United States District Court, S.D. New York
OPINION AND ORDER
ABRAMS, United States District Judge
S&N Builders, Inc. ("S&N") moves to
intervene in this diversity action brought by Plaintiff
S&S Kings Corp. ("S&S Kings") against
Defendant Westchester Fire Insurance Co.
("Westchester"). For the reasons set forth below,
S&N's motion to intervene is granted. Because
S&N's intervention deprives the Court of
subject-matter jurisdiction, however, the Court dismisses
this action without prejudice.
entered into a contract with the New York City Department of
Design and Construction, under which S&N agreed to
provide labor, materials, and equipment for the "Bronx
River Art Center Building Renovation" in Bronx, New
York. Compl. (Dkt. 1) ¶ 12; Aff. of Sakander Raja in
Supp. of Mot. to Intervene ("Raja Aff") (Dkt. 23)
¶3. S&N thereafter subcontracted a portion of the
work to S&S Kings. Compl. ¶ 14; Raja Aff. ¶3.
On or about December 13, 2013, S&N secured a payment bond
from Westchester, guaranteeing prompt payment to all persons
who provide labor and materials in connection with the
renovation project. Compl. ¶ 13; Raja Aff. ¶5.
Westchester and S&N are jointly and severally liable
under the payment bond. Compl. ¶ 17.
March 17, 2016, S&S Kings brought this action against
Westchester, seeking to recover monies due under its
subcontract with S&N. Compl. at 3. S&S Kings alleges
that it fulfilled all its obligations under the agreement but
was not paid $350, 598.61. Compl. ¶¶ 15-16. On May
13, 2016, Westchester filed an answer, which contained eleven
affirmative defenses. See generally Answer (Dkt.
7, 2016, S&N moved to intervene in this action under Rule
24 of the Federal Rules of Civil Procedure. Dkt 22. According
to S&N's president, S&S Kings failed to fulfill
its obligations under the subcontract, which S&N
subsequently terminated. Raja Aff. ¶¶ 7-9. S&N
asserts that it has incurred significant costs correcting
defective work originally performed by S&S Kings and
completing the work S&S Kings failed to do. See
Raja Aff. ¶ 10-11; Mem. of L. in Supp. of Mot. to
Intervene ("S&N Mem.") (Dkt. 24) at 1. S&N
"seeks to bring affirmative monetary claims directly
against S&S Kings, " which it would assert as a
party to this action. S&N Mem. at 1. S&S Kings
opposes S&N's motion. See Dkt. 25.
order to intervene as of right pursuant to Rule 24(a)(2), the
applicant must: (1) file a timely motion; (2) show an
interest in the litigation; (3) show that its interest may be
impaired by the disposition of the action; and (4) show that
its interest is not adequately protected by the parties to
the action." Weisshaus v. Swiss Bankers Assoc. (In
re Holocaust Victim Assets Litig.), 225 F.3d 191, 197
(2d Cir. 2000). While an applicant must satisfy all four
requirements, see Id. at 197-98, this test "is
a flexible and discretionary one, and courts generally look
at all four factors as a whole rather than focusing narrowly
on any one of the criteria, " Tachiona ex rel.
Tachiona v. Mugabe, 186 F.Supp.2d 383, 394 (S.D.N.Y.
these factors, the Court concludes that S&N is entitled
to intervene under Rule 24(a)(2). First, it is undisputed
that S&N's motion is timely. See PL's
Opp'n Mem. (Dkt. 25) at 1. Indeed, S&N moved to
intervene before discovery had begun and before construction
of the renovation project was complete. See S&N
Mem. at 4, 6; Raja Aff. ¶ 12.
S&N has a clear interest in this litigation. S&N is
the principal on the payment bond against which S&S Kings
seek to collect. Compl. ¶ 13. S&N and Westchester
are jointly and severally liable to S&S Kings, Compl.
¶ 17, and S&N will be obligated to indemnify
Westchester if S&S Kings prevails, S&N Reply Mem. at
4-5. See, e.g., Ail. Refinishing & Restoration, Inc.
v. Travelers Cas. & Sur. Co. of Am., 272 F.R.D. 26,
29 (D.D.C. 2010) ("[T]he [general contractor], as the
principal of the payment bond, has a clear interest in this
litigation because if a judgment is granted against the
[surety], the [surety] is likely to seek indemnification . .
. pursuant to their surety agreement."); see
generally Reinforced Concrete & Masonry Const., Inc. v.
Hudson Ins. Co., No. 14-CV-l705 (SAS), 2014 WL 6888764,
at *2 (S.D.N.Y. Dec. 8, 2014) (finding that a general
contractor "plainly has an interest" in an action
brought against its surety by a subcontractor); Union
Switch & Signal, Inc. v. St. Paul Fire & Marine Ins.
Co., 226 F.R.D. 485, 488 (S.D.N.Y. 2005) (characterizing
a general contractor's interest in a suit between its
surety and a subcontractor as "self-evident").
S&N's interests may be impaired by the disposition of
this action in several ways. If S&S Kings prevails in
this action, S&N must indemnify Westchester. S&N
Reply Mem. at 4-5; see, e.g., ColeMech. Corp. v.
Nat'l GrangeMut. Ins. Co., No. 06-CV-2875 (LAK)
(HBP), 2007 WL 2593000, at *4 (S.D.N.Y. Sept. 7, 2007)
("[G]iven [a general contractor's] obligation to
indemnify [its surety], [it] has a clear interest in the
outcome of the litigation that may be impaired by the outcome
of the litigation."). Moreover, because the key issue to
be determined in this case is S&N's liability under
the subcontract, judgment in this action may have preclusive
effects in any subsequent action S&N brings against
S&S Kings, where the same issue would likely arise.
See Burdick Assocs. Owners Corp. v. Indent. Ins. Co. of
N. Am., 560 N.Y.S.2d 481, 482 (2d Dep't 1990)
("[A] surety stands in its principal's shoes for
collateral estoppel purposes."). Furthermore, even if S&N
is not precluded from bringing claims against S&S Kings
in a subsequent action, it may nonetheless be subject to
inconsistent rulings. For example, the Court could find that
S&N is liable to S&S Kings for its work in this
action, and a state court could subsequently find that
S&S Kings breached the subcontract. See, e.g., United
States ex rel. Milestone Tarant, LLC/Highland Ornamental Iron
Works, Inc. v. Fed. Ins. Co., 815 F.Supp.2d 36, 39
(D.D.C. 2011) (finding that a general contractor could
intervene as of right in an action brought by a subcontractor
against its surety where the general contractor would
"be subject to the possibility of multiple or
inconsistent rulings if [its] and [the surety's]
liability are not determined simultaneously"). S&N
has therefore demonstrated that the outcome of this case may
impair its interests.
S&N's interests are not adequately protected by the
parties in this action. S&N represents that it intends to
seek "affirmative monetary claims against S&S Kings,
" which it could assert as counterclaims in this action.
S&N Mem. at 5. While Westchester may be entitled to make
some of the same defenses as S&N, it is not clear that
Westchester would bring the same counterclaims that S&N
intends to bring. Indeed, despite asserting eleven
affirmative defenses in its answer, Westchester has not
stated any counterclaims, as S&N represents that it would
as a defendant in this action. See, e.g., Atl.
Refinishing & Restoration, Inc., 272 F.R.D. at 30
(finding that a surety would not adequately protect a general
contractor's interests in an action brought by a
subcontractor, where the surety did not advance a defense the
general contractor sought to bring, despite "putting
forth thirteen other affirmative defenses in its
answer"); Coleman Capital v. Fidelity Deposit Co. of
Md.,43 F.R.D. 407, 408 (S.D.N.Y. 1967) ("Defendant
surety is unable to represent adequately [a general