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Judge Sontchi Holds that Pending Intervention Motion Will Not Stay a Stipulated Dismissal

By Evan T. Miller

On May 12, 2014, Judge Christopher S. Sontchi issued a Memorandum Order in Tampa Port Auth. v. Taylor (In re Irish Bank Resolution Corp.), Adv. No. 14-50084 (CSS), overruling an objection to dismissal of an adversary proceeding filed by Liberty Channelside, LLC (“Liberty”), a party seeking to intervene in the action. In the Order, the Court concluded that the mere filing of a motion to intervene does not render the movant a necessary signatory to a stipulation of dismissal under FRCP 41.

On March 13, 2014, Tampa Port Authority (“Plaintiff”) filed the adversary action (the “Action”) against Chuck Taylor, Channelside Bay Mall, LLC (“Channelside”) and Irish Bank Resolution Corp. (“IBRC”, and collectively with Taylor and Channelside, “Defendants”), seeking, inter alia, declaratory relief determining that the Lease (as defined below) was not an asset of IBRC and remained an executory contract between Plaintiff and the state receiver who took possession of the Retail Center (as defined below). Plaintiff is the owner of a parcel of a retail center (the “Retail Center”). Channelside leased the Retail Center from Plaintiff under a ground lease (the “Lease”), which was in turn mortgaged in favor of IBRC. In 2010, Plaintiff sought to evict Channelside and IBRC (as leasehold mortgagee), while IBRC in turn sought to foreclose on its leasehold mortgage; these actions led to the appointment of a state receiver to take possession of and operate the Retail Center.

In 2013, Liberty and IBRC had executed a contract to assign the Lease to Liberty, but the deal did not close. Plaintiff sought to take back the Retail Center free of the Lease, but shortly thereafter, IBRC filed a petition for relief under Chapter 15. Liberty filed an adversary complaint (the “Liberty Matter”) against IBRC and Plaintiff, alleging contractual interference by Plaintiff and acquiescence in the conduct by IBRC. The Liberty Matter remains pending.

On March 18, 2014, after Plaintiff initiated this Action, Liberty moved to intervene (the “Motion”), alleging that it was entitled to a constructive trust over the Lease and Retail Center. Prior to a decision on the Motion, however, Plaintiff and IBRC entered into the Stipulation to Dismiss (“Stipulation”) the Action. Liberty objected to the Stipulation on the grounds that (i) it had “appeared” in the action and should be considered a necessary signatory pursuant to FRCP 41(a)(1)(A)(ii); (ii) the Stipulation should be construed as a motion under FRCP 41(a)(2), which does not vest Plaintiff with an absolute right of dismissal; and (iii) various equitable grounds.

The Court overruled Liberty’s objection. As to Liberty’s FRCP 41(a)(1)(A)(ii) argument, the Court found that because the Motion had not been granted, there was “no case or controversy” in which Liberty could intervene. In addition, Liberty did not meet any of the exceptions recognized in other cases to be equitably treated as a de facto party because no statute made intervention in the Action “automatic”, there was no related proceeding in which Liberty had been permitted to intervene, and there were no representations made of a global settlement between Plaintiff, Defendants, and Liberty.

As to Liberty’s FRCP 41(a)(2) argument, the Court found that, unlike the cases Liberty cited in support of its argument, the Motion did not raise substantial issues regarding the Plaintiff’s rights to the Retail Center but rather issues more appropriately addressed in the Liberty Matter; nor would Dismissal of the Action impair Liberty’s interests, due to the pendency of the Liberty Matter.

Lastly, the Court rejected Liberty’s equitable arguments, concluding that: (1) dismissal of the Action would not affect whether the Court had subject matter jurisdiction over the parties’ disputes; (2) the parties’ rights were preserved by nature of the dismissal being without prejudice; (3) the Action was properly dismissed if, as Liberty asserted, the Action was simply a disguised appeal of an earlier Court decision; and (4) any issues Liberty wanted to raise could be done through its amended complaint in the Liberty Matter.

Thus, the Court overruled Liberty’s objection. A copy of the opinion can be found here.

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