R & G Mortg. Corp. v. Federal Home Loan Mortg., 08-2542.

CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)
Citation584 F.3d 1
Docket NumberNo. 08-2542.,08-2542.
PartiesR & G MORTGAGE CORPORATION and R-G Premier Bank of Puerto Rico, Plaintiffs, Appellees, v. FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendant, Appellee. Doral Bank, Putative Intervenor, Appellant.
Decision Date01 October 2009
584 F.3d 1
R & G MORTGAGE CORPORATION and R-G Premier Bank of Puerto Rico, Plaintiffs, Appellees,
Doral Bank, Putative Intervenor, Appellant.
No. 08-2542.
United States Court of Appeals, First Circuit.
Heard September 16, 2009.
Decided October 1, 2009.

[584 F.3d 4]

Nelson N. Cordova-Morales, with whom Harold D. Vicente and Vicente & Cuebas were on brief, for putative intervenor.

Raul M. Arias, with whom John Oberdorfer, Samantha R. Petrich, Patton Boggs LLP, Francisco G. Bruno, Irma M. Léon González, and McConnell Valdes were on brief, for plaintiffs.

William C. Ballaine, with whom Mark S. Landman, Landman Corsi Ballaine & Ford, Ricardo F. Casellas, Casellas Alcover

[584 F.3d 5]

& Burgos, P.S.C., and Kenton W. Hambrick were on brief, for defendant.

Before HOWARD, RIPPLE* and SELYA, Circuit Judges.

SELYA, Circuit Judge.

This appeal directly challenges the denial of an attempt at post-settlement intervention and indirectly challenges the propriety of a sealing order.1 The stage is easily set. After the settlement of a sealed lawsuit to which it was not a party, Doral Bank (Doral) sought to intervene. The district court denied the motion as untimely and refused to conduct a hearing anent the propriety of the sealing order. The court later declined to reconsider its order.

Doral now appeals, asseverating that it should have been permitted (i) to intervene as of right or (ii) to intervene permissively to challenge the sealing order. Discerning no abuse of discretion in the district court's rulings, we affirm.


We set forth the largely undisputed facts as found by the district court, consistent with record support.

This case rises from the ashes of the once vibrant market in mortgage-backed securities. The plaintiff is a mortgage lending and servicing conglomerate.2 The defendant, Federal Home Loan Mortgage Corp. (Freddie Mac), is (or, more accurately, was in earlier halcyon days) a prodigious purchaser of mortgages needed to feed its appetite for a steady stream of offerings of mortgage-backed securities. Freddie Mac does not itself collect and process loan payments or work out defaults on the mortgage loans that it buys. Instead, it outsources those tasks to qualified servicers.

R & G and Freddie Mac had a business relationship reaching back over three decades. In the ordinary course of that relationship, Freddie Mac contracted with R & G to service a substantial portfolio of Puerto Rican mortgages. In 2008, however, the relationship soured.

On July 11, 2008,3 Freddie Mac informed R & G that it was being terminated as a qualified servicer (and, thus, could no longer service Freddie Mac's loan portfolio). To pick up the slack, Freddie Mac contracted on the same date with Doral to take over the servicing of the loans on an interim basis. Doral noted this arrangement in a so-called 8-K report that it filed with the Securities and Exchange Commission (SEC).

On July 14, R & G brought suit against Freddie Mac in the United States District Court for the District of Puerto Rico. Its complaint alleged breach of contract and prayed for a declaratory judgment to vindicate its status as a qualified servicer of Freddie Mac mortgage loans (at least until a contractual appeals process had run its course), along with injunctive relief designed to keep the Freddie Mac mortgage portfolio under R & G's control pendente lite. Concerned that its confidential business

584 F.3d 6

information otherwise would wind up in the public domain, R & G asked that the case be placed under seal.

On the same day that the action was commenced, the district court issued an ex parte temporary restraining order (TRO) that, among other things, blocked both the termination of R & G's status as a qualified servicer and the planned transfer of the servicing rights to Doral. The court simultaneously granted R & G's ancillary request, placing the docket and all papers in the case under seal.

Doral received notice on several occasions that this litigation impeded its interim servicing contract. We cite some examples.

• Freddie Mac's associate general counsel initiated a conference call with Doral's president and in-house lawyer on July 15, during which the caller informed the Doral hierarchs that the TRO had issued and that it blocked Freddie Mac from shifting servicing of the portfolio to Doral.

• On July 16, R & G filed an 8-K report stating that R & G had obtained the TRO and describing its effect. That SEC report was a matter of public record.

• On the following day, Freddie Mac sent a letter to Doral formally notifying Doral that the TRO, issued by the federal court in Puerto Rico, put the planned transfer of the mortgage portfolio "on hold."

• On July 18, R & G's general counsel wrote to his counterpart at Doral, by mail and e-mail. That communique notified Doral of the issuance of the TRO and admonished that the TRO "precluded" the implementation of Doral's agreement with Freddie Mac. Although a glitch in the address caused a delay in delivery of the hard copy of this letter, Doral's general counsel acknowledged that he received it no later than August 11. In any event, Doral never denied receiving the e-mail, so it presumably received that version on the day of transmission.

• Doral responded to these developments on August 14. On that date, it wrote to R & G, advising that it would move to intervene in the pending action unless it was given a copy of the TRO. R & G refused this ultimatum via e-mail on the following day, noting that all the paperwork in the case was under seal. The e-mail advised that Doral's interim servicing agreement was not directly at issue in the litigation but that, insofar as that agreement pertained to R & G's portfolio of Freddie Mac mortgages, the TRO rendered Doral "unable to perform."

At this point, we return to the travel of the case. Rather than holding a hearing on preliminary injunction, see Fed.R.Civ.P. 65(b)(2)-(3), the district court extended the TRO several times by consent while settlement discussions percolated between R & G and Freddie Mac. On September 18, those parties jointly moved under seal for court approval of a negotiated settlement that allowed R & G to continue to service Freddie Mac mortgages until it could sell its servicing rights to a qualified third party.

On the same day, Freddie Mac advised Doral of the settlement. It offered to provide a copy of the sealed settlement agreement, contingent upon Doral's execution of a confidentiality agreement. Although Freddie Mac and Doral subsequently agreed to the terms of the confidentiality agreement, Doral never signed it.

The district court approved the settlement on September 25. A week later (on October 2), Doral moved to intervene

584 F.3d 7

either as of right or permissively. Invoking our decision in Banco Popular v. Greenblatt, 964 F.2d 1227 (1st Cir.1992), the district court denied the motion as untimely. The court later eschewed reconsideration. This seasonable appeal followed. We have jurisdiction because an order denying a motion to intervene is immediately appealable. Pub. Serv. Co. of N.H. v. Patch, 136 F.3d 197, 204 (1st Cir. 1998).


We first examine Doral's contention that it should have been granted leave to intervene as of right. We then turn to its alternative contention that it should have been granted leave to intervene permissively.

A. Intervention as of Right.

To succeed on a motion to intervene as of right, a putative intervenor must establish (i) the timeliness of its motion to intervene; (ii) the existence of an interest relating to the property or transaction that forms the basis of the pending action; (iii) a realistic threat that the disposition of the action will impede its ability to protect that interest; and (iv) the lack of adequate representation of its position by any existing party. See Negrón-Almeda v. Santiago, 528 F.3d 15, 22 (1st Cir. 2008); B. Fernández & Hnos., Inc. v. Kellogg USA, Inc., 440 F.3d 541, 544-45 (1st Cir.2006); see also Fed.R.Civ.P. 24(a). The movant must fulfill each of these preconditions. "The failure to satisfy any one of them dooms intervention." Patch, 136 F.3d at 204.

The court below recognized that when intervention is at issue, timeliness is the "prevenient question." Greenblatt, 964 F.2d at 1230 (explaining that "timeliness stands as a sentinel at the gates whenever intervention is requested and opposed"). Consequently, the court started with the timeliness requirement. We emulate that approach.

The timeliness inquiry is inherently fact-sensitive and depends on the totality of the circumstances. Id. at 1230-31. In evaluating that mosaic, the status of the litigation at the time of the request for intervention is "highly relevant." Id. at 1231. As a case progresses toward its ultimate conclusion, the scrutiny attached to a request for intervention necessarily intensifies. Id.

As a general matter, the case law reflects four factors that inform the timeliness inquiry: (i) the length of time that the putative intervenor knew or reasonably should have known that his interests were at risk before he moved to intervene; (ii) the prejudice to existing parties should intervention be allowed; (iii) the prejudice to the putative intervenor should intervention be denied; and (iv) any special circumstances militating for or against intervention. Id. Each of these factors must be appraised in light of the posture of the case at the time the motion is made. Geiger v. Foley Hoag LLP Ret. Plan, 521 F.3d 60, 65 (1st Cir.2008). Under this approach, motions to intervene that will have the effect of reopening settled cases are regarded with particular skepticism because such motions tend to prejudice the rights of the settling parties. See, e.g., In re Lease Oil Antitrust Litig., 570 F.3d 244, 250 (5th Cir.2009); Heartwood, Inc. v. U.S. Forest Serv., 316 F.3d 694, 700-01 (7th...

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