United States District Court, E.D. Pennsylvania
THOMAS N. ONEILL, Jr., District Judge.
Now before me is Cerida Investment Corporation's motion to intervene pursuant to Rule 24 of the Federal Rules of Civil Procedure, Dkt. No. 180, plaintiff Barbara Robertshaw's response thereto, Dkt. No. 190, Cerida's reply, Dkt. No. 191, Cerida's supplemental brief, Dkt. No. 208, and Robertshaw's reply to Cerida's supplemental brief. Dkt. No. 211. For the following reasons I will deny Cerida's motion.
The parties and the proposed intervenor are familiar with the facts of this litigation so a lengthy recitation is not necessary. In pertinent part, on August 5, 2013, following a bench trial and consideration of the parties' post-trial briefs (Dkt. Nos. 164, 165, 166 and 167) and oral argument (Dkt. No. 172), I granted plaintiff's request for declaratory relief against defendants Gary Pudles and Answernet and, relevant here, issued the following declarations:
c. Cerida Investment Corp. does not possess the 12, 704 shares of Answernet, Inc., that Gary Pudles and Betty Babjak claimed Cerida received as a result of an alleged assignment and exercise of the Waterside warrants;
d. Cerida Investment Corp. does not possess the 18, 148.02 shares of Answernet, Inc., that Gary Pudles and Betty Babjak claimed Cerida received as a result of an alleged assignment and exercise of the Progress Capital warrants;
e. Cerida Investment Corp. does not possess the 27, 493.3 shares of Answernet, Inc., that Gary Pudles and Betty Babjak claimed Cerida received as a result of an alleged assignment and exercise of the BF/PC warrants;
Dkt. No. 176 at ECF p. 1-2; see also Dkt. No. 175 at ECF pp. 45-60.
Cerida now moves to intervene pursuant to Rule 24 of the Federal Rules of Civil Procedure. In its motion Cerida asserts that it is:
owned fifty percent by Plaintiff [Barbara Robertshaw] and fifty percent by Defendant Gary Pudles. Cerida's President is Gary Pudles, a Defendant in this litigation. Cerida's Secretary is Defendant Betty Babjak. Defendant Gary Pudles and Plaintiff's father, William Robertshaw, make up the Board of Directors. Cerida and Defendant Answernet share nearly all their backoffice operations, such as insurance, accounting, information technology, buying, and sales.
Dkt. No. 180 at ECF p. 4. Cerida argues that it was not on notice that its rights to the above-listed Answernet shares were at risk in the instant litigation between its two owners "until the Court invalidated the shares in its August 5, 2013 Order. Prior to that point, [it asserts, ] the only Cerida shares that Plaintiff had put at issue were the 12, 704 shares (3%) of AnswerNet stock underlying the warrants transferred by Waterside Capital." Id. at p. 6. Cerida contends that "even as to these 12, 704 shares, ownership was only questioned in the limited context of Plaintiff's allegations of fraud based on Plaintiff's misperception that Cerida could not own its shares if it did not have physical share certificates." Id . It further asserts that "[u]nder these circumstances, Cerida reasonably was not aware that the Court would invalidate such an overwhelming amount of its AnswerNet shares, based on pre-2007 ownership transactions that even Plaintiff herself never put at issue." Id . Cerida therefore contends that its filing of its motion to intervene only eleven days after the issuance of the Court's August 5, 2013 Order represents only a negligible delay that does not prejudice the parties in the present litigation. Dkt. No. 180 at ECF p. 7.
Cerida asserts that it had "good reason" to delay in seeking to intervene because of various representations plaintiff's counsel made in a July 2012 discovery hearing. Id. at p. 6-7. Cerida states that it "watched as Pudles and AnswerNet attempted to obtain discovery on the ownership of the shareholdings other than the 3% at issue, only to be refused that discovery, and then given Plaintiff's assurance on the record that there's no issue involving Cerida in this case.'" Id. at p. 7, quoting Dkt. No. 50, Hrg. Tr. July 19, 2012, 27:19-24; and citing Dkt. No. 45. But at that hearing, plaintiff's counsel further explained that "no issue... has been raised by the complaint or the answer and affirmative defenses of AnswerNet that has any possible bearing on Cerida's internal information." Dkt. No. 50 at 27:21-24 (emphasis added). In November 2012, almost four months after that discovery hearing, Robertshaw amended her complaint to include allegations that Cerida did not own all of the shares it claimed in Answernet. See Dkt. No. 86 at ¶ 25 ("The Answernet Capitalization table that Defendants Pudles and Babjak provided falsely asserts that Cerida owned 62, 579 common shares of Answernet, and that Answernet had a total of 423, 396 issued shares outstanding."); ¶ 27 (Pudles and Babjak "knew that Answernet had never issued any shares at all to Cerida, and that there were not 423, 396 issued shares outstanding."); ¶ 34 ("At the Annual Meeting of the Shareholders that was held on December 15, 2011, Defendants Betty Babjak and Gary Pudles submitted a document entitled List of Shareholders of Answernet, Inc.', which also falsely asserted that Cerida owned 62, 579 common shares of Answernet, and that Answernet had a total of 423, 396 issued shares outstanding."); ¶ 35 (Pudles and Babjak "knew that Answernet's stock ledger did not contain any record of the shares that were allegedly owned by Cerida, and that there were not 423, 396 issued shares outstanding."); ¶ 36 (Pudles and Babjak "knew that Answernet had never issued any shares at all to Cerida."); ¶ 40 ("Answernet's counsel provided a document purporting to show warrant transactions which allegedly resulted in Cerida's obtaining the 62, 579 common shares of Answernet which Defendants Betty Babjak and Gary Pudles falsely claimed Cerida owned.").
Finally, Cerida contends that the parties would not be prejudiced by Cerida's intervention because
other Defendants have expressed an intention to file a motion to stay judgment, just as Cerida has, pending the filing of motions under Federal Rules of Civil Procedure 52 and 59. These motions will challenge the same basic holding that Cerida wishes to challenge with respect to the invalidation of over Cerida's ...