Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-05109/USCOURTS-caDC-97-05109-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 20, 1998 Decided February 20, 1998

No. 97-5109

SECURITIES AND EXCHANGE COMMISSION,

APPELLEE

JOHN H. LOMAX, ET AL.,

APPELLANTS

v.

PRUDENTIAL SECURITIES INCORPORATED,

APPELLEE

Appeal from the United States District Court 

for the District of Columbia 

(No. 93cv02164)

Graeme W. Bush argued the cause for appellants, with 

whom Albert G. Lauber, Carl S. Kravitz and Peter Van 

Lockwood were on the briefs.

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Arthur F. Mathews argued the cause for appellee Prudential Securities Incorporated, with whom Stephen F. Black was 

on the brief.

Jacob H. Stillman, Associate General Counsel, argued the 

cause for appellee Security & Exchange Commission, with 

whom Richard H. Walker, General Counsel, Susan S. McDonald, Senior Litigation Counsel, and Paul Gonson, Solicitor, were on the brief.

Before: EDWARDS, Chief Judge, WALD and ROGERS, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: Appellants John H. Lomax, Ann D. 

Lomax, Emory C. Camp, and Robert A. Callewart appeal the 

denial of their motion to intervene in the ongoing enforcement of a consent decree negotiated by the Securities and 

Exchange Commission and Prudential Securities Inc. Under 

the decree, Prudential provided a "claims resolution process" 

as an alternative to judicial relief for certain investors whom 

Prudential had allegedly defrauded. Appellants, former investors, voluntarily submitted their claims to this process and 

received damage awards, but they then sought to intervene as 

representatives of a class in the enforcement of the consent 

decree, claiming that Prudential had violated the consent 

decree by making initial damage award offers that were 

improperly low. In their "complaint in intervention," they 

sought enforcement of their interpretation of the decree's 

terms through common law claims based in contract, fraud, 

and unjust enrichment. Under Blue Chip Stamps v. Manor 

Drug Stores, 421 U.S. 723 (1975), and its progeny, the district 

court denied intervention as of right under Federal Rule of 

Civil Procedure 24(a)(2) and permissive intervention under 

Rule 24(b). In light of the express language in the consent 

decree indicating the parties' intention not to confer standing 

on third parties to enforce the decree, we affirm.

I.

On October 20, 1993, the Securities and Exchange Commission ("SEC" or "the Commission") sought an order under 

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section 21(e) of the Securities Exchange Act of 1934, 15 

U.S.C. § 78u(e) (1988), and other equitable relief against 

Prudential Securities Inc. ("Prudential") on the ground that 

Prudential had violated federal securities laws and an earlier 

SEC order by "misrepresent[ing] speculative, illiquid limited 

partnerships as safe, income-producing investments suitable 

for safety-conscious and conservative investors." As a result, 

the Commission asserted, Prudential "sold limited partnerships to a significant number of investors for whom the 

investments were not suitable." Concurrently, the Commission and Prudential submitted a consent decree, which the 

district court approved on October 21, 1993.

Under the terms of the consent decree, Prudential instituted a process to resolve the claims of the approximately 

340,000 investors whom Prudential had allegedly defrauded 

over an eleven year period through offer and sale of interests 

in over 760 limited partnerships. Under this claims resolution process, an investor could choose to submit claims to 

Prudential for evaluation of their merit, after which Prudential would decide to make a settlement offer or to reject the 

claim. Any investor who was dissatisfied with this initial 

offer, or whose claim was rejected, could submit the claim to 

binding arbitration, subject to appeal to the court-appointed 

Claims Administrator. Alternatively, such an investor could 

forgo arbitration and pursue judicial relief. Similarly, the 

consent decree did not affect the rights of investors who did 

not submit their claims to Prudential for evaluation; these 

investors retained all rights to seek relief in the courts. Any 

investor who chose to submit a claim to arbitration was 

required, however, to sign a form acknowledging that the 

arbitrator's decision was final, subject to appeal to the Claims 

Administrator, and any investor who accepted the initial 

settlement offer was similarly required to sign a release 

preventing any future legal action against Prudential based 

on the limited partnership interests.

Other terms of the consent decree further show the intent 

of the Commission and Prudential that the claims resolution 

process be final for those accepting settlement offers or 

entering binding arbitration. Paragraph nine of the decree 

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provides that "nothing herein shall be deemed to confer 

standing upon any persons other than plaintiff COMMISSION, defendant [Prudential] and the CLAIMS ADMINISTRATOR." Paragraph twelve of the decree adds that, "[e]xcept as explicitly provided in this FINAL ORDER and the 

CONSENT, nothing herein is intended to or shall be construed to have created, compromised, settled or adjudicated 

any claims, causes of action, or rights of any person whomsoever, other than as between the COMMISSION and [Prudential], in accordance with the CONSENT."

Following district court approval of the consent decree, 

Prudential notified its investors that it had established this 

claims resolution process. In this notice, Prudential explained the origin of and reasons for the process and outlined 

its basic terms. The explanation noted that Prudential had 

"established court-supervised procedures pursuant to the 

SEC settlement to resolve claims for compensatory damages." Prudential stressed that participation in the process 

was voluntary: "If you decide not to resolve your claim 

through the [process], your rights to pursue any legal remedies will not be restricted or expanded in any way." Prudential also made clear that investors who accepted initial settlement offers had to release Prudential from future liability 

with respect to the limited partnership interests, and that 

investors who submitted claims to binding arbitration had to 

acknowledge that "[t]he arbitrator's awards shall be final and 

binding on the parties with respect to all claims submitted," 

subject to appeal to the Claims Administrator.

Over the course of four years, Prudential paid more than 

$938 million to over 110,000 investors pursuant to the consent 

decree. The Claims Administrator filed quarterly reports in 

the district court on the progress of the claims resolution 

process, addressing various issues, including the net tax 

benefit policy of concern to appellants,1and describing the 

__________

1 Appellants asserted in their memorandum in support of the 

motion to intervene that the Claims Administrator had stated in his 

Third Quarterly Report that Prudential was to account for claimants' tax benefits on a net basis, so that tax benefits in early years 

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procedures taken to ensure the fairness and efficiency of the 

process. The claims resolution process was nearly complete 

when, on August 1, 1996, appellants filed a motion to intervene and a "class complaint in intervention" on behalf of 

themselves and a class of similarly situated claimants.2

Appellants had purchased limited partnership interests 

through Prudential in 1980, 1983, and 1984.3 All submitted 

their claims to Prudential under the consent decree, and, 

after receiving initial settlement offers, consented to binding 

arbitration. Two of the appellants, John H. Lomax and Ann 

D. Lomax, settled before the arbitrator made an award, while 

appellants Emory C. Camp and Robert A. Callewart received 

arbitration awards that they appealed, unsuccessfully, to the 

Claims Administrator. In a memorandum in support of their 

motion to intervene, as well as in their class complaint in 

intervention, appellants asserted that Prudential had intentionally and systematically understated the damages due to 

claimants under the consent decree. Specifically, appellants 

claimed that in calculating settlement offers pursuant to the 

terms of the consent decree, Prudential did not properly 

account for the tax that investors would have to pay on their 

__________

would be offset by tax costs incurred later. Appellants quoted the 

following language from the Third Quarterly Report:

In general, purported tax benefits will not be allowed to reduce 

offers or awards if they will be offset by recapture or offset in 

later years. Suspended losses are not allowed unless they can 

be used advantageously by claimants.

2 Originally, the claims resolution process was scheduled to be 

completed around October 20, 1996. After the delay caused by the 

motion to intervene, the fund was actually closed a year later, with 

the final report filed by the Claims Administrator on October 21, 

1997.

3 Notably, in the consent decree, Prudential agreed not to 

assert a statute-of-limitations defense against any claimants who 

entered the claims resolution process. The Commission hypothesizes that this provision of the consent decree was the only reason 

appellants were able to receive any compensation for their claims at 

all, and appellants do not contest this.

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damage awards or for the tax that investors would have to 

pay when realizing the "residual value" of their investments. 

Appellants alleged that Prudential had breached its agreement to resolve their claims fairly, intentionally defrauded 

them through misrepresentations and omissions, and was 

unjustly enriched as a result of its miscalculation of tax 

benefits. Asserting that the Commission and the Claims 

Administrator refused to rectify the problem, appellants 

sought judicial orders directing Prudential to enforce the 

terms of the consent decree as they interpreted it and to 

make the additional claims payments.

The district court denied the motion to intervene. Assuming the truth of the facts alleged in appellants' complaint,4

the 

district court ruled that they could not show a legally protected interest in the proceedings between the Commission and 

Prudential because, under Blue Chip Stamps v. Manor Drug 

Stores, 421 U.S. 723 (1975), and this court's interpretations of 

it, third party beneficiaries of a government consent decree 

may not enforce it when the consent decree contains unambiguous language establishing that the government did not 

intend them to have enforcement rights. The district court 

concluded that their common law claims were in reality claims 

for enforcement of the consent decree. Consequently, the 

district court concluded that appellants had no right to intervene under Federal Rule of Civil Procedure 24(a)(2), or, for 

the same reason, Rule 24(b).5

__________

4

"An application to intervene should be viewed on the tendered 

pleadingsthat is, whether those pleadings allege a legally sufficient claim or defense and not whether the applicant is likely to 

prevail on the merits." Williams & Humbert, Ltd. v. W. & H. 

Trade Marks (Jersey), Ltd., 840 F.2d 72, 75 (D.C. Cir. 1988).

5 The district court rejected the Commission's argument that 

section 21(g) of the Securities Exchange Act of 1934, 15 U.S.C. 

§ 78u(g) (1988), bars intervention in enforcement actions brought 

by the Commission. The Commission does not press this argument 

on appeal. The Commission does contend on appeal that any order 

reviewing the arbitration awards would violate section 10 of the 

Federal Arbitration Act, 9 U.S.C. § 10 (1988), but given our analysis, we have no need to address this argument.

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II.

Parties have the right under Rule 24(a)(2) to intervene in 

an action if they meet four requirements: (1) the application 

to intervene must be timely; (2) the applicant must demonstrate a legally protected interest in the action; (3) the action 

must threaten to impair that interest; and (4) no party to the 

action can be an adequate representative of the applicant's 

interests. See Williams & Humbert, Ltd. v. W. & H. Trade 

Marks (Jersey), Ltd., 840 F.2d 72, 74 (D.C. Cir. 1988). Consideration of the second requirement alone is sufficient to 

dispense of the instant appeal.6 We review the district 

court's resolution of a legal question in the context of a denial 

of a motion to intervene de novo, see Massachusetts Sch. of 

Law v. United States, 118 F.3d 776, 779 (D.C. Cir. 1997), and 

we affirm.7

Our inquiry into the enforcement rights of third party 

beneficiaries to consent decrees begins with Blue Chip 

Stamps, in which the Supreme Court decided that the protections against insider trading codified in the Commission's 

Rule 10b-5 apply only to actual purchasers and sellers of 

securities and not those who are merely offered a stock. See 

Blue Chip Stamps, 421 U.S. at 725. The case involved an 

antitrust consent decree and, in the course of ruling that 

those not involved in an actual sale of stock had no legitimate 

claim, the Court held that "a well-settled line of authority 

__________

6 Prudential also disputes whether appellants have shown the 

Commission to be an inadequate representative of their interests.

7 Our review of the district court's denial of permissive intervention under Rule 24(b)(2) is for abuse of discretion, see Twelve 

John Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir. 

1997), and we find none. Rule 24(b) permits the district court to 

allow intervention "(1) when a statute of the United States confers a 

conditional right to intervene; or (2) when the applicant's claim or 

defense and the main action have a question of law or fact in 

common." FED. R. CIV. P. 24(b). While appellants do fall within the 

ambit of the second criterion, their intervention would have no 

effect because they have no standing to enforce the consent decree, 

as we explain herein.

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from this Court establishes that a consent decree is not 

enforceable directly or in collateral proceedings by those who 

are not parties to it even though they were intended to be 

benefited by it." Id. at 750.

Subsequent decisions in this court have narrowed the effect 

of the broad language in Blue Chip, but not enough to allow 

these appellants to enforce the terms of this consent decree. 

In Beckett v. Air Line Pilots Ass'n, 995 F.2d 280 (D.C. Cir. 

1993), the court held that nonunion pilots who were not 

parties to a consent decree between a union and another 

group of pilots could sue the union to enforce the terms of the 

consent decree. See id. at 286-89. The court emphasized, 

however, that its holding did not imply that all third parties 

could seek judicial enforcement of the terms of consent 

decrees; this case was special because the consent decree 

established a trust and named the plaintiff nonunion pilots as 

beneficiaries. See id. at 285. The court interpreted Blue 

Chip only to prohibit enforcement by incidental third party 

beneficiaries, see id. at 288, whereas "intended third party 

beneficiaries of a consent decree have standing to enforce the 

decree," id. at 286 (quoting Hook v. Department of Ariz. 

Corrections, 972 F.2d 1012, 1014 (9th Cir. 1992)) (emphasis 

added) (internal quotation marks omitted). In so holding, the 

court reasoned that "consent decrees are generally construed 

according to the basic principles of contract law, and it is a 

fundamental principle of contract law that parties to a contract may create enforceable contract rights in a third party 

beneficiary." Id. (citations omitted). Because the nonunion 

pilots were not incidental beneficiaries but instead "direct 

beneficiaries," as the trust provisions made clear, they could 

sue to enforce the consent decree. Id.

Although this result might have conflicted with a broad 

reading of the language in Blue Chip, the Beckett court 

distinguished Blue Chip based on five considerations to narrow the scope of the restriction on third party enforcement of 

consent decrees. Among its five considerations, the court 

observed that Blue Chip involved a consent decree resulting 

from a government enforcement action: "Only the Government can seek enforcement of its consent decrees; therefore, 

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even if the Government intended its consent decree to benefit 

a third party, that party could not enforce it unless the decree 

so provided." Id. at 288 (citation omitted). Because application of this rule alone would have barred a third party from 

attempting to enforce the government consent decree in Blue 

Chip, the Beckett court concluded that Blue Chip should not 

be read so expansively that it would bar all third party 

enforcement of consent decrees. See id.; see also Hook, 972 

F.2d at 1015.

In Rafferty v. NYNEX Corp., 60 F.3d 844 (D.C. Cir. 1995), 

the court again addressed the enforcement rights of third 

party beneficiaries of government consent decrees. In that 

case, the district court had granted summary judgment 

against a terminated employee who claimed he was fired 

because he knew his employer had violated a government 

consent decree and who alleged violations of antitrust laws 

and the consent decree, misrepresentation, wrongful discharge, and breach of contract. See id. at 846-47. In 

affirming the judgment, the court held that the plaintiff could 

not enforce the terms of a consent decree that was the result 

of an antitrust enforcement action brought by the government: "Unless a government consent decree stipulates that it 

may be enforced by a third party beneficiary, only the parties 

to the decree can seek enforcement of it." Id. at 849 (citing 

Beckett, 995 F.2d at 288). The court further emphasized that 

the plaintiff was not an intended third party beneficiary of the 

consent decree. See id.

Struggling under the weight of this precedent, appellants 

contend nonetheless that they have a legally protected interest in enforcing the terms of a consent decree resulting from 

an SEC enforcement action. Appellants maintain that this 

court has never held squarely that intended third party 

beneficiaries, as distinct from incidental third party beneficiaries, cannot enforce a government consent decree when the 

decree establishes a process to resolve private damage claims 

including the prospective intervenors' claims. Beckett, appellants insist, only stated that Blue Chip might "perhaps" bar 

suits by third party beneficiaries of government consent 

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decrees,8see Beckett, 995 F.2d at 289, while Rafferty only 

pronounced this in dictum.9 Appellants suggest that the 

court should look for guidance to the Second Circuit's decision 

in Berger v. Heckler, 771 F.2d 1556 (2d Cir. 1985), in which 

that court concluded that, in granting benefits to third parties 

in a consent decree, the government necessarily "agreed to 

the enforcement of the decree in favor of nonparties." Id. at 

1567.

Appellants focus, to their detriment, on showing that there 

is no categorical bar against third party enforcement of 

consent decrees involving the government. This much is 

true; the fact that the government is involved is not in itself 

fatal to a third party enforcement effort. Rather, the key 

determination is whether the particular third party beneficiary who seeks to bring a claim based on alleged noncompliance 

with the consent decree is an intended beneficiary of the 

decree or only an incidental beneficiary. As the Beckett court 

indicated, the reason that courts are more loath to allow third 

parties to enforce consent decrees when the government is 

involved is that, because the government usually acts in the 

general public interest, third parties are presumed to be 

incidental beneficiaries. See Beckett, 995 F.2d at 288 (citing 

RESTATEMENT (SECOND) OF CONTRACTS § 313(2) & cmt. a (1979)). 

Indeed, there could well be merit to appellants' argument 

that the lack of an express stipulation authorizing third party 

enforcement should not automatically preclude enforcement 

even of government consent decrees. The argument might 

be that the presence of the government should raise the 

presumption that third parties are incidental beneficiaries, 

but that presumption could be overcome by contrary evidence 

__________

8 Although the court did use the word "perhaps" once, the court 

elsewhere stated unequivocally (albeit without elaboration or further analysis) that "[o]nly the Government can seek enforcement of 

its consent decrees." Beckett, 995 F.2d at 228.

9

In fact, the court's conclusion that third party beneficiaries of 

government consent decrees cannot enforce those decrees was an 

integral step in the analysis in Rafferty. See Rafferty, 60 F.3d at 

849.

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other than an express stipulation. When the court can 

determine the parties' intent from the consent decree, the 

fact that one of the parties is the government arguably should 

make little difference, and an express stipulation is not normally necessary to find that a third party is an intended 

beneficiary. See FED. R. CIV. P. 71; Beckett, 995 F.2d at 287-

88; Berger, 771 F.2d at 1565. Yet this circuit has opted for a 

bright line rule, effectively acknowledging both the sophistication of government agencies entering into consent decrees 

and the broad social significance of such decrees. See Rafferty, 60 F.3d at 849. In any event, contrary to appellants' 

position, the instant case presents no occasion for the court to 

reexamine its declarations in Beckett and Rafferty that third 

parties to government consent decrees cannot enforce those 

decrees absent an explicit stipulation by the government to 

that effect. Compare id. ("Unless a government consent 

decree stipulates that it may be enforced by a third party 

beneficiary, only the parties to the decree can seek enforcement of it."); Beckett, 995 F.2d at 288 (same); and Hook, 972 

F.2d at 1015 (same), with Berger, 771 F.2d at 1567 (allowing 

third party enforcement of consent decrees pursuant to Rule 

71, without regard to the involvement of a government party). 

No matter the evidence we may require to show that third 

parties to government consent decrees are intended beneficiaries, appellants cannot make this showing, and thus we leave 

for another day consideration of whether government authorization of third party enforcement must invariably be explicit.

Third parties to a consent decree, involving the government 

or not, must demonstrate that they are intended beneficiaries 

in order to have enforcement rights, and appellants fail to do 

so. Instead, they rely on the mistaken belief that a third 

party is an intended beneficiary if the parties to the consent 

decree had any intent to benefit that third party and that the 

clear intent in the consent decree to benefit defrauded investors thus necessarily gives them enforcement rights. To the 

contrary: a third party to a consent decree is not an "intended beneficiary" unless the parties "intended that a third party 

should receive a benefit which might be enforced in the 

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courts." Corrugated Paper Prods. v. Longview Fibre Co.,

868 F.2d 908, 911 (7th Cir. 1989) (quoting Brooklawn v. 

Brooklawn Housing Corp., 11 A.2d 83 (N.J. 1940)) (emphasis 

added); see also RESTATEMENT (SECOND) OF CONTRACTS

§ 302(1). The test is not, as appellants appear to suggest, 

only whether the contracting parties intended to confer a 

benefit directly on the third parties, but also whether the 

parties intended the third party to be able to sue to protect 

that benefit.

The consent decree could hardly make clearer that the 

parties did not intend others to be able to enforce its terms in 

court. The Commission and Prudential stated in paragraph 

nine of the consent decree that "nothing herein shall be 

deemed to confer standing upon any persons other than 

plaintiff COMMISSION, defendant [Prudential] and the 

CLAIMS ADMINISTRATOR." Furthermore, in paragraph 

twelve of the decree, they added that, "[e]xcept as explicitly 

provided in this FINAL ORDER and the CONSENT, nothing herein is intended to or shall be construed to have 

created, compromised, settled or adjudicated any claims, 

causes of action, or rights of any person whomsoever, other 

than as between the COMMISSION and [Prudential], in 

accordance with the CONSENT." It is difficult to imagine 

how the Commission and Prudential could have stated more 

explicitly that they did not want third parties enforcing the 

terms of the consent decree.10 As the district court concluded, "the unambiguous language of the consent decree clearly 

establishes that the government did not intend for third 

parties to enforce the consent decree." When a consent 

__________

10 Appellants' attempt to limit the meaning of these provisions 

is unconvincing. Appellants contend that paragraph nine is irrelevant because they do not rely on the consent decree for constitutional standing to bring their complaint. Paragraph twelve, appellants add, does not concern those in appellants' position, for their 

rights are among those "[e]xplicitly provided" in this consent decree. Yet, paragraph nine clearly intends to use "standing" in the 

sense of enforceable rights under the consent decree, not in the 

constitutional sense, and paragraph twelve preempts any enforcement rights in third parties because none were "[e]xplicitly provided" elsewhere in the consent decree.

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decree or contract explicitly provides that a third party is not 

to have enforcement rights, that third party is considered an 

incidental beneficiary even if the parties to the decree or 

contract intended to confer a direct benefit upon that party. 

See Morse/Diesel Inc. v. Trinity Indus., Inc., 859 F.2d 242, 

249 (2d Cir. 1988).

Despite appellants' protestations, their assertions of unfairness in this result are unpersuasive. The consent decree was 

the result of an agreement between the Commission and 

Prudential, and appellants' participation in the claims resolution process was voluntary. Appellants' right to bring their 

claims against Prudential to the courts was not affected by 

the consent decree; indeed, without the consent decree, appellants might have received no relief at all. See supra note 

3. Furthermore, appellants did not have to settle or submit 

their initial settlement offers to binding arbitration if these 

offers were too low. They did or should have known at the 

time of the initial offers that Prudential was applying a 

method of calculation different from the one they now advocate was intended to be applied, and they could have exited 

the claims resolution process at that point, resorting to the 

courts for relief.11 Instead, appellants now hope to bind the 

Commission and Prudential to their own interpretation of one 

portion of the consent decree's requirements while ignoring 

the consent decree's limitation of third party enforcement 

rights.

Because the parties to the consent decree clearly indicated 

that third parties such as appellants are not intended third 

party beneficiaries, appellants have no legally protected interest in enforcing the terms of the consent decree. Hence, they 

__________

11 Even accepting their assertion in support of the motion to 

intervene that Prudential's refusal to disclose its working papers 

prevented immediate discovery of its methodology, appellants do 

not explain why knowledge of this methodology was necessary for 

them to know what their settlement offers should have been under 

the terms of the consent decree; in particular, because their claims 

were for fairly large amounts of money, it is reasonable to assume 

some vigilance on their part.

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have no right to intervene in the proceedings between the 

Commission and Prudential to enforce the decree.

III.

In the alternative, appellants contend that, even if they 

cannot sue to enforce the consent decree directly, they have a 

legally protected interest in the proceedings between the 

Commission and Prudential, and thus a right under Rule 

24(a)(2) to intervene in the proceedings, based on their common law claims against Prudential on theories of contract, 

fraud, and unjust enrichment. A glance at the nature of 

these claims shows, however, that as the district court indicated, these claims are "inextricably intertwined with [appellants'] claim of noncompliance with the consent decree" and 

do not constitute a valid independent basis for intervention.

Appellants' common law claims turn on their allegation that 

Prudential violated the consent decree. In the contract claim, 

appellants allege that in representing to the investors that it 

would comply with the consent decree, Prudential made a 

separate offer to investors, which investors accepted for 

consideration, thereby forming a contract separate from the 

consent decree itself but based on the same terms, and that 

Prudential violated this contract when it violated the consent 

decree. Similarly, in the fraud and unjust enrichment claims, 

appellants allege that by misrepresenting that it would conform to the terms of the consent decree, Prudential defrauded 

investors and was unjustly enriched. Fairly read, the complaint in intervention only seeks enforcement on the basis of 

the common law claims; there is no request for declaratory 

or similar relief.

These common law claims represent transparent attempts 

to avoid the effect of Blue Chip and its progeny. As the 

district court stated, "the actions [appellants] complain of 

arise out of alleged noncompliance with the consent decree." 

If third parties in appellants' position could bring such claims, 

then the Blue Chip line of cases would be eviscerated: any 

time a party to a consent decree indicated to a third party 

that it would abide by the consent decree, such third party 

could bring a claim in contract (as appellants attempt here) to 

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enforce the terms of the consent decree. If the court will not 

permit consent decree enforcement claims, it cannot permit 

the same invalid claims dressed in new formalist attire. 

Hence, it follows that appellants' common law claims must 

fail.12 Cf. Lyle v. Food Lion, Inc., 954 F.2d 984, 987 (4th Cir. 

1992).

Appellants contend that to disallow such claims would 

unfairly immunize parties to consent decrees against all ordinary claims by nonparties relating to performance under such 

decrees, but this is not true as a broad proposition. If 

appellants asserted genuinely independent common law 

claims, they could press them. As counsel for the Commission conceded at oral argument, there are still instances when 

third parties may bring independent claims based on malfeasance by the parties to a consent decree: for instance, when a 

third party can substantiate allegations of fraud. By contrast, a disagreement over the proper interpretation of a 

decree's terms, as is present here, does not present a circumstance in which third parties can avoid the force of Blue Chip

and its progeny.

Much as appellants have no valid interest in enforcing the 

terms of the consent decree directly, they have no valid 

interest in doing so by repackaging a noncompliance claim in 

the shells of common law contract, fraud, and unjust enrichment. Accordingly, because appellants have no legally protected interest in the proceeding between the Commission 

and Prudential, we affirm the district court's order denying 

their motion to intervene under Rule 24(a)(2) or 24(b).

__________

12 Appellants maintain, unpersuasively, that Beckett and Rafferty establish that such common law claims are independently viable. 

In Beckett, the court did consider claims raised by the plaintiffs 

other than their claim for noncompliance with the consent decree, 

but this is unenlightening, for the court in that case decided that the 

plaintiffs could enforce the decree as intended third party beneficiaries. See Beckett, 995 F.2d at 284-89. In Rafferty, the court 

refused to allow the plaintiff to enforce the terms of a consent 

decree yet did address the merits of other claims, but these other 

claims were substantively different from and not simply restatements of the noncompliance claim. See Rafferty, 60 F.3d at 849-51.

USCA Case #97-5109 Document #331981 Filed: 02/20/1998 Page 15 of 15