Opinion
Cause No. 1:02-CV-128
November 25, 2002
MEMORANDUM OF DECISION AND ORDER
I. Introduction
Before the Court is the motion for leave to intervene filed by the non-party Property Owners Insurance Company ("Property Owners") on October 17, 2002. (Docket No. 26.)
The Defendant C.C. Rider, Inc. ("C.C. Rider") filed a brief in opposition on October 28, 2002, and the Plaintiff Nautilus Insurance Company (""Nautilus") filed an objection on November 4, 2002. Property Owners filed no reply. For the following reasons, Property Owners' motion for leave to intervene will be DENIED.
II. Factual and Procedural Background
This negligence and breach of contract action, before this Court on diversity, stems from a fire that destroyed Daniel and Phyllis Ecklebarger's (the "Ecklebargers") bar/restaurant which they rented to C.C. Rider.
The Ecklebargers' insurer of the property is Nautilus, and after the fire, it paid the Ecklebargers for the fire loss and became surrogated to any rights they may have against C.C. Rider. Indeed, Nautilus is suing C.C. Rider here alleging that C.C. Rider's sole shareholder, John Moran, was negligent and that this negligence caused the fire, or that C.C. Rider breached its lease by returning the property in a damaged, well, actually destroyed, condition.
To oversimplify a bit, C.C. Rider maintained a separate commercial property insurance policy with Property Owners covering the bar/restaurant contents. However, after the fire, Property Owners refused to pay on the policy, prompting C.C. Rider to file suit in the Allen County, Indiana Superior Court. Property Owners then filed a cross-claim for a declaratory judgment alleging that the fire was intentionally set, and therefore not covered by its policy.
Now, Property Owners seeks to intervene here, either as of right or permissively, for the sole purpose of obtaining a stay until the state court case has been resolved.
Nautilus argues that intervention is inappropriate, and both Nautilus and C.C. Rider oppose any stay. We will address these issues seriatim.
III. Discussion A. Intervention as of right
Property Owners does not point to any statute that provides it with an unconditional right to intervene, Fed.R.Civ.P. 24(a)(1), and therefore, in order to intervene as of right under Fed.R.Civ.P. 24(a)(2), it must show (1) it's application is timely, (2) it has an interest relating to the subject matter of the action, (3) there is at least potential for the impairment of that interest if the action is resolved without the intervener, and (4) there is a lack of adequate representation by existing parties. Reid v. Illinois State Bd. of Educ., 289 F.3d 1009, 1017 (7th Cir. 2002).
Fed.R.Civ.P. (a)(2) provides "[u]pon timely application anyone shall be permitted to intervene in an action . . . 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."
While there is no dispute that Property Owners' motion is timely, the real problem is that Property Owners lacks any cognizable interest in this case. To be cognizable under Rule 24(a)(2), Property Owners' interest in this action must be "direct, substantial, and legally protectable." Brennan v. N.Y.C. Bd. of Educ., 260 F.3d 123, 129 (2d Cir. 2001); Transamerica Ins. Co. v. South, 125 F.3d 392, 396 n. 4 (7th Cir. 1997); accord Donaldson v. United States, 400 U.S. 517, 531, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971) (requiring a "significantly protectable interest"). Indeed, "[a]n interest that is remote from the subject matter of the proceeding, or that is contingent upon the occurrence of a sequence of events before it becomes colorable, will not satisfy the rule." Brennan, 260 F.3d at 129 (quoting Washington Elec. Coop., Inc. v. Massachusetts Mun. Wholesale Elec. Co., 922 F.2d 92, 97 (2d Cir. 1990)); accord Travelers Indemnity Co. v. Dingwell, 884 F.2d 629, 638 (1st Cir. 1989) (interest must be direct not contingent); Restor-A-Dent Dental Labs., Inc. v. Certified Alloy Prods., Inc., 725 F.2d 871, 874 (2d Cir. 1984).
Property Owners only vaguely describes its interest in this action as one stemming from the fact that "the state trial Court [has not yet determined] whether coverage, including the obligation to provide a defense and indemnification, is to be afforded to . . . C.C. Rider pursuant to Property Owners' policy." (Property Owners' M. to Intervene, ¶ 11.)
However, Property Owners' interest in the coverage of its policy is clearly unrelated to the subject matter of the action between Nautilus and C.C. Rider. While this suit sounds in negligence and breach of contract, Property Owners seeks to somehow inject its coverage claim into this litigation through a stay. See Travelers Indemnity, 884 F.2d at 640 (insurer's coverage unrelated to tort liability).
This approach is particularly troubling given that Property Owners, defending C.C. Rider under a reservation of rights, is not entitled to control C.C. Rider's defense of this case, see, e.g., Gallant Ins. Co. v. Oswalt, 762 N.E.2d 1254, 1258 (Ind.Ct.App. 2002) (insurer defending under reservation of rights must hire independent counsel), but allowing them to intervene for the sole purpose of staying the litigation would essentially permit them to do so. "Such intervention would unfairly restrict [C.C. Rider], who faces a very real risk of an uninsured liability, and grant [Property Owners] `a double bite at escaping liability.'" Travelers Indemnity, 884 F.2d at 639 (quoting United Servs. Automobile Assoc. v. Morris, 741 P. 246, 251 (Ariz. 1987)).
Moreover, the resolution of this case without Property Owners will not impair its interest.
Indeed, while Property Owners obviously has an interest in resolving the scope of its coverage, a matter it is pursuing in state court, this case turns on the factually and legally distinct questions of whether C.C. Rider was negligent and breached its lease. Obviously, the resolution of these unrelated issues will not directly impair or even affect Property Owners' coverage.
Accordingly, because Property Owners does not have an interest in this litigation, and because its interest will not be impaired, it has failed to demonstrate a right to intervene under Fed.R.Civ.P. 24(a)(2).
B. Permissive intervention
Property Owners points to no statute which provides it with a conditional right to intervene, Fed.R.Civ.P. 24(b)(1), so to intervene permissively Property Owners must show that its "claim or defense and the main action have a question of law or fact in common." Fed.R.Civ.P. 24(b)(2). However, as discussed supra, Property Owners coverage claim is unrelated to the claims to be litigated here, so, as a matter of law, Property Owners cannot intervene.
Nevertheless, even if Property Owners could show that its coverage claim has a question of law or fact in common with this case, intervention is still inappropriate. Rule 24(b) provides that "[i]n exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties." Certainly, allowing Property Owners to intervene will unduly delay the resolution of this case because the only reason they want to intervene is to seek a stay. If such a stay were granted, a topic addressed briefly below, it would prejudice the parties in this case, impairing their right to a prompt resolution of their claims.
Thus, we will not allow Property Owners to intervene permissively.
C. Granting the motion to intervene would be a futility
Finally, intervention would be futile here because Property Owners gives us no reason to stay this case in deference to the state court proceeding. Indeed, federal courts have a "virtually unflagging obligation" to exercise the jurisdiction conferred on them by Congress. Colorado River Water Cons. Dist. v. United States, 424 U.S. 800, 817 (1976); AAR Int'l, Inc. v. Nimelias Enter. S.A., 250 F.3d 510, 517 (7th Cir. 2001). Nevertheless, in "exceptional" circumstances, a federal court may abstain from hearing a suit and "await the outcome of parallel proceedings as a matter of `wise judicial administration, giving regard to the conservation of judicial resources and comprehensive dispositions of litigation.'" AAR Int'l, 250 F.3d at 517 (quoting Finola Capital Corp. v. Ryan Helicopters U.S.A., Inc., 180 F.3d 896, 898 (7th Cir. 1999)); Colorado River, 424 U.S. at 817.
The initial step in determining whether the Colorado River doctrine applies is to inquire whether the state court case is parallel to this action. Caminiti Iatrarola, Ltd. v. Behnke Warehousing, Inc., 962 F.2d 698, 700 (7th Cir. 2000). The suits are parallel if they involve "substantially the same parties . . . litigating substantially the same issues simultaneously in two fora." AAR Int'l, 250 F.3d at 518. However, "the question is not whether the suits are formally symmetrical, but whether there is a `substantial likelihood' that the foreign litigation `will dispose of all claims presented in the federal case.'" Id.
As discussed supra, this action and the state court action are not parallel because they arise from a separate set of facts, at least two different contracts (i.e., the lease and Property Owners' policy), and different legal theories. Moreover, resolution of the state court case will not dispose of the claims presented here.
Accordingly, because these actions are not parallel, Colorado River abstention does not apply, and thus the motion for leave to intervene to merely seek a stay is actually an exercise in futility.
CONCLUSION
For the foregoing reasons, Property Owners' motion for leave to intervene is DENIED.