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Liberty Mutual Insurance Co. v. Treesdale

August 15, 2005

LIBERTY MUTUAL INSURANCE COMPANY
v.
TREESDALE, INC.; PITTSBURGH METALS PURIFYING COMPANY
*WALTER PIATT; EUGENE MCCUE, JR.; DANNY R. BAILEY; DENNIS J. BAILEY, CO-EXECUTORS OF THE ESTATE OF JOHN R. BAILEY; MARY BONIEY, PERSONAL REPRESENTATIVE OF THE ESTATE OF JOSEPH BONIEY; WILMA CHERNAY, EXECUTRIX OF THE ESTATE OF EDWARD S. CHERNAY; ROBERT S. PERKINS, EXECUTOR OF THE ESTATE OF RONALD L. PERKINS, PROPOSED INTERVENORS/APPELLANTS
*PURSUANT TO RULE 12(A) F.R.A.P.



Appeal from the United States District Court for the Western District of Pennsylvania (Civ. No. 02-cv-02179). District Judge: Hon. Arthur J. Schwab.

The opinion of the court was delivered by: McKEE, Circuit Judge.

PRECEDENTIAL

Submitted under Third Circuit LAR 34.1(a) May 5, 2005

Before: McKEE, SMITH and VAN ANTWERPEN, Circuit Judges

OPINION

The appellants or the decedents they represent (hereinafter collectively referred to as "Appellants") claim to have sustained bodily injury from exposure to asbestos-containing products manufactured or sold by Pittsburgh Metals Purifying Company ("PMP").*fn1 They appeal the district court's denial of their motion to intervene in an insurance coverage dispute between Liberty Mutual Insurance Company and PMP, its insured. For the reasons that follow, we will affirm.

I. FACTS

PMP is alleged to have manufactured and sold asbestos-containing side boards and rings which were marketed and sold to the steel industry under the trade name, "Soffelex," from approximately 1966 through 1975. The side boards and rings were used to maximize temperature during the steel manufacturing process. PMP has been named as a defendant, additional defendant or third-party defendant, in numerous lawsuits initiated by plaintiffs who allege that they have suffered bodily injury as a result of exposure to these asbestos-containing products. A small subset of these plaintiffs seek to intervene in an insurance coverage dispute between PMP and its insurer. Several thousand such asbestos claims have been filed to date, and Liberty Mutual has provided a complete defense to PMP against these asbestos claims. Before initiating this suit for a declaratory judgment, Liberty Mutual had paid judgments and/or settlements on behalf of PMP in excess of $5,000,000, the total coverage available under its Liberty Mutual primary policies. Upon exhaustion of the primary policies, PMP demanded that Liberty Mutual continue to defend and indemnify under Umbrella Excess Liability Policies ("UEL policies") issued by Liberty Mutual, and Liberty Mutual claims that it did so.

Liberty Mutual contends that it has now paid or committed to pay more than $5,000,000 in additional settlements, an amount which it believes has also exhausted the coverage under the UEL policies for these claims. In addition, Liberty Mutual claims to have spent several million dollars in defending PMP against the bodily injury claims. According to Liberty Mutual, PMP agrees that coverage is no longer available under the primary policies for the asbestos claims against PMP.

Appellants claim that from 1975 through 1984, Liberty Mutual issued ten UEL policies to PMP with total limits in excess of $25 million. Appellants also claim that PMP is insolvent except for the UEL policies. Liberty Mutual disputes that allegation arguing that there is no evidence of record that PMP is insolvent.

II. DISTRICT COURT PROCEEDINGS

Liberty Mutual filed this declaratory judgment action against PMP and Treesdale, Inc., PMP's parent company, seeking a declaration that it will have no further duty to defend or indemnify PMP once $5 million has been paid under the UEL policies. Appellants sought to intervene claiming that Liberty Mutual's obligation under the UEL policies is $26 million and arguing that their right to recovery for their asbestos-related injuries could be eliminated in the declaratory judgment action instituted by Liberty Mutual against PMP.

Appellants filed a motion to intervene pursuant to Fed.R.Civ.P. 24. In their reply to Liberty Mutual's opposition to their motion, Appellants for the first time asserted that they were entitled to intervene as of right because they are indispensable parties under Fed.R.Civ.P. 19(a).

The Magistrate Judge's Report and Recommendation recommended that the district court deny the motion, and dismiss a number of related motions as moot.*fn2 Appellants filed objections to the R&R, and Liberty Mutual responded to those objections. Appellants were then given leave to file a supplemental brief in support of their objections. In the supplemental brief, filed nine months after the initial motion to intervene, Appellants raised an entirely new argument under Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). Appellants now argue that the district court should have applied state law in determining whether they are indispensable parties to the declaratory judgment action.

The district court adopted the Magistrate Judge's R&R and entered an order denying the motion to intervene. This appeal followed.*fn3

III. DISCUSSION

Appellants make a number of arguments in support of their contention that the district court erred in not allowing them to intervene; each is considered separately.

A. Appellants' Interest Under Fed.R.Civ.P. 24(a)

Rule 24 provides, in relevant part:

(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 which 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.

Fed.R.Civ.P. 24(a)(2). We have held that a litigant seeking intervention as of right under Rule 24(a)(2) must establish 1) a timely application for leave to intervene, 2) a sufficient interest in the underlying litigation, 3) a threat that the interest will be impaired or affected by the disposition of the underlying action, and 4) that the existing parties to the action do not adequately represent the prospective intervenor's interests. Kleissler v. United States Forest Service, 157 F.3d 964, 969 (3d Cir. 1998). "Each of these requirements must be met to intervene as of right." Mountain Top Condominium Assoc. v. Dave Stabbert Master Builder, Inc., 72 F.3d 361, 366 (3d Cir. 1995) (citation omitted).

The district court denied the motion to intervene based upon its conclusion that Appellants did not have a "sufficient interest in the litigation;" the second element of the Rule 29(a)(2) inquiry.*fn4 Given that ruling, the district court did not discuss the other three requirements for intervention as of right.

To establish a sufficient interest for intervention, Appellants must demonstrate "'an interest relating to the property or transaction which is the subject of the action.'" Mountain Top, 72 F.3d at 366 (quoting Fed.R.Civ.P. 24(a)(2)).

While the precise nature of the interest required to intervene as of right has eluded precise and authoritative definition, some general guidelines have emerged. . . . [A]n intervenor's interest must be one that is significantly protectable. [This means that] the interest must be a legal interest as distinguished from interests of a general and indefinite character. The applicant must demonstrate that there is a tangible threat to a legally cognizable interest to have the right to intervene. This interest is recognized as one belonging to or one being owned by the proposed intervenors. . . . In general, a mere economic interest in the outcome of litigation is insufficient to support a motion to intervene. Thus, the mere fact that a lawsuit may impede a third party's ability to recover in a separate suit ordinarily does not give the third party a right to intervene. . . . While a mere economic interest may be insufficient to intervene, an intervenor's interest in a specific fund is sufficient to entitle intervention in a case affecting that fund. Thus, when a particular fund is at issue, an applicant claims an interest in the very property that is the subject matter of the suit.

Mountain Top, 72 F.3d at 366 (citations omitted).

Appellants contend that they satisfy the second prong of our inquiry under Mountain Top because they have an interest in a specific fund, viz., the Liberty Mutual UEL policies. According to Appellants, the insurance proceeds "constitute a specific source or fund that is and has been providing compensation to ...


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