U.S. v. Alisal Water Corp.

• Decision Date: 03 June 2004
• Docket Number: No. 02-16594.,02-16594.
• Citation: 370 F.3d 915
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. ALISAL WATER CORPORATION; Toro Water Service Inc.; Robert T. Adcock; Patricia Adcock; North Monterey County Water Service, Inc.; Mosslanding Water Service, Inc.; Natholyn Adcock; Bruce Pierson, as Trustee of the T & P Management Trust, the Patro Real Trust, The DKW Property Trust, the Real Land Trust, the Nine Unit Trust, the Alameda Asset Trust, the AWC Holdings Trust, the AWC II Holdings Trust, the AWC III Holdings Trust, the TWS Holdings Trust, the AWS Holdings Trust; David M. Simcho, as Trustee of the T & P Management Trust, the Patro Real Trust, the DKW Property Trust, the Real Land Trust, the Williams 249 Trust, the Nine Unit Trust, the Alameda Asset Trust, the AWC Holdings Trust, the AWC II Holdings Trust, the AWC III Holdings Trust, the TWS Holdings Trust, the AWS Holdings Trust, Defendants-Appellees, v. Silverwood Estates Development Limited Partnership, Plaintiff-Intervenor-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 915

370 F.3d 915

UNITED STATES of America, Plaintiff-Appellee, v. ALISAL WATER CORPORATION; Toro Water Service Inc.; Robert T. Adcock; Patricia Adcock; North Monterey County Water Service, Inc.; Mosslanding Water Service, Inc.; Natholyn Adcock; Bruce Pierson, as Trustee of the T & P Management Trust, the Patro Real Trust, The DKW Property Trust, the Real Land Trust, the Nine Unit Trust, the Alameda Asset Trust, the AWC Holdings Trust, the AWC II Holdings Trust, the AWC III Holdings Trust, the TWS Holdings Trust, the AWS Holdings Trust; David M. Simcho, as Trustee of the T & P Management Trust, the Patro Real Trust, the DKW Property Trust, the Real Land Trust, the Williams 249 Trust, the Nine Unit Trust, the Alameda Asset Trust, the AWC Holdings Trust, the AWC II Holdings Trust, the AWC III Holdings Trust, the TWS Holdings Trust, the AWS Holdings Trust, Defendants-Appellees, v. Silverwood Estates Development Limited Partnership, Plaintiff-Intervenor-Appellant.

No. 02-16594.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 11, 2004.

Filed June 3, 2004.

COPYRIGHT MATERIAL OMITTED

Elizabeth Kessler (argued), Todd S. Kim, Lori Jonas (briefed), U.S. Dept. of Justice, Environment & Natural Resources Division, Washington, DC; John D. Rothman, United States Environmental Protection Agency, San Francisco, CA, for the plaintiff-appellee.

Mark Fogelman, Steefel, Levitt, & Weiss, San Francisco, CA, William C. Last, Jr., Last Harrelson & Faoro, San Mateo, CA, for the plaintiff-intervenor/appellant.

Marc Fairman, and Bennett Young, San Francisco, CA, for the defendants-appellees.

Appeal from the United States District Court for the Northern District of California; Jeremy Fogel, District Judge, Presiding. D.C. No. CV-97-20099-JF.

Before: SCHROEDER, Chief Judge, TALLMAN, and CALLAHAN, Circuit Judges.

CALLAHAN, Circuit Judge:

We must decide whether a judgment creditor is entitled to intervene as of right under Fed.R.Civ.P. 24(a) in an environmental enforcement action that may impair the creditor's ability to collect a debt. Silverwood Estates Development ("Silverwood") appeals the district court's denial of its motion to intervene in an action brought by the United States against Alisal Water Corporation ("Alisal") for violations of the Safe Drinking Water Act ("SDWA"), 42 U.S.C. § 300f et seq. We have jurisdiction over the appeal of the denial of the motion to intervene pursuant to 28 U.S.C. § 1291. Donnelly v. Glickman, 159 F.3d 405, 409 (9th Cir.1998). We affirm.¹

I. Factual and Procedural Background

In 1995, Silverwood won a $1.7 million judgment against Alisal when the Monterey Superior Court determined that Alisal had intentionally breached an agreement to provide water service to a residential real estate development owned by Silverwood.²

In January 1997, the United States filed suit against Alisal in district court for violating the SDWA. A bench trial followed, and the district court granted summary judgment for the United States against Alisal on nine separate causes of action encompassing hundreds of individual violations of the SDWA. The United States requested injunctive relief and civil penalties against Alisal.

On April 9, 2002, while still considering the United States' request for penalties against Alisal, the district court appointed a receiver to manage Alisal's drinking water systems and oversee their possible sale. The court order barred enforcement of any action or lien against the receiver, or any property subject to the receivership, without first obtaining the court's approval. The order, however, permitted Alisal to retain control of Alco Water Service, its largest subsidiary.

On June 4, 2002, Silverwood filed a motion to intervene as of right in the litigation, contending its interests would be harmed in the event of a judicially ordered sale of Alisal's property. Finding that Silverwood's intervention in the litigation would raise the specter of a complicated "battle royal" among rival creditors over Alisal's assets, the district court denied the motion. On appeal, Silverwood maintains that its interest in collecting its judgment against Alisal will be substantially impaired if it is not allowed to intervene.

II. Analysis

A. Standard of Review

We review de novo the district court's ruling on a motion of intervention as of right. The question of whether the motion was timely filed is reviewed for abuse of discretion. United States v. Oregon, 745 F.2d 550, 552 (9th Cir.1984); see also NAACP v. New York, 413 U.S. 345, 365, 93 S.Ct. 2591, 37 L.Ed.2d 648 (1973); Forest Conservation Council v. United States Forest Serv., 66 F.3d 1489, 1493 (9th Cir.1995).

B. Legal Standard

To intervene as of right under Fed.R.Civ.P. 24(a)(2), the applicant must claim "an interest relating to the property or transaction which is the subject of the action and [that] 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."

In particular, we require an applicant for intervention as of right to demonstrate that "(1) it has a significant protectable interest relating to the property or transaction that is the subject of the action; (2) the disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect its interest; (3) the application is timely; and (4) the existing parties may not adequately represent the applicant's interest." United States v. City of Los Angeles 288 F.3d 391, 397 (9th Cir.2002) (quoting Donnelly, 159 F.3d at 409 (internal quotation marks omitted)). The party seeking to intervene bears the burden of showing that all the requirements for intervention have been met. Id.

In determining whether intervention is appropriate, courts are guided primarily by practical and equitable considerations, and the requirements for intervention are broadly interpreted in favor of intervention. Id.

C. Significantly Protectable Interest Relating to the Subject of the Action

The district court held that Silverwood did not assert a "significantly protectable interest relating to the property or transaction that is the subject of the action." An applicant for intervention has a significantly protectable interest if the interest is protected by law and there is a relationship between the legally protected interest and the plaintiff's claims. So. Cal. Edison Co. v. Lynch, 307 F.3d 794, 803, modified on other grounds, 353 F.3d 648 (9th Cir.2003) (quoting Donnelly, 159 F.3d at 409).

The "interest" test is not a bright-line rule. Id. An applicant seeking to intervene need not show that "the interest he asserts is one that is protected by statute under which litigation is brought." Sierra Club v. EPA, 995 F.2d 1478, 1484 (9th Cir.1993). It is enough that the interest is protectable under any statute. Id.

Silverwood contends that it has a legally protected interest in Alisal's property, and that the decision of the district court to award damages to the United States for Alisal's violations of the SDWA may impair this interest. We have held that a non-speculative, economic interest may be sufficient to support a right of intervention. Arakaki v. Cayetano, 324 F.3d 1078, 1088 (9th Cir.2003) (stating that Native Hawaiians had a sufficiently related interest to intervene in a lawsuit by taxpayers challenging the provision of benefits by the State of Hawaii and its subdivisions to Hawaiians).

To trigger a right to intervene, however, an economic interest must be concrete and related to the underlying subject matter of the action. See id. at 1085; So. Cal. Edison Co., 307 F.3d at 803; Greene v. United States, 996 F.2d 973, 976 (9th Cir.1993).

Silverwood asserts that although it lacks an interest relating to the environmental issues that are the subject of the liability phase of the action, the award of penalties in the remedies phase will affect its interests as a creditor. Donnelly, 159 F.3d at 410 (holding that an applicant may lack an interest in the liability phase of an action, but may still be entitled to intervene in the remedies phase).

However, regardless of the phase of litigation at which an interest arises, that interest must be related to the underlying subject matter of the litigation. California v. Tahoe Reg'l Planning Agency, 792 F.2d 779, 781 (9th Cir.1986) (denying intervention as of right by an applicant with solely environmental interests in an action "by a local water district against the United States concerning contracts between the parties respecting the delivery of the water").³

Here, the district court determined that Silverwood's sole interest in the present action is in the prospective collectability of a debt. This interest is several degrees removed from the overriding public health and environmental policies that are the backbone of this litigation. In Hawaii-Pacific Venture Capital Corp. v. H.B. Rothbard, 564 F.2d 1343, 1346 (9th Cir.1977), we held that the impaired ability to collect judgments that may arise from future claims does not give rise to a right of intervention. The underlying reasoning in Hawaii-Pacific supports the conclusion that an allegedly impaired ability to collect judgments arising from past claims does not, on its own, support a right to intervention. To hold otherwise would create an open invitation for virtually any creditor of a defendant to intervene in a lawsuit where damages might be awarded. See Public Serv. Comp. of New Hampshire v. Patch, 136 F.3d 197, 205 (1st Cir.1998) (holding that "[i]t is settled beyond peradventure ... that an undifferentiated, generalized interest in the outcome of an ongoing action is too porous a foundation on which to premise intervention as of right"); Glyn v. Roy Al Boat Mgmt. Corp., 897 F.Supp. 451, 453 (D.Haw.1995) ("Were this court to agree that Efimov could...