On Appeal from the United States District Court for the Eastern District of Pennsylvania, Civil Action No. 83-2809. On Appeal from the United States District Court for the Eastern District of Pennsylvania, Civil Action No. 84-1514.
Sloviter, Becker, and Cowen,*fn* Circuit Judges.
These consolidated appeals, arising out of a bitterly contested battle over the demise of a building project, raise two discrete procedural questions. The first question we will address is whether a suit by a contractor to enforce an arbitration award against the developer and the bank that financed the project renders the developer an indispensable party pursuant to Fed. R. Civ. P. 19. We hold that, given that the arbitration award is joint and several, the contractor may sue the bank alone and that the developer is not an indispensable party.
Second, we must determine whether the contractor may intervene as of right in a foreclosure action by the bank against the developer two years after a final settlement was reached in the action (although the district court retained jurisdiction to settle any disputes arising from the agreement). We hold that given the contractor's diligence in trying to unseal an agreement between the bank and the developer, maintained by the court under seal, the intervention cannot be deemed untimely when the ultimate unsealing gives rise to further proceedings. Nevertheless, we express doubts as to the contractor's underlying ability to intervene as of right, and remand this question to the district court to consider the contractor's status in relation to certain escrow accounts held pursuant to the sealed agreement between the bank and the developer.
I. FACTS AND PROCEDURAL HISTORY
To understand the questions on appeal and the procedural history of the two separate actions that are consolidated before us, it is necessary to review briefly the legal history of the collapse of the Hotel Rittenhouse project, a luxury hotel-apartment project in Center City Philadelphia.*fn1 Hotel Rittenhouse Associates (HRA), a partnership operated by Jack Wolgin, was the developer for the building project. FAB III Concrete Corporation (FAB) served as a concrete contractor for the project. Bank of America National Trust and Savings Association (the Bank) financed the project. As the project experienced financial difficulties, FAB and other contractors began to receive late payments from HRA. In early 1982 the Bank signed a letter with FAB assuring that it would pay FAB directly for its work. In August, 1982 all payments from the Bank to FAB ceased.
In June, 1983 the Bank sued to foreclose on the project and HRA counterclaimed alleging, inter alia, conspiracy and fraud surrounding the demise of the project. That first suit, which we will call Bank v. HRA, was settled, and as part of the court sponsored and supervised settlement, the terms were kept secret. FAB requested that the terms of the agreement be made public. The district court refused, but this court overturned the ruling and required that the terms of the agreement between the Bank and HRA be made public. Bank of Am. Nat'l Trust and Sav. Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339 (3d Cir. 1986). When the agreement became public, nearly two years after it was entered into, FAB learned that the Bank had agreed to fund an escrow from which HRA would pay its contractors. In return, HRA promised to indemnify the Bank against contractors' claims. According to this secret agreement, whatever HRA did not pay to the contractor and subcontractors would revert to Jack Wolgin personally. Wolgin also would receive a $1 million bonus for obtaining releases from all subcontractors.*fn2 FAB contends that during an arbitration arising out of a separate action (the FAB v. Bank case discussed below), HRA made claims that have been proved false by the unsealing of the secret agreement in the Bank v. HRA litigation. Specifically, FAB argues that: (1) HRA "pled poverty" when in reality a fund existed to pay contractors and that fund has been earning interest; and (2) it is clear from the secret agreement that HRA (contrary to its assertions in arbitration) had never incurred substantial interest claims to the Bank so that its claim against FAB in arbitration to recoup delay damages that HRA allegedly owed the Bank was fraudulent.
On February 17, 1982, five days after it received access to the secret agreement between the Bank and HRA, FAB moved to intervene in the Bank v. HRA case in order to claim an equitable right to interest that had been accruing on the escrow fund set aside for the benefit of contractors and subcontractors (including FAB). FAB estimates that the accrued interest exceeds $120,000. FAB particularly desires to intervene in this action because the escrow, upon which FAB wishes to obtain interest, was established pursuant to a negotiated agreement supervised by the court in this case, and the district court retained jurisdiction for all purposes connected with the agreement to settle any disputes arising out of the agreement. The district court denied the motion to intervene as untimely and FAB appeals that denial.
At the same time that FAB was attempting to unseal the secret agreement in the Bank v. HRA case, FAB initiated a separate suit against the Bank for money still due for its contracting work. This second case, which we will call FAB v. Bank, did not include HRA, whose presence in the action would have deprived the court of diversity jurisdiction. See 28 U.S.C. § 1332 (1982). When the suit was brought, the Bank made a motion for the inclusion of HRA as an indispensable party. That motion however was never ruled upon.*fn3 Instead, the district court stayed the FAB v. Bank action pending arbitration. At the arbitration proceeding all three parties were present. The Bank and HRA were represented by the same attorney. The arbitrator awarded FAB over $848,000 against the Bank and HRA, plus 6% interest from the date of the award to the date of payment. The Bank refused to pay the award until FAB signed a release of all claims, including state court claims for conspiracy and abuse of process that are still pending. FAB refused to sign a general release and instead returned to the district court to enforce its arbitration award against the Bank. The Bank, however, argued that FAB could not bring suit in federal court to enforce the arbitration award without including HRA because HRA was an indispensable party. The district court agreed and dismissed the action. The district court noted that FAB had brought claims in Pennsylvania state court and that it could enforce the arbitration award in that forum against both the Bank and HRA.
As a chronological matter we discussed the intervention question first; however, in our legal analysis, we will first address the Rule 19 indispensable party question. We will consider two questions: (1) Can FAB sue the Bank alone to enforce its arbitration award or is HRA an indispensable party to the ...