Summary
In Black & Decker the movant, Milling, sought to intervene in a case in which Foster, who formally had a fee-sharing arrangement with Milling, represented the plaintiff on a contingency fee basis.
Summary of this case from Complete Logistical Servs., LLC v. RulhOpinion
CIVIL ACTION NO. 02-1154, SECTION "K" (4)
December 10, 2003
MINUTE ENTRY
Before the Court is a Motion to Review and Appeal the Magistrate Judge's Denial of Motion for Leave to Intervene filed by Milling Benson Woodward L.L.P. ("Milling" or "Milling Firm") (Rec. Doc. No. 27). Having reviewed the pleadings, memoranda, and relevant law, the Court finds merit in the motion.
I. BACKGROUND
Plaintiffs filed the instant products liability action on March 18, 2002, in the 24th Judicial District Court for the Parish of Jefferson, State of Louisiana. Defendant removed the matter to this Court on April 17, 2002. The suit arises out of a fire at the home of Albert and Gayle Patent. State Farm Fire Casualty Company ("State Farm") paid the Patents for damages sustained in the fire and pursued the matter as subrogee to the rights of the Patents. State Farm is represented by Elton A. Foster.
On July 31, 2001, Foster entered into an employment contract with the Milling Firm. Prior to joining Milling, Foster had several clients, including State Farm, who he represented under a contingency agreement. According to the employment contract, Foster was to serve as Special Counsel to Milling under an arrangement where Foster would bring in business in exchange for revenues. However, the contract between Milling and Foster is unclear regarding the specifics of the fee sharing arrangement. The relationship between Foster and Milling deteriorated, and Foster left the Milling Firm on November 27, 2003.
State Farm, along with Foster's other clients, elected to continue to retain his services rather than remain a client of Milling. Thereafter, Milling sought to intervene in each of Foster's remaining cases. The instant request by Milling to intervene claims that, while employed with Milling, Foster expended time and services on behalf of State Farm that would be compensable by attorney fees. Specifically, Milling contends that it incurred expenses and earned fees in the amount of $5,855 and is therefore entitled to a portion of the fee award in the instant matter.
II. Legal Standards
The District Court may reconsider a magistrate judge's determination of non-dispositive pre-trial matters where it has been shown that the magistrate judge's order is "clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a). Here, the Court must consider whether the Magistrate Judge's denial of Milling's Motion for Leave to Intervene meets that standard.
Federal Rule of Civil Procedure 24(a) specifically governs intervention of right. There are four requirements to intervene as a matter of right under Rule 24(a):
1. The application must be timely;
2. The applicant must claim an 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 the applicant's ability to protect that interest; and
4. The applicant's interest must be inadequately represented by existing parties to the suit.
Fed.R.Civ.P. 24(a). See also Sierra Club v. Espy, 18 F.3d 1202, 1205 (5th Cir. 1995). In deciding this motion, this Court must read the term "interest" narrowly. Valley Ranch Dev. Co. v. F.D.I.C., 960 F.2d 550, 556 (5th Cir. 1992). The interest must be shown to be "direct, substantial, [and] legally protectable." New Orleans Pub, Serv., Inc. v. United Gas Pipe Line, 732 F.2d 452, 463 (5th Cir. 1984).
The Fifth Circuit's decision in Gaines v. Dixie Carriers, Inc., 434 F.2d 52 (5th Cir. 1970) and this Court's decision in Sonnier v. Tako Towing, Inc., 1992 WL 329723 (E.D. La. 1992) are relevant to whether Milling can claim an interest relating to the property which is the subject of the action. Gaines held that an intervention of right exists for an attorney who has a contingency fee contract with a client. 434 F.2d at 53. There, a law firm entered into a contingency fee contract to represent a plaintiff in a personal injury action. Id. After suit was filed and a considerable amount of time had allegedly been spent working on the case, the plaintiff discharged the law firm and employed new counsel. Id. at 54. The discharged from then sought to intervene in the underlying tort action to protect its interests under the contingency fee contract. Id. The district court denied the request to intervene, however the Circuit court reversed stating, "[w]e think it is clear that the appellant law firm here claimed an interest in the subject of the action against Dixie Carriers, Inc., and is so situated that the final disposition of the action may as a practical matter impair or impede its interests."
Additionally, this Court has held that the existence of a fee division agreement is sufficient enough interest to support an intervention of right under Rule 24(a). Sonnier, 1992 WL 329723, at *3. In Sonnier, the plaintiff, Paul Sonnier, Jr., and the defendant, Tako Towing, Inc., entered into a settlement agreement. Following the settlement, the law form of Gainsburgh, Benjamin, Fallon, David, Ates ("Gainsburgh") sought to intervene in the matter to recover attorney fees incurred by J. Mac Morgan, a former associate of Gainsburgh.
Prior to working for Gainsburgh, Morgan was retained by Sonnier. Id. at * 1. Subsequently, Morgan joined Gainsburgh and entered into a contract which provided that Morgan would receive 50% of any fee collected in cases in which he had been retained before joining the firm. Id. It also provided that in the event he was terminated, Morgan would receive 50% of the fees later paid by clients who chose to be represented by Morgan. Finally, the agreement stated that Morgan would reimburse Gainsburgh for any expenses incurred regarding such cases. Id.
While employed with Gainsburgh, Morgan filed Sonnier's claim against Tako Towing. Several months later, Morgan was terminated by Gainsburgh. Nonetheless, Sonnier retained Morgan as counsel. Id. Thereafter, Morgan and Gainsburgh both signed a joint stipulation, drafted by Morgan, which provided that Gainsburgh had incurred over $4,000 in costs; that Gainsburgh was entitled to recover such costs; and that Gainsburgh was entitled to recover 50% of any fees received by Morgan in prosecuting Sonnier's claim. Id. at *2. Gainsburgh sought to intervene to recover these fees, but Morgan opposed the request to intervene arguing that Gainsburgh did not have an interest in the litigation because Sonnier never entered a contingency fee agreement with the firm. Id. at *2.
Considering Gaines, this Court determined that Gainsburgh clearly had no "interest" under a contingency fee agreement which would allow an intervention of right in the Fifth Circuit. Id. at *3. However, this Court did find that Gainsburgh had a sufficient "interest" under Rule 24(a) as a result of its fee division agreement with Morgan. Id. The Court cited Scurto v. Siergrist, 598 So.2d 507 (La.App. 1st Cir. 1992), which held that:
In the situation where a retained attorney associates, employs or procures the employment of another attorney to assists him in handling a case involving a contingency fee, the agreement regarding division of the fee is a joint venture which gives the parties to the contract the right to participate in the fund resulting from the payment of the fee by the client.Scruto, 598 So.2d at 510. The Court determined that the fee arrangement between Morgan and Gainsburgh was a "joint venture." Sonnier, 1992 WL 329723, at *4. Therefore, because Morgan and Gainsburgh "contracted in advance to participate in any funds resulting from the Sonnier action, the firm has a legally protectable interest sufficient to allow intervention of right." Id. at *4.
III. ANALYSIS
In the instant case, the Magistrate Judge distinguished the facts of the instant case from Gaines and Sonnier, and held that there were "no provisions in the contract [between Foster and Milling] which suggest that the fees earned by Foster would be turned over to Milling." Magistrate Judge's Order at 10. As such, the Magistrate Judge concluded that "the Court has not been provided with any evidence that a fee division agreement existed between Foster and Milling," and denied Milling's request to intervene under Rule (24(a). Magistrate Judge's Order at 10.[1]
Rule 24(a), however, requires only that the applicant claim an Interest in order to satisfy Rule 24(a). Although the contract between Milling and Foster is unclear as to the specific fee sharing arrangement, it is apparent that a contract under which Milling claims an interest does in fact exist. It would be inequitable for Milling not to be able to intervene and at least prove its claim to the funds. This Court's decision in Sonnier, which cited Scurto, determined that the fee arrangement in Sonnier was a "joint venture." Sonnier, 1992 WL 329723, at *4. In the case at bar, Milling is attempting to assert its right as a party to the joint venture with Foster to participate in any funds resulting from the instant action and should be provided an opportunity to prove the existence of a fee sharing arrangement.
Wright Miller state that with respect to an application to intervene, "the general rules on testing a pleading are applicable here. The pleading is construed liberally in favor of the pleader and the court will accept as true the well pleaded allegations in the pleading." Charles A. Wright, Arthur R. Miller Mary K. Kane, Federal Practice and Procedure § 1914 at 418 (2d ed. 1986). With regard to the third requirement under Rule 24(a), whether the disposition of the action may as a practical matter impair or impede Milling's ability to protect that interest, Wright Miller state:
It is generally agreed that in determining whether disposition of the action will impede or impair the applicant's ability to protect his interest the question must be put in practical terms rather in legal terms. The central purpose of the 1966 amendment was to allow intervention by those who might be practically disadvantaged by the disposition of the action and to repudiate the view, expressed in authoritative cases under the former rule, that intervention must be limited to those who would be legally bound as a matter of res judicata.
Wright, Miller Kane, Federal Practice and Procedure § 1908 at 301 (2d ed. 1986) (emphasis added); see also Gaines, 434 F.2d at 54 (holding that disposition of the action could impair or impede attorney's ability to protect interest in proceeds once court has established there was a sufficient legal interest allowing intervention).
This Court finds the opinion of the Magistrate Judge to be clearly erroneous in denying Milling's request for intervention. Milling satisfied the intervention of right standard of Rule 24(a). Accordingly,
IT IS ORDERED that Milling's Motion to Review and Appeal the Magistrate Judge's Denial of Motion for Leave to Intervene (Rec. Doc. No. 27) is hereby GRANTED; the Magistrate Judge's Order Denying the Motion for Leave to Intervene (Rec. Doc. No. 26) is RESCINDED.
IT IS FURTHER ORDERED that Milling Benson Woodward L.L.P. shall be allowed by this Court to intervene pursuant to Fed.R.Civ.Pro. 24(a).