Shea v. Angulo

• Decision Date: 21 March 1994
• Docket Number: No. 93-1187,93-1187
• Citation: 19 F.3d 343
• Parties: Robert SHEA, Plaintiff-Appellee, v. Geraldo ANGULO, Hassan Namazee, First Capital Partners, et al., Defendants. Appeal of: Donald BUTZEN.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 343

19 F.3d 343

28 Fed.R.Serv.3d 646

Robert SHEA, Plaintiff-Appellee, v. Geraldo ANGULO, Hassan Namazee, First Capital Partners, et al., Defendants Appeal of: Donald BUTZEN.

No. 93-1187.

United States Court of Appeals Seventh Circuit.

Argued Jan. 19, 1994.

Decided March 21, 1994.

Edward M. Kay, James T. Ferrini, James S. Barber (argued), Kevin J. Young, Susan Condon, Imelda Terrazino, Clausen, Miller, Gorman, Caffrey & Witous, Chicago, IL, for plaintiff-appellee.

Thomas J. Dillon, Roger J. McFadden, Tyrrel J. Penn, McFadden & Dillon, Chicago, IL, for defendants.

John C. Ambrose, Marilyn Martin (argued), Ambrose & Cushing, Chicago, IL, for Donald Butzen.

Before CUMMINGS, COFFEY and EASTERBROOK, Circuit Judges.

CUMMINGS, Circuit Judge.

This is an appeal from the denial of appellant Donald Butzen's motion to intervene in litigation between Robert Shea ("Shea") and First Capital Advisers, Inc. ("FCA"), ¹ among others. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291 because the denial of a motion to intervene, whether as of right or by permission of the court, is treated in this Circuit as a final appealable order. See, e.g., B.H. by Pierce v. Murphy, 984 F.2d 196, 199, 200 (7th Cir.1993), certiorari denied, --- U.S. ----, 113 S.Ct. 2930, 124 L.Ed.2d 680; Peacock v. Board of School Commissioners of Indianapolis, 721 F.2d 210, 212 n. 2 (7th Cir.1983).

Background

The underlying litigation in this case is a contract action initiated by Shea in Illinois state court in July 1991 against several defendants, including FCA. The defendants removed that suit to federal district court because the parties are of diverse citizenship. Eventually the court granted motions to dismiss all of the defendants except FCA. Shea then filed an amended complaint alleging that in July 1989 he and FCA contracted that Shea, a stock broker, would introduce FCA, a registered investment adviser, to certain prospective clients. If those clients subsequently retained FCA to manage all or part of their portfolios, then FCA would place all of its trades on behalf of those clients through Shea's brokerage firm, thereby generating commissions for Shea. He further alleged in his amended complaint that he had introduced FCA to several clients that had subsequently retained FCA to manage portions of their portfolios, but that FCA, in breach of its contract with him, had failed to place all of its trades on behalf of those clients through his brokerage firm. Shea alleged damages in the form of lost commissions in excess of $50,000. In addition to his allegations of breach of contract Shea also alleged, in the alternative, that based on the same facts he was entitled to recover on theories of quantum meruit or promissory estoppel.

On October 16, 1992--well over a year after Shea's suit was first filed and after substantial discovery had occurred--appellant Donald Butzen ("Butzen") moved to intervene in the suit between Shea and FCA. In his motion Butzen alleged that "at all times relevant hereto" he and Shea had an oral partnership agreement that they would split equally all commissions generated by either of them, and that "at all times relevant" Shea was acting on behalf of the partnership. R. 67. Paraphrasing two of the four requirements for intervention as of right, Fed.R.Civ.P. 24(a)(2), Butzen alleged without elaboration that he "ha[d] a special interest relating to ... the subjects of this action ... and [that he was] so situated that the disposition of the action without his presence as a party [might] as a practical matter impair or impede his ability to protect his interest." R. 67. Addressing the two remaining requirements for intervention as of right, Butzen alleged that his interest would not be adequately represented by the existing parties because Shea denied the very existence of a partnership agreement between them, and that his motion was timely because he had only learned of the litigation on October 1, 1992. Id. He filed no affidavits or memoranda of law in support of this motion.

Defendant FCA and plaintiff Shea filed separate responses opposing the motion. Shea's response acknowledged that he and Butzen were partners at one time, but denied that the partnership was in effect at the time of the Shea-FCA dealings. R. 73 at 3. Shea also attached an affidavit in which, apparently in support of the position that Butzen's motion to intervene was not timely, he stated that he had informed Butzen in April 1991 that he was going to sue FCA and the other defendants, and in which he claimed that his attorney met with Butzen in June 1991 in preparation for the lawsuit. R. 73, attached affidavit.

Butzen then filed a reply in support of his motion to intervene, in which he argued, first, that Shea did not have the resources to litigate the case vigorously, and second, that Shea was likely to compromise his claim in a manner that would benefit only himself and not the Butzen-Shea partnership. R. 75. Butzen attached an affidavit to his reply. Apparently in support of the claim that Shea did not have the resources to litigate the case vigorously, Butzen stated in his affidavit that due to Shea's distressed circumstances Butzen had earlier satisfied a partnership debt in full, resulting in Shea's issuing Butzen a promissory note for Shea's portion of the obligation, and that Shea had not paid any interest or principal on the note since 1988. In support of the claim that Shea was likely to compromise his claim in a way prejudicial to Butzen's interests, Butzen stated that Shea had informed him in April 1991 that Shea was going to accept an offer of employment from FCA and that the partnership with Butzen was over. We may infer from the affidavit that Shea did not in fact accept the offer of employment. Butzen also informs us that Shea later told him that one of the principals at FCA was not to be trusted. Additionally, apparently in support of the timeliness of his motion, Butzen stated that Shea had not informed him of the filing of this lawsuit and that he was unaware of it until October 1992. Butzen further stated, however, that in May 1991 Shea had informed Butzen that Shea had asked his own employer, Kemper Securities, to sue FCA, but that the employer declined to do so. Butzen also stated that he met with Shea's lawyers, at Shea's request, in June 1991, but that subsequently Shea informed Butzen that the lawyers were not going to take the case. Finally, Butzen stated that Shea thereafter refused to talk to him at all.

Eventually the district court denied Butzen's motion to intervene on the ground that Butzen had failed to meet two of the four criteria of intervention as of right: impairment of interest and inadequacy of representation. Butzen moved the court for clarification, arguing that his motion for intervention encompassed permissive intervention as well as intervention as of right and that the court in its initial ruling had addressed only the issue of intervention as of right. Although there were serious questions as to whether Butzen's original motion had included permissive intervention, the court ruled from the bench on the merits of such a motion and denied it. ² This appeal followed.

Analysis

Federal Rule of Civil Procedure 24(a), Intervention of Right, provides in full:

Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute of the United States confers an unconditional right to intervene; or (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 parties.

Because Butzen does not argue that a federal statute gives him an unconditional right to intervene, his motion is governed by Rule 24(a)(2).

Rule 24(a)(2) establishes four conjunctive criteria for intervention as of right:

(1) timely application; (2) an interest relating to the subject matter of the action; (3) potential impairment, as a practical matter, of that interest by the disposition of the action; and (4) lack of adequate representation of the interest by the existing parties to the action.

Southmark Corp. v. Cagan, 950 F.2d 416, 418 (7th Cir.1991), quoting Meridian Homes Corp. v. Nicholas W. Prassas & Co., 683 F.2d 201, 203 (7th Cir.1982). The district court denied Butzen's motion to intervene as of right because it found on the basis of the materials provided by the parties ³ that Butzen could not meet the final two criteria of Rule 24(a)(2), potential impairment of interest and inadequacy of representation.

With respect to the impairment prong the court noted, "Impairment exists when the decision of a legal question ... would, as a practical matter, foreclose the rights of the proposed intervenor in a subsequent proceeding." S.A. 3, citing Meridian Homes Corp., 683 F.2d at 204. See also American National Bank and Trust Co. of Chicago v. City of Chicago, 865 F.2d 144, 147-148 (7th Cir.1989). In the court below and in this Court, Butzen focused most of his argument on the possibility that Shea would win a judgment against FCA, arguing that such an outcome would impair his interest. As the district court observed, however, whether or not Shea recovers from FCA, Butzen remains free to initiate his own suit against Shea to recover his share of the alleged partnership earnings. The district court correctly held, therefore, that--even if he could prove the allegations contained in the materials submitted to that court--there is no potential impairment of Butzen's interest as a result of the disposition of the Shea-FCA action.

Butzen now argues, somewhat cryptically, that "the real focus ... should be upon the claim Appellant Butzen has against the Defendants in the underlying action." Br. at 37. Butzen's...