Supernova Media, Inc. v. Shannon's Rainbow, lLC

• Citation: 297 P.3d 599,728 Utah Adv. Rep. 41
• Decision Date: 15 February 2013
• Docket Number: 20110412.,Nos. 20110368,s. 20110368
• Court: Supreme Court of Utah
• Parties: SUPERNOVA MEDIA, INC., a New York corporation, and Jocelyn Engle, an individual, Intervenors and Appellants, v. Shannon's Rainbow, LLC, a Utah limited liability company, Shannon's Rainbow, LLC, a Delaware limited liability company, Shannon's Rainbow Productions, LLC, a Pennsylvania limited liability company, Plaintiffs, v. PIA ANDERSON DORIUS REYNARD & MOSS, LLC, a Utah limited liability company, Defendant and Appellee. Supernova Media, Inc., a New York corporation, Intervenor and Appellant, v. Pia Anderson Dorius Reynard & Moss, LLC, a Utah limited liability company, Plaintiff and Appellee, v. Kelly H. Nelson, Charles Morrison, Summitworks, LLC, Shannon's Rainbow, LLC, et al., Defendants.

297 P.3d 599

728 Utah Adv. Rep. 41

SUPERNOVA MEDIA, INC., a New York corporation, and Jocelyn Engle, an individual, Intervenors and Appellants,

v.Shannon's Rainbow, LLC, a Utah limited liability company, Shannon's Rainbow, LLC, a Delaware limited liability company, Shannon's Rainbow Productions, LLC, a Pennsylvania limited liability company, Plaintiffs,

v.PIA ANDERSON DORIUS REYNARD & MOSS, LLC, a Utah limited liability company, Defendant and Appellee.

Supernova Media, Inc., a New York corporation, Intervenor and Appellant,

v.Pia Anderson Dorius Reynard & Moss, LLC, a Utah limited liability company, Plaintiff and Appellee,

v.Kelly H. Nelson, Charles Morrison, Summitworks, LLC, Shannon's Rainbow, LLC, et al., Defendants.

Nos. 20110368, 20110412.

Supreme Court of Utah.

Feb. 15, 2013.

Mary Anne Q. Wood, Kathryn O. Balmforth, Stephen Q. Wood, Salt Lake City, for appellants.

Robert K. Reynard, Brennan H. Moss, Troy L. Booher, Salt Lake City, for appellees.

Justice DURHAM, opinion of the Court:

INTRODUCTION

¶ 1 Supernova Media, Inc., and Joycelyn Engle appeal the denial of their motions to intervene as of right in two district court cases that we consolidate for purposes of this opinion. They also appeal the partial sealing of the record in one of the cases. We reverse the denial of the motions to intervene and set aside the sealing order. We remand for the district court to consolidate the cases and allow appellants to intervene.

BACKGROUND

¶ 2 The parties to this appeal owe their relationship to the film Shannon's Rainbow, which was created and financed by two media companies: SummitWorks, LLC (SummitWorks), and Supernova Media, Inc. (Supernova). Frank Johnson, a principal of SummitWorks, directed the film. Other principals of SummitWorks include Kelly Nelson and Charles Morrison.¹

¶ 3 In 2007, Johnson approached Joycelyn Engle of Supernova for help in raising money for the film. Ms. Engle is a principal of Supernova.² The SummitWorks and Supernova parties formed LLCs in Utah, Pennsylvania, and Delaware, each named “Shannon's Rainbow, LLC.” Supernova raised much of the film's capital from its investors, Stewart Rahr and Joseph DiPalma, who each invested one million dollars.

¶ 4 In Mr. DiPalma's investment agreements, Ms. Engle (on behalf of Supernova) and SummitWorks were named as equal co-managers of the Shannon's Rainbow LLCs, such that neither co-manager could act without the other. Ms. Engle also claims a 51 percent ownership interest in the film given to her for investing her personal funds, deferring payments owed to her, and providing her home as collateral for a bridge loan.

¶ 5 In 2008, Ms. Engle and SummitWorks reached an impasse over whether the film should first be distributed in North America or abroad. Since then, SummitWorks and Supernova have been litigating the issue of who has the right to control distribution of the film and to control the Shannon's Rainbow LLCs generally. This litigation has taken place in the federal district court for the District of Utah and in New York state courts. Supernova investor Joseph DiPalma also filed a lawsuit in New York state court seeking specific performance of his investor agreement, which promised an initial distribution of the film in North America.

¶ 6 Joseph Pia, a partner in defendant law firm Pia Anderson Dorius Reynard & Moss, LLC (PADRM), served as legal counsel for the Shannon's Rainbow LLCs before and after the impasse. After the impasse, he assisted SummitWorks in their litigation against Supernova and Mr. DiPalma.

¶ 7 In 2010, the SummitWorks parties stopped paying legal fees to PADRM. After six months of overdue bills, Mr. Pia withdrew from representation and tried to foreclose two liens on the film: an attorney's lien under Utah Code section 38–2–7 and a consensual lien pursuant to a 2009 representation agreement with the Shannon's Rainbow LLCs. Mr. Pia sent notice to SummitWorks (but not Supernova) that he intended to publicly sell the film in February of 2011.

¶ 8 Mr. Pia then sued the SummitWorks parties and the Shannon's Rainbow LLCs in Utah state court (the first case) seeking money damages and a declaratory judgment that his liens on the film were valid and entitled to priority.³ Instead of filing a counterclaim, the SummitWorks parties initiated a separate Utah state court action (the second case) against PADRM, seeking a declaration that the consensual lien was invalid and that any foreclosure would have to be accomplished through a judicial proceeding. The SummitWorks parties obtained a temporary restraining order against the public sale of the film and also sought a preliminary injunction.

¶ 9 Supernova did not receive formal notice of either of these Utah state cases. When Supernova became aware of these cases, it moved on its own behalf, and derivatively on behalf of the Shannon's Rainbow LLCs, to intervene as of right “for the purpose of obtaining a preliminary injunction, and seeking a stay to permit relevant issues to be decided in the pending ... New York [actions].” The motions to intervene were filed on February 23, 2011, in the second case (before Judge Hilder) and on March 2, 2011, in the first case (before Judge Iwasaki).

¶ 10 In the second case, SummitWorks and PADRM filed a stipulated motion to close the preliminary injunction hearing and seal the related records, based primarily on their claim that many of the records were protected by attorney-client privilege. Judge Hilder granted the motion. Although they had not been permitted to intervene, the Supernova parties filed a motion to unseal the record.

¶ 11 Shortly after a hearing on March 21, 2011, PADRM and the SummitWorks parties signed a settlement agreement. At Judge Hilder's request, the parties to the settlement disclosed three paragraphs of their agreement to Supernova. These paragraphs set forth the identity of the parties to the settlement and the scope of the mutual releases between PADRM, the SummitWorks parties, and the Shannon's Rainbow LLCs.⁴

¶ 12 SummitWorks and PADRM then filed stipulated motions to dismiss both cases under rule 41(a) of the Utah Rules of Civil Procedure. Judge Iwasaki and Judge Hilder granted the motions to dismiss and denied Supernova's motions to intervene. Judge Hilder also ruled that Supernova's motion to unseal the record was mooted by the denial of the motion to intervene. Supernova timely appealed. This court has jurisdiction pursuant to section 78A–3–102(3)(j) of the Utah Code.⁵

STANDARD OF REVIEW

¶ 13 “The standard of appellate review varies depending on the nature of the [district] court's analysis.” Manzanares v. Byington ( In re Adoption of Baby B.), 2012 UT 35, ¶ 40, ––– P.3d ––––. We apply a clearly erroneous standard to factual findings and a correctness standard to legal conclusions. Id. ¶¶ 40–41. “On mixed questions—involving application of a legal standard to a set of facts unique to a particular case—our review is sometimes deferential and sometimes not,” id. ¶ 42 (footnote omitted), depending on the following factors:

(1) the degree of variety and complexity in the facts to which the legal rule is to be applied; (2) the degree to which a trial court's application of the legal rule relies on facts observed by the trial judge, such as a witness's appearance and demeanor, relevant to the application of the law that cannot be adequately reflected in the record available to appellate courts; and (3) other policy reasons that weigh for or against granting discretion to trial courts,

State v. Levin, 2006 UT 50, ¶ 25, 144 P.3d 1096 (internal quotation marks omitted).

¶ 14 We have often said that a district court's ruling on a motion to intervene under rule 24(a) is reviewed for correctness. E.g., Parduhn v. Bennett, 2005 UT 22, ¶ 13, 112 P.3d 495. However, a ruling on a motion to intervene encompasses several types of analysis, each subject to a different standard of review. Swallow v. Jessop ( In re United Effort Plan Trust ), 2013 UT 5, ¶ 15, 296 P.3d 742. As a general matter, the factual findings underpinning an intervention ruling are subject to a clearly erroneous standard, Taylor–W. Weber Water Improvement Dist. v. Olds, 2009 UT 86, ¶ 3, 224 P.3d 709, and the district court's interpretation of rule 24(a) is reviewed for correctness, Arbogast Family Trust v. River Crossings, LLC, 2010 UT 40, ¶ 10, 238 P.3d 1035.

¶ 15 We review for abuse of discretion the district court's determination of whether the motion to intervene was timely filed. See Jenner v. Real Estate Servs., 659 P.2d 1072, 1073–74 (Utah 1983). Such review is appropriate under the Levin factors because timeliness depends on the “the facts and circumstances of each particular case.” Id. at 1073–74. To determine whether an intervenor substantially and unjustifiably delayed its motion to intervene, a district court must exercise judgment based on the totality of the circumstances. See id.

¶ 16 We review for correctness the district court's determination of whether the intervenor has “claim[ed] an interest relating to the property or transaction which is the subject of the action.” Utah R. Civ. P. 24(a); In re United Effort Plan Trust, 2013 UT 5, ¶ 22, 296 P.3d 742. Because rule 24(a) requires intervenors only to “claim”—rather than prove—an interest, the district court is not called on to weigh conflicting evidence but rather to determine whether the intervenor has presented sufficient evidence to make out a “claim.” Furthermore, we expect most motions to intervene to be founded on financial, personal, or institutional relationships or interests that “can be adequately reflected in a cold record.” Levin, 2006 UT 50, ¶ 40, 144 P.3d 1096.

¶ 17 The district court's determinations of whether “the disposition of the action may as a practical matter impair or impede [the intervenor's] ability to protect [the claimed] interest” and whether that interest is “adequately represented by existing parties,” are entitled to deferential review. Utah R. Civ. P. 24...