UNITED STATES DISTRICT COURT FOR THE 

DISTRICT OF NEW HAMPSHIRE

Pat V. Costa

v. Civil No. 06-cv-412-JD

Opinion No. 2007 DNH 031

Dreier, LLP, and

Steven M. Notinger, Trustee

O R D E R

Pat V. Costa appeals from the bankruptcy court’s order that

denied his motion to intervene in an adversary proceeding, Steven

M. Notinger, Trustee, v. Dreier, LLP, Adv. No. 06-1157-JMD, that

arose in a Chapter 7 bankruptcy case, In re: Robotic Systems,

Inc., and Auto Image ID, Inc., Bk.Nos. 04-14151-JMD and 04-14152-

JMD. Costa argues that because of the procedural history of the

adversary case and because of his particular interest in the

subject matter, the bankruptcy court erred in denying his motion

to intervene. Both the Trustee and Dreier, LLP, the law firm

that represented the Debtors, contend that the bankruptcy court

properly denied Costa’s motion.

Background

Robotic Vision Systems, Inc., and Auto Image ID, Inc., (“the

Debtors”) sought bankruptcy protection under Chapter 11 on

November 19, 2004. Pat V. Costa was the president, chief

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executive officer, and a director of the Debtors. Costa filed

proofs of claim for a secured claim, a general unsecured claim, a

priority unsecured claim, and an administrative priority expense

claim. The cases were jointly administered in bankruptcy and

were both converted to Chapter 7 cases on October 11, 2005. 

Steven M. Notinger was appointed to serve as Trustee.

Dreier, LLP, and Sheehan Phinney Bass &` Green, P.A.,

represented the Debtors during the Chapter 11 proceedings. 

Dreier, Sheehan, and other professionals who provided services

during the Chapter 11 phase filed final applications for fees and

expenses after the cases were converted to Chapter 7 proceedings. 

Costa and the United States Trustee filed objections. Costa

included claims of malpractice and fraud against Dreier and

another professional, Marotta, Gund, Budd & Dzera, LLC, (“MGBD”)

seeking an award of fees and expenses. The Trustee did not file

objections to the fee applications, but did file recommendations

as to two applications and moved to approve settlement agreements

with Dreier and another applicant. The bankruptcy court held a

hearing on the applications and objections on May 5, 2006. 

In the decision issued on May 26, 2006, the bankruptcy court

primarily addressed the legal and procedural issues raised by the

objections to the applications filed by Dreier and MGBD. The

court concluded that only the Trustee, not Costa, had standing to

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bring claims of fraud and malpractice against Dreier and MGBD

without first seeking leave of court. The bankruptcy court

converted the objections filed by Costa and the United States

Trustee to an adversary proceeding pursuant to Bankruptcy Rules

3007 and 9014(b) and in a separate order directed that an

adversary proceeding be initiated with the Trustee as the

plaintiff and Dreier as the defendant. The bankruptcy court also

directed that a separate adversary proceeding be initiated to

address the objections to MGBD’s fee application.

On June 16, 2006, Costa moved to intervene as a party in the

Dreier adversary proceeding under Federal Rule of Civil Procedure

24. On September 13, 2006, the court ruled that Costa did not

have a right to intervene, that permissive intervention was not

appropriate, and that Costa had not met the procedural

requirements for intervention. Costa appeals from that decision. 

Standard of Review

This court has jurisdiction to hear an appeal from final

orders issued by the bankruptcy court. 28 U.S.C. § 158(a)(1).

“An order flatly denying a motion to intervene in a judicial

proceeding is an immediately appealable collateral order.” Rhode

Island v. U.S.E.P.A., 378 F.3d 19, 26 (1st Cir. 2004). The

appellate court reviews the bankruptcy court’s factual findings

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for clear error and reviews its legal conclusions de novo. See

Fed. R. Bankr. P. 8013; In re Marrama, 430 F.3d 474, 477 (1st

Cir. 2005). 

Discussion

On appeal, Costa argues that he was entitled to intervene in

the adversary proceeding as a matter of right and that he met the

requirements for permissive intervention under Federal Rule of

Civil Procedure 24. He also challenges the bankruptcy court’s

alternative holding that he failed to comply with the procedural

requirements for intervention. The Trustee and Dreier filed

separate briefs in which they both contend that the bankruptcy

court properly denied Costa’s motion to intervene. Costa filed a

reply. The Trustee and Dreier move jointly to strike Costa’s

reply.

I. Motion to Strike Reply

The Trustee and Dreier move to strike Costa’s reply brief 

on the grounds that it refers to evidence that was developed in

depositions taken after the bankruptcy court’s decision, that it

mischaracterizes that evidence, and that it improperly raises a

new argument. In his opposition to the motion to strike, Costa

argues that his reply properly responded to arguments made by the

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Trustee and Dreier in their briefs. With respect to the new

evidence referenced in the reply, Costa contends that he was only

notifying this court of the ongoing proceedings in the bankruptcy

court and that none of that evidence is material to the appeal.

The sole issue on appeal in this case is whether the

bankruptcy court erred in denying Costa’s motion to intervene in

the adversary proceeding. Any issue as to whether the bankruptcy

court’s previous order commencing the adversary proceeding was

final and immediately appealable is not before the court in this

appeal. Therefore, the court will disregard any argument

pertaining to the merits of the conversion order. Because Costa

states that the new evidence he referenced is not material to his

appeal here, that evidence will not be considered. The motion to

strike is otherwise denied.

II. Appeal from the Intervention Order

Federal Rule of Civil Procedure 24 provides for mandatory

intervention in particular circumstances and permissive

intervention at the discretion of the court. Rule 24 applies in

bankruptcy proceedings through Bankruptcy Rule 7024. In re

Thompson, 965 F.2d 1136, 1141 (1st Cir. 1992). To be entitled to

intervene as of right, an intervenor “must show that (1) [he]

timely moved to intervene; (2) [he] has an interest relating to

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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 [his] ability to protect [his] interest;

and (4) no existing party adequately represents [his] interests.” 

B. Fernandez & Hnos., Inc. v. Kellogg USA, Inc., 440 F.3d 541,

544-45 (1st Cir. 2006). Permissive intervention under Rule 24(b)

is “available in the court’s discretion where the applicant’s

claim or defense and the main action have a ‘question of law or

fact in common.’” Daggett v. Comm’n on Governmental Ethics &

Election Practices, 172 F.3d 104, 108 (1st Cir. 1999) (quoting

Fed. R. Civ. P. 24(b)).

A. Intervention as of Right

The bankruptcy court found that Costa moved to intervene in

a timely fashion and that he had an interest relating to the

property involved in the adversary proceeding. The court found,

however, that Costa had not shown that disposition of the

adversary proceeding without his intervention would prevent him

from protecting his interests in the Debtors’ assets. The court

also found that Costa had not shown that the Trustee would not

adequately protect Costa’s interests. 

Costa’s interest in the Debtors’ assets, as found by the

bankruptcy court, is as follows:

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1Costa conflates issues he raised on behalf of the Debtors

in his objection to Dreier’s fee application with different

claims he now asserts against Dreier in his personal capacity. 

He also attempts to rely on the bankruptcy court’s order

converting the contested matter to an adversary proceeding as

part of the reasoning supporting his motion to intervene. These

efforts are not persuasive and undermine Costa’s case on appeal. 

7

Costa is a creditor who holds general unsecured,

priority unsecured, administrative priority unsecured,

and secured claims against the Debtors’ bankruptcy

estates. As a claimant, the ultimate resolution of

Dreier’s fee application will impact Costa’s recovery.

Approving and paying all or any portion of Dreier’s

fees and expenses will dissipate the assets of the

Debtors’ bankruptcy estates, which assets would

otherwise be available to satisfy the administrative

priority and other claims presently held by Costa.

Mem. Op. Sept. 13, 2006, at 6-7. On appeal, Costa argues that

his interests also include protecting the viability of claims of

fraud and tortious interference which he intends to bring on his

own behalf against Dreier and MGBD.1 Because Costa did not raise

those claims as part of his asserted interest in the Debtors’

estate in support of his motion to intervene in the bankruptcy

court, they will not be considered here. See In re Olympic Mills

Corp., --- F.3d ---, 2007 WL 102584 at *13 (1st Cir. Jan. 17,

2007).

The bankruptcy court found, and Costa does not dispute, that

the Trustee has a fiduciary duty to represent the interests of

the creditors in a bankruptcy proceeding. See Petitioning

Creditors of Melon Produce, Inc. v. Braunstein, 112 F.3d 1232,

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1240 (1st Cir. 1997). Although “[t]ypically, an intervenor need

only make a ‘minimal’ showing that the representation afforded by

a named party would prove inadequate, . . . in cases where the

intervenor’s ultimate objective matches that of the named party,

a rebuttable presumption of adequate representation applies.” B.

Fernandez & Hnos., 440 F.3d at 546. 

Costa asserts that because he might lose his right to bring

his personal claims against Dreier and MGBD based on the outcome

in the adversary proceedings, he has more to lose than the

Trustee and, therefore, the Trustee does not adequately represent

his interests. As noted above, however, Costa did not raise an

issue about his personal claims against Dreier and MGBD in the

bankruptcy court. Therefore, that interest will not be

considered here. Even if the argument were properly presented,

however, Costa has not shown that resolution of the adversary

proceeding would affect his personal claims, as distinct from

claims on behalf of the Debtors. With respect to any claims that

might be brought on behalf of the Debtors, Costa has not shown

that he would have standing to maintain such claims, see In re

Robotic Vision Sys., Inc., 343 B.R. 393, 399 (Bankr. D.N.H.

2006), undermining that ground for his theory of inadequate

representation, see Mangual v. Rotger-Sabat, 317 F.3d 45, 61 (1st

Cir. 2003). 

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Therefore, Costa failed to rebut the presumption that the

Trustee would serve as an adequate representative of his

interests in the Debtors’ assets in the adversary proceeding. 

Because Costa has not shown that the bankruptcy court erred in

concluding the Trustee would adequately represent Costa’s

interests, this court need not consider the other factors that

are necessary for intervention under Rule 24(a)(2). 

B. Permissive Intervention

Federal Rule of Civil Procedure 24(b)(2) permits

intervention when a non-party shows that his claim shares a

question of law or fact with the claims brought in the main

proceeding. Even when that showing is made, however, “the rule

merely permits intervention at the discretion of the [] court.”

Mass. Food Ass’n v. Mass. Alcoholic Beverages Control Comm’n, 197

F.3d 560, 568 (1st Cir. 1999). Therefore, the bankruptcy court’s

decision not to allow Costa to intervene under Rule 24(b)(2) is

reviewed for abuse of discretion. Daggett, 172 F.3d at 109.

The bankruptcy court denied Costa’s motion for permissive

intervention on the grounds that his interests were adequately

protected by the Trustee and that his involvement as a party

would cause undue delay based on the months of discovery and

length of trial he was proposing. Costa provides no basis to

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conclude that the bankruptcy court’s decision was an abuse of

discretion. Therefore, that decision is affirmed.

C. Failure to Follow Required Procedure

The bankruptcy court also found that Costa failed to follow

the procedure required for intervention under Rule 24(c) and

Bankruptcy Rule 7024(c). Both rules require an intervenor to

file a pleading that sets forth the claim he intends to assert. 

Costa failed to file such a pleading. 

Costa attempts to excuse his failure to comply with the

filing requirement by arguing that his objection to Dreier’s fee

application adequately stated his claim. The bankruptcy court

appropriately noted, however, that Costa’s fee objection raised

claims on behalf of the Debtors that he lacked standing to bring. 

“Accordingly, Costa should have articulated in a separate

pleading exactly what claims he would assert against Dreier in

this adversary proceeding.” Mem. Op. Sept. 13, 2006, at 12. 

Costa’s effort on appeal to raise new interests and claims

exemplifies the need for filing a pleading as required under Rule

24(c). Because the bankruptcy court correctly held that Costa did

not comply with the filing requirement, the court did not err in

denying the motion to intervene on that alternative ground.

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Conclusion

For the foregoing reasons, the decision of the bankruptcy

court issued on September 13, 2006, denying the motion of Pat V.

Costa to intervene in the adversary proceeding is affirmed. The

defendants’ motion to strike the reply (document no. 33) is

denied. The clerk of court shall close the case.

SO ORDERED.

____________________________

Joseph A. DiClerico, Jr.

United States District Judge

March 14, 2007

cc: Charles A. Dale, III, Esquire

James W. Donchess, Esquire

David Himelfarb, Esquire

Geraldine L. Karonis, Esquire

Norman N. Kinel, Esquire

Joshua E. Menard, Esquire

Deborah Ann Notinger, Esquire

Thomas J. Pappas, Esquire

US Bankruptcy Court - NH, Clerk

Terence D. Watson, Esquire

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