Feigin v. Alexa Group, Ltd., No. 99SC728.

• Decision Date: 05 March 2001
• Docket Number: No. 99SC728.
• Citation: 19 P.3d 23
• Parties: Philip A. FEIGIN, Securities Commissioner for the State of Colorado, Petitioner, v. ALEXA GROUP, LTD.; James P. Dufficy; Eva F. Balassa; and Securities America, Inc., Defendants, and Charles Patterson, Patricia Patterson, Edward Seevers, and Tamera Seevers.
• Court: Colorado Supreme Court

19 P.3d 23

Philip A. FEIGIN, Securities Commissioner for the State of Colorado, Petitioner, v. ALEXA GROUP, LTD.; James P. Dufficy; Eva F. Balassa; and Securities America, Inc., Defendants, and Charles Patterson, Patricia Patterson, Edward Seevers, and Tamera Seevers.

No. 99SC728.

Supreme Court of Colorado, En Banc.

March 5, 2001.

Ken Salazar, Attorney General, M. Ashley Albright, First Assistant Attorney General, Patricia A. Cooper, Assistant Attorney General, Business and Licensing Section, Denver, CO, Attorneys for Petitioner.

Kutak Rock LLP, John H. Bernstein, John P. Jones, Matthew J. Rita, Denver, CO, Attorneys for Securities America, Inc.

John F. Head, P.C., John F. Head, Ian S. Karpel, Heather R. Hanneman, Denver, CO, Attorney for Respondents.

Perkins Coie LLP, Donald Salcito, Stephen E. Abrams, Sean Steward, Denver, CO, Attorneys for Amicus Curiae North American Securities Administrators Association.

Justice RICE delivered the Opinion of the Court.

We granted certiorari to determine whether the court of appeals erred in applying a de novo standard of review, in allowing the Investors to intervene, and whether, by doing so, it improperly created a fiduciary or agency relationship between the Colorado Securities Commissioner (the "Commissioner") and the Investors in enforcement proceedings under section 11-51-602, 3 C.R.S. (2000). We now hold that a de novo standard of review is appropriate when reviewing a trial court's denial of a motion to intervene under C.R.C.P. 24(a). We further hold that the Investors had a valid interest in the civil enforcement action, but they were neither impaired nor impeded in their ability to protect that interest. We note that in holding otherwise, the court of appeals mischaracterized the role of the Commissioner by implying a fiduciary or agency relationship between the Commissioner and the Investors. Finally, we determine that the Investors' interests were adequately represented by the Commissioner. Thus, we reverse the court of appeals' judgment that the Investors were entitled to intervene as a matter of right under Rule 24(a)(2).

I. FACTS AND PROCEDURAL HISTORY

From March 1993 to July 1996, James Dufficy and Eva Balassa, general partners of Alexa Group, Ltd. ("Alexa"), allegedly engineered a "Ponzi" scheme whereby they sold securities and investments through Alexa, and either personally misappropriated or otherwise lost in excess of $500,000 of their investors' funds. Dufficy was licensed as a securities sales representative through Securities America, Inc. ("SAI"), the securities broker-dealer through which Alexa had established a securities brokerage account.

In June 1997, the Commissioner brought a civil enforcement action against Alexa, Dufficy, Balassa and SAI under section 11-51-602, seeking an injunction against future violations and damages for the defrauded investors. In January 1998, the Commissioner commenced settlement negotiations to resolve only the claims against SAI. As a result of these negotiations, a Stipulation for Order Settling Claims as to SAI ("Stipulation"), and a proposed Order Settling Claims Concerning SAI ("Order") were filed in February 1998.

The Stipulation provided for a claims process whereby all the Alexa investors who had invested funds during the period in which Dufficy was affiliated with SAI could be awarded compensation for their losses. In exchange for receiving payment under the Stipulation, SAI could require investors to provide it with a release of all other claims against it. The rights and claims of any investor who elected not to provide such a release, however, would not be impaired or otherwise affected by the Stipulation.

The Investors filed a motion to intervene in the Commissioner's civil enforcement action in order to contest the settlement reached by the Commissioner and SAI.¹ The Commissioner argued that the Investors had failed to satisfy the requirements of C.R.C.P. 24(a)(2) and therefore were not entitled to intervene. Without citing any reasons for its ruling, the trial court denied the Investors' motion and entered the Order, thus approving the settlement agreement between the Commissioner and SAI.

On appeal, the court applied a de novo standard of review in holding that (1) the Investors had an interest in the civil enforcement action; (2) their interest was not adequately represented by the settlement agreement; and (3) the execution and implementation of the settlement agreement would impede or impair the Investors' ability to protect their interests. Feigin v. Securities America, Inc., 992 P.2d 675, 679-80 (Colo.Ct.App.1999). The court of appeals thus concluded that under C.R.C.P. 24(a), the Investors were permitted to intervene as a matter of right. Id. at 682. The court of appeals held that because the trial court had not held a hearing on the question of its approval of the proposed agreement, it was impossible for the court to consider the Investors' objections on their merits. Id. Therefore, the court remanded the case and vacated the trial court's order denying intervention. Id. The court also vacated the order approving the settlement agreement to the extent that the agreement established a claims procedure for processing individual investors' claims. Id.

We granted certiorari to determine whether the court of appeals applied the correct standard of review and whether the court properly allowed the Investors to intervene as a matter of right. We also granted certiorari on the issue of whether the court of appeals, in determining that the Investors had an interest in the civil enforcement action, created a fiduciary or agency relationship between the Commissioner and defrauded investors.²

II. ANALYSIS

We have not previously addressed whether a defrauded investor may intervene in a civil enforcement action brought by the Commissioner under section 11-51-602, nor have we directly addressed the proper standard of review to apply to a trial court's denial of a motion to intervene under Rule 24(a). As such, this case presents an opportunity for us to address these issues of first impression, as well as to clarify the role of the Commissioner in bringing a civil enforcement action under section 11-51-602.

A. Standard of Review

Under C.R.C.P. 24, a non-party may intervene in a civil action as a matter of right, or by way of a permissive intervention.³ One who timely files an application may intervene as a matter of right if a statute confers an unconditional right to intervene or (1) the applicant claims an interest in the subject matter of the litigation; (2) the disposition of the case may impede or impair the applicant's ability to protect that interest; and (3) the interest is not adequately represented by existing parties. C.R.C.P. 24(a); People v. Ham, 734 P.2d 623, 625 (Colo.1987); The Dillon Cos., Inc. v. City of Boulder, 183 Colo. 117, 120-21, 515 P.2d 627, 628-29 (1973); Higley v. Kidder, Peabody & Co., 920 P.2d 884, 890 (Colo.Ct.App.1996).

The denial of a motion to intervene as a matter of right is a final and appealable order. O'Hara Group Denver, Ltd. v. Marcor Housing Sys., Inc., 197 Colo. 530, 540, 595 P.2d 679, 686 (1979). Furthermore, Rule 24 should be liberally interpreted to allow, whenever possible and compatible with efficiency and due process, issues related to the same transaction to be resolved in the same lawsuit and at the trial court level. Id. at 541, 595 P.2d at 688. However, Colorado courts have never specifically determined the standard of review that should apply when evaluating a trial court's denial of a Rule 24(a) motion to intervene.

In 1962, this court reviewed a Rule 24 motion brought by taxpayers to intervene in an action brought by the city. Denver Chapter of the Colo. Motel Ass'n, Inc. v. City & County of Denver, 150 Colo. 524, 374 P.2d 494 (1962). There, we held that "it was a matter which rested within the discretion of the trial court as to whether the petition for intervention should be granted. There was no showing upon which the intervention of petitioners should have been granted as a matter of right." Id. at 527, 374 P.2d at 495. In doing so, however, we did not explicitly adopt a standard for reviewing the trial court's denial of a Rule 24(a) motion. Instead, we merely applied the substantive requirements of Rule 24(a) and concluded that because the taxpayers had admitted in their briefs that their interests were adequately represented, intervention under Rule 24(a) should not have been permitted.

While the abuse of discretion standard for reviewing Rule 24(b) permissive intervention denials has been well settled in Colorado and elsewhere,⁴ in the thirty-eight years following Denver Chapter, this court has not clarified the proper standard for reviewing a Rule 24(a) denial of a motion to intervene as a matter of right.⁵

Courts in other jurisdictions are split as to the standard governing a review of the substantive requirements for a Rule 24(a) intervention.⁶ Alameda Water & Sanitation Dist. v. Browner, 9 F.3d 88, 89-90 (10th Cir.1993). While some courts have concluded that an abuse of discretion standard is appropriate,⁷ others have held that a trial court's denial of a Rule 24(a) motion should generally be reviewed de novo. Jordan v. Mich. Conference of Teamsters Welfare Fund, 207 F.3d 854, 862 (6th Cir.2000); League of United Latin Am. Citizens v. Wilson, 131 F.3d 1297, 1302 (9th Cir.1997); Alameda Water, 9 F.3d at 90; Doe v. Duncanville Indep. Sch. Dist., 994 F.2d 160, 167 (5th Cir.1993); United States ex rel. McGough v. Covington Tech. Co., 967 F.2d 1391, 1393-94 (9th Cir.1992).⁸ Other courts have adopted variations on the two approaches. Twelve John Does v. Dist. of Columbia, 117 F.3d 571, 576 (D.C.Cir.1997) (holding that an abuse of discretion standard governs whether to allow intervention under Rule 24(a) to the extent that such a decision turns on the adequacy of representation); Getty Oil v. DOE, 865 F.2d 270, 274 (...