Clear Blue Specialty Ins. Co. v. Ozy Media, Inc.

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CLEAR BLUE SPECIALTY INSURANCE COMPANY, Plaintiff, v. OZY MEDIA, INC., et al., Defendants.

No. 5:21-cv-08764-EJD

United States District Court, N.D. California, San Jose Division

November 3, 2023

ORDER GRANTING MOTION TO INTERVENE

RE: ECF NO. 108

EDWARD J. DAVILA, UNITED STATES DISTRICT JUDGE

Before the Court is Ford O'Brien Landy LLP's (“Ford O'Brien”) motion to intervene in this action to enforce a charging lien under New York Judiciary Law § 475 against the proceeds of the Directors & Officers Employment Practices Liability and Fiduciary Liability Policy (“D&O Policy”) issued by Plaintiff Clear Blue Insurance Company (“Clear Blue”) to Defendant Ozy Media Inc. (“Ozy Media” or the “Company”). ECF No. 109 (“Mot.”).

On October 25, 2023, the Court heard oral arguments from the parties and the prospective intervenor. For the reasons discussed below, the Court GRANTS the motion to intervene.

I. BACKGROUND

On October 25, 2021, Ford O'Brien, a law firm located in New York, executed a retainer agreement with Ozy Media. Mot. at 3. As the CEO of the Company, Defendant Carlos Watson executed the retainer agreement on behalf of Ozy Media. Id. The retainer agreement is governed under New York law. Id.

The Company engaged Ford O'Brien to represent it in connection with parallel government investigations and related civil lawsuits: (i) a criminal investigation by the U.S. Attorneys' Office for the E.D.N.Y.; (ii) a civil enforcement investigation by the SEC; (iii) a civil securities fraud action filed by an Ozy Media investor in the N.D. Cal. (LifeLine Legacy Holdings, LLC v. Ozy Media, et al., 21 Civ. 07751-BLF) (the “LifeLine Lawsuit”); and (iv) the present action (the “Clear Blue Lawsuit”) (collectively, “Underlying Proceedings”). Id. at 3. Ford O'Brien purportedly retained principal responsibility for the LifeLine Lawsuit and the Clear Blue Lawsuit, both of which arose from the government investigations and public disclosures that prompted the investigations. Id. at 3-4. Ford O'Brien managed a unified defense strategy on behalf of Ozy Media in connection with the government investigations, conducted witness interviews, and produced document discovery responsive to two government subpoenas, including over 27,000 documents. ECF No. 108-1 ¶ 8 (“O'Brien Decl.”). During the instant motion hearing, Ford O'Brien explained that it had an informal strategic partnership with Deckert LLC, the firm that represented Carlos Watson in the Underlying Proceedings. Although there was no formal joint defense agreement between the firms, Deckert and Ford O'Brien purportedly worked on a joint defense for Watson and Ozy Media since Watson was the authorized actor of the company and their interests were closely aligned.^[1]

With respect to the LifeLine Lawsuit, Ford O'Brien briefed and argued two motions to dismiss and ultimately secured dismissal of all claims. Mot. at 4. After Clear Blue initiated the present action seeking to rescind the D&O Policy based on material misrepresentations, Ford O'Brien recommended that Defendants engage with Bradley Nash of Hoguet Newman Regal & Kenney, LLP (“Hoguet Newman”), an expert in insurance coverage law, to represent them in pursuing a counterclaim for advancement of defense costs. Id. at 4. Because the interests of Ozy Media and Watson were aligned at that time, Nash agreed to represent both Defendants. Id. Although Ford O'Brien were not counsel of record in this action, the firm purportedly “oversaw” the firms handling the Clear Blue Lawsuit. Id.

On July 12, 2022, Nash moved for injunctive relief on behalf of Watson and Ozy Media. Id. The motion for injunctive relief was supported by a Declaration prepared and signed by Kevin O'Brien as counsel to Ozy Media. Id. On November 15, 2022, before the Court ruled on the motion, Ford O'Brien resigned its representation of Ozy Media. On April 20, 2023, the Court granted injunctive relief as to Watson and denied injunctive relief as to Ozy Media. ECF No. 82 (“Injunctive Relief Order”) at 26-27. The Court ordered Clear Blue to advance defense cost as to Watson pursuant to the D&O policy, which included up to $2 million available under Side A coverage. Id. at 27.

On April 25, Kevin O'Brien of Ford O'Brien sent a “notice of charging lien” to the parties under New York Judiciary Law § 475. See generally ECF No. 84. The notice asserts a “charging lien on all claims for advancement” in this action “which lien attaches to the full amount of any advancement of insurance benefits ordered and paid.” ECF no. 84-2, Ex. B. As a result, Clear Blue moved for leave to file an amended complaint to assert a claim in the nature of interpleader. ECF No. 84. The Court heard oral arguments from the parties and Ford O'Brien. Based on the facts before the Court, at that time the Court denied the motion, in part because Plaintiff and Ford O'Brien had failed to satisfy the requirements of statutory interpleader-namely, whether Ford O'Brien had a “colorable claim” to the insurance proceeds. ECF No. 105 (“June 30 Order”) at 57.

Eleven days later, Ford O'Brien moved to intervene. See generally, Mot. Watson opposes the motion. ECF No. 108 (“Opp'n”).

II. LEGAL STANDARD

A. Intervention as of Right

In general, Rule 24 has been “liberal[ly] constru[ed] in favor of applicants for intervention,” Arakaki v. Cayetano, 324 F.3d 1078, 1082-83 (9th Cir. 2003), because it usually “prevent[s] or simplif[ies] future litigation” and supports the “efficient resolution of issues.” United States v. City of Los Angeles, Cal., 288 F.3d 391, 397-98 (9th Cir. 2002).

Intervention as a matter of right under Fed.R.Civ.P. 24(a)(2) requires that: “(1) the application for intervention must be timely; (2) the applicant must have a significantly protectable interest relating to the property or transaction that is the subject of the transaction; (3) the applicant must be so situated that disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect that interest; and (4) the applicant's interest must be inadequately represented by the existing parties in the lawsuit.” Nw. Forest Res. Council v. Glickman, 82 F.3d 825, 836 (9th Cir. 1996), as amended on denial of reh'g (May 30, 1996). The putative intervenor bears the burden of establishing a right to intervene. California Dep't of Toxic Substances Control v. Jim Dobbas, Inc., 54 F.4th 1078, 1086 (9th Cir. 2022).

B. Permissive Intervention

A court may grant permissive intervention of a party under Rule 24(b) if three requirements are satisfied: “(1) the movant [] show[s] an independent ground for jurisdiction; (2) the motion must be timely; and (3) the movant's claim or defense and the main action must have a question of law and fact in common.” Venegas v. Skaggs, 867 F.2d 527, 529 (9th Cir. 1989), aff'd sub nom. Venegas v. Mitchell, 495 U.S. 82 (1990). Even if a prospective intervenor satisfies the threshold requirements, a district court has discretion to deny permissive intervention. See Orange v. Air Cal., 799 F.2d 535, 539 (9th Cir.1986) (“Permissive intervention is committed to the broad discretion of the district court.”).

III. DISCUSSION

Ford O'Brien alleges that Clear Blue became obligated to advance insurance proceeds to Watson after the Court granted the preliminary injunction motion in part and Ford O'Brien had sent all parties a Notice of Charging Lien. O'Brien Decl. ¶ 11. As a result, Ford O'Brien seeks to intervene as a matter of right under Fed. R. Civ. Proc. 24(a), or in the alternative, permission to intervene under Fed. R. Civ. Proc. 24(b), for the limited purpose of enforcing their charging lien.

The Court addresses each intervention requirement in turn. In reaching its decision, the Court notes that it is “guided primarily by practical and equitable considerations” and “interpret[s] the requirements broadly in favor of intervention.” Donnelly v. Glickman, 159 F.3d 405, 409 (9th Cir. 1998).

A. Intervention as of Right

1. Timeliness

Timeliness is a “threshold requirement” for intervention. United States v. Oregon, 913 F.2d 576, 588 (9th Cir. 1990). “Timeliness is to be determined from all the circumstances,” NAACP v. New York, 413 U.S. 345, 366 (1973), and it “is to be construed broadly in favor of the party seeking intervention.” United States v. Andrews, No. MISC-95-280, 1996 WL 442730, at *1 (E.D. Cal. May 24, 1996). There are three criteria to assess timeliness: “(1) the stage of the proceedings; (2) whether the parties would be prejudiced; and (3) the reason for any delay in moving to intervene.” Nw. Forest Res. Council, 82 F.3d at 836. Whether intervention is timely is left to the discretion of the trial court. Alaniz v. Tillie Lewis Foods, 572 F.2d 657, 659 (9th Cir. 1978).

Watson argues he will be prejudiced by any delay caused by intervention. Opp'n at 2. Watson contends that Ford O'Brien knew about the lawsuit since its inception and could have moved to intervene months ago. Id. “A[]dditional delay is not alone decisive” because “admission as a party will have the inevitable effect of prolonging the litigation to some degree,” although it may counsel against granting intervention. League of United Latin Am. Citizens v. Wilson, 131 F.3d 1297, 1304 (9th Cir. 1997). While Ford O'Brien was aware of litigation since its inception, “[t]he focus is on the date the entity attempting to intervene should have been aware its interests would no longer be protected adequately by the parties, rather than the date it learned of the litigation.” Nat. Res. Def. Council v. Locke, No. 01-CV-0421 JL, 2009 WL 10681122, at *6 (N.D. Cal. July 31, 2009) (emphasis added).

Here Ford O'Brien moved to intervene once the “litigation [] entered a new stage, where the would-be intervenor's rights...