Opinion
No. 00-44089 J11, Adv. No. 01-4098 AJ, Adv. No. 01-4156 AJ.
September 17, 2001
MEMORANDUM DECISION (MOTION FOR LEAVE TO INTERVENE)
A. Introduction
The Official Committee of Growers (the "Growers' Committee") has filed a motion seeking leave to intervene in this adversary proceeding. The motion is opposed by the Official Committee of Unsecured Creditors, the plaintiff herein (the "Creditors' Committee"), and by the U.S. Trustee, which appointed the Growers' Committee. The court will deny the motion.
Tri Valley Growers, the above debtor ("Tri Valley"), is a cooperative association organized to process and market fruits and vegetables delivered by its member growers. Tri Valley filed its chapter 11 petition herein on July 10, 2000.
The present adversary proceeding is a class action for declaratory relief in which the Creditors' Committee seeks a determination as to allowability and status of the creditor claims that have been filed by numerous grower-members of Tri Valley. Specifically, the complaint seeks a determination that the grower-members: (a) are not entitled to producer's liens under California Food and Agricultural Code § 54001 et. seq. because of their status as members of a cooperative, and thus, that they are not holders of secured claims against the estate herein, (b) that the grower members' right to receive a dividend out of the estate in respect of their unsecured claims is subject to certain restrictions in Tri Valley's charter, and (c) that because of such restrictions, the grower members do not have administrative priority claims arising from their postpetition deliveries of products to Tri Valley.
The motion is governed by Fed.R.Civ.P. 24, which applies in adversary proceedings via Fed.R.Bankr.P. 7024.
B. Intervention of Right
Fed.R.Civ. p. 24 (a) provides:
(a) Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute of the United States confers an unconditional right to intervene; or (2) when 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.
The Growers' Committee contends that it is entitled to intervene as a matter of right under both subsections of Fed.R.Civ.P. 24 (a).
As to Fed.R.Civ.P. 24 (a)(1), the Growers' Committee argues that Bankruptcy Code § 1109 (b) is a statute that confers upon it the unconditional right to intervene. Bankruptcy Code § 1109 (b) provides as follows:
(b) A party in interest, including the debtor, the trustee, a creditors' committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter.
In Matter of Marin Oil, Inc., 689 F.2d 445 (3d Cir. 1982), the Third Circuit held that "case" within the meaning of § 1109 (b) included adversary proceedings, and thus, that creditors' committees have an unqualified right to intervene in all proceedings being litigated in a particular bankruptcy case. This holding, if good law, would entitle the Growers' Committee to intervene herein without regard to any of the circumstances present here that would dictate against intervention.
In Fuel Oil Supply and Terminaling v. Gulf Oil Corp., 762 F.2d 1283 (5th Cir. 1985), however, the Fifth Circuit was faced with the same issue, and reached the opposite conclusion, holding that Bankruptcy Code § 1109 (b) did not confer upon creditors' committees the absolute right to intervene in adversary proceedings, and that courts should consider the factors specified in Fed.R.Civ.P. 24 (a) (2) when faced with a motion by a creditors' committee to intervene in an adversary proceeding. See also In re Thompson, 965 F.2d 1136, 1142 n. 8 (1st Cir. 1992).
In reaching its conclusion, the court in Fuel Oil noted that "courts have been hesitant to find unconditional statutory rights of intervention", and when they do, the right is generally conferred on the United States or a regulatory commission. Fuel Oil, 762 F.2d at 1286. The court also stated that the applicable procedural rules governing both intervention and the rights of creditors committees to initiate adversary proceedings supported its conclusion. Id. at 1286-87.
This court finds Fuel Oil more persuasive than Marin. Indeed, after it decided Marin, the Third Circuit revisited the issue in Phar-Mor Inc. v. Coopers Lybrand, 22 F.3d 1228, 1233 (3d Cir. 1994), and discussed in depth the reasons why many courts rejected its analysis in Marin, only to acknowledge that "internal operating procedures barred [the Third Circuit] from overruling it." In Phar-Mor, the Third Circuit noted:
The courts rejecting Marin have advanced three reasons why Marin's interpretation of the scope of § 1109 (b) is incorrect. First, Congress has consistently drawn a distinction between bankruptcy "cases" and "adversary proceedings" related to them in other parts of the bankruptcy statutory scheme. Second, courts have construed Rule 24 (a) (1) narrowly; these courts have been reluctant to interpret statutes to grant an unconditional right to intervene to private parties. Third, Bankruptcy Rule 7024 and its accompanying advisory committee note indicate that Congress was aware of a distinction between cases and adversary proceedings and that Congress intended to differentiate between them in the context of intervention.
According to the courts critical of Marin, these legislative and judicial developments indicate that Congress was aware of the distinction between adversary proceedings and cases, and deliberately did not extend the right to intervene to adversary proceedings. These courts believe that Congress intended that motions to intervene under § 1109 (b) would be controlled by Rule 24 (a) (2) rather than Rule 24 (a) (1).
Id. at 1232-33.
For the reasons stated in Fuel Oil and in Phar-Mor's discussion of the reasons courts have declined to follow Marin, this court holds that Bankruptcy Code § 1109 (b) does not provide creditors' committees with the absolute right to intervene in all adversary proceedings.
The next issue, then, is whether Fed.R.Civ. p. 24 (a) (2) provides the Growers' Committee with the right to intervene. To prevail, the Growers' Committee must show the following: (1) the application must be timely; (2) the applicant must have a "significantly protectable" interest relating to the transaction that is the subject of the litigation; (3) the applicant must be so situated that the disposition of the act as a practical matter will impair or impede the applicant's ability to protect its interest; and (4) the applicant's interest must be inadequately represented by the parties before the court. See Northwest Forest Resource Council v. Glicknuin, 82 F.3d 825, 836 (9th Cir. 1996).
Here, the Growers' Committee cannot make such a showing. As to the second factor, the Growers' Committee, as distinguished from the growers who filed claims, does not have any property interests at stake. See Purcell v. BankAtlantic Financial Corp., 85 F.3d 1508, 1512 (11th Cir. 1996). See also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 n. 1 (1992). As to the third factor, this court has held that the Growers' Committee does not even have standing to bind any grower-claimants as to the "allowance, disallowance, amount, priority, or status (secured or unsecured) of their individual claims," the very matters that are at issue herein. See Decision on Motion to Dismiss, filed June 26, 2001 inOfficial Committee of Growers v. Tri Valley Growers, Adv. Proc. 01-4076 AJ herein, attachment, p. 2.
As to the fourth factor, this court has found by its Amended Order Approving Maintenance of Class Action; Findings of Fact and Conclusions of Law, entered herein August 14 2001, that the growers are adequately represented by the class representatives herein. See paragraphs 9-12. The court has considered the applicable factors, see, e.g., Blake v. Pallan, 554 F.2d 947, 954-55 (9th Cir. 1977), and concluded that whatever interest the Growers' Committee has in the outcome of this litigation will be adequately protected by the class representatives, who, unlike the the Growers' Committee, are the real parties in interest, the parties with money at stake, and the parties with standing to litigate the issues that have been raised.
In Blake, the Ninth Circuit stated that when evaluating the adequacy of representation, the court should consider: (1) whether the interests of the existing party and the intervenor are sufficiently similar that the existing party would undoubtedly make the same legal arguments as the intervenor; (2) whether the existing party is capable and willing to make such arguments, and (3) whether the intervenor would add some necessary element not covered by the existing parties to the proceedings.
The court therefore holds that the Growers' Committee is not entitled to intervene pursuant to Fed.R.Civ. p. 24 (a) (2). See, e.g., In re Chalk Line Mfg., Inc., 184 B.R. 828, 833 (Bankr. N.D. Ala. 1995), In re Heck's Properties, Inc., 151 B.R. 739, 749 (S.D.W.Va. 1992) (denying equity committee's motion to intervene in action alleging injury to corporate debtor, because debtor in possession's prosecution of action adequately protected stockholders' interests); In re CVC Inc., 106 B.R. 478, 480 (Bankr. N.D. Ohio 1989) (holding that no inadequate representation existed justifying creditors' committee intervention under Rule 24 (a) (2) in debtor in possession's action against individual creditor).
C. Permissive Intervention
Fed.R.Civ.P. 24 (b) provides, in relevant part:
(b) Upon timely application anyone may be permitted to intervene in an action: (1) when a statute of the United States confers a conditional right to intervene; or (2) when an applicant's claim or defense and the main action have a question of law or fact in common. . . . In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.
A bankruptcy court has broad discretion to grant or deny motions for permissive intervention. Orange County v. Air California, 799 F.2d 535, 539 (9th Cir. 1986), cert. denied 480 U.S. 946 (1987). Even if the Growers' Committee could prove it meets all of Rule 24 (b) (2)'s threshold requirements, the Court retains the discretion to deny permissive intervention. Donnelly v. Glickman, (9th Cir. 1998) (citingOrange County, 799 F.2d at 159 F.3d 405, 412 (9th Cir. 1998) (citingOrange County, 799 F.2d at 539). In exercising its discretion, the Court may consider other relevant factors.
These relevant factors include the nature and extent of the intervenors' interest; their standing to raise relevant legal issues; the legal position they seek to advance, and its probable relation to the merits of the case; whether the intervenors' interests are adequately represented by other parties; whether intervention will prolong or unduly delay the litigation; and 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. Spangler v. Pasadena City Bd. of Educ., 552 F.2d 1326, 1329 (9th Cir. 1977).
Here, the court's consideration of the relevant factors leads it to conclude that intervention should be denied. The court has already mentioned that the Growers' Committee lacks standing to bind any claimants as to the allowance or status of their claims. It has also noted that the grower-claimants are already and adequately represented by the class representatives, and do not require an additional representative, especially one that has suffered no injury. The added expense to the estate also dictates against intervention.
Moreover, the U.S. Trustee appointed the Growers' Committee to negotiate a plan and "not . . . to engage in any litigation nor to defend any litigation concerning its individual members." Transcript of November 22, 2001 hearing at 34:24-35:10. The court will deny the Growers' Committee's motion for permissive intervention under Fed.R.Civ.P. 24 (b).
D. Conclusion
For the above reasons, the court will issue its order denying the motion of the Growers' Committee to intervene under Fed.R.Civ.P. 24 (a) and (b).
PROOF OF SERVICE
I, the undersigned, a regularly appointed and qualified clerk in the office of the United States Bankruptcy Court for the Northern District of California at Oakland, hereby certify:
That I, in the performance of my duties as such clerk, served a copy of the foregoing document entitled Memorandum Decision (Motion for Leave to Intervene) by depositing it in the regular United States mail at Oakland, California, on the date shown below, in a sealed envelope bearing sufficient postage, addressed as listed on the attached Service List.
I declare under penalty of perjury that the foregoing is true and correct.