54 F.4th 1078
9th Cir.2022Background
- DTSC sued current and former owners/operators under CERCLA and state law for remediation of contamination at an Elmira, CA site and amended to add Collins & Aikman (a dissolved Delaware LLC) as a defendant.
- Delaware Court of Chancery appointed a receiver for Collins & Aikman (at DTSC’s request) with power but not obligation to defend; the receiver declined to answer and the district clerk entered default against Collins & Aikman.
- DTSC moved for default judgment years later; three historic insurers (Century, Allianz, Continental) learned of the suit only after notice and promptly moved to intervene under Fed. R. Civ. P. 24(a)(2) and to set aside the clerk’s default under Rule 55(c).
- The district court denied intervention (finding no protectable interest because of coverage disclaimers or lack of duty to defend) and denied the motions to set aside default; insurers appealed.
- Ninth Circuit: insurers had constitutional standing and, under California law (Ins. Code §11580 and Clemmer line), had a protectable interest to intervene to defend their helpless insured; reversed denial of intervention, dismissed appeal as to Rule 55(c) orders for lack of appellate jurisdiction, and remanded.
Issues
| Issue | DTSC's Argument | Insurers' Argument | Held |
|---|---|---|---|
| Do intervenors who seek relief different from existing parties need constitutional standing? | Intervenors seeking different relief must show standing and insurers lacked it. | Insurers argued any contingent direct-action exposure gives concrete injury. | Court: Yes standing required; insurers met injury, causation, redressability — they had standing. |
| Does Rule 24(a)(2) require a "protectable interest" and do insurers have one under state law? | DTSC: insurers forfeited any interest by disclaiming coverage or not reserving rights; no protectable interest. | Insurers: CA Ins. Code §11580 (and Clemmer) gives an insurer a protectable interest to prevent default of a helpless insured regardless of coverage stance if timely to defend. | Court: Rule 24(a)(2) requires a legally protectable interest; under CA law §11580 an insurer timely seeking to defend a helpless insured has a protectable interest irrespective of coverage position — intervention should have been allowed. |
| Which law governs whether the asserted interest is "protectable under some law"? | (Implicit) Apply appropriate choice-of-law; DTSC did not assert a different forum law applies. | Insurers: state substantive law supplies the protectable interest (California). | Court: Applying Cassirer, federal courts should use forum (California) choice-of-law rules here and therefore applied California substantive law. |
| Is the district court's denial of motions to set aside clerk’s entry of default immediately appealable? | DTSC: order is interlocutory and not appealable. | Insurers: appealed denial as part of same interlocutory posture. | Court: No appellate jurisdiction over denial of motion to set aside clerk’s default (interlocutory); appeal dismissed as to Rule 55(c) rulings; remand allows district court to reconsider. |
Key Cases Cited
- Donaldson v. United States, 400 U.S. 517 (1971) (Rule 24(a)(2) requires a "significantly protectable" legal interest rather than a mere desire)
- Wilderness Soc'y v. U.S. Forest Serv., 630 F.3d 1173 (9th Cir. 2011) (en banc) (Rule 24(a)(2) requires the asserted interest be protectable under some law and related to the claims)
- Cassirer v. Thyssen-Bornemisza Collection Found., 142 S. Ct. 1502 (2022) (federal courts should apply forum choice-of-law principles when state law supplies the substantive rule)
- Clemmer v. Hartford Ins. Co., 587 P.2d 1098 (Cal. 1978) (insurer has an interest under California's direct-action statute to prevent default of a noncooperating insured)
- Town of Chester v. Laroe Estates, 137 S. Ct. 1645 (2017) (intervenors seeking different relief than parties must establish constitutional standing)