Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-02670/USCOURTS-azd-2_05-cv-02670-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1330 Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Cf. Colo. River Water Conservation Dist., 424 U.S. at 806 (reversing grant of motion

to dismiss based on abstention made by defendants and interveners); Smith v. Cent. Ariz.

Water Conservation, 418 F.3d 1028, 1030 (9th Cir. 2005) (affirming decision denying

plaintiff’s motion to abstain and remand); Intel Corp. v. Advanced Micro Devices, Inc., 12

F.2d 908, 910 (9th Cir. 1993) (reversing grant of defendants’ motion to stay the proceedings

based on abstention).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Mark H. Goldberg, et al., 

Plaintiffs, 

vs.

Pacific Indemnity Company, et al., 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

No. CV-05-2670-PHX-JAT

ORDER

Pending before this Court is a motion to intervene made by Marson & Sons, Inc.

(“Marson”) pursuant to Rule 24 of the Federal Rules of Civil Procedure and a motion made

by Marson to stay or dismiss the proceedings pursuant to the Colorado River abstention

doctrine. See Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817–19

(1976). Because only a party to a lawsuit may invoke the Colorado River abstention

doctrine,1

 this Court first considers Marson’s motion to intervene. Rule 24 provides two

types of intervention: (1) intervention as a right and (2) permissive intervention. 

Case 2:05-cv-02670-JAT Document 42 Filed 03/27/06 Page 1 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

A. Intervention as a Right

Rule 24(a) provides that “[u]pon timely application anyone shall be permitted to

intervene in an action . . . when the applicant claims an interest relating to the property or

transaction which is the subject of the action and the applicant is so situated that the

disposition of the action may as a practical matter impair or impede the applicant's ability to

protect that interest, unless the applicant's interest is adequately represented by existing

parties.” Fed. R. Civ. P. 24. Typically, the Rule is liberally construed to favor the applicants

for intervention. Arakaki v. Cayetano, 324 F.3d 1078, 1083 (9th Cir. 2003). An applicant

for intervention as a right must show:

(1) it has a "significant protectable interest" relating to the property or

transaction that is the subject of the action; 

(2) the disposition of the action may, as a practical matter, impair or impede

the applicant's ability to protect its interest; 

(3) the application is timely; and

(4) the existing parties may not adequately represent the applicant's interest.

Canatella v. California, 404 F.3d 1106, 1112 (9th Cir. 2005) (quoting Donnelly v. Glickman, 159 F.3d 405, 409 (9th Cir.1998)). 

Analyzing these factors “requires a practical and equitable analysis of the underlying facts.”

Id. at 1113 (describing a court’s discretion in analyzing the factors). 

 This Court must first decide whether Marson has a significant protectable interest

related to the property or transaction that is the subject of the litigation. In Arakaki, the Ninth

Circuit determined that a “significant protectable interest” is an interest “‘protectable under

some law’” and related to the claim at issue. 324 F.3d at 1084 (quoting Sierra Club v. EPA,

995 F.2d 1478, 1484 (9th Cir. 1993)). A sufficient relationship between the interest and the

claim exists only where “‘the resolution of the plaintiff’s claims actually will affect the

applicant.’” Id. (quoting Donnelly, 159 F.3d at 410). 

Marson did not identify its “significant protectable interest” in either its motion or its

reply to the parties’ response briefs. Instead, Marson argued more generally that it qualifies

under Rule 24(a) because the federal litigation involves the same underlying facts—alleged

Case 2:05-cv-02670-JAT Document 42 Filed 03/27/06 Page 2 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

damages to the Plaintiffs’ residential property—as the Plaintiffs’ suit against Marson in state

court. As a result, the Plaintiffs could potentially recover twice for so-called “stigma

damages.” Using inferences, Marson seemed to argue that its “significant protectable

interest” is its financial interests. And the relationship between that interest and the claim

in the federal action is as follows: if Marson was permitted to intervene in the federal lawsuit,

succeeded in convincing this Court to abstain from exercising jurisdiction, litigated the state

action claims along with the defendant insurance companies (“Defendants”), and lost at least

on the claim for stigma damages, it could suffer less financial deprivation since the payment

of stigma damages may be shared with the Defendants. 

The Defendants responded that the Court should deny Marson’s motion to intervene

as a right. They reasoned that Marson does not have a “significant protectable interest”

relating to a transaction that is the subject of the federal action because the federal dispute

involves an insurance contract and Marson is neither a party to nor a third party beneficiary

of the insurance contract at issue. 

The Court agrees with the Defendants. Marson’s only conceivable interest is

protecting its financial resources, which may be directly touched if Plaintiffs prevail in the

state action, and potentially touched in a subrogation action by the Defendants if the

Defendants lose in the federal action. However, this interest is not related to the claim at

issue. The federal action concerns an alleged breach of an insurance policy and a verdict for

the Plaintiffs in federal court will in no way impact their separate claims against Marson in

state court. 

Nor does the possibility of the Plaintiffs recovering similar damage awards in both

courts change the analysis. Arizona law permits double recovery under the collateral source

rule unless otherwise provided by state statute. Lopez v. Safeway Stores, Inc., --- P.3d ---,

---, No. 2 CA-CV 2005-0057, 2006 WL 465800 at *9 (Ariz. Ct. App. Feb. 28, 2006). The

collateral source rule provides that “‘[p]ayments made to or benefits conferred on the injured

party from other sources are not credited against the tortfeasor's liability, although they cover

all or a part of the harm for which the tortfeasor is liable.’” Taylor v. S. Pac. Transp. Co., 637

Case 2:05-cv-02670-JAT Document 42 Filed 03/27/06 Page 3 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

This Court, by referencing the Arizona collateral source rule, does not seek to answer

the question of whether the rule applies in the lawsuit between the Plaintiffs and Marson.

The Court only cites the rule to show that what appears to be Marson’s effort to receive a

windfall by sharing liability with the Defendants is inapposite to a “significant protectable

interest” meriting intervention as a right.

- 4 -

P.2d 726, 729 (Ariz. 1981) (quoting Restatement (Second) of Torts § 902(2) (1979)). The

court went on to explain:

The collateral source rule is most often applied in cases where an injured party

recovers from a tortfeasor amounts for which plaintiff has already been

compensated by his insurer. Evidence of these collateral payments is not

admissible to show mitigation of damages and the tortfeasor will be barred

from arguing that the plaintiff has already been made whole for his losses by

his own insurance company. The rationale for this rule is that simply because

the injured party might have provided by contract for reimbursement of []

expenses, it should not be used to lessen the tortfeasor's liability. There should

be no windfall for a tortfeasor because he injured an insured instead of a

non-insured. 

Id. at 729–30 (emphasis added) (internal citations omitted).2

Because this Court concludes Marson lacks a significant protectable interest related

to the claims in the federal action, Marson’s request to intervene as a right must be denied.

B. Permissive Intervention

Marson also asked this Court to permit it to intervene under Rule 24(b) of the Federal

Rules of Civil Procedure. The Rule provides that “[u]pon timely application anyone may be

permitted to intervene in an action: . . . when an applicant's claim or defense and the main

action have a question of law or fact in common.” Fed. R. Civ. P. 24(b)(2). A court “[i]n

exercising its discretion . . . shall consider whether the intervention will unduly delay or

prejudice the adjudication of the rights of the original parties.” Id. The applicant must

satisfy three requirements: “(1) it shares a common question of law or fact with the main

action; (2) its motion is timely; and (3) the court has an independent basis for jurisdiction

over the applicant’s claims.” Donnelly, 159 F.3d at 412 (citing Nw. Forest Res. Council v.

Glickman, 82 F.3d 825, 839 (9th Cir. 1996)); see also Kootenai Tribe of Idaho v. Veneman,

313 F.3d 1094, 1110–11 (9th Cir. 2002). Notwithstanding satisfaction of these requirements,

a district court still has the discretion to deny intervention. Donnelly, 159 F.3d at 412.

Case 2:05-cv-02670-JAT Document 42 Filed 03/27/06 Page 4 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

In support of permissive intervention, Marson argued that the federal action pertains

to the same underlying event and facts. Marson further argues that the Court should permit

intervention so that Marson can protect its rights and not be hurt by parallel proceedings

since the Plaintiffs may seek the same damages in both the federal and state actions. Marson

did not assert an independent basis for jurisdiction.

The Defendants responded by arguing that Marson’s claim or defense does not share

a common question of law or fact because Marson did not allege a claim or defense in its

motion to intervene, and Marson did not show the required independent basis for federal

jurisdiction. Moreover, the Defendants argued, even if Marson satisfied all three

requirements, this Court should deny the motion to intervene because Marson’s purpose for

seeking intervention is delay of the federal action through application of an abstention

doctrine. 

Marson failed to show how this Court has an independent basis for jurisdiction over

its claims, which is a threshold requirement for permissive intervention. Marson neither

asserted subject matter jurisdiction pursuant to 28 U.S. C. § 1331 nor diversity jurisdiction

pursuant to 28 U.S.C. § 1332. As a result, this Court cannot grant Marson’s motion for

permissive intervention. 

C. Conclusion

The Court denies Marson’s motion to intervene as a right pursuant to Federal Rule of

Civil Procedure 24(a) because Marson does not have a significant protectable interest related

to the property or transaction that is the subject of the litigation. The federal action concerns

different claims from the state action. Marson’s interest in protecting its financial interests

from the Plaintiffs’ possible double recovery is insufficient because the Arizona collateral

source rule could permit such a recovery by the Plaintiffs. The Court declines granting

Marson permissive intervention pursuant to Federal Rule of Civil Procedure 24(b) because

Marson failed to show the requisite independent basis for federal jurisdiction. Because

Marson is not a party to the federal action, it lacks standing to move to remove or stay the

Case 2:05-cv-02670-JAT Document 42 Filed 03/27/06 Page 5 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

federal action pursuant to the Colorado River abstention doctrine. Thus, based on the

foregoing,

IT IS ORDERED that Marson’s Motion to Intervene (Doc. # 22) is denied. 

IT IS FURTHER ORDERED that Marson’s Motion to Stay Proceedings Pursuant to

the Abstention Doctrine, or, in the Alternative, Motion for Removal of Action to State Court

Pursuant to the Abstention Doctrine (Doc. # 14), is denied. 

DATED this 27th day of March, 2006.

Case 2:05-cv-02670-JAT Document 42 Filed 03/27/06 Page 6 of 6