Unpublished Disposition, 848 F.2d 1242 (9th Cir. 1988)

MEMORANDUM^* 

Appellant John Olagues appeals from the district court's order denying his motion to intervene in a private action filed by the plaintiffs alleging securities fraud, RICO violations, breach of contract, fraud, recission and breach of fiduciary duty. Olagues sought to intervene to protect his alleged interest in $2.85 million awarded to the plaintiffs in this matter by order of the district court for the Southern District of New York (district court in New York).

* On October 26, 1981, the Securities and Exchange Commission (SEC) filed an action in the district court in New York, SEC v. Certain Unknown Purchasers of Santa Fe Options, et al., No. 81 Civ. 6553 WCC, alleging violations of federal securities laws resulting from trading in Santa Fe International Corporation (Santa Fe) stock on the eve of the announcement of its merger with Kuwait Petroleum Company. After filing the action, the SEC obtained a preliminary injunction prohibiting the transfer of funds from the New York trading accounts of certain option purchasers. The accounts contained approximately six million dollars in profits on anonymous trades that had been made through Swiss bank accounts. The Swiss banks refused to identify their customers. It was not until May 1984, after treaty requests and attempts by the customers to block the SEC efforts to learn their identities, that the names of the unknown purchasers were revealed.

The plaintiffs in the case before us are options market makers on the Pacific Stock Exchange who lost in excess of four million dollars when the news of the merger between Santa Fe and Kuwait Petroleum became public. They filed several private actions in 1982 and 1983 in the district court for the Northern District of California (district court in San Francisco) against "certain unknown purchasers." These unknown purchasers were described in the same manner as the SEC had referred to them in the action in the district court in New York. The plaintiffs obtained a default judgment against the unknown purchasers and filed the judgment in New York. The plaintiffs then levied writs of execution against the frozen funds in New York.

When the names of the defendants were revealed in the SEC action in May, 1984, the plaintiffs filed this separate action. After discovery took place, the parties in this matter and the SEC action entered into settlement negotiations. In February 1986, a settlement agreement was reached in the SEC action which also affected this action. Approximately five million dollars of the frozen funds were placed into a disgorgement claims fund which is being administered by a receiver and supervised by the SEC and the judge who presided over the SEC action in the district court in New York. In addition, approximately $2.85 million was released from the frozen accounts and paid directly to the plaintiffs in this action, and to the plaintiffs in a similar action pending in the Southern District of New York, in return for releases and dismissals of their private actions and releases of the writs of execution on the New York frozen funds. The remainder of the frozen funds were released to the defendants. This settlement was approved in a written order by the district court in New York in the SEC action.

Olagues alleges that he held call options for Santa Fe stock and was injured by the defendants' actions which violated federal securities laws. Olagues objected to the claims procedure set up by the district court in New York claiming that it wrongly excluded him from recovery. He also sought to intervene in the SEC action. The district court in New York rejected Olagues' claim and denied his motion to intervene. Olagues appealed the decision to the Second Circuit.

The Second Circuit, in a written opinion, affirmed the district court decision to deny intervention. SEC v. Certain Unknown Purchasers of Common Stock, 817 F.2d 1018, 1021-22 (2d Cir. 1987), cert. denied, 108 S. Ct. 1013 (1988). The Second Circuit also determined that the district court did not abuse its discretion in approving the settlement agreement which resulted in the plaintiffs receiving the $2.85 million. Id. at 1022.

At the same time Olagues was challenging the settlement order in the SEC action in the district court in New York, he moved to intervene in the action before us. Olagues filed his first motion on March 6, 1986. In that motion, Olagues contended that if the $2.85 million fund set up by the district court in New York was disposed of without his participation, he would be unable to protect his interest in those funds.

On April 15, 1986, the district court in San Francisco denied the motion to intervene without prejudice. At the same time, the district court ordered that if Olagues filed a second motion to intervene, he must "(a) state with particularity how intervention in the present action would preserve his interest in the alleged $2.8 million fund in the Southern District of New York; and (b) file with this court a true and correct copy of the 'Order Establishing a Claims Fund and Claims Procedures' in Securities & Exchange Commission v. Unknowns, No. 81 Civ. 6553 WCC (S.D.N.Y.)."

On May 1, 1986, Olagues renewed his motion to intervene. This motion was denied on July 30 because Olagues' appeal of the denial of the initial motion to intervene deprived the district court of jurisdiction. On January 26, 1987, Olagues filed a motion pursuant to Fed. R. Civ. P. 60(b) with the district court. On March 20, 1987, the district court granted the Rule 60(b) motion and ordered Olagues to refile his motion to intervene. Olagues filed his renewed motion to intervene on March 25, 1987.

In his renewed motion to intervene, Olagues reiterated his claim that he could only protect his interest in the $2.85 million awarded to the plaintiffs by the district court in New York by intervening in this action. Olagues contended that his only other course would be to sue the defendants himself which would be impractical because (1) the defendants were mostly foreigners, which would make jurisdiction and enforcement of a judgment difficult; (2) the SEC had given two million dollars back to the defendants which he was "sure is 'gone forever; ' " and (3) there might be a limit on damages equal to the illicit profits, thereby precluding a separate suit.

On April 1, 1987, the district court in San Francisco dismissed the underlying action with prejudice after all the parties had filed stipulations requesting dismissal, as required by order of the district court in New York.

On April 30, 1987, the district court in San Francisco issued an order denying the motion to intervene. In denying the motion to intervene in this action, the court stated that if Olagues wanted "to file another action against--personally against [the defendants], maybe you can do that, if you can find him." The district court held that " [t]here's nothing to intervene in. The case is dismissed. I have no fund--there was only one fund, and Judge Connor laid down the rules about getting into that fund and apparently you didn't qualify; so I just don't have that money."

II

Olagues contends that the district court erred when it denied his motion to intervene on the ground that there was no fund before the court. We review de novo the denial of a motion to intervene pursuant to Fed. R. Civ. P. 24(a) (2), however, the issue of timeliness is reviewed for abuse of discretion. County of Orange v. Air California, 799 F.2d 535, 537 (9th Cir. 1986), cert. denied, 107 S. Ct. 1605 (1987).

Olagues argues that the district court could not deny his motion on the grounds that there was no fund before the court because the Notes of Advisory Committee on Rules states that

[i]f an absentee would be substantially affected in a practical sense by the determination made in an action, he should as a general rule, be entitled to intervene, and his right to do so should not depend on whether there is a fund to be distributed or otherwise disposed of.

Fed. R. Civ. P. 24 advisory committee's note. The district court in San Francisco did not err in its ruling.

Olagues has failed to show how his alleged interest in the $2.85 million would be "substantially affected" by the dismissal of this action. In addition, Olagues has failed to show "an interest relating to the property or transaction which is the subject of the action." Fed. R. Civ. P. 24(a) (2). Olagues seeks to intervene only to affect the distribution of the $2.85 million ordered by the district court in New York. At no time did the court in this action have jurisdiction over the $2.85 million dollars. That money was in the control of the district court in New York. The district court in San Francisco does not have the ability to affect the distribution decisions made by that court. See e.g., Dennison v. City of Los Angeles, 658 F.2d 694, 695 (9th Cir. 1981) (consent decrees are not subject to collateral attack). The proper place to challenge the distribution was in the district court in New York.

Olagues' only purpose in moving to intervene in this action was to affect the distribution of the $2.85 million. Because that goal could not be achieved through intervention, denial of his request was proper.

The appellees request sanctions under Fed. R. App. P. 38, contending that Olagues' appeal is frivolous. Under Rule 38, " [i]f a court of appeals shall determine that an appeal is frivolous, it may award just damages and single or double costs to appellee." We have held that sanctions are appropriate when the appellant's arguments are wholly without merit and the result of an appeal is obvious. Mir v. Little Co. of Mary Hosp., No. 87-6269, slip op. at 4282-83 (9th Cir. April 13, 1988) (citing Grimes v. Commissioner, 806 F.2d 1451, 1454 (9th Cir. 1986) (per curiam)). We agree with the appellees that this appeal is without merit. Accordingly, attorney's fees in the amount of $1500 and double costs are awarded to the appellees.

AFFIRMED