Fifth Circuit Court Cases - Case Law and Opinions from the 5th Circuit Federal Court - Court of Appeals

	ROMINGER LEGAL
		Fifth Circuit Court of Appeals Opinions - 5th Circuit
					Need Legal Help?
					Need Legal Help?
LEGAL RESEARCH CENTER
LEGAL RESEARCH CENTER			LEGAL HEADLINES - CASE LAW - LEGAL FORMS	NOT FINDING WHAT YOU NEED? -CLICK HERE

This opinion or court case is from the Fifth Circuit Court or Appeals. Search our site for more cases - CLICK HERE

LEGAL RESEARCH

COURT REPORTERS

PRIVATE INVESTIGATORS

PROCESS SERVERS

DOCUMENT RETRIEVERS

EXPERT WITNESSES

Find a Private Investigator

Find an Expert Witness

Find a Process Server

Case Law - save on Lexis / WestLaw.

Legal News - Legal Headlines

UNITED STATES COURT OF APPEALS
for the Fifth Circuit
_____________________________________
No. 91-2073
_____________________________________
ENGRA, INC.,
Plaintiff-Appellant,
VERSUS
MORRIS I. GABEL,
Defendant-Appellee.
______________________________________________________
Appeal from the United States District Court for the
Southern District of Texas
______________________________________________________
(April 6, 1992)
ON PETITION FOR REHEARING
Before DAVIS, JONES and EMILIO M. GARZA, Circuit Judges.
PER CURIAM:
Attorney Van McFarland's petition for rehearing and the amicus
brief filed in this case lead us to conclude that our original
opinion unnecessarily decided issues of Texas law. A number of
alternate grounds are available on which this case may be decided.
We elect to withdraw our earlier opinion and substitute the
following:
Attorney Van McFarland filed this action to enforce a
contingent fee agreement with his client, Engra, Inc. against
Morris Gabel, the party his client sued. The district court

rendered a take-nothing summary judgment against McFarland. We
affirm and assess sanctions.
I.
In 1986, Van McFarland undertook the representation of Engra,
Inc. in its action against Morris I. Gabel under the federal
securities laws. The fee agreement between McFarland and Engra
included the following provision:
Our agreement is that we will represent you in the suit and
pursue it to settlement or judgment for 40% of all recovery .
. . . By execution below, each of you hereby sell, transfer
and assign unto us 40% of your claims and causes of action in
the referenced cases to secure performance of this agreement.
In June 1987, Engra filed a petition in bankruptcy which
automatically terminated McFarland's right to control the
litigation as Engra's counsel. McFarland was listed as a creditor
in the petition. In March 1988, the bankruptcy judge approved a
compromise and settlement of the claims arising out of the
litigation between Engra and Gabel for approximately $317,000 and
the suit was dismissed with prejudice. McFarland had full notice
of the proposed settlement and in fact corresponded with Gabel's
attorney as to whether the settlement included all claims.
Eight months later in December 1988, McFarland filed a "Notice
of Party in Interest" in Engra's original securities fraud action
in district court asserting a 40% interest in Engra's cause of
action. The district court scheduled a status conference on the
case in October 1990. McFarland then filed a "Memorandum
Concerning Validity of Assignment and Standing of Party in
Interest". Gabel and McFarland filed cross motions for summary
2

judgment. McFarland also filed a "Motion for leave to file amended
intervention and notice of real party in interest." The district
court denied all of McFarland's motions, including his motion to
intervene, and granted Gabel's motion for summary judgment.
McFarland appeals.
II.
McFarland was not named as a party to the action between Engra
and Gabel. As a non-party, he has no rights in the litigation
between his client and the defendant unless and until he is
permitted to intervene. Under Rule 24 of the Federal Rules of
Civil Procedure, intervention is proper only upon "timely
application". Fed.R.Civ.P. 24(a) and (b); United Airlines, Inc.
v. McDonald, 432 U.S. 385, 53 L.Ed.2d 423, 427 (1977); Stallworth
v. Monsanto Co., 558 F.2d 257, 263 (5th Cir. 1977).
In determining whether McFarland's motion to intervene was
timely, we consider four factors:
(1) The length of time during which the would-be intervenor
actually knew or reasonably should have known of his interest
in the case before he 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 he
actually knew or reasonably should have known of his interest
in the case.
(3) The extent of the prejudice that the would-be intervenor
may suffer if his petition for leave to intervene is denied.
(4) The existence of unusual circumstances militating either
for or against a determination that the application is timely.
Stallworth, 558 F.2d at 264-66.
3

First, McFarland knew of his interest in this case from its
inception. In particular, he knew that his rights to collect his
fee, whatever those rights may be, were no longer being represented
in mid-March 1988, when he became aware of the proposed settlement
between the bankruptcy trustee and Gabel, and corresponded with
Gabel's attorney concerning the settlement. McFarland took no
action to protect his interest in the settlement proceeds before
the bankruptcy judge dismissed all claims between Engra and Gabel
with prejudice on April 22, 1988. In fact, McFarland did nothing
until December 1988, when he filed a "Notice of Party in Interest"
in federal district court. Even if we read that filing as a Motion
to Intervene, it came eight months after the settlement and
dismissal. See United States by Bell v. Allegheny-Ludlum
Industries, Inc., 553 F.2d 451 (5th Cir. 1977) (Motion to intervene
seven and a half months after judgment and six months after
implementation of the decrees is untimely.)
Second, Gabel will suffer (and has suffered) prejudice by
McFarland's failure to assert his rights in a timely manner in the
bankruptcy proceeding. At the time of settlement and dismissal,
Gabel believed that his liability for claims asserted in the Engra
suit was discharged. McFarland's delay has required Gabel to
relitigate a claim he justifiably thought was resolved.
Third, McFarland will suffer little prejudice if his petition
for intervention is denied. Even assuming that McFarland has a
legitimate argument on the merits to recover from Gabel, the party
his client sued, (which is doubtful), he could just as easily have
4

pursued this claim in state court. This is especially true in this
case where there were no ongoing proceedings in the district court,
the claims had been settled and dismissed months earlier, and the
only unresolved claim asserted by McFarland was his rights under
his fee agreement with his client. Fourth, there are no unusual
circumstances militating in favor of finding that McFarland's
motion was timely.
Based on the above analysis, the district court did not err in
denying McFarland's motion to intervene. As the facts above aptly
demonstrate, attorney Van McFarland had full opportunity to protect
whatever rights he had under this fee agreement with his client,
Engra, Inc., in the bankruptcy proceedings. His motion to
intervene in the case, filed at the earliest in December 1988,
eight months after the case between Engra and Gabel was settled and
dismissed, is untimely as a matter of law.
In fact, these facts present a particularly egregious case of
a member of the bar multiplying the burdens of litigation. A
prudent counsel would have presented his claims for attorney fees
to the bankruptcy court. That was the obvious time and place to do
so. McFarland ignored that opportunity and instead generated an
entirely new round of litigation. He offers no excuse for
following this unreasonable course of conduct that was burdensome
to both the court and Gabel.
McFarland's appeal from the dismissal of his motion to
intervene unreasonably and vexatiously multiplied the proceedings.
We therefore impose sanctions against Mr. McFarland under 28 U.S.C.
5

� 1927 in the amount of $1,500 for the excess costs, expenses and
attorney fees he required Gabel to incur. Mr. McFarland shall
certify to the clerk within thirty days after our mandate issues
that he has paid the $1500 to Gabel or explain why he has not done
so.
AFFIRMED. Sanctions imposed.
6