Wellington Hills Park, LLC v. Assurance Company of America, No. 2:2010cv00916 - Document 35 (W.D. Wash. 2011)
Court Description: ORDER denying 28 Turnaround Inc.'s Motion to Intervene. Turnaround, Inc. terminated, by Judge James L. Robart.(MD)
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Wellington Hills Park, LLC v. Assurance Company of America Doc. 35 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 WELLINGTON HILLS PARK, LLC, Plaintiff, 11 ORDER DENYING MOTION TO INTERVENE v. 12 13 CASE NO. C10-0916JLR ASSURANCE COMPANY OF AMERICA, 14 Defendant. 15 This matter comes before the court on non-party Turnaround, Inc.’s 16 (“Turnaround”) motion to intervene (Dkt. # 28). Both Plaintiff Wellington Hills Park, 17 LLC (“Wellington”) and Defendant Assurance Company of America (“Assurance”) 18 oppose Turnaround’s motion. (Assurance Resp. (Dkt. # 32); Wellington Resp. (Dkt. # 19 33).) Having reviewed the submissions of the parties and the relevant law, the court 20 DENIES Turnaround’s motion to intervene. 21 22 ORDER- 1 Dockets.Justia.com 1 I. BACKGROUND 2 A. The Instant Lawsuit 3 In this lawsuit, Wellington alleges that Assurance breached an insurance contract 4 by refusing to pay certain “soft cost” losses. (See generally Compl. (Dkt. # 1).) On April 5 14, 2008, Assurance issued a “builder’s risk” insurance policy (the “Policy”) to 6 Wellington for a development project that included the construction of buildings in an 7 office park in Woodinville, Washington (the “Project”). (Vasquez Decl. (Dkt. # 11) Ex. 8 1.) Under the Policy, Assurance agreed to pay claims for certain “soft costs,” defined as 9 costs “which would not have been otherwise incurred except for a delay in the projected 10 completion date of the project.” (Id. at 22-23.) 11 In December 2008, Wellington discovered a failure in a retaining wall at the 12 Project and made a claim under the Policy to cover the resulting losses. (Compl. ¶ 5.) 13 According to Wellington, the wall failure caused the Project to be delayed approximately 14 6.5 months. (Id. ¶ 9.) Assurance determined that the wall failure was covered under the 15 Policy and paid for the costs to repair the damaged retaining wall. (Id. ¶ 7.) Assurance, 16 however, disputed the costs that Wellington attributed to the delay and agreed to pay only 17 $59,219 of Wellington’s $1.7 million “soft costs” claim. (Id. ¶¶ 16, 21.) In June 2010, 18 Wellington filed the instant action, seeking a declaration of the rights and obligations of 19 the parties under the Policy. Wellington alleges that Assurance breached the Policy and 20 violated the Washington Insurance Fair Conduct Act, RCW 48.30.015, when it denied 21 Wellington’s claim for “soft cost” losses. (Id. ¶¶ 23-35.) 22 ORDER- 2 1 B. Turnaround 2 On May 27, 2005, Wellington executed a Deed of Trust in favor of Frontier Bank 3 (“Frontier”), predecessor-in-interest to Union Bank, N.A. (“Union Bank”), in order to 4 secure a construction loan. (Groshong Decl. (Dkt. # 29) Ex. A.) In 2010, Union Bank 5 commenced a nonjudicial foreclosure against Wellington. (Id. Ex. E at 3.) On December 6 21, 2010, the Snohomish County Superior Court found that Wellington was in default on 7 its secured obligations and appointed Turnaround as custodial receiver to protect Union 8 Bank’s interest in the collateral described in the Deed of Trust. (Id. Ex. E at 1-2.) 9 Under the Deed of Trust, Wellington granted Frontier Bank a security interest in 10 certain of Wellington’s personal property. (Id. at 4.) The Deed of Trust defines 11 “personal property” as: 12 13 14 15 all equipment, fixtures, and other articles of personal property now or hereafter owned by Grantor, and now or hereafter attached or affixed to the Real Property, together with all accessions, parts, and additions to, all replacements of, and all substitutions for, any of such property, and together with all issues and profits thereon and proceeds (including without limitation all insurance proceeds and refunds of premiums) from any sale or other disposition of the property. 16 (Id. Ex. A at 7.) Additionally, the Deed of Trust provides that, in the event of 17 Wellington’s default, the lender may “receive and retain the proceeds of any insurance 18 and apply the proceeds to the reduction of the Indebtedness, payment of any lien 19 affecting the Property, or the restoration and repair of the Property.” (Id. at 3.) 20 Turnaround now moves the court to grant it leave to intervene in the instant 21 lawsuit. In its complaint in intervention, Turnaround asks the court for a declaratory 22 judgment that Turnaround is entitled to “all insurance proceeds determined to be owed by ORDER- 3 1 [Assurance]” under the terms of the receivership order and the language of the Deed of 2 Trust. (See Interv. Compl. (Dkt. #28, Attach. 1) ¶¶ 13-18.) 3 4 II. ANALYSIS Turnarounds asserts that it has a right to intervene in this action under Rule 5 24(a)(2). In order to intervene “as of right” under Rule 24(a)(2), an applicant must 6 satisfy each part of a four-part test: 7 8 9 (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. 10 California ex rel. Lockyer v. United States, 450 F.3d 436, 440-41 (9th Cir. 2006) (quoting 11 Sierra Club v. EPA, 995 F.2d 1478 (9th Cir. 1993)). In determining whether to grant a 12 motion for intervention, “courts are guided primarily by practical and equitable 13 considerations, and the requirements for intervention are broadly interpreted in favor of 14 intervenors.” United States v. Alisal Water Corp., 370 F.3d 915, 919 (9th Cir. 2004). 15 The burden, however, is on the proposed intervenor to demonstrate that the conditions for 16 intervention are satisfied. Id. 17 The court finds that Turnaround has not met three of the four factors required for 18 intervention “as of right.” Because neither Wellington nor Assurance disputes that 19 Turnaround’s intervention motion was timely, the court only addresses the last three 20 factors. 21 22 ORDER- 4 1 First, the court concludes that Turnaround has not met its burden to show that it 2 has a significantly protectable interest in this litigation. Turnaround asserts that as 3 custodial receiver it has a protectable interest in any insurance proceeds Wellington may 4 collect. (Mot. at 4-5.) The court finds that this interest does not relate to the subject 5 matter of the instant litigation as required for intervention to be appropriate. The 6 protectable interest requirement is generally satisfied when “the interest is protectable 7 under some law, and . . . there is a relationship between the legally protected interest and 8 the claims at issue.” Arakaki v. Cayetano, 324 F.3d 1078, 1084 (9th Cir. 2003). A non9 speculative, economic interest may be sufficient to support a right of intervention, but 10 that economic interest must be concrete and related to the underlying subject matter of 11 the action. Alisal, 370 F.3d at 919. 12 In Alisal, the Ninth Circuit affirmed the district court’s denial of a motion to 13 intervene as of right in an environmental enforcement action. Id. at 924. The district 14 court had concluded that the intervenors’ sole interest in the pending action was in the 15 prospective collectability of a debt owed by the defendant. Id. at 920. The court 16 determined that this interest did not relate to and was “several degrees removed from the 17 overriding public health and environmental policies” that were at issue in the case. Id. at 18 920 n.3. In particular, the court noted that 19 20 21 a mere interest in property that may be impacted by litigation is not a passport to participate in the litigation itself. To hold otherwise would create a slippery slope where anyone with an interest in the property of a party to a lawsuit could bootstrap that stake into an interest in the litigation itself. 22 ORDER- 5 1 Id. As a result, the court held that intervention was not appropriate because the 2 intervenor’s “interest in the prospective collectability of the debt secured by Alisal’s 3 property is not sufficiently related to the environmental enforcement action brought by the 4 United States.” Id. at 920-21. 5 Here, as in Alisal, the party seeking to intervene has not asserted an interest in the 6 claim at issue in this case. The central issue in the present case involves the 7 interpretation of the Policy contract. Turnaround’s interest, however, centers on the 8 interpretation of the Deed of Trust and on its ability to preserve property that might be 9 subject to the receivership order. As Turnaround notes, the reason it seeks intervention is 10 “to ensure that any such funds [awarded to the Plaintiff] do in fact become receivership 11 property.” (Reply (Dkt. # 34) at 2.) Thus, the court concludes that Turnaround is not 12 entitled to intervene in this case because its interest in the insurance proceeds as 13 receivership property is “not sufficiently related” to Wellington’s breach of contract 14 claim. Alisal, 370 F.3d at 920-21. 15 Second, even if Turnaround could claim a protectable interest in the underlying 16 matter, it cannot show that the disposition of the pending action would “as a practical 17 matter impair or impede its ability to protect that interest.” Lockyer, 450 F.3d at 441. 18 The disposition of the present matter would not impair Turnaround’s ability to assert its 19 rights under the Deed of Trust and the receivership order in the state court proceedings. 20 Thus, Turnaround has not met its burden of establishing that its ability to protect its 21 interest would be impaired by the disposition of this case. 22 ORDER- 6 1 Finally, because Turnaround’s motion to intervene fails on other grounds, the 2 court does not consider adequate representation at length. The court notes, however, that 3 even if the parties to this litigation do not adequately represent Turnaround’s interests, 4 Turnaround can protect its interest as custodial receiver in the state court proceedings. 5 See Alisal, 370 F.3d at 924. 6 7 III. CONCLUSION For the foregoing reasons, the court DENIES Turnaround’s motion to intervene 8 (Dkt. # 28). 9 Dated this 7th day of April, 2011. 10 A 11 12 ____ JAMES L. ROBART United States District Judge 13 14 15 16 17 18 19 20 21 22 ORDER- 7
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