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Neuman v. Pacific Group West

November 27, 2006

PHILLIP NEUMAN, AN INDIVIDUAL, AS ASSIGNEE OF THE CLAIMS OF THE POTOMAC GROUP WEST, INC., PLAINTIFF,
v.
PACIFIC GROUP WEST, INC.'S AND RICHARD BAKER, AN INDIVIDUAL AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANT.



The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court

ORDER: MOTION TO INTERVENE; (1) GRANTING (2) REMANDING CASE TO STATE COURT

Plaintiff Phillip Neuman originally filed his complaint in state court on April 18, 2006. Defendant Richard Baker removed the case to this Court on April 21, 2006, asserting jurisdiction based on diversity of citizenship. (Doc. No. 1.) Pacific Group West, Inc. ("PGW") filed a motion to intervene on October 23, 2006. (Doc. No. 17.) No party has filed a response to the motion to intervene. The Court held a hearing on November 27, 2006. James Crosby appeared by telephone for Plaintiff. James Garrett appeared in person for Defendant, and Christopher Dryden appeared in person on behalf of PGW. For the reasons stated below, PGW is entitled to intervene as of right, but should be aligned as a Plaintiff. Joinder of PGW as a Plaintiff, however, destroys diversity. Because the Court finds that PGW is an indispensable party, the Court GRANTS PGW's motion to intervene, but REMANDS the case back to state court.

Background

In Neuman's First Amended Complaint ("FAC"), he asserts that Baker was an employee of PGW and involved in PGW's business of brokering insurance policies. (Doc. No. 10, ¶ 9.) Neuman alleges that PGW assigned to him its rights against Baker on or about November 2, 2005. (Id. ¶ 4.) Accordingly, as assignee of PGW, Neuman brings claims against Baker for conversion, breach of employment contract, breach of duty of loyalty, and unjust enrichment. (Id. ¶¶ 10-47.)

In its motion, PGW asserts that it rescinded its assignment of rights to Neuman on March 1, 2006, before Neuman brought this suit against Baker. Further, PGW states that it has resolved its underlying dispute with Baker, its former employee. Accordingly, PGW seeks to intervene to rescind its assignment to Neuman and seeks declaratory relief. Additionally, PGW has an action pending in state court against Baker seeking rescission of the assignment.

Discussion

Rule 24 of the Federal Rules of Civil Procedure governs intervention, a procedure through which a person who is not a party to a lawsuit can gain party status without the consent of the original parties. Rule 24 sets forth two categories of intervention, intervention of right and permissive intervention. Where the right to intervene is not based upon a federal statute, intervention of right is governed by Rule 24(a)(2):

Upon 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.

Permissive intervention, in the absence of a federal statute providing a conditional right to intervention, is governed by Rule 24(b)(2): "Upon timely application anyone may be permitted to intervene in an action . . . when an applicant's claim or defense and the main action have a question of law or fact in common."

1. Intervention of Right

To intervene as of right, a party must meet these four requirements: (1) submit a timely application; (2) hold a significantly protectable interest relating to the property or transaction involved in the pending lawsuit; (3) show that disposition of the lawsuit may impair or impede the applicant's ability to protect its interest; and (4) show that the existing parties do not adequately represent the applicant's interests. Arakaki v. Cayetano, 324 F.3d 1078, 1083 (9th Cir. 2003). Courts interpret Rule 24 liberally in favor of applicants for intervention. Id.

Here, PGW has demonstrated a right to intervene. First, its application is timely. PGW states that it moved to intervene as soon as it had the chance to evaluate its stake in the current litigation. Further, the current parties have not yet participated in the case management conference required by Rule 16(b) of the Federal Rules of Civil Procedure, and the litigation is not so advanced as to make intervention untimely. Additionally, the current parties have not opposed PGW's motion. In its discretion, the Court determines that PGW's application is timely. See, e.g., Yniguez v. State of Arizona, 939 F.2d 727, 730-31 (9th Cir. 1991) (determination of timeliness left to discretion of trial court).

Second, PGW has a significantly protectable interest relating to the property or transaction in the pending lawsuit. According to PGW, the present lawsuit is based upon Neuman asserting PGW's claim for money that Baker owes to PGW. Thus, PGW has an interest in the subject matter of the litigation.

Third, a disposition of this suit without PGW's participation may impair or impede PGW's interest. PGW contends that this suit is hindering its efforts to resolve its underlying dispute with Baker. PGW asserts that it is prepared to settle its dispute with Baker. Accordingly, allowing ...


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