Bottoms v. Dresser Industries, Inc.

• Decision Date: 24 July 1986
• Docket Number: No. 84-1437,84-1437
• Citation: 797 F.2d 869
• Parties: , 231 U.S.P.Q. 384, 5 Fed.R.Serv.3d 994 Clifford C. BOTTOMS, Plaintiff-Appellee, v. DRESSER INDUSTRIES, INC., Defendant-Appellee, Kenneth Foster, Applicant for Intervention-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 869

797 F.2d 869

55 USLW 2180, 231 U.S.P.Q. 384, 5

Fed.R.Serv.3d 994

Clifford C. BOTTOMS, Plaintiff-Appellee, v. DRESSER INDUSTRIES, INC., Defendant-Appellee, Kenneth Foster, Applicant for Intervention-Appellant.

No. 84-1437.

United States Court of Appeals, Tenth Circuit.

July 24, 1986.

Rehearing Denied Oct. 15, 1986.

Alan Agee of Garvin, Agee & Meisel, Pauls Valley, Oklahoma, for appellant Kenneth Foster.

Jerry J. Dunlap (Gary Peterson of Dunlap & Codding, with him on briefs), Oklahoma City, Okl., for plaintiff-appellee Clifford C. Bottoms.

Charles F. Alden III (Page Dobson of Holloway, Dobson, Hudson & Bachman, Oklahoma City, Okl., and Rodney K. Caldwell of Arnold, White & Durkee, Houston, Tex., of counsel, with him on brief), for defendant-appellee Dresser Industries, Inc.

Before LOGAN, SETH, and SEYMOUR, Circuit Judges.

LOGAN, Circuit Judge.

The issue in this appeal is whether the district court correctly denied appellant Kenneth Foster's motion to intervene as of right pursuant to Fed.R.Civ.P. 24(a)(2). We affirm.

Foster attempted to intervene in an action Clifford C. Bottoms had initiated against Dresser Industries, Inc. to recover royalties pursuant to a 1971 agreement. In that agreement, Bottoms assigned Dresser his interest in an oil well drilling tool on which Bottoms held U.S. Patent No. Re 26,745. Bottoms was entitled to five percent of the net sales and rentals of all devices that infringed the patent. Dresser apparently paid royalties to Bottoms through 1981 but then declared that it was no longer infringing Bottoms' patent and thus not obligated to make payments. Bottoms' suit against Dresser on the agreement was filed in March 1982. Discovery essentially had been completed, some issues settled, and the case was within two months of trial when Foster sought to intervene on January 16, 1984.

Foster alleges that he and Bottoms entered into a partnership agreement in March 1965 entitling Foster to a one-half interest in the patent at issue in the Bottoms-Dresser action. Pursuant to this agreement, in 1965 Foster designed and sent to Bottoms a model of an oil well drilling tool called a "bumper sub." Thereafter Bottoms informed him that the device was a failure and could not be patented. Sometime during 1982 Foster discovered that Bottoms had patented a device similar to the bumper sub in August 1965. In November 1983, he learned of the action pending between Bottoms and Dresser.

The district court denied Foster's motion to intervene. It reasoned that, although Foster does have an interest in the litigation between Bottoms and Dresser, Bottoms would represent Foster's interests adequately. The court also noted that, even if Dresser settled with Bottoms, Foster could pursue his claims against Bottoms in a separate action.

Fed.R.Civ.P. 24(a)(2) provides that a person is entitled to intervene as a matter of right when

"the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties."

Foster claims an interest in the property or transaction, as required by 24(a)(2), but that is not enough. He also carries the burden of showing that Bottoms may represent his interests inadequately, Trbovich v. United Mine Workers, 404 U.S. 528, 538 n. 10, 92 S.Ct. 630, 636 n. 10, 30 L.Ed.2d 686 (1972); Natural Resources Defense Counsel, Inc. v. United States Nuclear Regulatory Commission, 578 F.2d 1341, 1345-46 (10th Cir.1978), and that disposition of the action will impair his ability to protect those interests. Fed.R.Civ.P. 24(a).

The most common situation in which courts find representation adequate arises when the objective of the applicant for intervention is identical to that of one of the parties. On this basis shareholders have been denied intervention in derivative actions when their interests were represented by other shareholders or the corporation, see In re General Tire & Rubber Co. Securities Litigation, 726 F.2d 1075, 1087 (6th Cir.1984), cert. denied, Schreiber v. Gencorp, Inc., 469 U.S. 858, 105 S.Ct. 187, 83 L.Ed.2d 120 (1985); Zimmerman v. Bell, 101 F.R.D. 329, 331 (D.Md.1984); Piedmont Paper Products v. American Financial Corp., 89 F.R.D. 41, 44 (S.D.Ohio 1980); insurance agents have been denied intervention in actions between the insurer and insured, see Continental Graphic Services, Inc. v. Continental Casualty Co., 681 F.2d 743, 745 (11th Cir.1982); and remaindermen under a trust and heirs of an estate have been denied intervention in actions brought by fiduciaries, see Peterson v. United States, 41 F.R.D. 131, 134-35 (D.Minn.1966); see also Bumgarner v. Ute Indian Tribe, 417 F.2d 1305, 1308-09 (10th Cir.1969). Foster alleges that he is Bottoms' partner or at least entitled to a fifty percent interest in the patent. We fail to see how Foster's interest in the outcome of this litigation differs from Bottoms' interest.

Although there obviously is a serious dispute between Bottoms and Foster, Bottoms has an overwhelming interest in maximizing the amount of royalties Dresser owes under the licensing agreement. In this sense, if Bottoms and Foster are partners or co-owners of the patent as Foster claims, they are in the same position as the stockholder and corporation in those derivative actions in which the stockholder sues to vindicate the corporation's rights: Each has an identical interest and motivation in obtaining the greatest possible recovery. Because the interests of Bottoms and Foster are identical, Foster must make "a concrete showing of circumstances ... that make [Bottoms'] representation inadequate." 7A C. Wright & A. Miller, Federal Practice & Procedure Sec. 1909, at 529 (1972). Moreover, in this type of case, the party's representation is presumptively adequate. See Moosehead Sanitary District v. S.G. Phillips Corp., 610 F.2d 49, 54 (1st Cir.1979); Commonwealth of Virginia v. Westinghouse Electric Corp., 542 F.2d 214, 216 (4th Cir.1976). This presumption may be overcome by showing that there is collusion between the representative and an opposing party, that the representative has an interest adverse to the applicant, or that the representative failed to represent the applicant's interest. Sanguine, Ltd. v. United States Department of the Interior, 736 F.2d 1416, 1419 (10th Cir.1984). Foster did not show any of these.

Foster argues that Bottoms' representation is inadequate because Bottoms asserts he is entitled to all the royalties Dresser owes while Foster claims only one-half of the royalties. This argument merits no significant response. Bottoms obviously wants to get as much as possible out of Dresser, despite his dispute with Foster. This ultimately would work to Foster's advantage in an action against Bottoms.

Foster, attempting to show adversity or collusion, argues that Bottoms may have structured the eventual settlement of the litigation to Foster's detriment. Specifically he alleges that Bottoms may have bargained away his claim to royalties and based the settlement instead on a consulting agreement he had with Dresser. This is wholly unconvincing. The consulting agreement apparently expired in 1973; only royalties were paid between 1974 and 1981. Bottoms v. Dresser Industries, Inc., No. 82-388-W, slip op. at 2 (W.D.Okl. Feb. 23, 1984) (R. III, 644). Thus it appears extremely unlikely that the settlement could be based on unpaid consulting fees. Moreover, Bottoms has made no claims for consulting fees. Therefore it is very doubtful that the scenario Foster paints would occur. ¹ See Moosehead Sanitary District, 610 F.2d at 54 (must be more than "speculation" concerning inadequacy of representation).

We also cannot accept Foster's argument that Bottoms, who originally made claims concerning two patents, only one of which affected Foster, might structure the settlement so that royalties would be paid only on the patent in which Foster had no interest. The court approved the parties' dismissal of the claim on that patent the day the motion to intervene was filed. R. III, 585, 586. Thus it should not have been part of any settlement reached with respect to the claim in which Foster had an interest. If Bottoms did structure a settlement with Dresser to favor his own interest over that of Foster, presumably he still would receive the same total amount of money. The settlement with Dresser could then be examined in litigation between Foster and Bottoms; if Bottoms cheated Foster, Bottoms would be responsible for the loss in damages.

Foster also argues that the district court's order approving the settlement and dismissing the action impaired his ability to recover by preventing him from bringing a later action against Dresser. The district court's order of dismissal stated:

"It is the express purpose and intent of this order that all claims or causes of action which were or might have been asserted by plaintiff, Clifford C. Bottoms, or by any person, firm, corporation, partnership, or entity claiming by, through or under the said plaintiff (including all claims for royalties due for future practice, or for the sale or rental of any device which infringes a claim of the patent in suit U.S. Re 26,745) shall be extinguished and forever discharged as against the defendant, Dresser Industries, Inc."

Bottoms v. Dresser, No. 82-388-W, slip op. at 1 (W.D. Okla. March 22, 1984) (R. IV, 1027). Assuming the district court's order would preclude an action by Foster against Dresser, we do not believe that Foster's ability to recover would be impaired. Foster's claim for royalties necessarily is limited to one-half of the amount Dresser owes Bottoms. And, as discussed above, Bottoms has every incentive to maximize the recovery from Dresser for royalties owed. Thus, even if Foster could not bring an action...