The opinion of the court was delivered by: Tenney, District Judge.
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.
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.
Collectors' Guild then filed a notice of appeal in the Second
Circuit and a supersedeas bond in the district court to stay
execution of the judgment. The bond was secured by a letter of
credit issued by Marine Midland Bank, N.A. ("Marine Midland"),
which named Fidelity as the beneficiary.*fn1
Mait Aff., Exh. 2; Supplemental Affidavit of Thomas DeLitto
("Supp. DeLitto Aff.") (sworn to Oct. 25, 1991), ¶¶ 5-6;
Affidavit of Edward P. Grosz ("Grosz Aff.") (sworn to September
27, 1991) ¶ 8. The letter of credit, in turn, was
collateralized by a certificate of deposit in the amount of
$300,000 which Permal had assigned to Marine Midland. Supp.
DeLitto Aff. ¶ 6. Permal is a limited partnership formed under
the laws of Delaware with its principal place of business in
Nassau, the Bahamas. See Supp. DeLitto Aff. ¶ 2. Permal engages
in the business of capital investments and was an investor in
Collectors' Guild. Id. ¶ 4.
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.
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
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.
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, ...