UNITED STATES COURT OF APPEALS

for the Fifth Circuit

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No. 91-2073

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ENGRA, INC.,

Plaintiff-Appellant,

VERSUS

MORRIS I. GABEL,

Defendant-Appellee.

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Appeal from the United States District Court for the

Southern District of Texas

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(April 6, 1992)

ON PETITION FOR REHEARING

Before DAVIS, JONES and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:

Attorney Van McFarland's petition for rehearing and the amicus

brief filed in this case lead us to conclude that our original

opinion unnecessarily decided issues of Texas law. A number of

alternate grounds are available on which this case may be decided.

We elect to withdraw our earlier opinion and substitute the

following:

Attorney Van McFarland filed this action to enforce a

contingent fee agreement with his client, Engra, Inc. against

Morris Gabel, the party his client sued. The district court
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rendered a take-nothing summary judgment against McFarland. We

affirm and assess sanctions. 

I.

In 1986, Van McFarland undertook the representation of Engra,

Inc. in its action against Morris I. Gabel under the federal

securities laws. The fee agreement between McFarland and Engra

included the following provision:

Our agreement is that we will represent you in the suit and

pursue it to settlement or judgment for 40% of all recovery .

. . . By execution below, each of you hereby sell, transfer

and assign unto us 40% of your claims and causes of action in

the referenced cases to secure performance of this agreement.

In June 1987, Engra filed a petition in bankruptcy which

automatically terminated McFarland's right to control the

litigation as Engra's counsel. McFarland was listed as a creditor

in the petition. In March 1988, the bankruptcy judge approved a

compromise and settlement of the claims arising out of the

litigation between Engra and Gabel for approximately $317,000 and

the suit was dismissed with prejudice. McFarland had full notice

of the proposed settlement and in fact corresponded with Gabel's

attorney as to whether the settlement included all claims.

Eight months later in December 1988, McFarland filed a "Notice

of Party in Interest" in Engra's original securities fraud action

in district court asserting a 40% interest in Engra's cause of

action. The district court scheduled a status conference on the

case in October 1990. McFarland then filed a "Memorandum

Concerning Validity of Assignment and Standing of Party in

Interest". Gabel and McFarland filed cross motions for summary
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judgment. McFarland also filed a "Motion for leave to file amended

intervention and notice of real party in interest." The district

court denied all of McFarland's motions, including his motion to

intervene, and granted Gabel's motion for summary judgment.

McFarland appeals. 

II.

McFarland was not named as a party to the action between Engra

and Gabel. As a non-party, he has no rights in the litigation

between his client and the defendant unless and until he is

permitted to intervene. Under Rule 24 of the Federal Rules of

Civil Procedure, intervention is proper only upon "timely

application". Fed.R.Civ.P. 24(a) and (b); United Airlines, Inc.

v. McDonald, 432 U.S. 385, 53 L.Ed.2d 423, 427 (1977); Stallworth

v. Monsanto Co., 558 F.2d 257, 263 (5th Cir. 1977). 

In determining whether McFarland's motion to intervene was

timely, we consider four factors:

(1) The length of time during which the would-be intervenor

actually knew or reasonably should have known of his interest

in the case before he petitioned for leave to intervene.

(2) The extent of the prejudice that the existing parties to

the litigation may suffer as a result of the would-be

intervenor's failure to apply for intervention as soon as he

actually knew or reasonably should have known of his interest

in the case.

(3) The extent of the prejudice that the would-be intervenor

may suffer if his petition for leave to intervene is denied.

(4) The existence of unusual circumstances militating either

for or against a determination that the application is timely.

Stallworth, 558 F.2d at 264-66. 
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First, McFarland knew of his interest in this case from its

inception. In particular, he knew that his rights to collect his

fee, whatever those rights may be, were no longer being represented

in mid-March 1988, when he became aware of the proposed settlement

between the bankruptcy trustee and Gabel, and corresponded with

Gabel's attorney concerning the settlement. McFarland took no

action to protect his interest in the settlement proceeds before

the bankruptcy judge dismissed all claims between Engra and Gabel

with prejudice on April 22, 1988. In fact, McFarland did nothing

until December 1988, when he filed a "Notice of Party in Interest"

in federal district court. Even if we read that filing as a Motion

to Intervene, it came eight months after the settlement and

dismissal. See United States by Bell v. Allegheny-Ludlum

Industries, Inc., 553 F.2d 451 (5th Cir. 1977) (Motion to intervene

seven and a half months after judgment and six months after

implementation of the decrees is untimely.)

Second, Gabel will suffer (and has suffered) prejudice by

McFarland's failure to assert his rights in a timely manner in the

bankruptcy proceeding. At the time of settlement and dismissal,

Gabel believed that his liability for claims asserted in the Engra

suit was discharged. McFarland's delay has required Gabel to

relitigate a claim he justifiably thought was resolved. 

Third, McFarland will suffer little prejudice if his petition

for intervention is denied. Even assuming that McFarland has a

legitimate argument on the merits to recover from Gabel, the party

his client sued, (which is doubtful), he could just as easily have
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pursued this claim in state court. This is especially true in this

case where there were no ongoing proceedings in the district court,

the claims had been settled and dismissed months earlier, and the

only unresolved claim asserted by McFarland was his rights under

his fee agreement with his client. Fourth, there are no unusual

circumstances militating in favor of finding that McFarland's

motion was timely. 

Based on the above analysis, the district court did not err in

denying McFarland's motion to intervene. As the facts above aptly

demonstrate, attorney Van McFarland had full opportunity to protect

whatever rights he had under this fee agreement with his client,

Engra, Inc., in the bankruptcy proceedings. His motion to

intervene in the case, filed at the earliest in December 1988,

eight months after the case between Engra and Gabel was settled and

dismissed, is untimely as a matter of law.

In fact, these facts present a particularly egregious case of

a member of the bar multiplying the burdens of litigation. A

prudent counsel would have presented his claims for attorney fees

to the bankruptcy court. That was the obvious time and place to do

so. McFarland ignored that opportunity and instead generated an

entirely new round of litigation. He offers no excuse for

following this unreasonable course of conduct that was burdensome

to both the court and Gabel. 

McFarland's appeal from the dismissal of his motion to

intervene unreasonably and vexatiously multiplied the proceedings.

We therefore impose sanctions against Mr. McFarland under 28 U.S.C.
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§ 1927 in the amount of $1,500 for the excess costs, expenses and

attorney fees he required Gabel to incur. Mr. McFarland shall

certify to the clerk within thirty days after our mandate issues

that he has paid the $1500 to Gabel or explain why he has not done

so. 

AFFIRMED. Sanctions imposed.