United States District Court, S.D. New York
April 22, 2004.
CAMPINAS FOUNDATION (a/k/a CAMPINAS STIFTUNG, VADUZ), Plaintiff; -against- CARL SIMONI, ET AL., Defendants
The opinion of the court was delivered by: KEVIN FOX, Magistrate Judge
MEMORANDUM and ORDER
Redwood Investments Corp. ("Redwood") has made an application to the
Court, pursuant to Fed.R.Civ.P. 24(a), that it be permitted to
intervene as of right in the above-captioned action or,
alternatively, that it be permitted, pursuant to Fed.R.Civ.P. 24(b),
to intervene in the above-captioned action through the exercise
of the Court's discretionary authority. Redwood maintains that, if the
plaintiff is successful in establishing its claims that $1.6 million
dollars were transferred from it to the defendant SSP Capital Partners
Limited ("SSP"), to discharge a debt owed Redwood by Aviation Investors
International Inc. ("AIIG"), for the buyout by AIIG of Redwood's shares
in AUG and that SSP failed to tender those funds to Redwood, then Redwood
would be entitled to receive those funds.
Plaintiff opposes Redwood's application. It contends that intervention
as of right is inappropriate because, inter alia, Redwood's
claim is contingent upon the plaintiff being victorious in this
litigation and, furthermore, Redwood has no "legally protectable"
interest in the funds that are the subject matter of this action. In
addition, the plaintiff maintains that the Court should not exercise its discretion to permit Redwood to intervene
in the action because, among other things, Redwood would introduce
collateral or extrinsic issues into the action and Redwood's presence in
the action is not needed to resolve the controversy at the heart of the
litigation: whether the plaintiff made an investment in SSP when it
caused funds to be electronically transferred to that entity or whether,
as plaintiff contends, the funds were sent to SSP so that a debt owed to
Redwood by AIIG might be satisfied.
Fed.R.Civ.P. 24(a) provides, in relevant part, that:
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
An application to intervene in an action as a matter of right, pursuant
to Fed.R.Civ.P. 24(a)(2) must be granted if the applicant: (a) files
the request timely; (b) claims an interest relating to the property or
transaction which is the subject matter of the action; (c) demonstrates
that the interest may be impaired by the disposition of the action; and
(d) shows that the interest is not adequately protected by the parties to
the action. See New York News, Inc. v. Kheel, 972 F.2d 482
(2d Cir. 1992); Restor-A-Dent Dental Labs., Inc. v.
Certified Alloy Products Inc., 725 F.2d 871
, 874 (2d Cir. 1984). The
interest that the applicant seeking to intervene wishes to protect must
be "direct, substantial and legally protectable . . . [for 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." Washington Elec.
Cooperative Inc. v. Massachusetts Mun. Wholesale Electric Co.,
922 F.2d 92
, 96-97 (2d Cir. 1990). If any of the four elements noted above is not satisfied, an
application for intervention as of right may be denied by a court.
See In Re Bank of New York Derivative Litigation, 320 F.3d 291
300 (2d Cir. 2003).
In the case at bar, the Court finds that Redwood's application to
intervene was made timely, since it was made at a juncture in the
litigation when pretrial discovery activities had not progressed very
far. Redwood has also demonstrated that it has an interest in the funds
that are the subject matter of this action, given that the plaintiff
contends that the funds sent to SSP were intended for Redwood as payment
by AIIG for an amount outstanding in a shareholder buyout transaction.
The Court also finds that Redwood's interest may be impaired by the
disposition of the action because if the defendants prevail, it will mean
that the funds that were transferred to SSP were not, as plaintiff
contends, intended to be surrendered to Redwood. Furthermore, Redwood's
interest is not being protected by any party to the action. While the
defendants contend that Redwood is not entitled to the funds in dispute
because they represent an investment in SSP, the plaintiff maintains that
the funds should be returned to it if a determination is made that the
funds it sent to SSP were not an investment in SSP but, rather, were to
be passed on to Redwood. The plaintiff alleges that the funds should be
returned to it and not delivered to Redwood because Redwood is controlled
by defendant Carl Simoni ("Simoni") and the plaintiff transferred those
funds based upon misrepresentations made by Simoni. Therefore, if the
funds are awarded to Redwood, Simoni would profit from the misconduct in
which the plaintiff maintains he engaged.
Although Redwood has an interest in the funds that are the subject
matter of the action, the Court finds that Redwood's interest is
contingent upon the occurrence of several events. Among these events are the following: 1) the establishment by
plaintiff that it did not transfer funds to SSP for the purpose of
investing in that entity; and 2) a determination of the circumstances
under which the plaintiff transferred the funds to SSP, that is, whether
the plaintiff acted as it did in order to fulfill a contractual
obligation of which Redwood might be a third-party beneficiary or
whether the plaintiff transferred the funds in order to confer a gift
upon Redwood. If no contractual obligation existed of which Redwood might
be a third-party beneficiary, and if no gift was intended to be
conferred on Redwood, then Redwood's interest in the funds that are the
subject matter of this action may not be direct, as it contends. See
Restor-A-Dent Dental Labs. Inc., 725 F.2d at 874.
Until matters such as those noted immediately above are resolved, the
Court cannot say that Redwood's interest in the subject matter of this
action is direct and not contingent upon the occurrence of a sequence of
events. Therefore, since Redwood cannot satisfy all of the conditions
precedent to a determination that it may intervene as of right in the
instant action, its application to intervene, made pursuant to
Fed.R.Civ.P. 24(a)(2), is denied.
Redwood has also requested that it be permitted to intervene in this
action, with the permission of the Court, pursuant to Fed.R.Civ.P.
24(b). Under that provision of the Rule, anyone may be permitted to
intervene in an action upon making a timely application "when an
applicant's claim or defense and the main action have a question of law
or fact in common." Fed.R.Civ.P. 24(b). Permissive intervention is a
matter that is left to the discretion of a court. In exercising that
discretion, Fed.R.Civ.P. 24(b) advises that the Court should consider
"whether the intervention will unduly delay or prejudice the adjudication
of the rights of the original parties." In connection with its application to intervene in this action as a
defendant, Redwood has submitted a proposed answer to the complaint and a
counterclaim. Through the counterclaim asserted by Redwood in its
proposed pleading, it maintains that if the plaintiff prevails in the
action, by establishing that the funds it transferred to SSP were not an
investment in SSP, but were to be credited to the debt owed Redwood by
AEG, then Redwood should receive the funds that are the subject matter of
this action. Redwood's counterclaim and the main claim in the action,
that plaintiff transferred funds to SSP to pay a debt owed to Redwood by
AIIG and not for the purpose of investing in SSP, present common issues
of fact. See Wiesshaus v. Swiss Bankers Ass'n, 225 F.3d 191,
202 (2d Cir. 2000). Moreover, intervention by Redwood will not delay the
resolution of this action, rather it will facilitate the adjudication of
the rights of the original parties or Redwood to the funds that are at
the heart of the controversy in this litigation. See Comer v.
Cisneros, 37 F.3d 775, 801 (2d Cir. 1994). Therefore, Redwood's
application to intervene in this action, pursuant to Fed.R.Civ.P.
24(b), is granted. However, inasmuch as counsel to the defendants, who
stand ready to represent Redwood, would not be able to champion Redwood's
claim as well as those of the defendants who are already parties to this
action free from any conflict of interest, Redwood must engage separate
counsel to represent it as the litigation moves forward.
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