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Ace Business Solutions, LLC v. Global Marketing & Development, Inc.

United States District Court, S.D. California

April 27, 2017

ACE BUSINESS SOLUTIONS, LLC, Plaintiff,
v.
GLOBAL MARKETING & DEVELOPMENT, INC., and AWESOME ENTERPRISES, LLC, Defendants.

          ORDER GRANTING MOTION TO INTERVENE [Doc. No. 52]

          Hon. Michael M. Anello United States District Judge

         Third parties TDL Global Ventures (“TDL”) and Losany Enterprises, LLC (“Losany”) (collectively, “the Intervenors”) move to intervene in this action pursuant to Federal Rule of Civil Procedure 24. See Doc. No. 52. The Court found this matter suitable for determination on the papers and without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons set forth below, the Court GRANTS the Intervenors' motion to intervene.

         Background

         On July 2, 2015, Plaintiff Ace Business Solutions, LLC (“Plaintiff” or “Ace”) filed this interpleader action pursuant to 28 U.S.C. § 1335. See Doc. No. 1. Plaintiff requests the Court determine, as between Defendants Global Marketing & Development, Inc. (“GMD”) and Awesome Enterprises, LLC (“Awesome”), the rights to a particular sum of money (“Net Distribution”) that Plaintiff has collected. Plaintiff Ace is a debt processing company that provides processing services for GMD pursuant to an agreement between the two entities. See Doc. Nos. 1, 24. Ace, as part of its services, collects payments from consumers and pays portions of those funds to GMD. Plaintiff also used to provide processing services to a company called 5STAR, Inc. (“5STAR”), which was originally owned by Awesome. See Doc. Nos. 1, 21. At some point, [1] GMD acquired 5STAR and thereby acquired 5STAR's servicing obligations. See Doc. Nos. 1, 21. Awesome disputes the propriety of this transaction and as a result, Awesome and GMD allegedly began to give Ace conflicting instructions regarding to whom Ace should distribute collected funds.

         Specifically, on June 17, 2015, Ace alleges it received notice from attorneys who represent organizations[2] that were previously affiliated with 5STAR, and who asserted there were certain “improprieties related to the transfer of ownership of 5STAR to GMD and/or parties affiliated with GMD, ” which affected GMD's entitlement to funds that Ace would typically transfer to GMD. On June 26, 2015, Plaintiff received notice from GMD requesting Plaintiff transfer to it the entire Net Distribution. Awesome claims a portion of the Net Distribution, and asserts GMD is entitled to none of it because GMD committed fraud and “misappropriate[d] companies and assets belonging to Awesome and businesses related to Awesome, [and] the revenue from debt invalidations businesses belonging to businesses related to Awesome.” See Doc. No. 26.

         Also, both GMD and Ace have filed counterclaims against one another arising out of the agreement between them. See Doc. Nos. 9, 16. GMD has filed a counterclaim against Ace alleging breach of contract and conversion. Ace has filed a counterclaim against GMD asserting claims for breach of contract and breach of the covenant of good faith and fair dealing.

         On January 1, 2016, the Intervenors filed a motion to intervene in this action.[3] See Doc. No. 21. This Court denied the Intervenors' initial motion on April 14, 2016. See Doc. No. 30. The Intervenors had “made certain claims against GMD” in the District Court of Maryland concerning both the Intervenors' “rights to some of the interplead monies to which GMD claimed to be entitled” as well as a breach of contract claim. See Doc. No. 52, p. 5; see also Doc. No. 55, p. 7. When the Intervenors filed the first motion to intervene, the Maryland action was still pending. See Doc. No. 52, p. 5. Both Ace and GMD opposed the Intervenors' first motion to intervene. See Doc. Nos. 24, 25.

         Before the Intervenors brought this second motion to intervene, the District Court of Maryland entered a final judgment in favor of the Intervenors against GMD for $1, 500, 000.00. See Doc. No. 52, p. 5. Furthermore, the District Court in Maryland issued a Writ of Execution to the Intervenors “as to the monies to which GMD is entitled” in this case. See Id. Purportedly based on the outcome of the Maryland case, GMD assigned to the Intervenors “jointly, all rights and entitlements to . . . [a]ny monies that presently are or will be due to GMD from the interplead monies in [the instant action].” See Doc. No. 55, Lubar Decl., Exh. 2. GMD joined in the Intervenors' second motion to intervene and claimed it “does not intend to spend any significant money and time defending the [interpleader action] and expects Intervenors to assert all rights to which GMD would have been entitled.” See Doc. No. 52-4.

         Legal Standard

         Federal Rule of Civil Procedure 24 governs motions to intervene in federal court. Rule 24 states that a court must, upon a timely motion, allow intervention of right where the movant:

(1) is given an unconditional right to intervene by a federal statute; or (2) claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

Fed. R. Civ. P. 24(a). The Ninth Circuit has interpreted Rule 24(a) as requiring an applicant meet all of the following four factors:

(1) the application for intervention must be timely;[4] (2) the applicant must have a ‘significant protectable' interest relating to the property or transaction that is the subject of the action; (3) the applicant must be so situated that the disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect that interest; and (4) the applicant's interest must not be adequately represented by the existing parties in the lawsuit.

Arakaki v. Cayetano, 324 F.3d 1078, 1084 (9th Cir. 2003), as amended (May 13, 2003); Southwest Center for Biological Diversity v. Berg, 268 F.3d 810, 817-18 (9th Cir. 2001); C.S. ex rel. Struble v. California Dep't of Educ., No. 08-CV-0226-W(AJB), 2008 WL 962159, at *2 (S.D. Cal. Apr. 8, 2008). An applicant has a significant protectable interest where its interest is protected under some law, and there is a relationship between its legally protected interest and the plaintiff's claims. See Donnelly v. Glickman, 159 F.3d 405, 409 (9th Cir. 1998). The resolution of the plaintiff's claims must actually affect the applicant, but if there would be a substantial effect, the applicant “should, as a general rule, be entitled to intervene.” Id.; Southwest Center for Biological Diversity v. Berg, 268 F.3d 810, 822 (9th Cir. 2001).

         In the alternative, courts may allow permissive intervention under Rule 24(b). The court may allow ...


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