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WERBUNGS UND COMMERZ v. COLLECTORS' GUILD

December 30, 1991

WERBUNGS UND COMMERZ UNION AUSTALT, PLAINTIFF,
v.
COLLECTORS' GUILD, LTD., DEFENDANT.



The opinion of the court was delivered by: Tenney, District Judge.

  OPINION

Pursuant to a jury verdict in favor of plaintiff Werbungs und Commerz Union Austalt ("Werbungs"), this court entered a judgment on December 29, 1989, ordering defendant Collectors' Guild, Ltd. ("Collectors' Guild") to pay Werbungs $895,466.06. Collectors' Guild then filed an appeal and posted a supersedeas bond in order to stay execution of the judgment pending appeal. The Second Circuit affirmed the judgment as to liability, but reversed and remanded the damages award. Werbungs Und Commerz Union Austalt v. Collectors' Guild, Ltd., 930 F.2d 1021 (1991). After Collectors' Guild filed for bankruptcy, the parties decided to settle for the amount of the bond, whereupon the bankruptcy court entered an Order containing the parties' Stipulation of Settlement. Werbungs now moves in this court for an order directing the bonding company, Fidelity and Deposit Company of Maryland ("Fidelity"), to pay Werbungs the full value of the bond. In addition, Permal Capital Partners, L.P. ("Permal") — an equity owner in Collectors' Guild — moves to intervene as a party-defendant pursuant to Fed.R.Civ.Pro. 24(a). For the reasons set forth below, the court grants Permal's motion to intervene, denies Werbung's motion to compel payment of the bond, and remands the issue of payment of the bond to the bankruptcy court.

BACKGROUND

This case arises out of two contracts entered into in 1969 between the plaintiff Werbungs and the predecessor-in-interest of defendant Collectors' Guild. Werbungs, 930 F.2d at 1023. Werbungs commenced an action against Collectors' Guild in 1987, claiming that under the contracts, it was entitled to the income derived from lithographic reproductions of illustrations by the artist Salvador Dali. See id. After a trial in December 1989, a jury found Collectors' Guild liable for breach of contract and awarded Werbungs damages in the amount of $1,140,000. Id. at 1025. This court granted a remittur to Collectors' Guild (reducing the damages award to $717,915) and entered a judgment, including interest, in the amount of $895,466.06. See id.; Werbungs Und Commerz Union Austalt v. Collectors Guild, Ltd., 728 F. Supp. 975 at 979-80(S.D.N Y 1989); Affidavit of Robert W. Cinque, Esq. ("Cinque Aff.") (sworn to Sept. 18, 1991), Exh. A.

On May 9, 1990, the appeal was argued before the Second Circuit. On June 12, 1990, Collectors' Guild filed a voluntary petition in the bankruptcy court pursuant to Chapter 11 of the Bankruptcy Code.*fn2 Werbungs, 930 F.2d at 1023. On April 18, 1991, the Second Circuit affirmed the judgment as to liability, but vacated the damages award and remanded the issue for retrial. Id. at 1025, 1028. The appellate court found that this court's jury instructions improperly allowed the jury to penalize Collectors' Guild for certain abuses it committed during discovery. Id. at 1027. Furthermore, the court stated that the remittitur could not cure the defective instruction because the error had infected the jury's entire consideration of the damages issue. Id. at 1027-28.

According to Permal, the bankruptcy estate of Collectors' Guild contains no assets from which a distribution could be made if Werbungs were awarded damages on remand. See Memorandum of Law in Support of Permal's Motion to Intervene and In Opposition to Plaintiff's Motion to Compel Payment Under a Supersedeas Bond ("Permal's Mem. in Opp.") at 2. Furthermore, Collectors' Guild lacks the resources to re-try the damages issue. Id. Because the one potential asset available to Werbungs is the value of the bond, Werbungs and Collectors' Guild signed a Stipulation of Settlement for the amount of the bond, which was "So Ordered" by the bankruptcy court on August 24, 1991. See Cinque Aff., Exh. C. The settlement agreement states that Werbungs and the Bankruptcy Trustee "agree to a modification of the Judgment such that [Werbungs] will accept the sum of $300,000.00 in full and complete satisfaction of the judgment . . . to come solely from the proceeds of the Supersedeas Bond." Id. The settlement also provides that "upon the receipt by [Werbungs] of the $300,000.00 . . . [Werbungs] shall pay the sum of $10,000.00 to the Debtor's estate." Grosz Aff., Exh. O. Pursuant to this settlement order in the bankruptcy court, Werbungs now moves in this court to compel payment of the bond by Fidelity to Werbungs. Permal has moved to intervene as a party-defendant in order to join Fidelity in opposing Werbungs' motion.

DISCUSSION

I.INTERVENTION

Rule 24(a) of the Federal Rules of Civil Procedure provides, in relevant part, that

  [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.

Werbungs objects to Permal's motion on three grounds, each of which will be addressed in turn: (1) the motion is untimely; (2) Permal has not filed the necessary pleadings; and (3) Permal does not have a sufficient interest in the subject matter of the litigation.

A. Timeliness

Whether a motion to intervene is timely is an issue within the sound discretion of the trial court and should be determined in light of all the circumstances of the case. NAACP v. New York, 413 U.S. 345, ...


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