Opinion
Civil Action No. 3:04-CV-1087-G.
June 8, 2005
MEMORANDUM OPINION AND ORDER
Before the court is the motion of Citibank USA, National Association ("Citibank") to intervene in this lawsuit. For the reasons stated below, Citibank's motion to intervene is granted.
I. BACKGROUND
This case involves allegedly unauthorized charges on a credit card and arose from the following events. In April 1999, John Shaunfield ("Shaunfield") applied for and was issued a Diners Club credit card by Citicorp Diners Club, Inc. ("Citicorp" or "Diners Club"). Intervenor Citibank USA, National Association's Original Counterclaim ("Citibank's Counterclaim") ¶ 5; Plaintiff's First Amended Complaint ("Complaint") ¶ 2. According to the card agreement on his Diners Club account, Shaunfield was responsible to pay Citibank for charges made to his account. Id.
In April or May 2001, Carey Smith ("Smith"), a real estate developer, and his wife (collectively, the "Smiths") checked into the Diamond Bar Hotel for an extended stay. Complaint ¶ 10. During this time, the Smiths' stay at the Diamond Bar Hotel was guaranteed by an unknown third party. Id. Shaunfield and Smith entered into a contract in which Smith agreed to provide Shaunfield's company, Vida Technologies, Inc. ("Vida"), with $10,000,000 of financing in exchange for 40% ownership in Vida. Id. ¶ 11. At the time of this contract, Smith represented to Shaunfield that he had worked out the terms for a $200,000,000 line of credit with a bank in Portugal. Id. In September 2001, Shaunfield went to Portugal to finalize the terms of the financing contract. Id. ¶ 12. During this trip, the Diamond Bar Hotel contacted Smith and explained that the third-party guarantee for his stay was about to expire. Id. Smith asked Shaunfield to agree to guarantee his and his wife's stay at the hotel through October 15, 2001. Id. Shaunfield agreed to pay only for the room and tax charges and provided the Diamond Bar Hotel with his Diners Club credit card. Id.
The negotiations over the terms of the financing between the bank in Portugal and Smith began to break down. Id. ¶ 13. As a result, Shaunfield returned home to Collin County, Texas. Id. With the October 15, 2001 date approaching, the Diamond Bar Hotel contacted Shaunfield and requested that he agree to extend his guarantee until November 30, 2001. Id. Diamond Bar also requested that in addition to the room and tax charges, Shaunfield guarantee all room charges. Id. After Diamond Bar reassured Shaunfield that room charges consisting of phone calls, movie charges, and food from the restaurant should not exceed $8,000, Shaunfield agreed to extend his guarantee of the Smiths' stay. Id. Once again, Shaunfield used his Diners Club credit card to cover the charges. Id.
The financing from the bank in Portugal was not successful; however, Smith continued to assure Shaunfield that he could come up with the financing to provide Vida with $10,000,000 in exchange for an ownership interest. Id. ¶ 14. During this time period, Shaunfield's guarantee of the Smiths' stay at the Diamond Bar Hotel expired. Id. Additionally, Shaunfield received his Diners Club credit card statement, which showed that the hotel charges far exceeded the $8,000 the hotel had estimated and represented to Shaunfield. Id. Based on the statement, Shaunfield refused to guarantee the Smiths' stay at the hotel any further. Id. Nevertheless, in accordance with his previous agreements with the Diamond Bar Hotel, Shaunfield paid the charges on his Diners Club credit card for the Smiths' stay at the hotel through November 30, 2001. Id.
When Shaunfield received his Diners Club statement for the period ending January 31, 2002, three separate charges from the Diamond Bar Hotel, in the total amount of $11,117.84, appeared. Id. ¶ 15. In a letter dated February 20, 2002, Shaunfield disputed the legitimacy and accuracy of these charges with Diners Club. Id. On March 5, 2002, Diners Club acknowledged receipt of Shaunfield's dispute and temporarily credited his Diners Club credit card account $11,117.84. Id.
On March 26, 2002, Diners Club notified Shaunfield that the Diamond Bar Hotel had produced documentation supporting the authorization for the charges and reversed the temporary credit that had been applied to Shaunfield's Diners Club credit card account. Id. ¶ 16. After reviewing the documentation provided by the Diamond Bar Hotel to Diners Club, Shaunfield noticed that not all of the date changes made after November 30, 2001 on the credit card authorization were initialed, that the credit card authorization appeared to contain forgeries of his initials, and that the fax banner on the top of the purported authorization pages misspelled his last name. Id. ¶ 17. On April 6, 2002, Shaunfield sent Diners Club a letter addressing the disputed charges and the forged authorizations. Id. ¶ 18. Once again, on April 23, 2002, Diners Club reversed the charges and credited Shaunfield's account in the amount of $11,117.84. Id.
Then, in August 2002, without any notice to Shaunfield, Diners Club reversed $9,058.11 of the $11,117.84 previously credited to Shaunfield's account. Id. ¶ 19. In response to this action, Shaunfield again disputed the accuracy of the charges by letter. Id. Diners Club did not respond to this letter. Id. On November 18, 2002, Citicorp informed Shaunfield that his credit card account had been suspended for failure to pay the $9,058.11. Id. ¶ 20.
Shaunfield brought this suit in a state district court against Citicorp, Citicorp Credit Services, Inc., Southern Hospitality, Inc. d/b/a Holiday Inn Select/Diamond Bar, Equifax, Inc., Equifax Information Services, L.L.C., and CSC Credit Service, Inc., (collectively, the "defendants") alleging breach of contract, fraud, negligent misrepresentation, promissory estoppel, violations of the Texas Deceptive Trade Practices Act ("Texas DTPA"), violations of the Federal Fair Debt Collection Practices Act ("FDCPA"), violations of the Federal Fair Credit Reporting Act ("FCRA"), violations of the Federal Fair Credit Billing Act ("FCBA"), and seeking damages plus attorney's fees. See generally Complaint. Citibank now moves to intervene, see generally Citibank USA, National Association's Motion to Intervene and Brief in Support ("Citibank's Motion to Intervene"), a motion opposed by Shaunfield.
II. ANALYSIS A. Intervention of Right — Rule 24(a)(2)
Federal Rule of Civil Procedure 24(a) governs intervention of right and provides in pertinent part:
(a) Upon timely application anyone shall be permitted to intervene in an action . . . (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.
"Federal courts should allow intervention `where no one would be hurt and the greater justice could be attained.'" Sierra Club v. Espy, 18 F.3d 1202, 1205 (5th Cir. 1994) (citing McDonald v. E.J. Lavino Company, 480 F.2d 1065, 1074 (5th Cir. 1970)). An applicant may intervene as of right if he: (1) timely files an application; (2) claims an interest in the subject matter of the action; (3) shows that disposition of the action may impair or impede the applicant's ability to protect that interest; and (4) shows that the existing parties to the action will not adequately represent that interest. Heaton v. Monogram Credit Card Bank of Georgia, 297 F.3d 416, 422 (5th Cir. 2002). The would-be intervenor bears the burden of demonstrating an entitlement to intervene and must satisfy all of the above requirements. Edwards v. City of Houston, 78 F.3d 983, 999 (5th Cir. 1996) (en banc). The inquiry is a flexible one and "must be measured by a practical rather than technical yardstick." Id. (internal quotation marks and citations omitted).
1. The Timeliness of Citibank's Motion to Intervene
Timeliness for purposes of intervention is determined from the point that the intervenor learns that its interest in the lawsuit would not be adequately protected by the other parties, not from inception of the case or the date the intervenor learned of the litigation. United States v. State of Washington, 86 F.3d 1499, 1503 (9th Cir. 1996). When determining whether a motion to intervene is timely, a court must consider: (1) how long the potential intervenor knew or reasonably should have known of its stake in the case into which it seeks to intervene; (2) the prejudice, if any, the existing parties may suffer because the potential intervenor failed to intervene when it knew or reasonably should have known of its stake in that case; (3) the prejudice, if any, the potential intervenor may suffer if the court does not let it intervene; and (4) any unusual circumstances that weigh in favor of or against a finding of timeliness. Ruiz v. Estelle, 161 F.3d 814, 827 (5th Cir. 1998), cert. denied sub nom., Ruiz v. Culberson, 526 U.S. 1158 (1999); Edwards, 78 F.3d at 1000; Espy, 18 F.3d at 1205; Stallworth v. Monsanto Company, 558 F.2d 257, 264-66 (5th Cir. 1977). These factors are a framework and "not a formula for determining timeliness." Edwards, 78 F.3d at 1004. A motion to intervene may still be timely even if all the factors do not weight in favor of a finding of timeliness. See Stallworth, 558 F.2d at 267.
"The requirement of timeliness is not a tool of retribution to punish the tardy would-be intervenor, but rather a guard against prejudicing the original parties by the failure to apply sooner." Espy, 18 F.3d at 1205 (citing McDonald, 430 F.2d at 1074). A motion to intervene's "[t]imeliness is to be determined from all the circumstances." Edwards, 78 F.3d at 1000 (internal quotation marks and citations omitted). "Th[is] analysis is contextual; absolute measures of timeliness should be ignored." Espy, 18 F.3d at 1205 (citing Stallworth, 558 F. 2d at 266). Further, a court should ignore "[h]ow far the litigation has progressed when intervention is sought[,] . . . the amount of time that may have elapsed since the institution of the action . . . [, and] the likelihood that intervention may interfere with orderly judicial processes. . . ." Stallworth, 558 F.2d at 266 (internal quotation marks and citations omitted).
a. Did Citibank Move to Intervene When It Became Aware of Its Interest?
"Courts should discourage premature intervention [because it] wastes judicial resources." Espy, 18 F.3d at 1206 (citing Stallworth, 558 F.2d at 265). Thus, "[t]he timeliness clock runs either from the time the applicant knew or reasonably should have known of his [stake in the case into which he seeks to intervene], or from the time he became aware that his [stake] would no longer be protected by the existing parties to the lawsuit." Edwards, 78 F.3d at 1000 (internal quotation marks and citations omitted). The timeliness clock does not run from the date the potential intervenor knew or reasonably should have known of the existence of the case into which he seeks to intervene. Espy, 18 F.3d at 1206 ("[W]e reject the notion that the date on which the would-be intervenor became aware of the pendency of the action should be used to determine whether it acted promptly.").
It is abundantly clear that Citibank has a stake in this case. The question, then, is when Citibank's stake materialized, and thus, when it knew or reasonably should have known of its stake in the case. Shaunfield filed suit in state court in May 2004; however, he failed to serve any of the defendants. See Citibank USA, National Association's Reply to Plaintiff's Response to Motion to Intervene ("Citibank's Reply") at 3; Plaintiff's Response to Citibank USA, National Association's Motion to Intervene ("Shaunfield's Response") at 2. After learning of the suit, the defendants Diners Club and Citicorp Credit Services, Inc. (collectively, the "Citicorp defendants") removed the case to this court on May 20, 2004. Notice of Removal; Citibank's Reply at 3; Shaunfield's Response at 2. Citibank maintains that during the course of the Citicorp defendants' analysis and investigation of Shaunfield's claims, Citibank was able to identify its interest in the case. Citibank's Reply at 3. Consequently, Citibank asserts, it first learned of its potential interest in this case in January 2005. See Citibank's Motion to Intervene at 2. Soon thereafter, Citibank sought to assert its claims through intervention. Id. Although Citibank contends that it did not become aware that its interests were not being adequately represented until January 2005, this claim seems disingenuous given the fact that Citibank and the Citicorp defendants are represented by the same counsel and both parties are part of the same corporate organization. As a result, the court finds that Citibank should have known that its interests would not be adequately protected as soon as it became aware of the existence of this case. The court presumes that Citibank became aware of this case in or around the time that it was filed and that Citibank delayed in not seeking to intervene until April 6, 2005. Therefore, the first timeliness factor weighs against Citibank.
Citibank first attempted to become a party to this action on by filing its counterclaim by interpleader on March 8, 2005. See generally Defendants Citicorp Diners Club, Inc. and Citicorp Credit Services, Inc.'s Amended Answer to Plaintiff's First Amended Complaint and Citibank USA, National Association's Interpleader and Original Counterclaim ("Citicorp's Answer and Citibank's Counterclaim"). This motion, however, was subsequently withdrawn and was replaced by the instant motion to intervene. See Notice of Withdrawal of Citibank USA, National Association's Interpleader and Original Counterclaim ("Citibank's Notice of Withdrawal") (April 5, 2005). Additionally, Citibank's intervention was filed within the deadline for joinder of additional parties, and prior to completion of any discovery other than initial disclosures. See Order Establishing Schedule and Certain Pretrial Requirements ("Scheduling Order") (Jan. 19, 2005).
b. Will the Existing Parties Suffer Prejudice From Citibank's Intervention?
The second factor is concerned "only [with] that prejudice which would result from the would-be intervenor's failure to request intervention as soon as he knew or reasonably should have known about his [stake] in the action." Stallworth, 558 F.2d at 265. It is inevitable that Citibank's intervention in the proceedings will cause Shaunfield to experience increased costs and delays in attempting to pursue his rights. Nevertheless, these are consequences which would have resulted whether Citibank had moved for intervention last month or when the case was initially removed to federal court. "[T]he likelihood that intervention may interfere with orderly judicial processes . . . has nothing to do with timeliness." Stallworth, 558 F.2d at 266. "[P]rejudice must be measured by the delay in seeking intervention, not the inconvenience to the existing parties of allowing the intervenor to participate in the litigation." Espy, 18 F.3d at 1206 (citing Stallworth, 558 F.2d at 265).
Specifically, Shaunfield claims that Citibank's intervention "will inevitably delay further discovery." Shaunfield's Response at 3. Although the discovery period has started, Citibank's intervention will not affect any of the current deadlines. In fact, as of May 10, 2005, the parties had only exchanged their initial disclosures. See Citibank's Reply at 3. Additionally, only one defendant has submitted written discovery to Shaunfield and requested dates for Shaunfield's deposition. Id. at 3-4. Since the parties have not conducted a significant amount of discovery, the court finds that Citibank's intervention in the litigation will not prejudice Shaunfield or the existing parties. Thus, the second factor weighs in favor of Citibank.
c. Will Citibank Suffer Prejudice if Intervention is Disallowed?
The third factor focuses on the prejudice the potential intervenor would suffer if not allowed to intervene. Stallworth, 558 F.2d at 265-66. If Citibank is not permitted to intervene, it will undoubtedly suffer significant prejudice. Citibank is the only party who possesses the right to (1) seek enforcement of the contract at issue in this case and (2) seek repayment of the money owed by Shaunfield. Citibank's Motion to Intervene at 3. These issues relate to obligations that would be avoided if Shaunfield prevails in this case. As a result, if Citibank cannot intervene, it could be precluded from, or prejudiced in, subsequent legal action against Shaunfield. The third factor weighs in favor of Citibank.
d. Unusual Circumstances
Finally, the court must decide whether any unusual circumstances weigh in favor of or against a finding that the motion to intervene was timely. This court finds that there are no unusual circumstances present that militate against permitting Citibank to intervene. To the contrary, Citibank's intervention in this lawsuit will actually ensure that Shaunfield's claims, and any defenses and counterclaims thereto, will be adjudicated at the same time and in the same place. Because each of the foregoing elements weighs in favor of a finding of timeliness, this court concludes that Citibank's motion to intervene was timely.
2. Citibank's Interest in the Subject Matter of the Present Action
To meet the second requirement for Rule 24(a)(2) intervention, a potential intervenor must demonstrate that it has an interest that is related to the property or transaction that forms the basis of the controversy. John Doe No. 1 v. Glickman, 256 F.3d 371, 375, 379 (5th Cir. 2001). Not any interest, however, is sufficient; the interest must be "direct, substantial, [and] legally protectable. . . ." Id. at 379 (alteration in original) (internal quotation marks and citations omitted). The Fifth Circuit has explained that "the interest [must] be one which the substantive law recognizes as belonging to or being owned by the applicant." New Orleans Public Service, Inc. v. United Gas Pipe Line Company, 732 F.2d 452, 464 (5th Cir.) (en banc) (emphasis in original), cert. denied sub nom., Morial v. United Gas Pipe Line Company, 469 U.S. 1019 (1984). The court must therefore determine whether the proposed intervenor is a real party in interest. See id.
In general, a mere economic interest in the outcome of the litigation is insufficient to support a motion to intervene. See, e.g., id. ("[I]t is plain that something more than an economic interest is necessary."). Thus, the mere fact that a lawsuit may impede a third party's ability to recover in a separate suit ordinarily does not give the third party a right to intervene. See Hawaii-Pacific Venture Capital Corporation v. Rothbard, 564 F.2d 1343, 1346 (9th Cir. 1977). While a mere economic interest may be insufficient to support the right to intervene, an intervenor's interest in a specific fund is sufficient to support intervention in a case affecting that fund. See, e.g., Gaines v. Dixie Carriers, Inc., 434 F.2d 52, 53-54 (5th Cir. 1970) (holding that a law firm could intervene in a former client's action to protect its interest in its contingency fee); Hardy-Latham v. Wellons, 415 F.2d 674, 676 (4th Cir. 1968) (holding that finders who supplied a broker with the name of a seller were allowed to intervene in the broker's case against the seller for a broker's fee because "[t]hey claim an interest in both the transaction and the fund which are the subject of the main action, and if the entire amount were paid directly to [the broker], their ability to collect their proper share would as a practical matter be more difficult"); United States v. Eilberg, 89 F.R.D. 473, 474 (E.D. Pa. 1980) (holding that two attorneys who claimed an interest in the same funds sought by the United States in a suit against a Congressman were entitled to intervene "whether their claim sound[ed] in contracts or tort, law or equity."); Peterson v. United States, 41 F.R.D. 131, 134 (D. Minn. 1966) (holding that the trust remaindermen had a sufficient interest to intervene in an action by the trust executors for a tax refund); see generally 7C C. WRIGHT A. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1908, at 272-75 (2d ed. 1986) ("Interests in property are the most elementary type of right that Rule 24(a) is designed to protect, and many of the cases in which a sufficient interest has been found under amended Rule 24(a)(2) have been cases in which there is a readily identifiable interest in land, funds, or some other form of property."). Thus, when a particular fund is at issue, an applicant claims an interest in the very property that is the subject matter of the suit.
In this case, Citibank states that its interest in the litigation is its right to sue to collect a debt that is the subject matter of Shaunfield's suit. Citibank's Reply at 4. Since Citibank possesses the sole right to enforce the contractual obligations asserted against Shaunfield, it is a real party in interest to the claims it seeks to bring against Shaunfield. None of the other defendants has standing to bring the claims Citibank now seeks to assert. Furthermore, contrary to Shaunfield's contentions, Citibank's interest is more than a mere economic interest. Citibank's direct claim to recover a debt that is the subject matter of this dispute is substantially greater than a "mere economic interest" such as a general creditor's claim, unrelated to the subject matter of the suit. As a result, intervention is necessary here to protect Citibank's right to enforce the credit card agreement and to collect the debt alleged to be owed by Shaunfield.
3. Protection of Citibank's Interest Arising from the Pending Action
The potential intervenor must be situated so that the disposition of the case into which he seeks to intervene may impair or impede his ability to protect his interest. Espy, 18 F.3d at 1207. Shaunfield argues that his "claims do not concern whether or not he owes the balance on the account, but rather whether or not he was defrauded and whether or not violations of the federal fair credit reporting, billing and collection laws have occurred." Shaunfield's Response at 3. Nevertheless, at the heart of the instant action is a determination of whether Shaunfield owes Citibank the balance on the account. If Shaunfield is liable for breaching the credit card agreement and owes a balance on the account, his claims against the Citicorp defendants (affiliates of Citibank) are probably unmeritorious. Because a finding adverse to the Citicorp defendants on Shaunfield's claims could interfere with Citibank's ability to enforce its agreement, the court finds that Citibank's interests will be impaired if it is not permitted to participate in this litigation.
4. Existing Parties' Ability to Represent Citibank's Interest
The potential intervenor has the burden of proving that the existing parties do not adequately represent his interest. Espy, 18 F. 3d at 1207. This burden "is satisfied if the applicant shows that representation of his interest may be inadequate; and the burden of making that showing should be treated as minimal." Trbovich v. United Mine Workers of America, 404 U.S. 528, 538 n. 10 (1972) (internal quotation marks and citation omitted). As stated above, Citibank's interests cannot be adequately represented by the existing parties because only Citibank has the right to enforce the credit card agreement at issue and to collect the indebtedness allegedly owed by Shaunfield. Thus, the only means by which Citibank's interests can be adequately protected is through intervention in this case.B. Permissive Intervention — Rule 24(b)
Since district courts have broad discretion in granting motions to intervene permissively, permissive intervention entails a lower standard than intervention as of right. See League of United Latin American Citizens, Council No. 4434 v. Clements, 884 F.2d 185, 189 (5th Cir. 1989). Consequently, because Citibank's motion to intervene meets the higher standard, the court finds in the alternative that the lower standard for permissive intervention is also met. Thus, in the alternative, the court exercises its discretion to allow permissive intervention by Citibank under Rule 24(b).
III. CONCLUSION
In sum, applying Rule 24(a)'s four requirements, this court concludes that Citibank is entitled to intervene as a matter of right. In the alternative, the court concludes that permissive intervention should be allowed. For the reasons stated above, Citibank's motion to intervene is GRANTED. Citibank shall file and serve its counterclaim in intervention within ten days of this date.
SO ORDERED.