SFR Invs. Pool 1 v. NewRez LLC

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SFR INVESTMENTS POOL 1, LLC, Plaintiff, v. NEWREZ LLC D/B/A SHELLPOINT MORTGAGE SERVICING, Defendant.

No. 2:22-cv-00626-GMN-EJY

United States District Court, D. Nevada

May 10, 2023

ORDER

Gloria M Navarro, District Judge

Pending before the Court is the Federal Housing Finance Agency's (“FHFA”) Motion to Intervene, (ECF No. 35). Plaintiff and Counter-Defendant SFR Investments Pool 1, LLC (“SFR”) filed a Response, (ECF No. 49), to which FHFA filed a Reply, (ECF No. 53).

For the reasons discussed below, the Court GRANTS FHFA's Motion to Intervene.

I. BACKGROUND

This case arises out of Shellpoint's pursuit of foreclosure on the property located at 6451 Hamilton Grove Avenue, Las Vegas, NV 89122, Parcel No. 161-15-714-026 (the “Property”). (Compl. ¶¶ 5, 36, ECF No 1). The Court previously granted SFR's Motion for Preliminary Injunction and enjoined Shellpoint from continuing foreclosure proceedings on the Property during the pendency of this case. (Preliminary Injunction Order 10:22-24, ECF No. 22). The Court incorporates the background information about the Property from its previous Preliminary Injunction Order, (ECF No. 22).

Originally the parties stipulated to a discovery plan which set the discovery cut-off on December 19, 2022. (See Stip. Discovery Plan 2:1-4, ECF No. 24). However, on December 1, 2022, the parties submitted a stipulation and order extending the discovery cut-off to February 17, 2023. (See Stip. Extend Time 4:22-23, ECF No. 34). On December 2, 2022, FHFA filed the present Motion to Intervene, (ECF No. 35), which the Court discusses below.

II. LEGAL STANDARD

Fed. R. Civ. P. 24 includes provisions for intervention of right and permissive intervention. “On timely motion,” the court must permit anyone to intervene as a matter of right who:

(1) is given an unconditional right to intervene by a federal statute; or

(2) claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

Fed. R. Civ. P. 24(a). The rule governing permissive intervention indicates that the court has discretion to allow one to intervene who:

(A) is given a conditional right to intervene by a federal statute; or

(B) has a claim or defense that shares with the main action a common question of law or fact.

Fed. R. Civ. P. 24(b)(1).

III. DISCUSSION

FHFA argues that its intervention is warranted under Rule 24 for three reasons: (1) as a right under Rule 24(a)(1) because it has a statutory right to intervene as Fannie Mae's conservator in any action in which Fannie Mae is a party; (2) as a right under Rule 24(a)(2) because it meets those requirements as regulator and conservator; and (3) because it meets the requirements for permissive intervention under Rule 24(b)(1) as regulator and conservator. (Mot. Intervene 5:3-11:6, ECF No. 35); (Reply 1:24-11:27, ECF No. 53).

Regardless of which theory FHFA advances under, “[i]ntervention, both of right and by permission, can occur only ‘[o]n timely motion.'” Peruta v. Cty. of San Diego, 771 F.3d 570, 572 (9th Cir. 2014) (quoting Rule 24). Accordingly, the Court will first consider whether FHFA's Motion to Intervene is timely.

A. Timeliness

The Ninth Circuit has characterized the timeliness factor as “a flexible concept” left to the discretion of district courts. United States v. Alisal Water Corp., 370 F.3d 915, 921 (9th Cir. 2004) (citation omitted). The timeliness factor for intervention as a matter of right is treated more leniently than for permissive intervention. United States v. Oregon, 745 F.2d 550, 552 (9th Cir. 1984) (citation omitted). To that end, courts focus on three factors: (1) the stage of the proceeding at which an applicant seeks to intervene; (2) the reason for and length of the delay; and (3) the prejudice to other parties. Smith v. Los Angeles Unified Sch. Dist., No. 830 F.3d 843, 854 (9th Cir. 2016) (citing Alisal Water, 370 F.3d at 921). A proposed intervenor bears the burden of meeting these elements, but “the requirements for intervention are [to be] broadly interpreted in favor of intervention.” Id. at 853 (citing Alisal Water, 370 F.3d at 919); see also Westlands Water Dist. v. United States, 700 F.2d 561, 563 (9th Cir. 1983) (Rule 24(a) requirements are construed in favor of the applicant).

Courts must assess the totality of the circumstances “bear[ing] in mind that the crucial date for assessing the timeliness of a motion to intervene is when proposed intervenors should have been aware that their interests would not be adequately protected by the existing parties[,]” not the date the proposed intervenor learned of the litigation. Smith, 830 F.3d at 854 (citation and internal quotation omitted).

1. Stage of the Proceedings

FHFA contends that the stage of the proceedings weighs in favor of intervention because discovery remains open, Shellpoint has yet to file an answer, and FHFA's intervention would not require any discovery the parties did not already anticipate because it seeks to raise only “statutory defenses that present pure questions of law.” (Reply 2:5-3:13). In rebuttal, SFR argues that this case is far from “its infancy” because there are “only [thirty-four] business days left in discovery” at the time of its filing, and following the Court's Motion to Dismiss Order, Shellpoint only has two counterclaims remaining, specifically its quiet title and equitable liens claims. (Resp. 2:17-3:6).

The “stage of the proceedings” factor focuses on “what had already occurred” by the time prospective intervenors sought intervention. League of United Latin American Citizens v. Wilson, 131 F.3d 1297, 1303 (9th Cir. 1997). Stated another way, “[r]ather than promote form over substance with regard to procedural matters, the court should focus on what has already occurred, instead of what has yet to occur.” Lin v. Suavei, Inc., No. 3:20-cv-0862, 2023 WL 1870069, at *3 (S.D. Cal. Feb. 9, 2023) (citing Wilson, 131 F.3d at 1303). Where a “district court has substantively-and substantially-engaged the issues in th[e] case,” a delay can weigh strongly against intervention.” Western Watersheds Project v. Haaland, 22 F.4th 828, 836 (9th Cir. 2022). In Wilson, the Ninth Circuit affirmed the denial of a motion to intervene as untimely where multiple proceedings had already occurred, including the issuance of a temporary restraining order, a preliminary injunction, an appeal of the preliminary injunction to the Ninth Circuit, and a partial grant of summary judgment. Wilson, 131 F.3d at 1303.

The stage of the proceedings weighs in favor of intervention. While the Court has ruled on SFR's Motion for Preliminary Injunction and Motion to Dismiss, it has not substantively and substantially engaged the issues in the case. See Alaska Airlines, Inc. v. Schurke, No. 11-cv-0616, 2013 WL 12250544, at *2 (W.D. Wash. Feb. 25, 2013) (determining the stage of proceedings did not weigh against intervention where “the court has only decided a preliminary issue of ripeness, dismissed the complaint once, and allowed Alaska to file an amended complaint. Since then, the parties have engaged in discovery but the court has not decided any major issue”); Acosta v. Huppenthal, No. 10-cv-623, 2012 WL 1282994, at *2 (D. Ariz. Feb. 6, 2012) (finding the stage of the proceedings did not weigh against intervention where the court had already ruled on the plaintiffs' motion for preliminary injunction and motion to dismiss); S. Yuba River Citizens League and Friends of the River v. Nat'l Marine Fisheries Svc., 2007 WL 3034887, at *12 (E.D. Cal. Oct. 16, 2007) (allowing intervention where the only substantive motion filed was motion to dismiss, no discovery had been conducted, and party moved for intervention before dispositive motion filing deadline). Although SFR is correct that discovery was nearly completed when FHFA filed its Motion to Intervene, the “resolution of the liability and remedies phase” of this case is “not imminent.” McIver v. KW Real Estate/Akron Co., LLC, No. 13-cv-306, 2016 WL 8230634, at *3 (C.D. Cal. June 15, 2016). Therefore, this factor weighs in favor of timely intervention.

2. Reason For and Length of Delay

FHFA contends that the reason and length of delay factor militates in favor of intervention because the Ninth Circuit has generally “held that delays in months[,]” like here, “are timely, while delays measured in years are untimely.” (Reply 5:22-23). Moreover, FHFA maintains it “has not delayed moving for intervention as it has been on notice of the threat to enjoin its ability to protect its interest in this action for only a short time.” (Mot. Intervene 7:16-18). In rebuttal, SFR contends that FHFA's proffered justification for its delay is meritless because the Court's Preliminary Injunction Order was entered five months before it filed the instant Motion to Intervene and eight months after SFR filed its Complaint. (Resp. 3:16-4:4).

The Ninth Circuit has held that “prejudice to existing parties is ‘the most important consideration in deciding whether a motion for intervention is untimely.'” Smith, 830 F.3d at 857 (quoting State of Or., 745 F.2d at 552). Thus, in assessing prejudice, the Ninth Circuit has emphasized that,

The only “prejudice” that is relevant under this factor is that which flows from a prospective intervenor's failure to intervene after he knew, or reasonably should have known, that his interests were not being adequately represented-and not from the fact that including another party in the case might make resolution more “difficult[.]”

Id. (emphasis added).

Here FHFA's argument solely focuses on...