HER, Inc. Ex Rel. Stonebridge Corp. v. ParenteauHER, Inc. Ex Rel. Stonebridge Corp. v. Parenteau
Lead Opinion
{¶ 1} Intervenor-appellant, Parenteau Development and Design, Inc. (“PD&D”), appeals from a judgment of the Franklin County Court of Common Pleas that denied its motion to intervene in a shareholder derivative action brought by plaintiff-appellee, HER, Inc. (“HER”), on behalf of the Stonebridge Corporation against defendants-appellants, Thomas K. Parenteau (“Parenteau”) and Parenteau Builders, Inc. (“PBI”). 1
{¶ 2} HER is a corporation whose chairman is Harley Rouda Sr., and whose CEO and general counsel is Harley Rouda Jr. (“the Roudas”). Parenteau is the sole shareholder and president of both PBI and PD&D. In 1995, PD&D and HER executed a close corporation agreement, creating Stonebridge with the intention of developing a condominium project in Marysville, Ohio. PD&D and HER each owned 50 percent of the stock in Stonebridge.
(¶ 3} In
HER, Inc. v. Parenteau,
“* * * Mr. Parenteau, individually and as the sole shareholder of [PBI], the defendants in this action, stands to lose financially if Stonebridge prevails in this suit. Hence, we do not consider PD&D (which is also owned solely by Mr. Parenteau) in our determination of whether [HER] is a fair and adequate representative of similarly situated shareholders. * * * Further, in opposing [HER]’s efforts in regard to this lawsuit, it is possible that PD&D was motivated by its individual interests rather than by what was beneficial to Stonebridge. * * *
“For all of these reasons, and by virtue of the specific circumstances presented in the case at bar, we do not consider PD&D a similarly situated shareholder, whom [HER] must fairly and adequately represent. Rather, [HER] is the only similarly situated shareholder as that term is used inCiv.R. 23.1 . * *.*”
{¶ 4} Concluding that there may be a “legitimate class of one” in derivative lawsuits, we found that HER could fairly and adequately represent the interests of the corporation, and remanded for further proceedings.
{¶ 5} In July 2002, Parenteau and PBI filed an answer to the complaint denying any wrongdoing, a counterclaim for money owed them by Stonebridge, and a third-party complaint against HER in its individual capacity, and against the Roudas, claiming that the actions of HER and the Roudas caused the problems with the condominium development, rather than anything done by Parenteau, PBI, or PD&D. At the same time, PD&D filed a motion for leave to intervene to assert claims against HER and the Roudas for breaching their fiduciary duties to PD&D to obtain financing, and to market the project, with the result that PD&D was deprived of the benefits of its investment and its equal opportunity to participate in Stonebridge. PD&D additionally alleged that HER breached the close corporation agreement by these acts, by an unauthorized sale of Stonebridge real property, and by the prosecution of the lawsuits on behalf of Stonebridge.
{¶ 6} In its memorandum in opposition to PD&D’s motion to intervene, HER asserted that nearly all of the claims PD&D sought to assert by intervention were time-barred, with the remaining claim being rendered res judicata by this court’s decision in HER I. Further pleadings followed, in which PD&D denied that its proposed intervention was untimely and in which HER further asserted that its shareholder derivative action would represent PD&D’s interests, rendering intervention unnecessary.
{¶ 7} In October 2002, the trial court rendered its decision and entry denying PD&D’s motion for leave to intervene. Although the court’s decision acknowledged that
{¶ 8} PD&D now appeals, assigning the following as error:
“First Assignment of Error: The trial court committed reversible error by denying Parenteau Development and Design, Inc. leave to intervene of right. “Second Assignment of Error: The trial court committed reversible error by denying Parenteau Development and Design, Inc. leave to permissively intervene.
“Third Assignment of Error: The trial court committed reversible error by denying Parenteau Development and Design, Inc.’s motion for leave to intervene without considering Parenteau Development and Design, Inc.’s response to arguments raised for the first time in a surreply memorandum in opposition to the motion for leave to intervene.”
{¶ 9} PD&D’s assignments of error are related and will be addressed together.
{¶ 10}
“(A) Intervention of right.
“Upon timely application anyone shall be permitted to intervene in an action: * * * (2) when the applicant claims an interest relating to the property or transaction that is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.
“(B) Permissive intervention.
“Upon timely application anyone may be permitted to intervene in an action: * * * (2) when an applicant’s claim or defense and the main action have a question of law or fact in common. * * * In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.”
{¶ 11} By its motion, PD&D asserted that it had a right to intervene, pursuant to
{¶ 12} “A trial court’s decision on the timeliness of a motion to intervene will not be reversed absent an abuse of discretion.”
State ex rel. First New Shiloh Baptist Church v. Meagher
(1998),
{¶ 13} In
Likover v. Cleveland
(1978),
“* * * In general, the basis of the alleged right to intervene is balanced against trial convenience and potential prejudice to the rights of original parties. Intervention as of right may be granted at a time in the proceedings when permissive intervention would not. That is, in cases of permissive intervention, greater consideration may be given to undue delay or prejudice in adjudicating the rights of the original parties, whereas in cases of intervention of right, the court may give the greater consideration to possible prejudice to the intervenor in protecting his interest if intervention is not granted. * * *”
{¶ 14} Thus, a different standard applies depending upon whether the proposed intervenor has a right to intervene or may only do so permissively. Where an intervenor has a right to intervene, the scales tip in favor of allowing intervention despite the existence of conditions that might otherwise militate against intervention, including timeliness. See, e.g.,
Blackburn v. Hamoudi
(1986),
{¶ 15} An intervention of right occurs “when the applicant claims an interest relating to the property or transaction that is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.”
{¶ 16} We also find that PD&D is so situated that the action may impair or impede its ability to protect its interests. As we determined in HER I, as a “legitimate class of one,” HER could fairly and adequately represent the interests of the corporation in bringing a shareholder’s derivative action. As the only other shareholder in the close corporation, PD&D has an interest in the outcome of HER’s action on behalf of Stonebridge, and the outcome of that action will undoubtedly affect PD&D’s ability to protect its interests. Moreover, although PD&D is arguably Parenteau’s corporate alter-ego, and existing parties Paren-teau and PBI might be deemed capable of representing.PD&D’s interests in the action, only PD&D is named as the other shareholder in Stonebridge, and a judgment either way in the action is likely to affect PD&D’s interests, which may diverge from Parenteau’s and PBI’s interests.
{¶ 17} Indeed, because
{¶ 18} It remains whether PD&D’s motion to intervene was timely. Because we hold that PD&D’s circumstances met the criteria for intervention as of right, our analysis of the timeliness of the motion gives greater weight to any possible prejudice to PD&D in protecting its interest if intervention is not granted. In other words, the analysis does not begin with the question of “why grant the motion,” but, rather, “why not grant the motion.” See McCormac Ohio Civil Rules Practice (2003) 85, Section 4.35 (“If intervention is of right, the court should be reluctant to dismiss the application as being untimely since the applicant has much more at stake”).
{¶ 19} HER asserts that the motion was untimely because intervention was not sought at the time Parenteau and PBI moved to dismiss the complaint (which motion culminated in our decision in HER I), and that nothing precluded PD&D from moving to intervene at any time after the filing of the complaint. HER additionally charges that this suit has progressed beyond the time in which intervention would be easily accommodated, so that further delays would result. HER finally notes that nearly all of PD&D’s claims are barred by the statute of limitations, which has not been tolled by the time taken to prosecute the appeal in HER I or by the discovery rule.
{¶ 20} Although we agree that nothing precluded PD&D from moving to intervene at any prior stage of this litigation, it was reasonable for PD&D to wait
{¶ 21} In addition, although adding another party at this stage of the proceedings might create delay, PD&D could have asserted its claims in a separate action and then moved to consolidate the two cases, which also would have created delay. The pertinent question is not whether delay will result from the intervention, but whether the parties to the pre-existing litigation would be prejudiced by the delay, and whether any prejudice to those parties outweighs the prejudice to the would-be intervenor if intervention is not granted. Likover, supra. In this case, PD&D’s allegations are similar to those already raised in the counterclaim brought by Parenteau and PBI, and inasmuch as all of these parties are actually the same persons acting in different capacities, it is difficult to find that prejudice to any of the pre-existing parties would result.'
{¶ 22} Regarding HER’s claim that the relevant statutes of limitations operate as a bar to 23 out of PD&D’s 24 claims, the relevant question is not whether the statute of limitations would bar these actions on the date PD&D moved to intervene, but, rather, whether the claims were time-barred at the time the initial action was filed, since, as the only other shareholder in Stonebridge, PD&D had an “interest relating to the subject of the action and [was] so situated that the disposition of the action in his absence may (a) as a practical matter impair or impede his ability to protect that interest.”
{¶ 23} We decline to engage in an analysis of whether the 24 claims raised by PD&D against HER and the Roudas were viable at the time of HER’s initial complaint; therefore, an analysis depends upon factual questions regarding whether PD&D knew or, in the exercise of reasonable diligence, should have known of any wrongdoing by HER within the appropriate time periods contained in the various statutes of limitations. The issue of whether these claims are time-barred is inextricably linked to the merits of the claims of all of the parties in all of their various corporate and individual capacities, and on remand the statute-of-limitations issues raised by all of the claims must be considered.
Judgment reversed and cause remanded with instructions.
Notes
. Although Parenteau and PBI are designated as appellants, the sole issue on appeal is whether the trial court erred in denying PD&D’s motion to intervene.
Dissenting Opinion
dissenting.
{¶ 25} Because I do not believe that the trial court abused its discretion in denying the motion to intervene, I respectfully dissent.
{¶ 26} Although the majority opinion accurately identifies the legal standard for intervention under
{¶ 27} Therefore, I respectfully dissent.