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BMO Harris Bank, N.A. v. Truland Systems Corporation

United States District Court, E.D. Virginia, Alexandria Division

April 27, 2017

BMO Harris Bank, N.A., Plaintiff,
v.
TRULAND SYSTEMS CORPORATION, et al., Defendants.

          MEMORANDUM OPINION

          James C. Cacheris UNITED STATES DISTRICT COURT JUDGE

         This matter is before the Court on Movant Allied World National Assurance Company's (“Allied World”) Motion to Intervene to Seek an Order Finding the Receivership Stay Does not Apply or, Alternatively, Relief Therefrom. [Dkt. 62.] For the following reasons, the Court will grant Allied World's motion to intervene. The Court will also deny without prejudice Allied World's motion for a ruling on whether the Receivership Stay applies and, if so, relief therefrom.

         I. Background

         In December 2013, an arbitration demand was filed by Balfour Beatty/DPR/Big-D, a Joint Venture (“BDB”), against Truland, among other entities, as a result of Truland's allegedly faulty installation of electrical equipment at a project known as the Utah Data Center (the “Project”). In response to BDB's claims against it, Truland filed an arbitration demand against Cache Valley Electric Company (“Cache Valley”) for contribution and/or indemnification, among other claims. The two arbitrations were then consolidated. Arbitration is scheduled to proceed for nine weeks, from June 26 until September 25, 2017. Opp. [Dkt. 69], ¶ 17.

         On July 23, 2014, Truland filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Eastern District of Virginia. The Bankruptcy Court subsequently appointed a Chapter 7 Trustee. On September 4, 2014, the Bankruptcy Court issued a Consent Order Granting Emergency Motion for Relief from Stay (“Stay Lift Order”), which had been filed by BMO Harris Bank, N.A. (“BMO”). This Order permitted BMO to take charge of certain property (the “Collateral”) and to seek the appointment of a receiver. On September 9, 2014, pursuant to BMO's request, this Court entered a Receivership Order. [Dkt. 9.] The Receivership Order appointed Raymond A. Yancey to take charge of all Receivership Property, which included the Collateral as defined by the Bankruptcy Court's Stay Lift Order. [Id.] The Receivership Order also stayed any further litigation involving the Receivership Property (the “Receivership Stay”). [Id.]

         On October 24, 2016, Allied World filed a lawsuit in the United States District Court of Utah against Truland and three other insureds (the “Utah Lawsuit”). That same day, Allied World filed a motion with the Bankruptcy Court to seek relief from the automatic bankruptcy stay so that it could proceed against Truland in the Utah Lawsuit. The Bankruptcy Court's subsequent Order granted Allied World's motion in part, lifting the automatic bankruptcy stay after it found that the Trustee of the Debtors' Property “has no interest in [Allied World's] excess insurance policy.” [Dkt. 63, Exh. B.] However, the Bankruptcy Court also ordered Allied World to seek a determination from this Court as to whether its Receivership Order imposed any further limitations on the Utah Lawsuit.

         On March 30, 2017, pursuant to the Bankruptcy Court's Order, Allied World filed a Motion to Intervene to Seek an Order Finding the Receivership Stay does not Apply or, Alternatively, Relief Therefrom with this Court. [Dkt. 62.] On April 13, 2017, Receiver filed his opposition, [Dkt. 69], to which Allied World replied on April 19, 2017 [Dkt. 76]. This motion is now ripe for disposition.

         II. Legal Standard

         A. Motion to Intervene

         Federal Rule of Civil Procedure 24(a)(2) provides that, upon a third party's timely motion, a court “must permit anyone to intervene who . . . claims an interest relating to the property . . . 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). In the Fourth Circuit, “[a] party seeking to intervene as a matter of right must satisfy four requirements:

First, the intervenor must submit a timely motion to intervene in the adversary proceeding. Second, he must demonstrate a ‘direct and substantial interest' in the property or transaction. Third, he has to prove that the interest would be impaired if intervention was not allowed. Finally, he must establish that the interest is inadequately represented by existing parties.

United States. v. B.C. Enter., Inc., 667 F.Supp.2d 650, 655 (E.D. Va. 2009) (citing Richman v. First Woman's Bank, 104 F.3d 654, 659 (4th Cir. 1997)).

         Where a proposed intervenor cannot demonstrate an entitlement to intervene as a matter of right, a court may also permit intervention by anyone who brings a timely motion and “has a claim or defense that shares with the main action a common question of law or fact.” Fed.R.Civ.P. 24(b)(1)(B). In exercising its discretion to allow permissive intervention, the Court “must consider whether the intervention will unduly delay or prejudice the adjudication of the original parties' rights.” Fed.R.Civ.P. 24(b)(3).

         A motion for intervention under either Rule 24(a) or 24(b) “must state the grounds for intervention and be accompanied by a pleading that sets out the claim or defense for which intervention is sought.” Fed.R.Civ.P. 24(c). “[L]iberal intervention is desirable to dispose of as much of a controversy ‘involving as many apparently concerned persons as is compatible with efficiency and due ...


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