Thursday, December 24, 2015
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C.A. Clarifies Timeliness Requirement for Intervention
By a MetNews Staff Writer
The timeliness of a motion to intervene in civil litigation depends on when the movants learned their interests were being inadequately represented, regardless of when they learned there was litigation, the Fourth District Court of Appeal has ruled.
Div. Three ruled Tuesday that an Orange Superior Court judge must reconsider a ruling that denied several owners of condominium units the right to intervene in litigation between their homeowners association and the developer. Judge Robert Moss erred, the court said, in holding that the motion to intervene was untimely because it was brought nearly two years after the moving parties learned of the filing of the lawsuit.
The suit concerns a development in Newport Coast, built by Brookfield Ziani LLC in 2003 and 2004. Ziani Homeowners Association sued in July 2012, alleging plumbing and other defects in construction.
Early last year, the association agreed to settle the lawsuit. In May of last year, the nine homeowners who brought the appeal moved to intervene, seeking both permissive and mandatory intervention under Code of Civil Procedure §387.
The movants claimed that they had only recently learned that the association and its attorney were not adequately representing their interests. They said they had been assured, at board meetings and otherwise, that the case would not be settled for an amount less than necessary to pay for necessary repairs to the individual units and to the common areas.
When the settlement was agreed to, they said, they were informed of the existence of an agreement, but not its terms.
It was not until March 31 of last year, they said, that the association’s attorney sent out a letter informing them that completion of the repairs would consume the settlement funds, as well as requiring the association to dip into its reserves. And two to three weeks later, they alleged, they learned for the first time that individual owners would not be reimbursed for plumbing repairs that had already been paid for and would left with some combination of repair costs, a special HOA assessment, and depleted reserves.
The association opposed intervention, arguing that the board would protect the movants’ interests in deciding how the settlement funds would be used and that the movants’ effort to obtain class certification would be damaging to the HOA.
Moss, in denying the motion, noted that §387 requires a “timely application” to intervene. The movants failed that test, he said, because they “knew or should have known about this litigation on or about the date the complaint was filed.”
Allowing intervention, he added, “would be particularly unfair to the developer who committed its resources to settling the case with HOA,” whereas if the motion had been filed earlier “the developer could have taken the claims of the individual homeowners into account.”
But Justice David Thompson, writing for the Court of Appeal, noted that §387 was modeled after Rule 24 of the Federal Rules of Civil Procedure, and that federal courts have consistently interpreted that rule’s timeliness requirement by focusing on when the moving parties knew, or should have known, that their interests were being inadequately represented.
It makes sense, Thompson added, that because intervention is only permitted in the absence of adequate representation by the existing parties, a person whose interests are being adequately represented, or who has no reason to believe they aren’t, shouldn’t be penalized for not attempting to intervene at that point.
On remand, the justice explained, the trial judge must determine when the movants knew or should have known that the HOA was not effectively representing them, and then reconsider the timeliness issue based on that finding. If the motion is found to be timely, the judge must then make the additional findings necessary to a ruling under §387, Thompson said.
Presiding Justice Kathleen O’Leary and Justice William Rylaarsdam joined in the opinion. But O’Leary added a brief concurrence of her own, raising the question of whether the HOA has standing to sue on behalf of individual owners for damage to their individual units.
The case is Ziani Homeowners Association v. Brookfield Ziani LLC, 15 S.O.S. 6116.
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