United States District Court, S.D. Texas, Houston Division
ORDER ON MOTION TO INTERVENE
Hanovice Palermo United States Magistrate Judge
Quantlab Group, LP and Quantlab Financial, LLC (collectively
“Plaintiffs” or “Quantlab”) brought
this breach of fiduciary duty and malpractice action against
Defendant Allen Herman Dempster (“Dempster”), an
attorney and accountant, and his firm, Dempster &
Dietler, LLP (collectively “Defendants”). ECF No.
81. Plaintiffs allege that Defendants, who served for many
years as Plaintiffs' attorney, prepared partnership
agreements and a Voting Trust Agreement that enabled two of
Quantlab Group's minority partners, Bruce P. Eames
(“Eames”) and Andrey Omeltchenko
(“Omeltchenko”), to attempt to take control of
Quantlab and its related companies. Id.
20, 2019, Plaintiffs filed a motion to compel production of
Defendants' privilege log and underlying documents, which
consist of Dempster's communications with Eames,
Omeltchenko, and their separate counsel. ECF No. 57; ECF No.
64 at 11. Non-parties Eames, Omeltchenko, and their
affiliated business entities submitted a letter requesting a
conference to discuss their position on the motion. ECF No.
66. On August 17, 2019, this Court denied the request for
conference and granted in part Plaintiffs' motion to
compel, finding that the attorney-client and work-product
privileges belong to Quantlab and that Dempster had only
provided Eames and Omeltchenko with advice in their roles as
officers and managers of Quantlab. ECF No. 86 at 6, 8. Eames
and Omeltchenko filed objections to the Order, ECF No. 87,
which the District Judge overruled, ECF No. 99.
before the Court is Eames and Omeltchenko's
(“Intervenors”) motion to intervene,
filed to obtain a protective order and prevent discovery of
the same communications between Eames, Omeltchenko, and
Dempster that were subject to this Court's previous Order
on August 17, 2019. ECF No. 88. Intervenors argue they are
entitled to intervene as of right under Federal Rule of Civil
Procedure 24(a), or in the alternative, that the Court should
allow permissive intervention under Rule 24(b). Id.
at 1. Based on a review of the record and applicable
authorities, the motion to intervene is DENIED.
INTERVENORS ARE NOT ENTITLED TO INTERVENE AS OF RIGHT BECAUSE
THE MOTION IS UNTIMELY, INTERVENORS HAVE NO INTEREST IN THIS
ACTION, AND INTERVENORS HAVE NOT SHOWN THEIR ALLEGED
INTERESTS ARE INADEQUATELY REPRESENTED BY EXISTING
24(a) provides for intervention of right by any person who
timely files a motion and claims an interest in the action
that will be impeded by its disposal, “unless existing
parties adequately represent that interest.”
Fed.R.Civ.P. 24(a)(2). The Fifth Circuit has established a
four-prong test for evaluating intervention as of right:
(1) the application 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 or impede his ability to protect
that interest; (4) the applicant's interest must be
inadequately represented by the existing parties to the suit.
Wal-Mart Stores, Inc. v. Tex. Alcoholic Beverage
Comm'n, 834 F.3d 562, 565 (5th Cir. 2016)
(quotations and alterations omitted). “‘Failure
to satisfy any one requirement precludes intervention of
right.'” Miniex v. Houston Hous. Auth.,
No. 17-CV-624, 2019 WL 2371959, at *2 (S.D. Tex. June 5,
2019) (quoting Edwards v. City of Houston, 78 F.3d
983, 999 (5th Cir. 1996)).
Intervenors are not entitled to intervene as of right because
they fail to satisfy three of the four prongs of the Fifth
Circuit's test. First, their application is not timely.
Courts look to a four-factor framework in evaluating
timeliness for a motion to intervene:
(1) The length of time during which the would-be intervenor
actually knew or reasonably should have known of its interest
in the case before it petitioned for leave to intervene; (2)
the extent of the prejudice that the existing parties to the
litigation may suffer as a result of the would-be
intervenor's failure to apply for intervention as soon as
it knew or reasonably should have known of its interest in
the case; (3) the extent of the prejudice that the would-be
intervenor may suffer if intervention is denied; and (4) the
existence of unusual circumstances militating either for or
against a determination that the application is timely.
St. Bernard Par. v. Lafarge N. Am., Inc., 914 F.3d
969, 974 (5th Cir. 2019) (quotations omitted).
“Timeliness is assessed from the totality of the
circumstances, in which no one factor is dispositive or
exhaustive.” Uniloc 2017 LLC v. AT&T
Mobility LLC, No. 18-CV-514, 2019 WL 1773117, at *2
(E.D. Tex. Apr. 23, 2019).
argue that the timeliness clock starts to run when an
intervenor becomes aware that “‘its interests
would no longer be protected by the original parties,
'” and they first became aware their interests
would not be protected by Defendants on July 12, 2019, when
Dempster filed an affidavit stating he had represented
Intervenors in their capacities as officers of Quantlab. ECF
No. 88 at 8 (quoting Sierra Club v. Espy, 18 F.3d
1202, 1206 (5th Cir. 1994)). Quantlab argues the clock starts
at the point an intervenor “‘knew that he had an
interest in the case, '” “‘not when
[he] knew or should have known that his interests would be
adversely affected.'” ECF No. 92 at 12 (quoting
St. Bernard Par., 914 F.3d at 974).
starting point can be used to calculate timeliness.
Edwards, 78 F.3d at 1000 (“The timeliness
clock runs either from the time the applicant knew or
reasonably should have known of his interest or from the time
he became aware that his interest would no longer be
protected by the existing parties to the lawsuit.”)
(citation omitted). However, even if the Court considers the
relevant starting point to be when Intervenors became aware
of their adverse interests, as Intervenors propose, their
motion is untimely. Intervenors admit they knew about the
discovery dispute over their communications with Dempster on
February 19, 2019, when Defendants told Intervenors they may
not be able to protect Intervenors' interests. ECF No. 88
at 3. At that point, Dempster had already filed an affidavit
stating he had performed work for Intervenors “in their
roles as officers and managers of the Quantlab
entities.” ECF No. 32 ¶ 12 (filed Oct. 9, 2018);
see also ECF No. 31 at 11, 14, 16 n. 46 (filed Oct.
9, 2018) (Dempster's brief arguing he performed work for
Intervenors as representatives of Quantlab). Intervenors
cannot claim the affidavit filed on July 12, 2019 was the
first time they learned of Dempster's position.
relevant starting time is, at the latest, February 19, 2019.
Over six months elapsed before Intervenors filed their motion
on August 30, 2019, during which time the parties briefed,
and the court decided, the issue Intervenors seek to
intervene to protect. Their failure to intervene in a timely
manner would prejudice original parties because Intervenors
would attempt to relitigate the attorney-client issue this
Court has already decided-further delaying the litigation.
See, e.g., Mohammad v. Toyota Motor Corp.,
No. 11-CV-3257, 2012 WL 12884573, at *2 (N.D. Tex. Oct. 22,
2012). Intervenors themselves would not be
prejudiced by denial of their motion to intervene because
they have already asserted their position to this Court.
Without filing a motion to intervene, Intervenors attempted
to inject themselves into the dispute, and they even filed
objections to this Court's Report and Recommendation,
which the District Judge considered in making her ruling.
See ECF No. 87; ECF No. 99. In addition, Intervenors
would not be prejudiced because they do not have sufficient
interest in this action. Finally, Intervenors have not
pointed to any special circumstances that would affect the
timeliness analysis. Therefore, the Court finds
Intervenors' application to be untimely. See,
e.g., Mohammad, 2012 WL 12884573, at *2
(finding motion to intervene untimely when intervenors waited
seven months to file their motion, during which time ...