Opinion ID: 1465768
Heading Depth: 1
Heading Rank: 5

Heading: Timing Considerations

Text: Sonat contends that, even if Lumbermens had a right to participate on appeal, the court of appeals did not abuse its discretion in denying Lumbermens' intervention because Lumbermens only attempted to do so after the trial court's judgment became final. Ordinarily, a trial court does not abuse its discretion by denying a motion to intervene after the court has rendered a final judgment. Comal County Rural High Sch. Dist. No. 705 v. Nelson, 158 Tex. 564, 314 S.W.2d 956, 957 (1958). But our decisions in City of San Benito and El Paso Independent Automobile Dealers Ass'n demonstrate that one who has been virtually represented may be entitled to invoke a right of participation as a named party after judgment has been rendered. Those decisions stem from our recognition that `[t]o hold otherwise would deprive nonnamed [parties who will be bound by a judgment] of the power to preserve their own interests.' City of San Benito, 109 S.W.3d at 754 (quoting Devlin v. Scardelletti, 536 U.S. 1, 10, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002)); see also United Airlines, Inc. v. McDonald, 432 U.S. 385, 395-96, 97 S.Ct. 2464, 53 L.Ed.2d 423 (1977) (holding that member of putative class was entitled to intervene to appeal denial of class certification after trial court rendered final judgment incorporating named plaintiffs' settlement with defendant); Ross v. Marshall, 426 F.3d 745, 761 (5th Cir.2005) (holding that insurer that correctly anticipated its insured would drop its appeal was entitled to intervene to appeal adverse judgment against insured). It is true that, because virtual representation is an equitable doctrine, other factors may weigh against allowing intervention after final judgment has been rendered. While other equitable factors may weigh against allowing a virtually-represented party to invoke appellate rights, the mere fact that the party does not attempt to invoke those rights until after judgment, when the need to invoke them arose, is not dispositive.
Sonat argues that Lumbermens is not entitled to intervene because it did not attempt to do so until after Cudd filed its reply brief in the court of appeals, ten weeks after Sonat nonsuited its breach-of-contract claims and Cudd failed to raise the choice-of-law issue in its initial appellate brief. We have never articulated a particular standard for evaluating the timeliness of a virtually-represented party's effort to invoke appellate rights. But we find useful the test that the Fifth Circuit has recently articulated for evaluating the timeliness of a motion to intervene as of right under Rule 24(a)(2) of the Federal Rules of Civil Procedure. [7] Considerations under that test are (1) the length of time during which the would-be intervenor should have known of its interest in the case before attempting to intervene; (2) the extent of prejudice that the existing parties may suffer as a result of the would-be intervenor's failure to apply for intervention as soon as it actually knew or should have known of its interest in the case; (3) the extent of prejudice the would-be intervenor would suffer if intervention is denied; and (4) the existence of unusual circumstances militating either for or against a determination that the application is timely. Ross, 426 F.3d at 754. These factors give structure to [the] timeliness analysis, [but the analysis] remains `contextual' and should not be used as a `tool of retribution to punish the tardy would-be intervenor, but rather [should serve as] a guard against prejudicing the original parties . . . .' Id. (quoting Sierra Club v. Espy, 18 F.3d 1202, 1205 (5th Cir.1994)). The first factor `focuses on the time lapse between the applicant's receipt of actual or constructive knowledge of his interest in the litigation and the filing of his motion for intervention.' Id. at 754 (quoting Edwards v. City of Houston, 78 F.3d 983, 1000 (5th Cir.1996)). The `critical inquiry . . . is whether in view of all the circumstances the intervenor acted promptly' to protect its interests. Id. at 755 (quoting United Airlines, 432 U.S. at 395-96, 97 S.Ct. 2464). When, as here, a would-be intervenor's interests have been represented by a named party, promptness is measured from the point that `it became clear . . . that [the would-be intervenor's] interests . . . would no longer be represented by [the named party].' Id. (quoting United Airlines, 432 U.S. at 394, 97 S.Ct. 2464). In United Airlines, an unnamed putative classmember sought to intervene in order to appeal the denial of class certification, and did so within three weeks of the date the named classmembers' settlement was incorporated into a final judgment. United Airlines, 432 U.S. at 390, 97 S.Ct. 2464. In this case, ten weeks elapsed between the time Lumbermens became aware that Cudd would not pursue the choice-of-law ruling and the time Lumbermens filed its motion to intervene. Lumbermens explains this delay by pointing to the novel posture of this case and the uncertainty created by the lack of any specific rule providing for intervention on appeal. In evaluating the reasonableness of an appellant's explanation of delay in perfecting an appeal, we have given weight to the fact that the underlying procedural rules were unclear. See Hone v. Hanafin, 104 S.W.3d 884, 888 (Tex.2003). In Hanafin, the appellants failed to timely file notice of an accelerated appeal based on their belief that their request for findings of fact and conclusions of law had extended the deadline. We noted that courts and scholars disagreed about whether filing such a request extended the deadline for perfecting an appeal, and that our appellate rules did not clearly state that doing so would not extend the deadline. Id. Consequently, we held that the appellants had reasonably explained their failure to timely file their notice of appeal. Id. While it would have been preferable for Lumbermens to have acted more promptly in light of Sonat's nonsuit in the breach-of-contract case, we agree that under the circumstances of this case, Lumbermens did not wait an inexcusably long period of time to attempt to invoke appellate rights under the virtual-representation doctrine after it became aware that Cudd would not pursue the choice-of-law issue on appeal. The second factor in the Fifth Circuit's timeliness test is the extent of prejudice that the existing parties may suffer as a result of the applicant's failure to apply for intervention at an earlier time; this factor `is concerned only with the prejudice caused by the applicants' delay, not that prejudice which may result if intervention is allowed.' Ross, 426 F.3d at 755 (quoting Edwards, 78 F.3d at 1002). Sonat contends it was prejudiced by Lumbermens' delay because Lumbermens seeks to raise issues that were not raised in Cudd's initial appellant's brief, effectively contravening Rule 38.1(e) of the Rules of Appellate Procedure. But until Cudd filed a brief that omitted the choice-of-law issue, Lumbermens had no cause to attempt to intervene. Sonat further argues, though, that it will suffer prejudice because it has already filed its responsive brief. However, Rule 38.7 of our appellate rules empower the courts of appeals to allow parties to amend or supplement their briefs whenever justice requires. TEX. R. APP. P. 38.7. If Lumbermens is permitted to raise the choice-of-law issue based on the virtual-representation doctrine, then justice would surely require that Sonat be permitted to respond. The third factor the Fifth Circuit considers is the extent of prejudice the applicant would suffer if intervention is not permitted. Ross, 426 F.3d at 754. It is undisputed that the choice-of-law issue is potentially dispositive. Although Lumbermens invites us to decide the choice-of-law issue, we make no judgment regarding the issue's merits. But if the trial court erred in its choice-of-law decision and the judgment stands despite that error, then the prejudice to Lumbermens is obvious and severe. `[I]t is essential to our system of justice, that litigants should have their day in court.' United Airlines, 432 U.S. at 395 n. 16, 97 S.Ct. 2464 (quoting Am. Brake Shoe & Foundry Co. v. Interborough Rapid Transit Co., 3 F.R.D. 162, 164 (S.D.N.Y.1942)); see also Verburgt v. Dorner, 959 S.W.2d 615, 616-17 (Tex.1997) (disfavoring disposition of appeals based upon harmless procedural defects); TEX. R. CIV. P. 1 (The proper objective of rules of civil procedure is to obtain a just, fair, equitable and impartial adjudication of the rights of litigants under established principles of substantive law) (emphasis added). The fourth factor the Fifth Circuit considers is the existence of unusual circumstances militating either for or against a determination that the application is timely. Ross, 426 F.3d at 754. To some extent, the fact that Sonat nonsuited its breach-of-contract claims against Cudd with prejudice militates against finding that Lumbermens' effort to intervene in this case was timely. [8] But in several of the cases we have cited, a virtually-represented party was allowed to appeal despite the fact that the opposing party had negotiated a settlement with the virtual representative. In Ross, the plaintiff had negotiated an agreement with the insured under which no appeal of the underlying judgment would have ensued if the Fifth Circuit had not permitted the insurer's intervention. Moreover, if Lumbermens is not permitted to intervene and the choice-of-law issue is meritorious, Cudd will have essentially foisted liability for uninsured claims onto its insurer. Cf. State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696, 713 (Tex.1996) (invalidating assignment of bad faith claims on public policy grounds when insured abandoned its natural position in order to take advantage of insurer). In light of the novel posture of this case, the extent of likely prejudice to Lumbermens if it is not allowed to raise the choice-of-law issue its insured abandoned, and the unlikelihood of prejudice to Sonat resulting from the timing of Lumbermens' effort to invoke appellate rights, we conclude that the timing of Lumbermens' motion does not prevent its intervention.
Sonat argues that if Lumbermens is permitted to appeal in this case, then all insurers, indemnitors, and other similarly-situated parties will be entitled to intervene on appeal, potentially interfering with insureds' appellate strategy or raising issues contrary to their insureds' interests or colluding with their insureds to expand briefing schedules or page limitations. We note that analogous concerns arguably exist when an insurer intervenes in the trial court, and Sonat seems to agree that Lumbermens would have been entitled to intervene in the trial court if Cudd had opted not to pursue the choice-of-law issue there. Nevertheless, we agree that every disagreement between an insured and its liability insurer would not justify separate appeals. As we recently acknowledged, the insurance policy determines whether an insurer or its insured has the right to control litigation, a contract right that would be defeated if every disagreement between the two justified each in filing its own appeal. See Northern County Mut. Ins. Co. v. Davalos, 140 S.W.3d 685, 688-89 (Tex.2004)., However, our procedural rules favor the resolution of cases based upon substantive principles. Verburgt, 959 S.W.2d at 616-17; TEX. R. CIV. P. 1 We reiterate that whether a would-be intervenor is entitled to appeal under the virtual-representation doctrine is an equitable determination that must be decided on a case-by-case basis. Our decision today is limited to the situation presented.