United States District Court, S.D. Texas, Houston Division
Rosenthal, Chief United States District Judge.
April 2019, Louisiana Oilfield Logistics, LLC sued Flotek
Chemistry, LLC, asserting anticipatory contract breach,
contract breach, promissory estoppel, and quantum meruit.
(Docket Entry No. 1). Louisiana Oilfield field its original
complaint under seal. (Docket Entry No. 2). The court
unsealed the complaint in June 2019 and directed Louisiana
Oilfield to file an amended complaint by July 5, 2019.
(Docket Entry Nos. 7, 10). On July 11, Advance Business
Capital LLC d/b/a Triumph Business Capital moved to intervene
as of right under Federal Rule of Civil Procedure 24(a)(2).
(Docket Entry No. 12). Neither Louisiana Oilfield nor Flotek
oppose Triumph's motion to intervene.
case centers on Louisiana Oilfield's and Flotek's
August 2018 transportation services agreement. (Docket Entry
No. 11 at 2). The agreement required Louisiana Oilfield to
provide trucks for Floteck's chemical business in
exchange for fixed payments based on the number of trucks
Louisiana Oilfield made available each day. (Id.).
In February 2019, Flotek told Louisiana Oilfield that the
agreement had been terminated but continued to pay the
invoices that Louisiana Oilfield submitted. (Id. at
3). hi March 2019, Flotek gave Louisiana Oilfield written
notice that the agreement had been terminated in February
2019, because of alleged breaches by Louisiana Oilfield.
(Id.). Flotek stopped paying the invoices Louisiana
Oilfield submitted, and Louisiana Oilfield sued.
(Id. at 3-4).
is in the "factoring business," which involves
paying "cash for accounts receivable from a [company]
and [a]ssum[ing] the risk of loss and delayed payment in
return for a discount of the face value." Ford v.
LVNV Funding, LLC, No. 9-CV-971, 2010 WL 11651849, at *l
n.2 (E.D. Tex. Nov. 30, 2010). Third parties "who owe on
the accounts receivable make payments directly to the
'factor, '" allowing "the
'factor's' customer immediate access to cash and
remov[ing] the risk to the customer of uncollectible accounts
and Louisiana Oilfield entered into a factoring agreement in
May 2018, which gave Triumph the right to collect
Flotek's invoice payments under its transportation
services agreement with Louisiana Oilfield. (Docket Entry No.
12 at 6). In November 2018, Triumph sent Flotek three written
notices that Louisiana Oilfield's accounts "had been
assigned to Triumph and that . . . payment of the [invoices]
were to be made solely and exclusively to Triumph."
(Id. at 9). Flotek then made payments directly to
Triumph. (Id.). Triumph moves to intervene based on
the factoring agreement. (Id. at 12).
24(a)(2) governs intervention of right based on an interest
in the action." St. Bernard Par. v. Lafarge N. Am.,
Inc., 914 F.3d 969, 974 (5th Cir. 2019). The Fifth
Circuit has established a four-pronged test for intervention
under Rule 24(a)(2):
(1) the application for intervention must be timely; (2) the
applicant must have an interest relating to the property or
transaction which is the subject of the action; (3) the
applicant must be so situated that the disposition of the
action may, as a practical matter, impair his ability to
protect that interest; [and] (4) the applicant's interest
must be inadequately represented by the existing parties to
Id. (quoting Sommers v. Bank of Am., N.A.,
835 F.3d 509, 512 (5th Cir. 2016)). "Although the movant
bears the burden of establishing its right to intervene, Rule
24 is to be liberally construed." Texas v. United
States, 805 F.3d 653, 656 (5th Cir. 2015) (quoting
Brumfield v. Dodd, 749 F.3d 339, 341 (5th Cir.
2014)). 'Federal courts should allow intervention where
no one would be hurt and the greater justice could be
attained." Id. (quoting Sierra Club v.
Espy, 18 F.3d 1202, 1205 (5th Cir. 1994)).
seems likely that Triumph meets Rule 24(a)(2)'s
intervention requirements. Triumph's intervention,
however, raises a subject-matter jurisdiction question. This
is a diversity action. Triumph, a would-be plaintiff, and
Flotek, the defendant, are both Texas citizens. Triumph
argues that its intervention would not destroy diversity
because "no independent ground of jurisdiction need be
shown to support intervention as a matter of right."
(Id. at 21 (quoting Arbuckle Broads, v. Rockwell
Int'l Corp., 513 F.Supp. 412, 416 (N.D. Tex. 1981)).
rule did not survive the enactment of 28 U.S.C. §
1367(b), which provides:
In any civil action of which the district courts have
original jurisdiction founded solely on section 1332 of this
title, the district courts shall not have supplemental
jurisdiction under subsection (a) over claims by plaintiffs
against persons made parties under Rule 14, 19, 20, or 24 of
the Federal Rules of Civil Procedure, or over claims by
persons proposed to be joined as plaintiffs under Rule 19 of
such rules, or seeking to intervene as plaintiffs under Rule
24 of such rules, when exercising supplemental jurisdiction
over such claims would be inconsistent with the
jurisdictional requirements of section 1332.
28 U.S.C. 1367(b). Section 1367(b) requires
plaintiff-intervenors like Triumph to meet § 1332's
jurisdictional requirements, including complete diversity.
See Griffin v. Lee, 621 F.3d 380, 387 (5th Cir.
2010) ("In this case, the lack of complete diversity and
the presence of an amount in controversy less than $75, 000
are both inconsistent with the jurisdictional requirements of
28 U.S.C. § 1332. Under a plain reading of 28 U.S.C.
§ 1367(b), there was no supplemental jurisdiction over
Lee's claim in intervention, as it was a claim by a
person seeking to intervene as a plaintiff under Rule
24."); Rosmer v. Pfizer, Inc., 263 F.3d 110,
115 (4th Cir. 2001) ("[I]n diversity actions the rule of
complete diversity would still be required in the context of
Rule 24 intervention or Rule 19 joinder of required
parties."); Dev. Fin. Corp. v. Alpha Hous. &
Health Care, Inc., 54F.3d 156, 160 (3d Cir. 1995)
("The plain language of § 1367(b) limits
supplemental jurisdiction over claims of plaintiffs against
persons made parties under Rule 14, 19, 20, or 24, and of
parties who join or intervene as plaintiffs pursuant to Rule
19 or 24." (emphasis and quotation omitted));
Samuels v. Twin City, 602 Fed.Appx. 209, 211 (5th
authority makes clear that Triumph must be diverse from
Flotek. Both are Texas citizens. Triumph's motion to
intervene, (Docket Entry No. 12), is denied, without
prejudice. Triumph may renew its motion in light of §
1367(b) and the caselaw requiring ...