356 F. Supp. 3d 287
S.D. Ill.2018Background
- Royal Park (plaintiff) sued U.S. Bank (trustee) in 2014 alleging breach of trustee duties in twenty-one RMBS trusts (the "Underlying Suit").
- In 2017 Royal Park filed a separate putative class action (the "Fees Complaint") alleging U.S. Bank improperly billed legal fees and costs it incurred defending the Underlying Suit to the trusts, asserting breach of contract and related claims.
- The Fees Complaint was consolidated with the Underlying Suit; discovery on the Fees Complaint was stayed pending motions.
- The National Credit Union Administration Board (NCUA), which holds certificates in two overlapping trusts, sought to intervene in the Fees action; U.S. Bank opposed intervention.
- U.S. Bank sought leave to move to dismiss the Fees Complaint (Article III standing and other defenses) or alternatively to stay the Fees proceedings pending resolution of the Underlying Suit.
- The district court denied NCUA's intervention request and denied U.S. Bank's motion to dismiss but granted a stay of the Fees Complaint pending resolution of the Underlying Suit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of NCUA intervention | NCUA filed promptly after Fees Complaint and after learning of billing practice; motion timely. | U.S. Bank: intervention untimely because the underlying litigation began in 2014; measure from original complaint. | Timely — court measures from Fees Complaint and found NCUA’s short delay acceptable. |
| Whether NCUA has a cognizable interest under Rule 24 | NCUA holds certificates in two overlapping trusts and has direct, substantial interests. | U.S. Bank: interest insufficient; not a necessary party under Rule 19; some holdings are only residual. | Interest satisfied as to overlapping trusts — NCUA has a direct stake. |
| Adequacy of representation (Rule 24) | NCUA: as a federal liquidating agent and absent class member, its interests differ and may be inadequately represented. | U.S. Bank: Royal Park adequately represents identical interests; NCUA seeks same relief. | Not adequate — because identity of interest imposes higher burden and NCUA did not show Royal Park would not protect its interests; intervention denied. |
| Dismiss vs. Stay of Fees Complaint | Royal Park: pressing separate Fees action; proceed. | U.S. Bank: dismissal for lack of standing or, alternatively, stay because Fees claims depend on findings in Underlying Suit (e.g., trustee gross negligence affecting indemnification). | Dismissal denied; stay granted — proceedings on Fees Complaint stayed until Underlying Suit resolved to avoid duplicative/inefficient rulings. |
Key Cases Cited
- Floyd v. City of New York, 770 F.3d 1051 (2d Cir. 2014) (governs four-factor Rule 24 intervention test and timeliness analysis)
- Nken v. Holder, 556 U.S. 418 (2009) (stay is an exercise of judicial discretion and requires balancing of factors)
- Curtis v. Citibank, N.A., 226 F.3d 133 (2d Cir. 2000) (second/duplicative suits commonly stayed)
- Hartford Fire Ins. Co. v. Mitlof, 193 F.R.D. 154 (S.D.N.Y. 2000) (stare decisis and impairment can justify intervention)
- MasterCard Int'l Inc. v. Visa Int'l Serv. Ass'n, Inc., 471 F.3d 377 (2d Cir. 2006) (discusses relationship between Rule 19 necessary-party concepts and Rule 24 intervention)
- Devlin v. Scardelletti, 536 U.S. 1 (2002) (absent class members may object or opt out; limits on intervention where class procedures exist)