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Palaniappan v. Gilbert Hospital LLC

United States District Court, D. Arizona

March 28, 2019

Nat Palaniappan, Plaintiff,
Gilbert Hospital LLC, et al., Defendants.


          Honorable John J. Tuchi, United States District Judge.

         At issue is Wesco Insurance Company's (“Movant”) Motion to Intervene (Doc. 88, Mot.), to which Plaintiff filed a Response (Doc. 89, Resp.) and Movant replied (Doc. 90, Reply). Defendant Gilbert Hospital did not file a responsive brief, and thus neither takes a position opposing nor supporting the Motion. Defendant Principal Financial Group has previously been dismissed from this action. (Doc. 96.)

         I. BACKGROUND

         Plaintiff filed suit against his employer, Defendant Gilbert Hospital (“Defendant”) claiming breach of fiduciary duty under ERISA. (Doc. 45, Am. Compl.) The Court has summarized the relevant factual background in other Orders, such as the Order granting Defendant Principal Financial Group's Motion to Dismiss (Doc. 96 at 1-3.) The Court will not restate the history behind Plaintiff's claims here.

         Movant is the insurance provider for Defendant's parent company. (Mot. at 2.) Pursuant to their insurance policy, Movant retained defense counsel on behalf of Defendant in this matter. (Mot. at 2.) Defendant then filed a Notice of Involuntary Bankruptcy Case Filing on May 17, 2018. (Doc. 74.) Movant's appointed counsel, Mr. Daniel Garrison, subsequently moved to withdraw from this case pursuant to local Rule of Civil Procedure 83.3(b)(2). (Doc. 76.) The Court granted Mr. Garrison's Motion to Withdraw on June 7, 2018, and set a deadline of July 13, 2018, for Defendant to retain new counsel. (Doc. 79.)

         On July 25, 2018, Movant filed a Motion to Intervene, alleging that when Movant attempted to retain new counsel before the Court's deadline, Defendant's receiver refused to cooperate. (Mot. at 2.) Movant alleges that “[t]he receiver indicated it had no interest in a defense unless [Movant] confirmed unreserved coverage for both defense or immunity; otherwise, Plaintiff could obtain judgment and seek a portion of liquidated assets in the receivership proceedings.” (Mot. at 2.) Movant now seeks to intervene for two reasons: “(a) to obtain a declaration that the receiver's refusal to consent to defense under reservation is a breach of the cooperation clause [of parties' insurance coverage agreement], or alternatively (b) to protect its interests in the litigation by mounting a defense against claims made by Plaintiff against [Defendant.]” (Mot. at 2.)


         A. Intervention as a Matter of Right

         Federal Rule of Civil Procedure 24(a) permits intervention as a matter of right on a timely motion. While the Ninth Circuit Court of Appeals construes Rule 24(a) liberally in favor of potential intervenors, the applicant for intervention bears the burden of demonstrating that he has satisfied the elements for intervention. See Ctr. for Biological Diversity v. U.S. Bureau of Land Mgmt., 266 F.R.D. 369, 372 (D. Ariz. 2010); see also Prete v. Bradbury, 438 F.3d 949, 954 (9th Cir. 2006). Applicants are required to satisfy a four-part test for intervention by right:

(1) the motion must be timely; (2) the applicant must claim a “significantly protectable” interest relating to the property or transaction which is the subject of the action; (3) the applicant must be so situated that the disposition of the action may as a practical matter impair or impede its ability to protect that interest; and (4) the applicant's interest must be inadequately represented by the parties to the action.

United States v. Aerojet Gen. Corp., 606 F.3d 1142, 1148 (9th Cir. 2010) (quoting Cal. ex rel. Lockyer v. United States, 450 F.3d 436, 440 (9th Cir. 2006)). “Failure to satisfy any one of the requirements is fatal to the application . . . .” Perry v. Proposition 8 Official Proponents, 587 F.3d 947, 950 (9th Cir. 2009) (citation omitted). In determining whether the requirements are met, “courts are guided primarily by practical and equitable considerations, and the requirements for intervention are broadly interpreted in favor of intervention.” United States v. Alisal Water Corp., 370 F.3d 915, 919 (9th Cir. 2004).

         B. Permissive Intervention

         Federal Rule of Civil Procedure 24(b) governs permissive intervention. An applicant must demonstrate: “‘(1) independent grounds for jurisdiction; (2) [that] the motion is timely; and (3) [that] the applicant's claim or defense, and the main action, have a question of law or a question of fact in common.'” S. Cal. Edison Co. v. Lynch, 307 F.3d 794, 803 (9th Cir. 2002) (quoting United States v. City of L.A., 288 F.3d 391, 403 (9th Cir. 2002)). Even where those three elements are satisfied, however, the district court retains the discretion to deny permissive intervention. Id. (citing Donnelly v. Glickman, 159 F.3d 405, 412 (9th Cir. 1998)). In exercising its discretion, a court must consider whether intervention will unduly delay or prejudice the original parties and should consider whether the applicant's interests are adequately represented by the existing parties and judicial economy favors intervention. Venegas v. Skaggs, 867 F.2d 527, 530-31 (9th Cir. 1998).

         III. ...

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