Piedmont Paper Products, Inc. v. American Financial Corp.

89 F.R.D. 41, 32 Fed. R. Serv. 2d 247, 1980 U.S. Dist. LEXIS 16192
CourtDistrict Court, S.D. Ohio
DecidedDecember 1, 1980
DocketNo. C-1-80-236
StatusPublished
Cited by10 cases

This text of 89 F.R.D. 41 (Piedmont Paper Products, Inc. v. American Financial Corp.) is published on Counsel Stack Legal Research, covering District Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Piedmont Paper Products, Inc. v. American Financial Corp., 89 F.R.D. 41, 32 Fed. R. Serv. 2d 247, 1980 U.S. Dist. LEXIS 16192 (S.D. Ohio 1980).

Opinion

OPINION

DAVID S. PORTER, Senior District Judge:

The facts in this derivative and class action suit by American Financial Corporation shareholders have already been adequately set forth in our memorandum of decision and order of May 6, 1980 (doc. 11). Before the Court at this time is shareholder J. W. Brown’s motion to intervene as a party-defendant and counterclaimant (doc. 13). This motion is the subject of supporting, opposing and reply memoranda (docs. 15, 30, 34). We note that only the plaintiffs oppose intervention.

The applicant desires to intervene on behalf of himself and on behalf of a class of “independent, nonaligned minority shareholders of [AFC]” (doc. 13). He asserts that he and the class have an interest relating to the common stock of AFC which is the subject of this action; that disposition of this litigation will impair or impede his ability, and that of the class, to protect their interests in the AFC common stock owned by them; that the plaintiffs’ interests and motives are not in accord with the views of nearly all other minority shareholders of AFC and that the plaintiffs therefore cannot adequately represent that class of shareholders; that the individual defendants are precluded by their personal interests in the incentive plans opposed by the plaintiffs from impartially presenting the views of disinterested shareholders such as the applicant. He further asserts that the defenses and counterclaims he brings on behalf of himself and the class he seeks to represent have questions of law and fact common to the issues established by the plaintiffs’ complaint.

In opposition to the motion, the plaintiffs assert first of all that the applicant’s proposed answer fails to meet the requirement of Rule 24(c) of “a pleading setting forth the claim or defense for which intervention is sought” because it does not address the amended complaint filed after the motion was made. Because a new proposed answer, addressing the amended complaint has been submitted (see doc. 34), this objection has been made moot. We note also that there is nothing in Rule 24(c) that obligates an applicant for intervention to amend his proposed defenses and counterclaims while the motion to intervene is still pending. Plaintiffs’ reliance upon Gabauer v. Woodcock, 425 F.Supp. 1 (E.D.Mo.1976), aff’d in part and rev'd in part on other grounds, 594 F.2d 662 (8th Cir. 1975), is misplaced. The motion to intervene in Gabauer was accompanied not by a proposed answer and counterclaim, as here, but instead by a bare motion to dismiss. The purpose of the accompanying pleading is to inform the parties and the Court of the position that will be asserted by the appli[43]*43cant if intervention is allowed. See Alexander v. Hall, 64 F.R.D. 152 (D.S.C.1974). We believe that this purpose has been full-filled in this case by the pleadings submitted by the applicant.

The plaintiffs’ next objection is that the application to intervene was untimely because premature. With the possible exception of an application to intervene in a case that has not yet been commenced, we do not believe that an application to intervene can be made too early. The requirement that an application be timely made was inserted in Rule 24 to prevent unfair prejudice and delay in the disposition of a matter before the court. In the procedural posture of this case, timeliness depends primarily “upon the readiness of the case for trial.” Alexander v. Hall, 64 F.R.D. 152, 157 (D.S.C.1974); see Penick v. Columbus Education Association, 574 F.2d 889 (6th Cir. 1978); Skillken and Co. v. City of Toledo, 528 F.2d 867 (6th Cir. 1975). Accordingly, plaintiffs’ objection of prematurity is rejected.

To intervene .of right, an applicant must prove that:

(1) He has an interest relating to the property or transaction that is the subject of the action;
(2) He is so situated that the disposition of the action may, as a practical matter, impair or impede his ability to protect that interest; and
(3) His interest is not adequately protected by the existing parties.

Fed.R.Civ.P. 24; Blanchard v. Johnson, 532 F.2d 1074 (6th Cir. 1976), cert. denied 429 U.S. 834, 97 S.Ct. 100, 50 L.Ed.2d 100 (1977); Afro-Amcrican Patrolman’s League v. Duck, 503 F.2d 294 (6th Cir. 1974). The applicant here seeks intervention for two distinct purposes, to join in defending the action and to assert certain counterclaims against the plaintiff. We will examine these two distinct purposes separately.

It is undisputed that the applicant here has, with respect to his desire to contribute to the defense of this action, an interest relating to the transaction which is the subject of this action. It is clear that he has voted a certain way and possesses an interest in maintaining the efficacy of his vote. He also asserts an interest in maintaining the current management of AFC in control. However, the applicant’s counterclaims do not pertain to the stockholders meeting that is the subject of this action, but rather to the bringing of this action itself. The applicant’s interest in recovering damages for the bringing of this action is not an interest relating to the subject matter of this action. Therefore, the applicant here cannot claim a right to intervene with regard to his counterclaim.

Plaintiffs do not assert, with respect to the applicant’s intervention as a defendant, that the applicant’s ability to protect that interest will not be impaired or impeded by disposition of this action. Plaintiffs do, however, object that the applicant’s ability to protect the interests asserted by his counterclaims would not be impaired or impeded by disposition of this action because the relief requested by the applicant differs from the subject matter of this action. While we cannot say that a determination of this action favorable to the plaintiffs would not make assertion of the applicant’s counterclaims more difficult, we believe that the difference asserted by the plaintiffs goes more strongly toward the first element for intervention of right discussed in the preceding paragraph. Our disposition of that claim makes it unnecessary for us to determine whether or not the applicant’s ability to protect the interests asserted by his counterclaims will be impeded or not.

As to the adequacy of representation by current parties, it is clear that the plaintiffs’ interests are adverse to the applicant’s. It is also clear that neither the corporate nor the individual defendants have any interest in asserting the counterclaims advanced by the applicant. As to the applicant’s defense of this action, however, it appears that his interest and the interests of the class he seeks to represent will be adequately protected by the defendants who are already parties to this action. [44]*44We note first of all that, in this Circuit, the applicant has the burden of proof on this issue. Blanchard v. Johnson, 532 F.2d 1074 (6th Cir. 1976), cert. denied 429 U.S. 834, 97 S.Ct. 100, 50 L.Ed.2d 100 (1977);

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89 F.R.D. 41, 32 Fed. R. Serv. 2d 247, 1980 U.S. Dist. LEXIS 16192, Counsel Stack Legal Research, https://law.counselstack.com/opinion/piedmont-paper-products-inc-v-american-financial-corp-ohsd-1980.