E-Alert Case Updates
Maryland Federal Court Considers Rule 24 Motions to Intervene by Lead Paint Plaintiffs
CX Reinsurance Company Ltd. v. Leader Realty Company, et al.
Available at http://www.mdd.uscourts.gov/recent-opinions
In CX Reinsurance Company Ltd. v. Leader Realty Company, et al., the District Court for the District of Maryland considered motions to intervene filed by Natasha Johnson and Katiara Harper (collectively, “Movants”). At issue in the federal case, was an action for rescission and damages, filed by CX Reinsurance Company (“CX Re”), based on its claim that Defendants made material misrepresentations in their application for insurance. In a separate state court personal injury lawsuit, the Movants alleged that they resided in properties, owned by Defendants, where they suffered lead paint poisoning. In their motions to intervene, Movants indicated that, if judgments were entered against Defendants in the state forum, they would look to Defendants’ liability insurance policy, issued by CX Re for satisfaction of their judgments. The Movants asserted that they were entitled to intervene as of right under Federal Rule of Civil Procedure 24(a)(2), or in the alternative, they requested permissive intervention under Rule 24(b).
Plaintiff and Defendant opposed the Movants’ motions to intervene as of right. Only Plaintiff, however, opposed the Movant’s request to intervene under any authority, including permissive intervention under Rule 24(b).
Rule 24(a)(2) provides:
To intervene as a matter of right, under Rule 24(a)(2), the moving party must show that: (1) it has an interest in the subject matter of the action, (2) disposition of the action may practically impair or impede the movant’s ability to protect that interest, and (3) that interest is not adequately represented by the existing parties. Additionally, the Fourth Circuit states that a contingent interest in the outcome of other pending litigation constitutes a “significantly protectable interest that satisfies Rule 24(a)(2).” Teague v. Bakker, 931 F.2d 259 (4th. Cir. 1991).
The District Court found that the Movants failed to prove adequately the second required element. If CX Re prevailed in its action for rescission against Defendants (such that Defendants lost insurance coverage), the Movants would be forced to satisfy any state court judgment against the Defendants from assets other than the CX Re insurance policy. In Teague, the Fourth Circuit emphasized that “the existence and amount of such [other] assets are questionable” due to the Teague Defendants’ poverty. Here, the Movants made no similar showing as to Defendants’ poverty or their lack of assets other than the CX Re insurance policy. Therefore, the District Court denied intervention as of right.
Permissive intervention, under Rule 24(b) provides:
Here, the “common question of law or fact” was whether Defendants made material misrepresentations on applications for liability insurance. If the Court found that Defendants did in fact make material misrepresentations, then CX Re would be entitled to rescission and neither Defendants nor Movants would be able to benefit from liability coverage (assuming that Movants’ state law claims fell within the scope of the policy’s liability coverage). Further, the Court could not discern any delay or prejudice that would result from Movants’ intervention. Accordingly, Movants’ motions to intervene were granted under Rule 24(b).
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