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David P. Gould Marks, Inc. Lawrence I. Weisman, Philip Doccolo Rocko, Inc. Patrick L. Day, Trustee for James M. Weisman v. Alleco, Inc. Morton M. Lapides Henry Weitz Edward A. Weisman Harry J. Conn David H. Cohen Robert H. Heller William D. Houser Frederic K. Raiff Arthur F. Staley David C. Barr John E. Baker Jeffrey R. Lapides Heather A. Ditto Jayme Dorf Mark A. Garfinkle David S. Klein Donn A. Lewis Jeffrey E. Mann J. Tighe Merkert Joan L. Nickel Frank E. Silvestro Norman B. Weisman Deborah A. Wenner C.J. Nelson Harry J. Kane Pamela Lapides Smith Barney, Harris Upham & Company Peat, Marwick, Mitchell & Company, Now--Peat, Marwick, Main & Company Laventhol & Worwath American Security Bank Perpetual Savings Bank Squire, Sanders and Dempsey Marshall M. Meyer, Appeal of Lawrence I. Weisman David P. Gould Marks, Inc. Philip Doccolo Rocko, Inc. Patrick L. Day, Trustee for James M. Weisman. Leonard Robinson Patricia Robinson v. Allegheny Beverage Corporation Morton M. Lapides Henry Weitz Marshall M. Meyer Edward A

Citation: 883 F.2d 281Docket: 88-3637

Court: Court of Appeals for the Fourth Circuit; September 8, 1989; Federal Appellate Court

Narrative Opinion Summary

This case concerns an appeal from the denial of a motion to intervene and the approval of a class action settlement in a federal securities and common law fraud action. The appellants, non-class member bondholders, sought to intervene in ongoing class litigation, objecting to a proposed settlement on the grounds that it would deplete assets and prejudice their own prospective claims in a separate, subsequently filed lawsuit. The district court denied intervention, finding the motion untimely and the intervenors lacking a sufficient interest under Federal Rule of Civil Procedure 24(a), and further held that appellants lacked standing to object to the settlement under Rule 23(e) as non-class members. On appeal, the Fourth Circuit affirmed, holding that only class members may object to settlements under Rule 23(e) and that intervention under Rule 24(a)(2) requires a direct, protectable interest related to the subject matter of the litigation, which was absent here. The court also found no abuse of discretion in the district court’s timeliness determination, noting the potential prejudice to existing parties and lack of justification for delay. The decision underscores the narrow circumstances permitting intervention by non-class members in class action settlements and affirms the district court’s discretion in managing such proceedings, resulting in the final approval of the settlement and the exclusion of the appellants’ claims.

Legal Issues Addressed

Discretion to Consider Non-Party Views in Settlement Approval

Application: The court clarified that while non-class members generally lack standing to object to a class action settlement, the trial court retains discretion to consider their views during the approval process.

Reasoning: The ruling clarified that non-class members generally do not have standing to contest class settlements, though the trial court retains the discretion to consider non-party views.

Intervention of Right under Federal Rule of Civil Procedure 24(a)(2)—Requirements

Application: The court required intervenors to demonstrate a protectable interest relating to the subject of the action, potential impairment of that interest, and inadequate representation by existing parties to intervene as of right; the intervenors failed to meet the 'interest' requirement.

Reasoning: To successfully intervene, the applicant must demonstrate three criteria: a protectable interest, potential impairment of that interest, and inadequate representation.

Non-Class Member Interests and Intervention

Application: The court held that general or speculative interests in a party’s assets arising from potential future judgments in separate actions do not constitute a sufficient interest under Rule 24(a) to permit intervention in a class action settlement.

Reasoning: However, the mere general interest in Alleco's assets from a speculative recovery in an unrelated action does not meet the requirements of Rule 24, which necessitates a connection to the property or transaction at issue.

Standard of Review for Denial of Intervention

Application: The appellate court clarified that denial of a motion to intervene is reviewed for abuse of discretion, while legal conclusions regarding the requirements of Rule 24(a)(2) (excluding timeliness) are subject to de novo review.

Reasoning: The denial of a motion to intervene can only be overturned if there is an abuse of discretion, while legal conclusions regarding Rule 24(a)(2) requirements, excluding timeliness, are subject to de novo review.

Standing to Object to Class Settlement under Federal Rule of Civil Procedure 23(e)

Application: The court applied Rule 23(e) to hold that only class members have standing to object to a proposed class action settlement; non-class members, such as Weisman, do not possess such standing.

Reasoning: The court reiterated that under Federal Rule of Civil Procedure 23(e), only class members are entitled to object to settlement proposals, reinforcing that non-class members lack standing to raise objections, as doing so could hinder the settlement process.

Timeliness of Motion to Intervene under Rule 24

Application: The court emphasized that both intervention as of right and permissive intervention require a timely application, and assessed timeliness based on the stage of litigation, prejudice to existing parties, and reasons for delay. The motion to intervene was found untimely.

Reasoning: Additionally, the court ruled that the motion to intervene was untimely, as both intervention of right and permissive intervention require a 'timely application' according to Fed. R. Civ. P. 24(a).