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Olden v. Hagerstown Cash Register Inc.

decided: April 14, 1980.

EDITH OLDEN, GENERAL ADMINISTRATRIX AND ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF WILLIAM C. OLDEN, DECEASED, AND ANTHONY CHIOFALO, ADMINISTRATOR AD PROSEQUENDUM OF THE ESTATE OF PHILIP L. CHIOFALO, DECEASED, APPELLEE
v.
HAGERSTOWN CASH REGISTER, INC., A PENNSYLVANIA CORPORATION, DEFENDANT-THIRD-PARTY-PLAINTIFF, V. ALTAIR AIRLINES, INC., PHILADELPHIA INTERNATIONAL AIRPORT, PHILADELPHIA, PENNSYLVANIA, THIRD-PARTY-DEFENDANT, HARTFORD INSURANCE COMPANY, PROPOSED INTERVENOR, APPELLANT.



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civil No. 77-1937 Consolidated with D.C. Civil No. 78-0717)

Before Seitz, Chief Judge, Adams and Weis, Circuit Judges.

Author: Per Curiam

Opinion OF THE COURT

In this wrongful death action brought by the widow of an employee killed on the job, the workmen's compensation insurance carrier seeks to intervene to protect its interest in the prospective judgment. Because we conclude that, at this stage, the insurance company's interest is being adequately championed by plaintiff's prosecution of the lawsuit, we affirm the denial of the motion for intervention.

Plaintiff's decedent, a New Jersey resident, was killed in a midair plane crash in Pennsylvania in April 1977. Because the accident occurred during the course of decedent's employment with a Pennsylvania company, his family was entitled to benefits under the Pennsylvania Workmen's Compensation Act. Within a month the employer's insurance carrier, the Hartford Insurance Company, began periodic payments and established a compensation reserve of $200,000.

Five months after the collision, the administratrix, decedent's widow, filed suit on behalf of herself, her children, and the estate, seeking damages from the owner of the other airplane, defendant Hagerstown Cash Register, Inc. Jurisdiction was grounded in diversity of citizenship, Hagerstown being a Pennsylvania corporation with its principal place of business in that state. Plaintiff's counsel began preparation of the case and some four months later was contacted by an adjuster for the Hartford, who asked for and received a status report.

In September 1978, plaintiff's attorney held a meeting with the Hartford personnel and Paul Sandler, Esquire, a partner of Hovsepian and Sandler, a Philadelphia law firm representing the insurance company. He agreed to give Mr. Sandler permission to attend all depositions and the trial itself but would not consent to his appearing as an attorney of record. Soon thereafter, Mr. Sandler stated that he had been retained by the insurer on a contingency basis to represent its subrogation interests and that he wished to enter a formal appearance. Plaintiff's counsel then proposed a compromise: that he would be lead counsel, that the Hartford would be solely liable for fees generated by Sandler, and that Mrs. Olden would not be required to share payment of those fees.

The Hartford rejected the compromise and, on December 20, 1978, petitioned the district court for leave to intervene, alleging that it had a subrogation claim for the workmen's compensation payments. In substance, the motion averred that the insurer's interest in recovering its lien was not being adequately protected by the existing parties to the lawsuit.

The petition to intervene was denied by the magistrate who conducted the pretrial proceedings and, on motion to reconsider, by the district judge in a memorandum opinion. The district judge reviewed the application under both Rule 24(a) of the Federal Rules of Civil Procedure for intervention of right, and subsection (b) of the same rule for permissive intervention. Turning first to the intervention of right contention, the court observed that the applicant had the burden of showing that the representation of its interest was inadequate, citing Trbovich v. United Mine Workers, 404 U.S. 528, 538 n.10, 92 S. Ct. 630, 636 n.10, 30 L. Ed. 2d 686 (1972), and Pennsylvania v. Rizzo, 530 F.2d 501, 505 (3d Cir.), cert. denied, 426 U.S. 921, 96 S. Ct. 2628, 49 L. Ed. 2d 375 (1976). Noting that there was no allegation of incompetency of counsel, the court held that the Hartford had not shown that plaintiff would "fail to present all relevant facts and law in an effective manner" and had not demonstrated "how its interests (would) be compromised by plaintiff's management of the trial."

In responding to the carrier's contention that at some time in the future plaintiff's counsel would attempt to compromise the compensation lien, the court observed that, at the stage then existing, both the plaintiff and the carrier were seeking the largest recovery possible, and the company could protect its interests in informal settlement negotiations. Plaintiff expressed no objection to the Hartford entering the case after either a verdict or a settlement had been reached.

With respect to permissive intervention under Rule 24(b), the district judge found that the Hartford's presence at trial might lead to the disclosure of the existence of workmen's compensation, possibly prejudicing plaintiff before the jury. An additional detriment was the probability of further delay in the trial date because of the addition of a new party. In view of these circumstances, the court exercised its discretion to deny permissive intervention. The insurer appeals the denial of both mandatory and permissive intervention.

Rule 24(a) permits a party to intervene as of right whenever it demonstrates an interest in the subject matter of the action that will not be "adequately represented by existing parties."*fn1 Although the language of the rule is ambiguous as to which party has the burden of showing the adequacy of representation, the district court was correct in placing that burden, however "minimal" it may be, on the proposed intervenor. Trbovich v. United Mine Workers, supra at 538 n.10, 92 S. Ct. at 636 n.10; Pennsylvania v. Rizzo, supra at 505.

A request for intervention, especially in diversity proceedings, brings to the fore some choice of law issues. Determining the scope of the intervenor's interest will often require an inquiry into state law. But the timing and manner of the intervention is purely a matter of federal law. See McDonald v. E. J. Lavino Co., 430 F.2d 1065, 1070 (5th Cir. 1970). See generally (7A C. Wright & A. Miller, Federal Practice & Procedure) § 1905, at 475-76 (1972). Thus, we must first determine what interest the Hartford has under state law and, second, whether, as a matter of federal law, that interest is being adequately represented by existing parties.

The Hartford is obligated to make payments under the Pennsylvania Workmen's Compensation Act. Pa.Stat.Ann. tit. 77, §§ 1-1031 (Purdon 1952 & Supp.1979), and whatever right of recoupment is available to the carrier necessarily flows from the same legislation. Both plaintiff and the Hartford agree, therefore, that the insurer's right of ...


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