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Sun Sky Hospitality LLC v. United States Department of Agriculture

United States District Court, D. Arizona

October 25, 2018

Sun Sky Hospitality LLC, Plaintiff,
v.
United States Department of Agriculture, Defendant.

          ORDER

          Hon. Rosemary, Marquez, United States District Judge

         Pending before the Court is a Motion to Intervene filed by non-party First Citizens Bank & Trust Company d/b/a First Citizens Bank (“First Citizens”). (Doc. 19.) Plaintiff Sun Sky Hospitality, LLC (“Plaintiff” or “Sun Sky”) filed a Response in opposition (Doc. 20), and First Citizens filed a Reply (Doc. 21).

         I. Background

         In 2010, First Citizens' predecessor-in-interest loaned Plaintiff $3.737 million, with the United States Department of Agriculture (“USDA”) guaranteeing 80% of the loan principal and applicable interest under its Business and Industry Guaranteed Loan Program. (Doc. 19 at 3.)[1] In an underlying state-court proceeding, First Citizens alleges that Sun Sky defaulted on the USDA-backed loan. (Id. at 4.) Plaintiff has asserted frustration-of-purpose and failure-to-mitigate defenses in the state-court proceeding. (Id.)

         On February 21, 2018, Plaintiff filed the above-captioned lawsuit pursuant to the Administrative Procedure Act and the Declaratory Judgment Act, seeking to depose USDA employee Gary Mack under state-court subpoena and to compel production of documents in the USDA's possession. (See Doc. 1.) Plaintiff and Defendant have been engaged in efforts to resolve, without Court involvement, the issue that precipitated this case and a companion case, United States v. Sun Sky Hospitality LLC, MC 18-00002-RM. As a result of those efforts, Plaintiff conducted a deposition of Mr. Mack on June 13, 2018, and Plaintiff and Defendant agreed to a second, limited deposition if necessary after Defendant produced additional documents to Plaintiff. (Doc. 14 at 1-2; see also Doc. 20-1 at 4-5.)

         On September 11, 2018, Plaintiff and Defendant notified chambers of a discovery dispute concerning documents that Defendant had withheld from production on the grounds that they may be privileged. (See Doc. 16.) On September 18, 2018, the Court ordered Defendant to submit the relevant documents to the Court for in camera review. (Id.) The Court further ordered Defendant to serve a copy of its Order on counsel representing First Citizens in the underlying state litigation. (Id.) Defendant complied with both orders. (Docs. 17, 18.) The documents submitted for in camera review are:

1. An April 29, 2011 engagement letter from attorney Margaret Gillespie of May Potenza Baran & Gillespie, P.C. to First Citizens;
2. An August 28, 2013 document titled “Proposed Action” from Margaret Gillespie to First Citizens, which sets forth legal opinions and is marked “attorney-client privileged”; and
3. A September 8, 2015 confidential mediation memorandum from May Potenza Baran & Gillespie, P.C.

         On September 21, 2018, First Citizens filed the pending Motion to Intervene. (Doc. 19.) First Citizens seeks to intervene for the limited purpose of (1) addressing Defendant's potential disclosure of information and documents that First Citizens asserts are privileged, (2) addressing this Court's in camera review of the information and documents, and (3) seeking a protective order to preclude improper disclosure of the information and documents. (Id. at 1.)

         II. Motion to Intervene

         A. Legal Standard

         Under Rule 24(a)(2) of the Federal Rules of Civil Procedure, “the court must permit anyone to intervene who, ” on timely motion, “claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.” Fed.R.Civ.P. 24(a)(2). When analyzing a motion to intervene under Rule 24(a)(2), the Court must determine (1) whether the motion is timely; (2) whether the movant has “a ‘significantly protectable' interest relating to the property or transaction which is the subject of the action”; (3) whether the movant is “so situated that the disposition of the action may as a practical matter impair or impede its ability to protect that interest”; and (4) whether the movant's interest is “inadequately represented by the parties to the action.” Wilderness Soc'y v. U.S. Forest Serv., 630 F.3d 1173, 1177 (9th Cir. 2011) (en banc) (internal quotation omitted).

         Under Rule 24(b)(1)(B), on timely motion, the court has discretion to permit anyone to intervene who “has a claim or defense that shares with the main action a common question of law or fact.” Fed.R.Civ.P. 24(b)(1)(B). When analyzing a motion for permissive intervention under Rule 24(b), the Court must determine (1) whether there is “an independent ground for jurisdiction”; (2) whether the motion is timely; and (3) whether there exists “a common question of law and fact between the movant's claim or defense and the main action.” Freedom from Religion Found., Inc. v. Geithner, 644 F.3d 836, 843 (9th Cir. 2011). “In exercising its discretion over ...


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