Michael A. Scott v. Tim Bond ( 2018 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-2288
MR. MICHAEL A. SCOTT, Intervenor/Plaintiff,
Potential Intervenor - Appellant,
v.
TIM BOND, on his own behalf and on behalf of all others similarly situated,
Plaintiff - Appellee,
and
CRICKET COMMUNICATIONS, LLC,
Defendant - Appellee,
and
AT&T INC,
Defendant.
Appeal from the United States District Court for the District of Maryland, at Baltimore.
Marvin J. Garbis, Senior District Judge. (1:15-cv-00923-MJG)
Argued: March 20, 2018 Decided: May 17, 2018
Before DUNCAN, KEENAN, and THACKER, Circuit Judges.
Affirmed by unpublished opinion. Judge Keenan wrote the opinion, in which Judge
Duncan and Judge Thacker joined.
ARGUED: Martin Eugene Wolf, GORDON, WOLF & CARNEY, CHTD, Towson,
Maryland, for Appellant. Charles Alan Rothfeld, MAYER BROWN LLP, Washington,
D.C.; Cory Lev Zajdel, Z LAW, LLC, Timonium, Maryland, for Appellees. ON BRIEF:
Benjamin H. Carney, GORDON, WOLF & CARNEY, CHTD, Towson, Maryland, for
Appellant. Archis A. Parasharami, Matthew A. Waring, MAYER BROWN LLP,
Washington, D.C., for Appellee Cricket Communications, LLC.
Unpublished opinions are not binding precedent in this circuit.
2
BARBARA MILANO KEENAN, Circuit Judge:
This appeal involves two parallel class actions alleging claims that arose from a
merger between Cricket Communications, LLC (Cricket), and AT&T Inc. (AT&T). In
early 2015, plaintiff Tim Bond filed the present class action in the district court alleging
state-law claims against Cricket on behalf of a nationwide class. 1 In his complaint, Bond
asserted that the merger rendered certain Cricket cellular phones obsolete. Later that
year, intervenor Michael Scott filed a separate class action in Maryland state court arising
from the same facts, alleging a single claim against Cricket under the federal Magnuson-
Moss Warranty Act (the Warranty Act, or the Act), 15 U.S.C. §§ 2301–2312.
In February 2017, Bond and Cricket stipulated to amend Bond’s complaint in the
district court to add an essentially identical Warranty Act claim. Six months later, after
the parties in the Bond case notified the district court that they had reached a proposed
settlement, Scott moved to intervene in that case under Federal Rule of Civil Procedure
24. The district court denied Scott’s motion as untimely, and Scott now appeals. 2
We address the question whether the district court abused its discretion in denying
Scott’s motion to intervene, which was filed about six months after Scott knew or should
have known that the Warranty Act claims in the Bond case replicated his own suit. We
1
Bond filed his initial complaint against AT&T, but later substituted Cricket as
the defendant.
2
We have jurisdiction to consider Scott’s appeal, because we treat the denial of a
non-party’s motion to intervene as an appealable final judgment. Bridges v. Dep’t of Md.
State Police, 441 F.3d 197, 207 (4th Cir. 2006).
3
conclude that the district court did not abuse its discretion, and we affirm the court’s
order denying Scott’s motion.
I.
Bond filed his class action complaint in the district court in March 2015, alleging
that Cricket sold Code Division Multiple Access (CDMA) cellular phones after Cricket
merged with AT&T in 2013. Claiming that Cricket should have known that the CDMA
phones would lose functionality on AT&T’s network after the merger, Bond alleged
various Maryland state-law claims against Cricket, including breach of certain warranties.
The district court referred those claims to arbitration in January 2016.
In September 2015, Scott filed his own putative class action in Maryland state
court based on the same facts, seeking to represent only Maryland citizens and alleging
only a single claim, namely, a violation of the Warranty Act. The Warranty Act permits
a consumer under certain circumstances to bring a class action in state or federal court
alleging a breach of state-law warranties. See 15 U.S.C. § 2310(d); Scott v. Cricket
Commc’ns, LLC, 865 F.3d 189, 192 (4th Cir. 2017).
In October 2015, Cricket removed Scott’s case from state court to the district
court. 3 One month later, Cricket filed a Notice of Related Case in the Scott case,
designating the Bond case as a related case on the Scott docket (the Notice). Cricket
informed the district court in the Notice that the allegations in both cases “arise from the
3
The two federal proceedings were assigned to different district court judges.
4
same events,” namely, Cricket’s alleged knowledge that the merger with AT&T
eventually would render Cricket’s CDMA phones obsolete. Cricket also stated in the
Notice that Scott had alleged only a Maryland class, while Bond had alleged a nationwide
class. Cricket set forth the relationship between the claims in the two cases as follows:
The Bond complaint asserts a claim for breach of implied warranty, as well
as other Maryland state-law claims. The Scott complaint asserts a single
cause of action under the [ ] Warranty Act, and that claim in turn rests on
allegations that Cricket breached express and implied warranties in
violation of Maryland law.
In February 2017, the parties in the Bond case filed a joint stipulation to permit
Bond to amend his complaint to add a Warranty Act claim (the second amended
complaint). Shortly thereafter, in March 2017, the district court allowed Bond to file the
second amended complaint. Both the Scott complaint and the second amended Bond
complaint now contain allegations that the Warranty Act imposes civil liability on any
“warrantor” for “failing to comply with any obligation under a written warranty and/or
implied warranty.” Both complaints also identify Cricket as a “warrantor” under the
Warranty Act, and each action presently states a claim that Cricket’s alleged breaches of
certain express and implied warranties violated the Act.
On August 11, 2017, Cricket sent a letter to the district court in the Bond case
notifying the court that the parties had reached a proposed settlement in that case, and
stating that the settlement also would encompass the claims asserted in the Scott case.
5
However, Cricket’s letter to the district court did not supply any other details regarding
the terms of the proposed settlement. 4
Two weeks after Cricket sent its letter to the district court concerning the proposed
settlement, Scott moved to intervene in the Bond case under Federal Rule of Civil
Procedure 24(a). 5 In reviewing Scott’s motion, the district court observed that “Scott
could have, and should have, acted [to intervene] sooner.” The court found that Scott had
known about Bond’s case since November 2015, and that Scott “could have intervened in
February 2017” when the parties in the Bond case filed the stipulation to add the
Warranty Act claim, “but chose to pursue his own case in state court.” Accordingly, the
court exercised its discretion to deny as untimely Scott’s motion to intervene. Scott now
appeals from the district court’s determination.
II.
On appeal, Scott argues that his motion to intervene under Rule 24(a) was timely,
contending that a class member has no obligation to intervene before expiration of the
period allowing class members to “opt out” of a proposed settlement. Scott separately
4
The parties ultimately disclosed the terms of the proposed settlement to the
district court in November 2017.
5
Scott’s motion to intervene also invoked Rule 24(b), which, like Rule 24(a),
requires timely intervention. On appeal, however, Scott does not raise any argument
regarding Rule 24(b). Accordingly, we conclude that he has abandoned any challenge to
the denial of his motion to intervene under Rule 24(b). See Fed. R. App. P. 28(a)(8)(A)
(“[An appellant’s] argument . . . must contain . . . appellant’s contentions and the reasons
for them.”).
6
maintains that he lacked notice that his interests were not protected by the parties in the
Bond case until August 2017, when those parties filed their letter notifying the district
court that they had reached a proposed settlement. We disagree with Scott’s arguments.
We review for abuse of discretion a district court’s determination denying as
untimely a motion to intervene under Rule 24(a). Nat’l Ass’n for Advancement of
Colored People v. New York, 413 U.S. 345, 365–66 (1973) [NAACP]; Gould v. Alleco,
Inc., 883 F.2d 281, 286 (4th Cir. 1989). District courts are accorded broad discretion in
deciding the timeliness of a motion to intervene after assessing all the relevant
circumstances. See NAACP, 413 U.S. at 366; Gould, 883 F.2d at 286. A district court
abuses its discretion if its decision was guided by incorrect legal standards or rested upon
a clearly erroneous factual finding. Brown v. Nucor Corp., 576 F.3d 149, 161 (4th Cir.
2009).
Under Rule 24(a), a district court must permit an applicant to intervene in ongoing
litigation if certain conditions are met. Such intervention as a matter of right is
predicated on the filing of a timely motion, in which a non-party “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). Thus, to intervene as a matter of right under Rule 24(a), a movant
generally must satisfy four criteria: (1) timeliness, (2) an interest in the litigation, (3) a
risk that the interest will be impaired absent intervention, and (4) inadequate
representation of the interest by the existing parties. In re Brewer, 863 F.3d 861, 872
7
(D.C. Cir. 2017); Scardelletti v. Debarr, 265 F.3d 195, 202 (4th Cir. 2001), rev’d on
other grounds sub nom. Devlin v. Scardelletti, 536 U.S. 1, 6 (2002).
Timeliness is a central consideration when deciding a motion to intervene, and a
movant’s failure to seek intervention in a timely manner is sufficient to justify denial of
such motion. See Gould, 883 F.2d at 286; Scardelletti, 265 F.3d at 202. A proposed
intervenor should move to intervene as soon as it becomes clear that his interests “would
no longer be protected by the named class representatives.” Hill v. W. Elec. Co., 672
F.2d 381, 386 (4th Cir. 1982). When assessing the timeliness of a motion to intervene,
we consider (1) how far the case has progressed, (2) the prejudice to other parties caused
by any tardiness in filing the motion, and (3) the reason for any tardiness. Alt v. EPA,
758 F.3d 588, 591 (4th Cir. 2014); Gould, 883 F.2d at 286. The most important
consideration in reviewing a motion to intervene is whether the existing parties will
suffer prejudice if the motion is granted. Hill, 672 F.2d at 386.
First, in relation to the stage of the proceedings, the timeliness requirement is
intended to prevent an intervenor from “derailing a lawsuit within sight of the terminal.”
Alt, 758 F.3d at 591 (quoting Scardelletti, 265 F.3d at 202). Here, Scott sought to
intervene in the Bond case in August 2017, shortly after Cricket and Bond filed their
letter notifying the court that they had reached a proposed settlement. A settlement in
principle raises a strong interest in finality. See Gould, 883 F.2d at 286–87 (holding that
intervention motion, filed after settlement proposal was presented to court, was
untimely); see also Alt, 758 F.3d at 591–92 (affirming determination that motion to
intervene was untimely when settlement negotiations had occurred but no settlement had
8
been reached); CE Design Ltd. v. King Supply Co., 791 F.3d 722, 726 (7th Cir. 2015)
(affirming district court’s untimeliness determination when settlement had been reached).
And the district court reasonably found that Scott had known about Bond’s lawsuit since
the Notice was filed in November 2015, but had failed to intervene after being notified
that the related action involved the same conduct by Cricket that was being challenged by
a nationwide class. See D’Amato v. Deutsche Bank, 236 F.3d 78, 84 (2d Cir. 2001)
(explaining that intervenor should have intervened when he received “notice of his
interest in the instant action”). This lengthy delay and the fact of settlement supplied
strong reasons for the district court to question the timeliness of Scott’s motion.
Second, for similar reasons, a decision permitting Scott to intervene in August
2017 likely would have resulted in significant prejudice to Cricket and Bond. The delay
caused by substantial additional litigation can demonstrate prejudice to existing parties.
See Gould, 883 F.2d at 286–87. Moreover, intervention often is disfavored when it
would disrupt a proposed settlement late in the litigation process, because such
intervention may “threaten the delicate balance reached by existing parties after
protracted negotiations.” Smith v. L.A. Unified Sch. Dist., 830 F.3d 843, 857 (9th Cir.
2016); see also Scardelletti, 265 F.3d at 204 (explaining that danger that settlement might
“unravel[ ]” can show prejudice).
Notably, Scott does not dispute that his intervention in the Bond case would have
resulted in prejudice to Cricket and Bond, at least by delaying the parties’ efforts to have
the district court approve the proposed settlement. As an intervenor under Rule 24(a),
Scott could have pursued additional discovery and have opposed any motions in the Bond
9
case, including the motion for preliminary approval of the settlement that is now pending.
See Columbus-Am. Discovery Grp. v. Atl. Mut. Ins. Co., 974 F.2d 450, 469 (4th Cir.
1992). His intervention therefore would have delayed that litigation substantially. If
Scott had sought to intervene in February 2017, when the Warranty Act claim was added
to the Bond case and he knew that his own Warranty Act claim was threatened, he could
have avoided disrupting the parties’ proposed settlement agreement. We therefore
conclude that a strong likelihood of prejudice to Cricket and Bond supported the district
court’s decision to deny Scott’s motion to intervene.
Third and finally, a movant seeking intervention must provide a plausible
justification for a tardy motion to intervene. Alt, 758 F.3d at 591; Gould, 883 F.2d at
286. For example, a delay in filing might be justified if a person never received notice of
a class action implicating his interests, see Crawford v. Equifax Payment Services, Inc.,
201 F.3d 877, 881 (7th Cir. 2000), or if there had been a substantial “change of
circumstances” in the case, Smith, 830 F.3d at 854. However, if an intervenor was aware
of a parallel case “from the outset” but “pursued a separate suit,” the fact of a proposed
settlement in the parallel case by itself is not a change of circumstances sufficient to
justify tardy intervention. See Scardelletti, 265 F.3d at 203.
Here, Scott did not attempt to participate in any manner in the Bond case from the
date Cricket filed the Notice in November 2015 until August 2017, when Scott sought to
intervene in the proceedings. As of November 2015, Scott knew that the Bond case
involved the very conduct by Cricket that Scott was challenging on behalf of a smaller
class. Even assuming that Scott reasonably believed that his interests were not affected
10
by the Bond case when the Notice was filed in November 2015, he necessarily knew that
the Bond case threatened his interests as soon as the parties in that case stipulated to add
the Warranty Act claim in February 2017. And Scott himself stated in his brief filed in
this Court that “the filing of [Bond’s] second amended complaint [was] suspect.” Thus,
by his own admission, Scott had reason to intervene in February 2017 when the parties in
the Bond case filed their stipulation, and yet he waited six months to do so. Moreover,
Scott knew no more about the Bond case’s purported threat to his rights in August 2017
than he knew in February 2017, because the settlement terms were not filed with the
court until November 2017. 6 The district court therefore had compelling reasons to reject
Scott’s proffered justification for intervening long after he was aware of perceived threats
to his interests. Accordingly, we conclude that the district court did not abuse its
discretion in denying as untimely Scott’s motion to intervene. 7
Our conclusion is not altered by Scott’s contention that we must presume the
timeliness of a class member’s motion to intervene, if the motion is filed before the
deadline for class members to request exclusion from a class settlement. In a class action
filed under Rule 23(b)(3), a settlement is binding on all class members, except for
6
We also observe that because Rule 23 requires that a district court hold a hearing
to consider whether a class action settlement is “fair, reasonable, and adequate,” Fed. R.
Civ. P. 23(e)(2), Scott may raise concerns as a class member about the fairness of the
settlement’s terms at that hearing, or decide to “opt out” of the nationwide class.
7
We do not reach Scott’s arguments regarding the other prongs of the Rule 24
analysis, because his untimely request to intervene was a sufficient basis for the district
court’s exercise of discretion denying the motion. See Gould, 883 F.2d at 286;
Scardeletti, 265 F.3d at 202.
11
members who request exclusion from the class before the expiration of the deadline set
by the court (the opt-out deadline). See 3 William B. Rubenstein, Newberg on Class
Actions § 9:38 (5th ed. 2017); In re MI Windows & Doors, Inc., Prods. Liab. Litig., 860
F.3d 218, 223 (4th Cir. 2017). The Third Circuit has “recognized a [rebuttable]
presumption of timeliness for intervention motions filed by purported class members,” as
long as such a motion is filed before the opt-out deadline. 8 Wallach v. Eaton Corp., 837
F.3d 356, 372, 374 (3d Cir. 2016); In re Cmty. Bank of N. Va., 418 F.3d 277, 314–15 (3d
Cir. 2005) (reversing untimeliness ruling for class members who filed motion to
intervene within two months of notice of settlement but before opt-out deadline).
Fundamentally, this presumption promotes fair notice to absent class members, who are
otherwise under “no duty to take note of the suit.” Wallach, 837 F.3d at 373 (citation and
internal quotation marks omitted).
We decline to apply such a presumption in this case. Concerns about fair notice
apply to absent class members who otherwise have taken no action regarding the class
claims, not to parties in a related proceeding. See id.; D’Amato, 236 F.3d at 84
(observing that intervention is not appropriate for one who has had “notice of his interest
in the instant action” for some time); Scardelletti, 265 F.3d at 203 (“Although [the
intervenor] argues that he was not aware of his interest in the settlement until the notice
8
Contrary to Scott’s argument, the Supreme Court’s decision in American Pipe &
Construction Co. v. Utah, 414 U.S. 538 (1974), is inapposite to our present inquiry.
American Pipe announced a tolling rule that applies to ordinary class member intervenors
after a district court ultimately has rejected certification of a proposed class. See id. at
542–44, 549–52.
12
of proposed settlement, [his] argument is belied by his participation in [parallel
litigation.]”). In the present case, Scott was not a typical absent class member otherwise
unaware of the proceedings in Bond. Instead, Scott filed his own competing class action
six months after Bond filed his class action under Rule 23(b)(3), and Cricket identified
Bond’s case as a related case on the Scott docket in November 2015. Thereafter, Scott
had notice of any developments in the Bond case, including the February 2017 stipulation
adding the Warranty Act claim. 9 Accordingly, there are no concerns about fair notice
here, and we do not apply the Third Circuit’s presumption. 10
III.
For these reasons, we affirm the district court’s denial of Scott’s motion to
intervene as untimely.
AFFIRMED
9
We disagree with Scott’s contention that our decision in Hill v. Western Electric
Co., 672 F.2d at 386, supports application of the presumption in this case. Our decision
in Hill involved the question whether intervention was untimely when individuals failed
to intervene while a petition for certiorari was pending, an issue not presented here. Id.
Moreover, Hill did not recognize a presumption, but rather focused on the timeliness
factors that we analyze above. Id. at 386–87.
10
We express no view on the propriety of applying the Third Circuit’s
presumption in another case.
13