Summary
ruling in plaintiff's favor would affect defendant debt collector, but "would not affect [the rights of American Express, the proposed intervenor,] to contract with debt collectors or to charge interest, fees, or costs as it sees fit"
Summary of this case from Elouarrak v. Firstsource Advantage, LLCOpinion
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Asil A. Mashiri, Mashiri Law Firm a Professional Corporation, Tamim Jami, The Jami Law Firm, San Diego, CA, for Plaintiff.
Brandon Allen Carnes, Pro Hac Vice, Rock Fusco & Connelly, LLC, Chicago, IL, Thomas Hall Brehme, IV, Law Office of T. Hall Brehme IV, San Diego, CA, for Defendant.
ORDER GRANTING MOTION TO INTERVENE
Hon. Anthony J. Battaglia, United States District Judge.
American Express National Bank moves to intervene in plaintiff’s debt collection violation action against Alltran claiming the case both affects AMEX’s contractual rights with their debt collectors and violates a settlement agreement between plaintiff and AMEX. (Doc. No. 52-1 at 5-6.) Under Local Rule 7.1, the Court submits on the moving papers and VACATES the August 23, 2018 hearing. CivLR 7.1(d)(1). Because AMEX has a protectable right, the Court GRANTS its motion to intervene. I. BACKGROUND
Plaintiff brought this potential class action against Alltran alleging violations of the Fair Debt Collection Practices Act ("FDCPA") and California’s Rosenthal Fair Debt Collection Practices Act ("Rosenthal"). (Doc. No. 1.) Alltran sent plaintiff a collection notice for a debt (referred to as the "Validation Notice") owed to AMEX. (Id. ¶ 18.) The Validation Notice did not state the debt was "accruing interest, late charges, or other fees," and the next notice plaintiff received included a higher amount owed. (Id. ¶¶ 19, 20.)
Roughly six months after commencing litigation against Alltran, plaintiff sent a written demand to AMEX regarding her account. (Doc. No. 60 at 8.) Plaintiff notes the demand letter makes no mention of her claims against Alltran. (Id. at 9.) AMEX and plaintiff entered into a settlement agreement in which plaintiff agreed to a release of her claims. (Doc. No. 52-3, Settlement Agreement, at 25-29.) The exact wording of the agreement and its implications are discussed below.
II. LEGAL STANDARDS
Federal Rule of Civil Procedure 24 governs intervention motions. It states:
(a) On timely motion, the court must permit anyone to intervene who:
(1) is given an unconditional right to intervene by a federal statute; or
(2) 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.
Fed. R. Civ. P. 24(a). The Ninth Circuit construes "Rule 24(a) liberally in favor of potential intervenors." California ex rel. Lockyer v. United States, 450 F.3d 436, 440 (9th Cir. 2006). AMEX argues it has a right to intervene under the second prong.
III. DISCUSSION
When claiming intervention as a matter of right, the intervenor must meet a four-part test:
(1) the motion must be timely; (2) the applicant must claim a "significantly protectable" interest relating to the property or transaction which is the subject of the action; (3) the applicant must be so situated that the disposition of the action may as a practical matter impair or impede its ability to protect that interest; and (4) the applicant’s interest must be inadequately represented by the parties to the action.
Sierra Club v. EPA, 995 F.2d 1478, 1481 (9th Cir. 1993). AMEX maintains it meets all four elements necessary to intervene.
A. AMEX Timely Filed the Motion
The Ninth Circuit imposes three factors to evaluate whether a motion was timely brought: "(1) the stage of the proceeding at which an applicant seeks to intervene; (2) the prejudice to other parties; and (3) the reason for and length of the delay." United States ex rel. McGough v. Covington Technologies Co., 967 F.2d 1391, 1394 (9th Cir. 1992) (quotations omitted). "Although the length of the delay is not determinative, any substantial lapse of time weighs heavily against intervention." United States v. State of Wash., 86 F.3d 1499, 1503 (9th Cir. 1996). One Ninth Circuit case states the "rationale underlying [the timeliness] requirement" is to prevent parties from intervening "only after the original parties have reached an acceptable settlement" because such an intervention would "cause substantial prejudice to the original parties." Empire Blue Cross and Blue Shield v. Janet Greeson’s A Place For Us, Inc., 62 F.3d 1217, 1219 (9th Cir. 1995).
AMEX argues its motion is timely because the case is still in the early stages of litigation, there would be no prejudice to plaintiff, and there was no delay. (Doc. No. 52-1 at 9-10.) Plaintiff disputes this, arguing the case is over a year old, plaintiff will suffer prejudice, and AMEX fails to provide reasons for delay. (Doc. No. 60 at 11-13.) 1. The Case is still in its Early Stages
Litigation commenced in May 2018, over a year ago. (Doc. No. 1.) Discovery has been ongoing throughout the end of 2017 and early 2018 as noted by various discovery-related motions. (See Doc. Nos. 12, 14, 16, 26, 33.) Although plaintiff filed a class certification motion, the briefing was extended and ultimately dismissed pending mediation. (Doc. No. 49.) For four months the case sat silently pending mediation, which was scheduled for June 14, 2018. (Doc. No. 56 at 2.) However, AMEX filed the intervention motion on June 11, causing Alltran to cancel the mediation. (Id. ) On June 15, 2018, the parties requested to stay the case pending the outcome of AMEX’s motion. (Id. )
Based on this case’s unique procedural history, the Court finds that the case indeed is in the early stages of litigation. While some discovery has been exchanged, and a class certification motion was filed, all of that was stayed. Thus, discovery remains open and no substantive motion deadlines have passed. While a year does seem like quite a while for a case in federal court, in this particular case, because of the parties’ deadline extensions, mediation, and agreement to stay proceedings, the case is still in its early stages. Thus, the Court finds the case has not progressed so far as to make intervention burdensome.
2. Intervention will not Prejudice Plaintiff
Plaintiff argues AMEX’s "eleventh hour intervention" has prejudiced plaintiff because it caused Alltran to take the mediation off calendar resulting in plaintiff’s loss of fees and has stalled plaintiff’s filing her class certification motion. (Doc. No. 60 at 12.) Plaintiff’s concerns are somewhat undermined, however, by the fact that AMEX contacted plaintiff back in February regarding plaintiff’s settlement with AMEX and potential intervention. (Doc. No. 52-1 at 10.) Plaintiff’s complaint regarding her delayed class certification motion is also undermined by the parties’ joint motion to stay briefing that motion to pursue mediation. (Doc. No. 48.) Although plaintiff wants to pin the delays in her case on AMEX’s intervention, it appears some were of her own doing and done with knowledge of a potential incoming intervention motion. Thus, the Court finds intervention at this stage does not prejudice plaintiff.
3. AMEX’s Filing was Not Significantly Delayed
AMEX states they learned of the class certification motion in mid-February and obtained outside counsel shortly thereafter. (Doc. No. 52-1 at 10.) AMEX asserts they reviewed the docket and after seeing a 120-day delay, took their time in reviewing plaintiff’s case, collected documents, discussed AMEX’s options, and finally decided to file the instant motion— over the course of four months. Plaintiff argues this is unreasonable. (Doc. No. 60 at 13.) Timeliness is not just a matter of counting days, but is based on the totality of circumstances. Smith v. Los Angeles Unified School Dist., 830 F.3d 843, 854 (9th Cir. 2016) ("Timeliness is determined by the totality of the circumstances facing would-be intervenors...."). The Court finds AMEX’s reasons for delaying the filing of the intervention motion were reasonable in these circumstances. Thus, the Court finds AMEX meets the first element of intervention: timeliness.
B. AMEX has a Significantly Protectable Interest
Under FRCP 24(a)(2), a party may intervene of right when they have "an interest relating to the property or transaction which is the subject of the action." "An applicant for intervention has a significantly protectable interest if the interest is protected by law and there is a relationship between the legally protected interest and the plaintiff’s claims." United States v. Alisal Water Corp., 370 F.3d 915, 919 (9th Cir. 2004). However, "a mere interest in property that may be impacted by litigation is not a passport to participate in the litigation itself." Id. at 920, n.3.
AMEX claims two protectable interests support its right to intervene. First, AMEX argues plaintiff’s claims "interfere with American Express’s legal and contractual rights to collect on is debts as well as the way in which American Express attempts to collect the debts of its Cardmembers with the assistance of its vendors." (Doc. No. 52-1 at 11.) Second, AMEX claims it "has an interest in enforcing the terms of the settlement agreement," which released AMEX and its collection agencies from all claims. (Id. ; Settlement Agreement, Doc. No. 52-3 at 26.)
1. AMEX Does Not Have a Right to Intervene Based on Perceived Contractual or Legal Rights
First, AMEX argues any potential resolution in favor of plaintiff on this case would affect AMEX’s legal and contractual rights to collect on its debts. (Doc. No. 52-1 at 11.) AMEX alleges it "would suffer practical impairment from a ruling that precluded it from communicating with its Cardmembers with the assistance of vendors, such as Alltran." (Id. ) Plaintiff disagrees, arguing her case would neither interfere with AMEX’s contractual right to communicate with its Cardmembers nor interfere with any contractual right to collect debts through a third-party, such as Alltran. (Doc. No. 60 at 16.) Plaintiff states "[r]egardless of the outcome of this case, AMEX is free to pursue any collection against its Cardmembers. This lawsuit neither stays, prevents[,] nor prohibits collection efforts of any debts owed to AMEX." (Id. at 16-17.)
The Court agrees. Plaintiff’s claims against Alltran are solely based on Alltran’s failure to comply with notification requirements on the Validation Notices it sends when collecting on debts. (Doc. No. 1 ¶¶ 18-22.) Plaintiff does not argue Alltran (or AMEX) cannot communicate with those who owe debts. Plaintiff does not claim Alltran (or AMEX) cannot charge interest on debts owed. Plaintiff is not stating AMEX cannot use a debt collector such as Alltran to collect debts owed. Plaintiff’s complaint merely alleges Alltran violated the FDCPA and Rosenthal for failure to properly notify plaintiff (and others) that interest, costs, and fees were accruing on their account. (Id. ) In other words, plaintiff is in no way addressing the message of the Validation Notice, but merely the delivery. Were the Court to find in plaintiff’s favor, Alltran would be required to pay statutory damages, attorney’s fees, and would be required to change the language on their standard Validation Notices sent to consumers. However, such a ruling would not affect AMEX’s rights to contract with debt collectors or to charge interest, fees, or costs as it sees fit. Thus, the Court finds AMEX does not have a protectable interest under this theory.
2. AMEX Has a Protectable Interest in Enforcing its Settlement Agreement
AMEX also argues that it has "an interest in enforcing the terms of the Settlement Agreement." (Doc. No. 52-1 at 12.) The settlement agreement, in its "Release by Abdurahman" section, states:
For the good and valuable consideration as set forth herein, Abdurahman agrees to and hereby does release American Express and its affiliated companies (including but not limited to American Express Company; American Express Travel Related Services Company, Inc.; and American Express Centurion Bank), their directors, officers, agents, employees, representatives, servants, attorneys, predecessors, successors, assigns, subsidiaries, parent, affiliated entities, collection agencies , and vendors , from any and all claims , actions, causes of action, demands, liabilities, or obligations of any nature or kind, whether at present known or unknown , upon or by reason of any damage, loss or injury, which heretofore has been or which hereafter may be sustained by the undersigned, or for any other matters whatsoever from the beginning of the world to the Effective Date, related to the subject matter of the Demand and the Account . Abdurahman further agrees that he will not file any claims, complaints, subpoenas, affidavits, arbitrations and/or proceedings with any court, arbitration forum, regulatory or administrative agency ("Proceedings") against the aforementioned released parties with respect to the matters released in this Agreement, and any such Proceedings filed prior to the execution of this Agreement shall promptly be dismissed or withdrawn , with prejudice. This Agreement is intended to resolve forever the entire disagreement between Abdurahman and American Express related to the Account. (Doc. No. 52-3 at 26 (emphasis added).) AMEX asserts Alltran is a vendor and thus the settlement agreement released any claims against it as well, including the instant suit. Absent intervention, Alltran would not be able to introduce the agreement as a defense, and AMEX would lose the benefit of its bargain and "impairment of its contractual right[s]." (Doc. No. 52-1 at 12.)
Plaintiff retorts that "[t]his contention is meritless," and argues that the scope of the settlement is narrower than AMEX is interpreting. (Doc. No. 60 at 21-22.) Plaintiff states that the Demand, provided to the Court under seal, (Doc. No. 63 at 3), guides the scope of issues and the parties the settlement agreement covers, and it does not include claims against Alltran or FDCPA/Rosenthal claims. (Id. ) Plaintiff also argues that AMEX can bring a separate suit to enforce the settlement agreement. (Id. at 23.)
In their reply, AMEX argues plaintiff’s argument regarding scope is wrong. (Doc. No. 61 at 14-15.) The Court agrees. In the sealed settlement agreement, there is an integration clause which states the parties agree that the settlement agreement contains the entire agreement. (Doc. No. 63-1, Sealed, at 5.) There is no reference to the Demand in this section. The presence of such a clause is strong evidence of the parties’ intent, although it is not dispositive. Slivinsky v. Watkins-Johnson Co., 221 Cal.App.3d 799, 805-06, 270 Cal.Rptr. 585 (1990). Plaintiff has not pointed to any case law in which a demand letter narrowed the scope of an integrated settlement agreement. If plaintiff wished to expressly reserve the right to sue Alltran, there is precedence which allows those rights to be preserved. Perez v. Gordon & Wong Law Group, P.C., No. 11-CV-03323-LHK, 2012 WL 1029425, at *3-5 (N.D. Cal. Mar. 26, 2012). In that case, Perez signed a similar settlement agree, but expressly reserved rights to sue the defendant law group. Id. at *5 ("[T]he Settlement Agreement explicitly states: ‘Notwithstanding the foregoing, nothing contained herein shall be deemed to be a release of the Gordon & Wong Law Group, Andrew A. Ford, Mitchell L. Wong, Thomas M. Ray or Amy Gordon. ’ "). The Court held that "the intent of the parties to leave the issue of Defendants’ potential liability open and unsettled is manifest on the face of the settlement agreement.... [Thus,] [b]ecause Plaintiff’s claims against Defendants were expressly reserved in the settlement agreement, they are not barred by res judicata." Id.
Here, plaintiff did not expressly reserve potential claims against Alltran or any other third party in its settlement agreement with AMEX. Because it failed to do so, and because the contract clearly on its face prevents lawsuits against collection agencies such as Alltran, the Court finds AMEX has a protectable interest in enforcing its bargained for agreement.
C. Disposition of this Matter without AMEX’s Intervention Could Impede its Interest
AMEX argues it has a direct interest in the adjudication of this matter as it would impact its "ability to collect Plaintiff’s and other Cardmembers’ debts and could also impact American Express’s business and contractual relationships with its vendors, including Alltran." (Doc. No. 52-1 at 13.) Plaintiff alleges the case fails to affect AMEX because they are not liable, as a creditor, under the FDCPA. (Doc. No. 60 at 23.) AMEX notes while creditors are indeed not liable under the FDCPA, plaintiff also alleged Rosenthal violations, in which AMEX could be liable under. (Doc. No. 61 at 15.) AMEX is correct in their assertion that they face liability under the Rosenthal Act. Huy Thanh Vo v. Nelson & Kennard, 931 F.Supp.2d 1080, 1090 (E.D. Cal. 2013) ("Thus, unlike the FDCPA, the Rosenthal Act applies to creditors seeking to collect their own debts, so long as they do so ‘in the ordinary course of business, regularly.’ "). Thus, AMEX does have interests in the disposition of this matter as it pertains to plaintiff’s Rosenthal cause of action.
Additionally, plaintiff argues AMEX could enforce its rights by bringing a breach of contract case against plaintiff in state court to enforce the settlement agreement. (Doc. No. 60 at 23.) AMEX argues "this makes little sense" because it seeks to enforce rights "with respect to the claims in this action" and could allow plaintiff to extract a settlement from Alltran in federal court while litigating whether plaintiff even had a right to that settlement in state court. The Court agrees this course of action could lead to "gamesmanship." If AMEX, and its vendor Alltran, have secured rights against this very lawsuit through their settlement agreement with plaintiff, they should be able to litigate those rights jointly, rather than being forced to play two hands in separate courts.
D. Alltran Cannot Adequately Represent AMEX’s Interests
Finally, AMEX asserts that because "Alltran was not a party to the Settlement Agreement," it "cannot represent or advocate for American Express’s interest in enforcing its terms." (Doc. No. 61 at 16.) "The prospective intervenor bears the burden of demonstrating that the existing parties may not adequately represent its interest." Southwest Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 822 (9th Cir. 2001). "However, the burden of showing inadequacy is minimal, and the intervenor need only show that representation by existing parties may be inadequate." Safety Syringes, Inc. v. Plastef Investissements, 2:07-cv-02307-FMC-PLAx, 2008 WL 11336826, at *4 (C.D. Cal. Sep. 25, 2008). Here, AMEX asserts that its rights as a creditor are different than Alltran’s rights as a collector. (Doc. No. 52-1 at 14.) Plaintiff contends both parties have the same objective, which is to interpret the settlement agreement broadly. (Doc. No. 60 at 24.)
Here, Alltran’s interest is very narrow: it relates to the notices it sends to consumers and whether that notice complies with various statutes. AMEX’s interest, however, is broader, as they argue, because it comports to its interest in settling with debtors, and whether those settlements protect it (and Alltran) from lawsuits such as this one, against a third-party vendor. AMEX also convincingly notes that because Alltran was not a party to the settlement agreement, it cannot speak intelligently to the bargained-for-exchange AMEX gave for such a ride release in liability. (Doc. No. 52-1 at 14.) The Court agrees that only AMEX can represent its interests in enforcing the confidential settlement agreement.
E. AMEX’s Motion to Compel Arbitration
Under Federal Rule of Civil Procedure 24(c), AMEX’s intervention motion must "be accompanied by a pleading that sets out the claim or defense for which intervention is sought." However, AMEX did not include such a pleading, instead, AMEX attached a proposed motion to compel arbitration. (Doc. No. 52-5.) AMEX also included case law permitting a motion to compel to be filed rather than a pleading. (Doc. No. 52-1 at 6, fn 4; See Pro Lawns, Inc. v. Fidelity and Deposit Co. of Maryland, No. 3:14-cv-408-WKW, 2015 WL 350637, at *3 (M.D. Ala. Jan. 23, 2015) (finding the intervenor’s failure to include a pleading was not prejudicial and that "[i]t is apparent that Yates intends to intervene in order to compel arbitration of its liability to Pro Lawns, and therefore, Yates is excused from attaching a true ‘pleading’ to its motion to intervene.").)
Similarly, it is clear here that AMEX seeks to intervene to compel arbitration as it attached both the proposed motion and a copy of plaintiff’s contract with AMEX— which includes an arbitration clause. (Doc. No. 52-3 at 19.) Thus, AMEX’s failure to file a pleading with its motion is not grounds for denial.
IV. CONCLUSION
The Court finds AMEX has a protectable interest in enforcing its settlement agreement with plaintiff, one Alltran that cannot be represent. Thus, the Court GRANTS AMEX’s motion to intervene in this case. (Doc. No. 52.)
With their intervention motion, AMEX also filed a proposed motion to compel arbitration. (Doc. No. 52-5). AMEX may file that motion by August 31, 2018 . Any response is due by September 14, 2018 . Any reply is due by September 21, 2018 . Class certification deadlines will be set at a later time, pending the outcome of any arbitration or mediation motions.
IT IS SO ORDERED.