United States Court of Appeals

For the First Circuit

Nos. 05-2187, 05-2189 

B. FERNÁNDEZ & HNOS., INC.;

CARIBBEAN WAREHOUSE LOGISTICS, INC.,

Plaintiffs, Appellees,

v.

KELLOGG USA, INC.; ABC INSURANCE;

XYZ SURETY; PREFERRED INSURANCE;

JOHN DOE; RICHARD DOE,

Defendants,

 

KELLOGG CARIBBEAN SERVICES COMPANY, INC.,

Movant, Appellant.

 

No. 05-2188

B. FERNANDEZ & HNOS., INC.;

CARIBBEAN WAREHOUSE LOGISTICS, INC.,

Plaintiffs, Appellees,

v.

KELLOGG USA, INC.,

Defendant, Appellant,

 

ABC INSURANCE; XYZ SURETY; PREFERRED INSURANCE;

JOHN DOE; RICHARD DOE,

Defendants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Jaime Pieras, Jr., Senior U.S. District Judge]
Of the Eighth Circuit, sitting by designation. *

Before

 Torruella, Circuit Judge,

John R. Gibson, Senior Circuit Judge,*

and Howard, Circuit Judge.

Ricardo F. Casellas, with whom Fiddler González & Rodríguez,

P.S.C., was on brief for appellant, Kellogg Caribbean Services

Co., Inc.

Luis A. Oliver, with whom Fiddler González & Rodríguez,

P.S.C., were on brief, for appellant and Kellogg USA, Inc.

Alfredo Fernández Martínez, with whom Delgado & Fernández,

LLP, Ramón L. Walker Merino and Walker Merino Law Office, were on

brief, for appellees, B. Fernandez & Hnos., Inc. and Caribbean

Warehouse Logistics, Inc. 

March 17, 2006
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HOWARD, Circuit Judge. Before us are three interlocutory

appeals arising from an action brought by B. Fernandez & Hnos.,

Inc. (BFH) and Caribbean Warehouse Logistics (CWL) (collectively,

appellees) against Kellogg USA, Inc. (Kellogg USA). The appellees

accuse Kellogg USA of violating Puerto Rico Law 75, a statute

prohibiting a principal from terminating without just cause a

distribution agreement with its dealer. P.R. Laws Ann. tit. 10, §

278. Appellees seek an injunction, damages, and declaratory

relief. Federal jurisdiction is premised on diversity of

citizenship as appellees are Puerto Rico companies and Kellogg USA

is a Michigan company. See 28 U.S.C. § 1332.

The first appeal, by nonparty Kellogg Caribbean Services,

Inc. (Kellogg Caribbean), a Puerto Rico company, challenges the

denial of its motion to intervene under Fed. R. Civ. P. 24(a) and

for dismissal under Fed. R. Civ. P. 19(b). Pointing out that it

(and not Kellogg USA) is the party to the agreements with

appellees, Kellogg Caribbean argues that it is an indispensable

party whose intervention must be allowed but would destroy

diversity jurisdiction. The district court denied the motion on

the ground that Kellogg USA, a company affiliated with Kellogg

Caribbean because they share the same corporate parent company,

could adequately represent Kellogg Caribbean's interests. 

The second and third appeals, by Kellogg USA and Kellogg

Caribbean respectively, challenge a preliminary injunction ordering

Kellogg USA and its affiliates (which includes Kellogg Caribbean)
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to specifically perform the agreements with appellees. We do not

reach the merits of these appeals because our resolution of the

intervention appeal requires that we vacate the preliminary

injunction. 

I.

We derive the relevant facts primarily from the

allegations and evidence submitted by Kellogg Caribbean in support

of its motion to intervene but also consider uncontroverted facts

established elsewhere in the record. See Southwest Ctr. for

Biological Diversity v. Berg, 268 F.3d 810, 819-20 (9th Cir. 2001)

(stating that "a district court is required to accept as true the

non-conclusory allegations made in support of an intervention

motion") (collecting cases); 7C Charles Alan Wright, Arthur R.

Miller & Mary Kay Kane, Federal Practice & Procedure § 1914, at 418

(2d ed. 1986).

BFH, a Puerto Rico company, distributes Kellogg products

to Puerto Rico retailers. CWL, also a Puerto Rico company and an

affiliate of BFH, provides logistical and warehousing services.

Kellogg USA, a Michigan company and subsidiary of nonparty Kellogg

Company, manufactures cereal products on the mainland United States

for export to certain geographic markets throughout the world.

Kellogg Caribbean, a Puerto Rico company, promotes, sells and

distributes Kellogg products in Puerto Rico. Like Kellogg USA,

Kellogg Caribbean is a subsidiary of Kellogg Company.
Appellees dispute the effectiveness of this assignment, but, 1

at this stage of the case, we accept the facts as pleaded by

Kellogg Caribbean. See supra at 4.

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In 1992, Kellogg USA signed an agreement to supply

Kellogg products to BFH for distribution to Puerto Rico retailers.

Sometime thereafter, Kellogg USA assigned its rights and

obligations under this agreement to Kellogg Caribbean.1

In October 2004, BFH and Kellogg Caribbean signed an

Inventory and Repurchase Agreement under which Kellogg Caribbean

would purchase the Kellogg products owned by BFH. The purpose of

the repurchase agreement was to permit Kellogg Caribbean to

consolidate its warehouse and administrative functions into one

facility. Within this agreement, Kellogg Caribbean notified BFH

that it had been assigned Kellogg USA's interest in the

distribution agreement. The agreement stated that the terms of the

initial Kellogg USA-BFH distribution agreement remained in "full

force and effect." 

After purchasing BFH's inventory, Kellogg Caribbean sold

Kellogg products to BFH for distribution to the Puerto Rico market.

As part of its consolidation effort, Kellogg Caribbean hired CWL,

BFH's affiliate, to manage its warehouse operation. But Kellogg

Caribbean and CWL did not sign a written agreement for these

services.

In November 2004, Kellogg Caribbean informed BFH that it

was exercising a provision in the distribution agreement entitling

it to sell Kellogg "Cereal in a Cup" and "Fruit Snacks" products
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directly to Puerto Rico retailers. BFH would, however, remain the

distributor of other Kellogg products.

Displeased, BFH sued Kellogg USA claiming that it had

violated Law 75 by permitting "it or its affiliates" to sell

"Cereal in a Cup" and "Fruit Snacks" directly to retailers. Five

months later, Kellogg Caribbean notified CWL that it was

terminating their warehouse services relationship. Shortly

thereafter, appellees amended the complaint to add a count by CWL

alleging that Kellogg USA "and/or its affiliates" violated Law 75

by terminating the warehouse services agreement. Appellees sought

damages, declaratory relief, and a preliminary and permanent

injunction.

Five days after appellees filed their amended complaint,

Kellogg Caribbean moved "to intervene and to dismiss for lack of

an indispensable party." In due course, the district court denied

the motion. After an evidentiary hearing, the court entered a

preliminary injunction requiring Kellogg USA "and/or its affiliates

or subsidiaries" to specifically perform the agreements with

appellees pending trial.

II.

As mentioned above, federal jurisdiction is premised on

the diversity of citizenship between Kellogg USA (a Michigan

company) and BFH and CWL (Puerto Rico companies). But, if Kellogg

Caribbean (a Puerto Rico company) is entitled to intervene as a

matter of right under Rule 24(a)(2) and is an indispensable party
-7-

under Rule 19(b), the litigation must be dismissed because there

would not be complete diversity. As Professors Wright, Miller and

Kane have explained:

A person who should have been joined in

the first instance because he is so

related to the action that he is regarded

as "indispensable" cannot intervene if his

joinder will deprive the court of

jurisdiction over the subject matter of

the action. The action must be dismissed,

as Rule 19(b) requires, if the court

concludes that he is so related to the

action that he is indispensable. For this

reason the courts, in considering an

application for intervention by one whose

joinder would defeat diversity . . . will

examine his relation to the action and

[dismiss the action] if he . . . meets

the tests of Rule 24(a)(2) and . . . was

. . . an indispensable party to the

original action. 

7C Wright, Miller & Kane, supra § 1917, at 477-78; see also

Travelers Indemnity Co. v. Dingwell, 884 F.2d 629, 636 (1st Cir.

1989). We begin by considering whether Kellogg Caribbean meets

the requirements of Rule 24(a)(2). 

A. Rule 24(a)(2)

We review the denial of a Rule 24(a)(2) motion for abuse

of discretion. See Ewers v. Heron, 419 F.3d 1, 2 (1st Cir. 2005).

But, because Rule 24(a)(2) provides explicit criteria for

adjudicating a motion to intervene, the district court's

discretion is more circumscribed than in some other contexts. See

Cotter v. Mass. Assoc. of Minority Law Enforcement Officers, 219

F.3d 31, 34 (1st Cir. 2000). We will reverse if the district

court committed a legal error, or if the court reaches a decision
The requirements for a nonparty to intervene under Rule 2

24(a)(2) are similar to the requirements for a named party to join

a nonparty as a "person needed for just adjudication" under Fed.

R. Civ. P. 19(a)(2)(i). See 1966 Advisory Committee Notes to Fed.

R. Civ. P. 24. Therefore, cases applying Rule 19(a)(2)(i) are

helpful in interpreting application of Rule 24(a)(2) and vice

versa. See Pujol v. Shearson/Am. Express, Inc., 877 F.2d 132, 135

(1st Cir. 1989); 4 J. Moore, Moore's Federal Practice §

19.02[5][c] (2005). 

-8-

patently out-of-step with the purposes of Rule 24(a)(2). 

See Pub. Serv. Co. of N.H. v. Patch, 136 F.3d 197, 204 (1st Cir.

1998).

Rule 24(a)(2) provides in pertinent part:

Upon 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.

A putative intervenor thus must show that (1) it timely moved to

intervene; (2) it has an interest relating to the property or

transaction that forms the basis of the ongoing suit; (3) the

disposition of the action threatens to create a practical

impediment to its ability to protects its interest; and (4) no

existing party adequately represents its interests. See Patch, 2

136 F.3d at 204. "The failure to satisfy [all four conditions]

dooms intervention." Id.
Appellees claim that Kellogg Caribbean has no interest in 3

BFH's claim because Kellogg USA's assignment of the distribution

agreement to Kellogg Caribbean was ineffective. But, as mentioned

previously, we assume for purposes of this appeal that the

assignment was effective. See supra at n.1.

-9-

Because appellees concede that Kellogg Caribbean timely

moved to intervene, we first consider whether Kellogg Caribbean

has "an interest relating to the property or transaction which is

the subject of the action." Kellogg Caribbean easily meets this

requirement. An intervenor has a sufficient interest in the

subject of the litigation where the intervenor's contractual

rights may be affected by a proposed remedy. See Forest Conserv.

Council v. United States Forest Serv., 66 F.3d 1489, 1495 (9th

Cir. 1995); Harris v. Pernsley, 820 F.2d 592, 601 (3d Cir. 1987).

Here, appellees' proposed remedy -- an injunction requiring

specific performance of the agreements -- obviously would affect

Kellogg Caribbean's asserted contractual rights. Kellogg

Caribbean is the only Kellogg entity which is a party to these

agreements so that an injunction specifically enforcing the

agreements would surely limit its opportunity to terminate or

alter its future business relationship with appellees.3

This same rationale satisfies the requirement that

Kellogg Caribbean's interests, as a practical matter, may be

impaired by this litigation. Appellees seek an injunction

requiring specific performance that could bind Kellogg Caribbean.

See Fed. R. Civ. P. 65(d); see generally 11A Wright, Miller &

Kane, supra § 2956 (discussing the circumstances in which a
-10-

nonparty may be bound by an injunction). Thus, this litigation

could result (and preliminarily has resulted) in an order directly

affecting Kellogg Caribbean's contractual rights. This is more

than sufficient to satisfy the "practical impediment" requirement.

See Daggett v. Comm. on Governmental Ethics & Election Practices,

172 F.3d 104, 110-11 (1st Cir. 1999) (holding that the possibility

that the litigation could end with an injunction adversely

affecting intervenors' interests was adequate to satisfy this

aspect of Rule 24(a)(2)). 

This brings us to the district court's basis for denying

intervention: that Kellogg Caribbean's interests are sufficiently

represented by Kellogg USA. In so ruling, the district court

concluded that, because Kellogg USA and Kellogg Caribbean are

subsidiaries of a common parent, there is a presumption that

Kellogg USA would adequately represent Kellogg Caribbean's

interests. According to the district court, Kellogg Caribbean

could only rebut this presumption by showing that its interests

were somehow adverse to those of Kellogg USA, there was collusion

between Kellogg USA and appellees, or Kellogg USA has committed

nonfeasance in litigating the case. Because Kellogg Caribbean did

not make any of these showings, the court denied intervention. 

Typically, an intervenor need only make a "minimal"

showing that the representation afforded by a named party would

prove inadequate. Trbovich v. United Mine Workers, 404 U.S. 528,

538 n.10 (1972); see Patch, 136 F.3d at 207. However, in cases
-11-

where the intervenor's ultimate objective matches that of the

named party, a rebuttable presumption of adequate representation

applies. See Daggett, 172 F.3d at 111; Moosehead Sanitary Dist.

v. S.G. Phillips Corp., 610 F.2d 49, 54 (1st Cir. 1979). We are

doubtful that this presumption should apply based solely on the

fact that Kellogg Caribbean and Kellogg USA share the same parent

company. Cf. Pujol, 877 F.2d at 135 (stating that "corporate

alter ego status does not, by itself, mean that [the s]ubsidiary"

is automatically denied intervention). 

But assuming arguendo that this presumption applies, we

think that the district court focused too narrowly when it ruled

that Kellogg Caribbean could only rebut the presumption by showing

adversity of interest, collusion, or nonfeasance. We have

explained that this trilogy of grounds for rebutting the adequate

representation presumption is only illustrative. See Daggett, 172

F.3d at 111. Indeed, we have stressed the case-specific nature

of this inquiry, Maine v. United States Fish & Wildlife Serv., 262

F.3d 13, 19 (1st Cir. 2001), and have discouraged district courts

from identifying only a limited number of "cubbyholes" for

inadequate representation claims, Mass. Food Assoc. v. Mass.

Alcohol Beverages Control Comm., 197 F.3d 560, 567 n.5 (1st Cir.

1999).

Rather, to overcome the presumption, the intervenor need

only offer "an adequate explanation as to why" it is not

sufficiently represented by the named party. Maine, 262 F.3d at
This was Kellogg USA's lead argument in response to 4

appellees' preliminary injunction motion.

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19. One way for the intervenor to show inadequate representation

is to demonstrate that its interests are sufficiently different

in kind or degree from those of the named party. See United

Nuclear Corp. v. Cannon, 696 F.2d 141, 144 (1st Cir. 1982); Glancy

v. Taubman Cts., Inc., 373 F.3d 656, 675 (6th Cir. 2004)

("Asymmetry in the intensity . . of interest can prevent a named

party from representing the interests of the absentee."). 

To support its inadequate representation claim, Kellogg

Caribbean contends that the arguments it would emphasize are

different from those that Kellogg USA has pressed and will press.

According to Kellogg Caribbean, Kellogg USA will stress that it

is not a party to the agreements at issue and therefore cannot be

held liable for breaching those agreements under Law 75. See 4

Goya de P.R., Inc. v. Rowland Coffee Roasters, Inc., 206 F. Supp.

2d 211, 218-19 (D.P.R. 2002) (holding that a manufacturer that

assigns its interest in distribution contract is generally not

liable under Law 75). On the other hand, Kellogg Caribbean

contends, because it admits that it is a party to the agreements,

it would defend by arguing that appellees' allegations of

wrongdoing are unfounded. In Kellogg Caribbean's view, this

difference in emphasis is sufficient to demonstrate that Kellogg

USA does not adequately represent its interests.

In assessing this argument, we observe first that,
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because of the potential for an injunction binding Kellogg

Caribbean's future dealings, Kellogg Caribbean has a tangible and

substantial stake in the outcome of this case. Because of this

direct interest, the burden on Kellogg Caribbean to show

inadequate representation is lighter than if its interest was

"thin and widely shared." Daggett, 172 F.3d at 113-14; see

also Virg. Sur. Co. v. Northrop Grumman Corp., 144 F.3d 1243, 1248

(9th Cir. 1998) (concluding that a subsidiary was a necessary

party in a lawsuit against the parent because the litigation could

result in an injunction limiting the subsidiary's rights). 

We recognize that there is nothing to prevent Kellogg

USA from defending this lawsuit by arguing that, even if it is a

party to the agreements, Kellogg Caribbean acted lawfully. But,

as we will explain, Kellogg Caribbean almost certainly has more

to lose than Kellogg USA in this litigation -- at least insofar

as appellees seek relief enjoining Kellogg Caribbean to perform

under the agreements. 

According to Kellogg Caribbean's pleadings (which we

accept as true, see supra at 4), Kellogg USA is not a party to the

agreements, does not own or control Kellogg Caribbean, does no

business in Puerto Rico, and had no involvement in the events

underlying appellees' complaint. Unlike Kellogg Caribbean,

Kellogg USA is unlikely to be harmed by an injunction ordering

specific performance of the agreements; after all, it no longer

has a business relationship with appellees. See Tell v. Trustees
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of Dartmouth Coll., 145 F.3d 417, 419 (1st Cir. 1998) (stating

that "without a perfect identity of interests, a court must be

very cautious in concluding that a litigant will serve as a proxy

for an absent party"). The potential for this litigation to have

a greater adverse impact on Kellogg Caribbean is a sufficient

basis for concluding that Kellogg USA may not serve as an adequate

proxy. See Nat. Union Fire Ins. Co. v. Rite Aid of S. Carolina,

Inc., 210 F.3d 246, 251 (4th Cir. 2000) (concluding that a parent

company was a necessary party in a lawsuit against its subsidiary

because the results of the litigation could have more serious

future consequences for the parent); see also Southwest Ctr. for

Biological Diversity, 268 F.3d at 824 ("[I]t is not Applicants'

burden at this stage in the litigation to anticipate specific

differences in trial strategy. It is sufficient for Applicants

to show that, because of differences in interests, it is likely

that Defendants will not advance the same arguments as

Applicants.").

In sum, Kellogg Caribbean's attempt to overcome the

presumption of adequate representation should not have been

limited to showing adversity, collusion or nonfeasance. Because

the injunctive relief sought would affect Kellogg Caribbean and

because "there is sufficient doubt about the adequacy of

representation to warrant intervention," Trbovich, 404 U.S. at

538, Kellogg Caribbean has satisfied the Rule 24(a)(2)

requirements.
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B. Rule 19(b)

Having concluded that Kellogg Caribbean meets the Rule

24(a)(2) requirements, but that intervention would destroy

complete diversity, we turn to whether Kellogg Caribbean is an

indispensable party under Rule 19(b). See supra at 7-8. Rule

19(b) provides that, if a nonparty is deemed necessary to

litigation but joining that nonparty would deprive the court of

jurisdiction, the court should permit the action to proceed only

to the extent that "equity and good conscience" warrant.

Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102,

109 (1968). Four factors channel the analysis:

[F]irst to what extent a judgment rendered in

the person's absence might be prejudicial to

the person or those already parties; second,

the extent to which, by protective provisions

in the judgment, by the shaping of relief, or

other measures, the prejudice can be lessened

or avoided; third, whether a judgment

rendered in the person's absence will be

adequate; fourth, whether the plaintiff will

have an adequate remedy if the action is

dismissed for nonjoinder.

Fed. R. Civ. P. 19(b). 

We review Rule 19(b) determinations only for abuse of

discretion, see United States v. San Juan Bay Marina, 239 F.3d

400, 403 (1st Cir. 2001), because such determinations involve

"the balancing of competing interests" and "must be steeped in

pragmatic considerations," Travelers, 884 F.2d at 635. Here,

the district court did not independently analyze the Rule 19(b)

question due to the erroneous conclusion that Kellogg Caribbean
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could not intervene. Because the district court is in the

"preferred position" to make the Rule 19(b) determination, we

think that it should have the first opportunity to address the

question. Id.

That said, at least one thing is clear: Kellogg

Caribbean is indispensable insofar as appellees seek an

injunction that affects Kellogg Caribbean's interests under the

agreements. See, e.g., Acton Co. Inc. of Mass. v. Bachman Foods,

Inc., 668 F.2d 76, 81-82 (1st Cir. 1982) (stating that, in an

action seeking recision of a contract, all parties to the

contract and others having a substantial interest in it are

indispensable parties); 7 Wright, Miller & Kane, supra § 1613,

at 196 ("[I]n an action seeking specific performance of a

contract all persons who will be required to act to carry out a

court order compelling performance have been held to be

indispensable parties."). As discussed earlier, our conclusion

that Kellogg Caribbean meets Rule 24(a)(2)'s requirements was

influenced by our concern that it could be enjoined to perform

under the agreements without being adequately represented. This

analysis also renders Kellogg Caribbean an indispensable party,

at least to the extent that appellees seek specific performance.

See Acton, 668 F.2d at 81-82.

Nevertheless, there are multiple ways that the district

court could resolve the Rule 19(b) question consistent with this

limitation. For example, it could decide that Kellogg
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Caribbean's involvement in the underlying dispute is so extensive

that it is indispensable to a proper adjudication of the case and

therefore dismiss the action entirely. See H.D. Corp. of P.R. v.

Ford Motor Co., 791 F.2d 987, 993 (1st Cir. 1986); Freeman v.

Northwest Acceptance Corp., 754 F.2d 553, 559 (5th Cir. 1985).

It also could decide to retain jurisdiction and limit the relief

available to appellees. See 7 Wright, Miller & Kane, supra §

1608 at 107 ("[W]hen rescission or specific performance might

have a detrimental impact on an absent person, money damages may

prove to be an appropriate alternative."). We do not prejudge

whether one of these approaches, or perhaps another, provides a

better avenue for accommodating the "competing interests" of the

parties. 

This rationale requires, however, that we vacate the

preliminary injunction while the district court considers the

Rule 19(b) question. This injunction, by its terms, requires

that Kellogg Caribbean (as an affiliate of Kellogg USA) perform

under the agreements while this litigation is pending. As just

discussed, this kind of relief cannot be granted consistent with

Rule 19(b) because it harms Kellogg Caribbean's legal interests.

III.

For the reasons stated, we vacate the preliminary

injunction and remand for further proceedings consistent with

this opinion. The parties shall bear their own costs.

So ordered.