Candelario-Del-Moral v. UBS Financial Services Inc. , 746 F.3d 30 ( 2014 )

United States Court of Appeals
For the First Circuit
No. 13-1765
IN RE DAVID EFRON,
Movant, Appellant.
___________________
MADELEINE CANDELARIO-DEL-MORAL,
Plaintiff, Appellee,
v.
UBS FINANCIAL SERVICES INCORPORATED
OF PUERTO RICO,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Salvador E. Casellas, U.S. District Judge]
Before
Howard, Selya and Lipez,
Circuit Judges.
David Efron pro se.
Judith Berkan, with whom Mary Jo Méndez and Berkan/Méndez were
on brief, for plaintiff-appellee.
Enrique G. Figueroa-Llinás, with whom Christopher N. Manning,
Ashley W. Hardin, and Williams and Connolly LLP were on brief, for
defendant-appellee.
March 21, 2014
SELYA, Circuit Judge. For over four centuries, persons
learned in the law have known that, when litigation is in prospect,
vigilance is good and somnolence is bad. Commentators and courts
have phrased this sentiment in different ways. See, e.g., In re
Wood, [1883] 23 Ch.D. 644 at 653 (Eng.) ("It is a reasonable
presumption that a man who sleeps upon his rights has not got much
right."); Edmund Wingate, Maxims of Reason (1658) ("Laws come to
the assistance of the vigilant, not of the sleepy."). The lesson
to be derived is that "[t]he law ministers to the vigilant not to
those who sleep upon perceptible rights." Puleio v. Vose, 830 F.2d
1197, 1203 (1st Cir. 1987). This appeal illustrates the wisdom of
that statement.
I. BACKGROUND
This appeal has its genesis in the district court's
denial of a motion to intervene. We touch upon the rudiments of
the underlying dispute only so far as necessary to put the appeal
into a workable perspective. Where, as here, a putative intervenor
neglects to submit a proposed pleading with his motion to
intervene, see Fed. R. Civ. P. 24(c), we rely on facts made
manifest in the record as a whole, see B. Fernández & Hnos., Inc.
v. Kellogg USA, Inc., 440 F.3d 541, 543 (1st Cir. 2006). The
reader who thirsts for more exegetic detail may consult the litany
of prior opinions in this case. See, e.g., Candelario-Del-Moral v.
UBS Fin. Servs. Inc. (Candelario II), 699 F.3d 93, 95-99 (1st Cir.
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2012); Candelario-Del-Moral v. UBS Fin. Servs. Inc. (Candelario
III), 290 F.R.D. 336, 338-39 (D.P.R. 2013); Candelario-Del-Moral v.
UBS Fin. Servs. Inc. (Candelario I), 691 F. Supp. 2d 291, 294-300
(D.P.R. 2010).
The putative intervenor, David Efron, and his former
wife, Madeleine Candelario-Del-Moral, have been engaged in
acrimonious and long-running litigation related to their high-
stakes divorce. At one time, Efron had more than $11,000,000 in
accounts at UBS Financial Services Inc. (UBS). In October of 2006,
a Puerto Rico court in which the divorce proceedings were pending
issued an order effectively attaching the funds held in Efron's UBS
accounts. Soon thereafter, the court made a ruling that may or may
not have sufficed to vacate the attachment. See Candelario II, 699
F.3d at 101-04 (describing reasons for uncertainty about the effect
of the ruling). UBS, at Efron's urging, treated the attachment as
void and dispersed the bulk of the funds. By the time the matter
was clarified, there were insufficient funds remaining to satisfy
Candelario's demands.
Candelario took umbrage. She repaired to the federal
district court, invoked diversity jurisdiction, see 28 U.S.C.
§ 1332(a), and sued UBS for negligently releasing the attached
funds. After considerable skirmishing, the district court, ruling
on cross-motions for summary judgment, awarded Candelario nearly
$4,000,000. Candelario I, 691 F. Supp. 2d at 304. Both parties
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appealed. We held that summary judgment was premature and remanded
the case for further proceedings. Candelario II, 699 F.3d at 105-
06, 107.
We digress for a moment. The suit brought by Candelario
against UBS was only one of several cases touching upon the
couple's tangled affairs. Pertinently, Efron filed for bankruptcy
protection in March of 2011. The bankruptcy proceeding is relevant
here because, on July 28, 2011, UBS filed a contingent proof of
claim seeking indemnification for any sums paid to Candelario by
way of judgment or settlement in her tort case against UBS. This
right of indemnification, UBS asserted, flowed from the provisions
of its account agreement with Efron (an agreement that dated back
to 2002).
We return now to the tort case. Following our remand,
Candelario and UBS, at the district court's suggestion, opted to
undertake mediation. On March 4, 2013, UBS sent Efron an
electronic letter informing him that it had scheduled the first
mediation session for the next day and reiterating that it would
seek indemnification if a settlement was achieved. One week later,
Efron — a veteran trial lawyer, proceeding pro se — moved to
intervene as of right in the Candelario-UBS litigation. Candelario
opposed Efron's motion.1
1
In the court below, UBS professed neutrality as to Efron's
motion. In its appellate brief, however, UBS argued that the
district court did not abuse its discretion in denying the motion.
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The district court noted that Efron's motion to intervene
failed to comply with mandatory procedural requirements in that it
was not accompanied by a proposed pleading. See Candelario III,
290 F.R.D. at 340 n.3 (citing Fed. R. Civ. P. 24(c)). Although the
court acknowledged that it could deny the motion on this procedural
ground alone, it nonetheless elected to go further, see id.; see
also Pub. Citizen v. Liggett Grp., Inc., 858 F.2d 775, 783-84 (1st
Cir. 1988) (noting that a district court may elect to entertain a
procedurally deficient motion to intervene), and denied the motion
on the merits, see Candelario III, 290 F.R.D. at 340 n.3. Efron
appeals.
II. ANALYSIS
This appeal raises three issues, which the parties
present in a series of back-and-forth volleys. First, Candelario
claims that we lack appellate jurisdiction to review the denial of
intervention here and now. Second, Efron claims that the district
court improvidently denied the motion to intervene. Third,
Candelario claims that Efron's prosecution of the appeal is
sanctionable. We examine these issues one by one.
A. Appellate Jurisdiction.
We start with the jurisdictional question. For the most
part, interlocutory rulings are not immediately appealable but must
But at oral argument, UBS's counsel seemed to revert to its
original position.
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be held in abeyance until the entry of final judgment. See Torres
v. Puerto Rico, 485 F.3d 5, 8 (1st Cir. 2007); see also 28 U.S.C.
§ 1291. But this general rule, like virtually every general rule,
admits of exceptions. One such exception, established beyond hope
of contradiction, holds that the courts of appeals have
jurisdiction, on an interlocutory basis, to review the denial of
motions to intervene as of right. See, e.g., Pub. Serv. Co. of
N.H. v. Patch, 136 F.3d 197, 204 (1st Cir. 1998).
In federal civil cases, intervention as of right is
governed by the provisions of Federal Rule of Civil Procedure
24(a). That rule authorizes the district court to allow
intervention by any person or entity who, by a timely motion,
"claims an interest relating to the property or transaction that is
the subject of the action, and is so situated that disposing of the
action may as a practical matter impair or impede the movant's
ability to protect its interest, unless existing parties adequately
represent that interest." Fed. R. Civ. P. 24(a)(2). Efron's
motion was styled as a motion to intervene as of right and appears
to make a colorable showing of the elements prescribed by Rule
24(a)(2).
Candelario counters that Efron never adequately
identified how his interest in this case would be impaired by his
exclusion from it. The central premise of her argument is that
this shortcoming, compounded by Efron's failure to annex a proposed
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pleading to his motion, somehow converted his motion to intervene
into an attempt to gain permissive intervention. Building on this
premise, she argues that we lack jurisdiction to review
interlocutory orders denying permissive intervention.
This argument is bootless. Even though the scope of our
jurisdiction to hear interlocutory appeals from the denial of
motions seeking permissive intervention is freighted with
uncertainty, see generally 7C Charles A. Wright and Arthur R.
Miller et al., Federal Practice and Procedure § 1923 (3d ed. 2013),
that uncertainty is immaterial here because the premise on which
Candelario's argument rests is faulty. Efron moved for
intervention as of right; the district court considered his motion
under Rule 24(a)(2); and — timeliness aside — Efron has a colorable
claim to such intervention. The fact that Efron neglected to
conform to some of the procedural requirements for as-of-right
intervention is regrettable, as is his failure to develop his
arguments about his interests in the case. But those failures do
not by some mysterious alchemy transmogrify his motion into one for
permissive intervention.
To sum up, Efron is appealing from the denial of a motion
to intervene as of right. It follows that we have jurisdiction to
hear and determine his interlocutory appeal.
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B. The Merits.
We turn next to Efron's challenge to the district court's
denial of his motion. To succeed on a motion to intervene as of
right, a putative intervenor must demonstrate:
(i) the timeliness of [his] motion to
intervene; (ii) the existence of an interest
relating to the property or transaction that
forms the basis of the pending action; (iii) a
realistic threat that the disposition of the
action will impede [his] ability to protect
that interest; and (iv) the lack of adequate
representation of [his] position by any
existing party.
R & G Mortg. Corp. v. Fed. Home Loan Mortg. Corp., 584 F.3d 1, 7
(1st Cir. 2009). The putative intervenor "must run the table and
fulfill all four of these preconditions." Patch, 136 F.3d at 204.
The first of these elements — timeliness — is the
sentinel that guards the gateway to intervention. The court below
focused the lens of its inquiry on the question of timeliness. See
Candelario III, 290 F.R.D. at 340-42. We emulate that sensible
approach.
In this context, timeliness involves more than merely
checking off the pages of a calendar. But even though multiple
factors may influence the timeliness inquiry, see Banco Popular de
P.R. v. Greenblatt, 964 F.2d 1227, 1231 (1st Cir. 1992); Culbreath
v. Dukakis, 630 F.2d 15, 20-24 (1st Cir. 1980), the most important
factor is the length of time that the putative intervenor knew or
reasonably should have known that his interest was imperilled
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before he deigned to seek intervention. For this purpose, "[t]he
passage of time is measured in relative, not absolute, terms." R
& G Mortg., 584 F.3d at 8. "As a case progresses toward its
ultimate conclusion, the scrutiny attached to a request for
intervention necessarily intensifies." Id. at 7. In the end,
"[t]imeliness is to be gauged from all the circumstances, including
the stage to which the proceedings have progressed before
intervention is sought." Chase Manhattan Bank v. Corporacion
Hotelera de P.R., 516 F.2d 1047, 1049 (1st Cir. 1975) (per curiam).
We review the denial of a motion to intervene as of right
for abuse of discretion. See Negrón-Almeda v. Santiago, 528 F.3d
15, 21 (1st Cir. 2008); Int'l Paper Co. v. Inhabs. of Jay, Me., 887
F.2d 338, 344 (1st Cir. 1989). Within this rubric, we evaluate the
district court's legal rulings de novo and its factual findings for
clear error. See R & G Mortg., 584 F.3d at 7-8. Withal, the
district court's assessment of timeliness vel non "is case-specific
and is entitled to substantial deference." Cadle Co. v.
Schlictmann, Conway, Crowley & Hugo, 338 F.3d 19, 21 (1st Cir.
2003); accord NAACP v. New York, 413 U.S. 345, 366 (1973).
In the case at hand, the district court "appl[ied] the
general standard provided by . . . Rule 24(a)(2)." Int'l Paper,
887 F.2d at 344. The question for us, then, is whether the
district court's decision "so fails to comport with that standard
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as to indicate an abuse of discretion." Id. We answer that
question in the negative.
Efron does not deny that he knew about Candelario's suit
against UBS virtually from its inception. He likewise knew that
the Candelario-UBS litigation had been pending for years and was
well-developed by the time that he moved to intervene. And even
before Candelario's suit began, Efron signed an account agreement
that contained an indemnification clause.
Giving Efron the benefit of the doubt, the district court
found that the very latest that he should have known that his
rights were in jeopardy was July 28, 2011, when UBS filed a
bankruptcy proof of claim for indemnification with respect to,
inter alia, any settlement that it might make with Candelario. See
Candelario III, 290 F.R.D. at 341. This was more than nineteen
months before Efron sought to intervene.
Efron labors to discredit this finding. He tells us that
he thought that Candelario's suit was worthless and would surely
fail at trial. He suggests that, due to this mindset, he did not
realize that his rights were in jeopardy until March 4, 2013 (when
UBS notified him that it might settle).
This suggestion is disingenuous. A party cannot wilfully
blind himself to facts that are perfectly apparent and then claim
that he lacked knowledge of what those facts plainly portended.
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We have seen this movie before: the district court's
unwillingness to accept Efron's excuse for not asserting his rights
at a much earlier date is entirely consistent with our decision in
Narragansett Indian Tribe v. Ribo, Inc., 868 F.2d 5 (1st Cir.
1989). There, the putative intervenors insisted that they had
waited more than thirteen months after they became aware of a
lawsuit "because they believed that the lawsuit was frivolous; in
their estimation, it would never go to trial, but would be
dismissed." Id. at 7. We concluded that such a flimsy "excuse
simply will not wash." Id. That reasoning is equally applicable
here.
We have said before, and today reaffirm, that "[p]arties
having knowledge of the pendency of litigation which may affect
their interests sit idle at their peril." Id. Settlements are
commonplace in civil cases; and Efron, an experienced litigator,
knew (or, at least, should have known) from the time that he
learned of Candelario's suit that settlement was a possibility.2
He also knew (or, at least, should have known) that in the event it
made any payment to Candelario, UBS would look to him for
indemnification. Nevertheless, he chose to sit on his hands for
many months without seeking to join the fray. When he finally
2
Indeed, in our earlier opinion, we specifically admonished
"that this [was] a case best resolved by settlement." Candelario
II, 699 F.3d at 107 (internal quotation mark omitted). That
opinion was published more than four months before Efron moved to
intervene.
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decided to act, the time for action had passed. The district court
found this lengthy delay inexcusable, and so do we.
Of course, the district court also weighed other factors
that might potentially bear on the timeliness inquiry. For
example, the court considered the harm that might result to Efron
from a denial of his motion to intervene. It concluded that Efron
would suffer no significant prejudice from the denial of
intervention because any settlement or judgment in the Candelario-
UBS litigation would not preclude him either from challenging
Candelario's claims to the marital estate or from raising defenses
against UBS's claims of indemnification. See Candelario III, 290
F.R.D. at 342.
Although the court was correct when it said that a denial
of intervention would not be a bar to Efron's subsequent raising of
defenses, we are skeptical about its conclusion. Efron obviously
would be better off if he could defend directly against
Candelario's claims in the pending litigation. But any such harm
is largely attributable to Efron's lollygagging and, thus, Efron is
in a peculiarly poor position to grouse about it. See R & G
Mortg., 584 F.3d at 9 ("For obvious reasons, a preventable hardship
weighs less heavily in the balance of harms."). In all events, we
agree with the district court that any prejudice to Efron from the
denial of intervention is outweighed by the prejudice that would
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inure to Candelario if intervention were granted at this late date.
See Candelario III, 290 F.R.D. at 342.
In performing its analysis, the district court also found
that there were no special circumstances that militated in favor of
allowing intervention. See id. Efron makes a feeble attempt to
impugn this finding, arguing that UBS's March 4 letter "is a
special circumstance of actual notice which operates to excuse any
dilatory conduct." Appellant's Br. at 12. But this riposte
amounts to nothing more than smoke and mirrors; it conveniently
overlooks the district court's supportable determination that Efron
was on notice at least nineteen months prior to his receipt of the
March 4 letter that UBS might settle with Candelario. Thus, the
letter cannot plausibly be said to constitute a special
circumstance supporting intervention.
To say more on this issue would be pointless. Efron knew
(or, at least, should have known) that Candelario's suit against
UBS threatened his financial interests. That knowledge called for
vigilance on his part, but instead of exercising vigilance, Efron
chose to sleep upon his rights. Under these circumstances, the
district court acted well within the ambit of its discretion both
in deeming Efron's motion to intervene untimely and in refusing to
grant it. Cf. United States v. Metro. Dist. Comm'n, 865 F.2d 2, 5
(1st Cir. 1989) (explaining that "[t]he district court is in the
best position to judge the impact of intervention at this time in
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this complex ongoing litigation that has already consumed years of
[its] attention").
C. Sanctions.
After Efron appealed, Candelario moved for sanctions on
the ground that the appeal was frivolous. A duty panel of this
court referred the motion to this merits panel for disposition. We
now address that motion.
Candelario's motion for sanctions invokes Federal Rule of
Appellate Procedure 38 and its counterpart, 1st Cir. R. 38.0. Rule
38 affords the court of appeals discretion to "award just damages
and single or double costs to the appellee" if the court
"determines that an appeal is frivolous." Fed. R. App. P. 38. An
appeal is frivolous if the arguments in support of it are wholly
insubstantial and the outcome is obvious from the start. See
Cronin v. Town of Amesbury, 81 F.3d 257, 261 (1st Cir. 1996) (per
curiam). Put another way, an appeal is frivolous "when the
appellant's legal position is doomed to failure — and an
objectively reasonable litigant should have realized as much from
the outset." Toscano v. Chandris, S.A., 934 F.2d 383, 387 (1st
Cir. 1991).
By dint of judicial interpretation, the scope of Rule 38
has been enlarged to reach beyond frivolousness simpliciter. See,
e.g., In re Simply Media, Inc., 583 F.3d 55, 56-57 (1st Cir. 2009)
(per curiam). Thus, we have sanctioned various shortcomings above
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and beyond frivolousness under the aegis of Rule 38. See, e.g.,
Thomas v. Digital Equip. Corp., 880 F.2d 1486, 1491 (1st Cir. 1989)
(imposing Rule 38 sanctions for "blatant misrepresentations in [an]
appellant's brief" (internal quotation mark omitted)). So, too,
Local Rule 38.0 authorizes sanctions not only for frivolous appeals
but also for vexatious litigation conduct. See Jasty v. Wright
Med. Tech., Inc., 528 F.3d 28, 34 (1st Cir. 2008).
Candelario serves up a menu of grievances. To whet our
appetite, she lambastes Efron's noncompliance with the briefing
schedule. As a side dish, she calumnizes a number of statements
contained in Efron's appellate filings as false and misleading.
The main course is her insistence that the appeal itself has been
frivolous from the start.
We can quickly dispose of her first argument. At the
time that Candelario moved for sanctions, Efron's brief was one
week overdue. While an appellant who files his briefs out of time
risks dismissal of his appeal, see 1st Cir. R. 45.0, the untimely
filing in this case occasioned only a brief delay. To impose
sanctions would be tantamount to using an elephant gun to kill a
fly.
The claimed misrepresentations present a different type
of problem. An appellate court lacks the factfinding capability of
a trial court; and we are not prepared to choose, on this algid
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record, between the parties' wildly conflicting versions of the
truth.
This brings us to the principal thrust of Candelario's
argument: her assertion that the appeal lacked any vestige of merit
and should not have been taken at all. This argument presents a
closer question.
Given his protracted delay, Efron's case for intervention
was manifestly weak. But "weak" is not synonymous with
"frivolous." "[A]n appeal can be weak, indeed almost hopeless,
without being frivolous . . . ." Lallemand v. Univ. of R.I., 9
F.3d 214, 217-18 (1st Cir. 1993). In the last analysis, we think
that the case-specific nature of timeliness determinations counsels
against saying that Efron "had no legitimate ground for pursuing
this appeal." E.H. Ashley & Co. v. Wells Fargo Alarm Servs., 907
F.2d 1274, 1280 (1st Cir. 1990). We therefore decline Candelario's
invitation to sanction Efron simply for prosecuting the appeal.3
Let us be perfectly clear. Our denial of sanctions
should not be taken as an endorsement of Efron's decision to
3
In her brief on appeal, Candelario endeavors to expand the
dimensions of her motion to include, as additional grounds for
sanctions, 28 U.S.C. § 1927 and this court's inherent power. While
we may have discretion to allow such an expansion, it would be
pointless to do so here. The same reasons that lead us to deny
sanctions under Rule 38 are sufficient to ground a denial of
sanctions under section 1927 and this court's inherent power.
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appeal. Although we have determined that Efron did not cross the
line by appealing, he came perilously close to doing so.4
III. CONCLUSION
We need go no further. For the reasons elucidated above,
the judgment of the district court is affirmed and Candelario's
motion for appellate sanctions is denied.
So Ordered. Costs shall be taxed against the appellant.
4
We add, moreover, that neither Efron nor Candelario gains
any advantage from the incessant hurling of epithets. Rancor and
petulance are not attractive qualities, and giving vent to them
rarely if ever advances a litigant's cause.
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