725 F.2d 871 (2nd Cir. 1984), 93, Restor-A-Dent Dental Laboratories, Inc. v. Certified Alloy Products, Inc.

Docket Nº:93, Docket 83-7731.
Citation:725 F.2d 871
Party Name:RESTOR-A-DENT DENTAL LABORATORIES, INC., Plaintiff-Appellee, v. CERTIFIED ALLOY PRODUCTS, INC., Defendant, Unigard Mutual Insurance Company, Intervener-Appellant.
Case Date:January 13, 1984
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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725 F.2d 871 (2nd Cir. 1984)




Unigard Mutual Insurance Company, Intervener-Appellant.

No. 93, Docket 83-7731.

United States Court of Appeals, Second Circuit

January 13, 1984

Argued Dec. 16, 1983.

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William M. Stewart, New York City, for plaintiff-appellee.

Thomas R. Newman, New York City (Siff & Newman, P.C., Earl J. McHugh, Lissa Griffin, New York City, of counsel), for intervener-appellant.

Before FEINBERG, Chief Judge, and FRIENDLY and OAKES, Circuit Judges.

FEINBERG, Chief Judge:

Unigard Mutual Insurance Company (Unigard), appeals from an order of the United States District Court for the Southern District of New York, David N. Edelstein, J., denying Unigard's motion to intervene pursuant to Fed.R.Civ.P. 24(a) and (b) in an action between plaintiff Restor-A-Dent Dental Laboratories, Inc. (Restor-A-Dent) and defendant Certified Alloy Products, Inc. (Certified). The stated purpose of Unigard's intervention is to propose interrogatories to the court for submission to the jury in the event that the jury returns a verdict for Restor-A-Dent. Unigard claims that it has the right to intervene under Rule 24(a), and in the alternative that the district court abused its discretion in denying permissive intervention pursuant to Rule 24(b). For reasons stated below, we affirm the order of the district court.


In August 1982, Restor-A-Dent filed its complaint against Certified, consisting of three causes of action. The first alleges that Certified breached its contract with Restor-A-Dent by delivering defective alloy to be used in producing dental products, for which Restor-A-Dent claims damages of $216,068 for "loss of production time, including additional labor costs, overhead costs, etc., to reproduce its dental products...." The second cause of action seeks $319,500 in damages for loss of profits from the breach of contract and warranty of merchantability and fitness. The third cause of action alleges $1,509,860 in damages from the breach due to loss of accounts and loss of goodwill.

Unigard is Certified's general liability insurer. In that capacity, it has apparently retained counsel to represent Certified in

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the action and has continued to provide a defense. However, according to the record before us, Unigard has informed Certified that while it will provide a defense to Certified, "it [does] not have any duty to indemnify Certified for intangible losses such as 'loss of production time, loss of profits, loss of accounts and loss of goodwill....' "

Restor-A-Dent's action against Certified proceeded in routine fashion with the parties engaging in, and apparently completing, discovery until June 1983 when the pretrial order was due. At that time, Unigard moved to intervene under Rule 24(a) and (b), "for the limited purpose of submitting written interrogatories to [the] Court for submission to the jury, to be answered by the jury in the event that it returns a verdict awarding damages to plaintiff...." Unigard stated that under California law, which it alleges governs interpretation of the insurance policy, Unigard is obligated to pay only for "property damage" which does not include such items as loss of profits, loss of accounts and loss of goodwill. Since the allegedly non-covered items constituted some 90% of Restor-A-Dent's total demand of over $2,000,000 damages, Unigard contended that it was critical to "know with certainty the exact dollar amount of the damages assessed against Certified for which Certified claims to be entitled to indemnification from Unigard," in the event that the jury found for Restor-A-Dent. Unigard argued that a general verdict would make difficult, if not impossible, a precise determination as to the allocation of the jury's award and alleged that its intervention would not delay or impede the action. Unigard attached six suggested interrogatories with its motion, although it failed to furnish a copy of the insurance policy. The proposed interrogatories are reproduced in the margin. 1

Defendant Certified took the position that if the disputed claims were to go to the jury at all, the suggested interrogatories "may be proper." Plaintiff Restor-A-Dent opposed the motion to intervene, arguing that Unigard knew of the lawsuit almost from its inception since it was defending Certified, yet had remained silent until all discovery was completed and the pre-trial order submitted. Restor-A-Dent also claimed that it would be "grossly" prejudiced if intervention were permitted since if "special interrogatories are added to the list of items that the jury must address ... the burden to reach a just verdict will become excessive, falling entirely on the shoulders of the plaintiff."

By endorsement dated August 5, 1983, the district judge denied Unigard's motion to intervene. The decision was based on the tardiness of Unigard's motion and the burden that the judge thought intervention would place on Restor-A-Dent. Unigard appealed, and moved in this court to have the trial stayed pending appeal and the appeal expedited. A panel of this court denied the motion in September 1983, and we are informed that the case presently awaits trial. On appeal, Unigard contends that the district court erred in not allowing intervention under either subsection (a) or subsection (b) of Rule 24. We consider first Unigard's contentions as to the former, which deals with intervention as of right.

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Under Rule 24(a)(2), which is reproduced in the margin, 2 an intervener must show that: (1) the application is timely; (2) "the applicant claims an interest relating to the property or transaction which is the subject matter of the action...."; (3) the protection of the interest may as a practical matter be impaired by the disposition of the action; and (4) the interest is not adequately protected by an existing party. See United States Postal Service v. Brennan, 579 F.2d 188, 191 (2d Cir.1978).

As to requirement (1), Unigard argues that it seeks to intervene only after a general verdict for plaintiff, should there be one, and that the trial had not yet begun nor had the pre-trial order been entered when it made its motion. As to requirements (3) and (4), Unigard points out that if the jury returns only a general verdict for plaintiff in the action, it will be extremely difficult, if not impossible, for Unigard or anyone else to determine exactly what items the jury's award took into account. Moreover, the parties to the case may not desire any clarification of the award: Restor-A-Dent has already indicated its opposition to interrogatories, and Certified, as the insured, may have no real interest in clarifying the extent to which it must pay Restor-A-Dent's damages out of its own pocket rather than looking to its insurer. We are willing to assume arguendo, therefore, that on these facts the critical inquiry regarding Unigard's right to intervene under Rule 24(a)(2) is whether Unigard has an interest relating to the property or transaction which is the subject matter of the action.

The term "interest" in this context defies a simple definition. See Vazman, S.A. v. Fidelity International Bank, 418 F.Supp. 1084, 1085 & n. 1 (S.D.N.Y.1976); Shapiro, Some Thoughts on Intervention Before Courts, Agencies and Arbitrators, 81 Harv.L.Rev. 721, 740 (1968) (Shapiro). Before the 1966 amendment, Rule 24(a) allowed intervention as of right only where the applicant "is or may be bound by a judgment in the action" or where the "applicant is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof." See original Rule 24(a)(2) and (3), 28 U.S.C. app. at p. 2624 (1940). Clearly, the 1966 amendment was intended to expand the right to intervene beyond those situations. See Fed.R.Civ.P. advisory committee note to 1966 amendment, 28 U.S.C. app. at pp. 432-33 (1976). However, as another court has aptly observed, "the amendments made the question of what constitutes an 'interest' more visible without contributing an answer." Smuck v. Hobson, 408 F.2d 175, 178 (D.C.Cir.1969) (in banc).

In discussing "interest" in the context of intervention as of right, the Supreme Court has stated that the interest must be "significantly protectable." See Donaldson v. United States, 400 U.S. 517, 531, 91 S.Ct. 534, 542, 27 L.Ed.2d 580 (1971); see also Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 154, 87 S.Ct. 932, 946, 17 L.Ed.2d 814 (1967) (Stewart, J., dissenting) (applicant must "have an 'interest' in the litigation sufficiently direct and immediate to justify his entry as a matter of right."). Moreover, it is said that such an interest must be direct, as opposed to remote or contingent. See, e.g., Airline Stewards and Stewardesses Ass'n v. American Airlines, Inc., 455 F.2d 101, 105 (7th Cir.1972); In re Penn Central Commercial Paper Litigation, 62...

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