David Swinton v. Adam J. Starke

Citation: Not availableDocket: 18-3186

Court: Court of Appeals for the Eighth Circuit; May 29, 2020; Federal Appellate Court

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In the case before the Eighth Circuit, Adam J. Starke filed a putative class action against SquareTrade, Inc. in December 2016, alleging violations of consumer protection laws related to a Protection Plan he purchased. In April 2018, David M. Swinton filed a similar action in Iowa, leading to a proposed class settlement between Swinton and SquareTrade. Starke sought to intervene in Swinton's case and requested a stay based on the first-to-file rule, but the district court denied his motion, allowing him only to submit an amicus brief. The court subsequently approved the settlement, which included a refund for class members, a coupon for future purchases, attorney fees, and changes to SquareTrade's Amazon storefront.

Starke appealed the denial of his intervention motion. The Eighth Circuit affirmed the district court's decision, reviewing the intervention under Federal Rule of Civil Procedure 24(a)(2), which allows intervention if the movant files a timely motion, claims a related interest, may be impaired by the action's disposition, and is not adequately represented by existing parties. The court noted that the first two requirements were met, as Starke's motion was timely and he claimed a legitimate interest. The appeal highlighted the procedural standards for intervention and the liberality with which Rule 24 should be interpreted.

The third requirement in question is whether Starke's interests may be impaired by the resolution of the Swinton Action. It is established that class members, like Starke, may have their interests impacted by the outcome of a class action settlement. The potential for class members to be bound by an unfavorable settlement meets the impairment criterion. Relevant case law, including Tech. Training Assocs. v. Buccaneers Ltd. P’ship and Little Rock School Dist. v. Pulaski County Special School Dist. No. 1, indicates that the possibility of impairment suffices, without needing absolute certainty. The Supreme Court has affirmed that class members possess the right to intervene if their interests are inadequately represented. This principle is supported by the Federal Rules of Civil Procedure, which suggest that a class member can intervene when there is a showing of inadequate representation by existing parties.

The district court had concluded that Starke would not be impaired because he could opt out of the settlement, but this reasoning is criticized. It is argued that allowing class members to opt out does not preclude their right to intervene, as both Rule 23 and the history of Rule 24 allow for intervention to ensure adequate representation. Despite meeting the first three intervention requirements, Starke does not satisfy the fourth, as he is adequately represented by Swinton, who is pursuing the same claims. A presumption of adequate representation exists when intervenors are class members, as established in Jenkins by Jenkins v. Missouri. Starke attempts to argue against this presumption by claiming that the burden to demonstrate inadequate representation is low. However, the court mandates a higher burden for intervention in cases where an existing party is obliged to represent the interests of the prospective intervenor, supported by case law and the requirement of adequate representation in class actions.

Starke contends that Swinton does not have a duty to advocate for his interests as a putative class representative, including attorney fees and incentive awards. However, Starke is not named as a class representative and is only a putative class member; thus, Swinton is obligated to represent all of Starke's interests. Rule 24(a)(2) specifies that a proposed intervenor's interest must relate to the subject matter of the action, which does not include Starke’s claims for an incentive award or attorneys’ fees. Starke's argument that Swinton inadequately represents him because of Swinton's failure to oppose SquareTrade's motion to compel arbitration or engage in discovery does not suffice to overcome the presumption of adequate representation. Differences in litigation strategy do not indicate inadequate representation.

Starke perceives the Swinton Action's settlement as a 'reverse auction,' where the defendant selects ineffective class lawyers to negotiate weak settlements, potentially indicating collusion. However, the court noted that representation remains adequate unless there is evidence of collusion, adverse interests, or failure in duty. The district court found Starke lacked evidence of a reverse auction, noting that the facts he presented—such as Swinton copying his complaint, settling without discovery, and excluding him from discussions—do not imply collusion or misconduct. The Federal Rules allow settlement before a specific litigation stage, and the court determined the settlement provided adequate relief. Starke’s comparison to a prior Eleventh Circuit case is deemed inappropriate; that case involved clear evidence of a manipulative strategy by counsel, which is not present here.

The court affirms the district court's denial of Starke’s motion to intervene and his request for a stay under the first-to-file rule. Starke lacks appellate jurisdiction for the stay motion as he is not a party in the ongoing case in the Southern District of Iowa. The established principle is that only parties or properly joined parties can appeal adverse judgments. While there exists an exception allowing for appellate review of a denial of intervention, the court finds that Starke's argument for pendent appellate jurisdiction—claiming that his stay motion is inextricably intertwined with the intervention motion—does not hold, as resolving one does not necessarily resolve the other. The first-to-file rule involves considerations of federal comity between concurrent cases, while the intervention motion requires a specific analysis based on four factors outlined in Federal Rule 24. The court concludes that it does not possess pendent appellate jurisdiction and affirms the judgment.