its pending summary judgment motion will be deferred, and that is not prejudicial.
Finally, a factor relevant to the determination whether to grant a stay, but which is not accounted for in Judge Posner' s model, is the public interest. However, the public interest is not implicated in this case, which is a purely private litigation concerning insurance coverage in a routine tort action. This is a far cry from those cases where public policy weighs against the grant of a stay. See, e.g., United States v. Private Sanitation Industry Association of Nassau/Suffolk, Inc., 44 F.3d 1082, 1084 (2d Cir. 1995) (stay of divestiture order denied in light of public and government interest in "terminating the control of trash handling on Long Island by criminal conspirators"); Hirschfeld v. Board of Elections, 984 F.2d 35, 39 (2d Cir. 1993) (public interest in candidate appearing on ballot).
In sum, Ms. Seay has some colorable likelihood of obtaining a reversal of Judge Stein's order. There will be real harm to her if the instant case proceeds to conclusion prior to a final determination of her right to participate in it. On the other hand, there is no harm to Allstate from delaying a decision on its motion for summary judgment. Lastly, the public interest is not implicated in the determination whether to grant a stay in this case. Accordingly, a stay is warranted.
Conclusion
For the reasons set forth above, the application of the proposed intervenor is granted and further proceedings in this action are stayed until the Second Circuit has determined the pending appeal.
SO ORDERED.