Judge: Nathan Vu, Case: 30-2021-01233896, Date: 2023-07-24 Tentative Ruling

Motions to Intervene

James Toone’s, Chi An Chou’s, Richard Lee Folsom’s, Yeuk Ming Scot Mok’s, Ming Dai’s, and Sheng Zhang’s Motion for Leave to Intervene is DENIED.

Fremont Investment LLC’s Motion for Leave to Intervene is DENIED.

James Toone, Chi An Chou, Richard Lee Folsom, Yeuk Ming Scot Mok, Ming Dai, and Sheng Zhang move for leave to intervene. In a separate filing, Fremont Investment LLC moves for leave to intervene.

Standard for Intervention

A non-party, who is referred to as an “intervenor,” may become a party to an action or proceeding between other persons by:

(1) Joining a plaintiff in claiming what is sought by the complaint;

(2) Uniting with a defendant in resisting the claims of a plaintiff; or

(3) Demanding anything adverse to both a plaintiff and a defendant.

(Code. Civ. Proc., § 387, subd. (b).)

The non-party must request leave to intervene from the court “by noticed motion or ex parte application,” which “shall include a copy of the proposed complaint in intervention or answer in intervention and set for the grounds upon which intervention rests.” Code. Civ. Proc., § 387, subd. (c).)

The court must grant leave to intervene if either of the following requirements are met:

(A) A provision of law confers an unconditional right to intervene; or

(B) The person seeking intervention claims an interest relating to the property or transaction that is the subject of the action and that person is so situated that the disposition of the action may impair or impede that person's ability to protect that interest, unless that person's interest is adequately represented by one or more of the existing parties.

(Code. Civ. Proc., § 387, subd. (d)(1).) This is referred to as mandatory intervention.

The court may grant leave to intervene, at its discretion, “if the [non-party] has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both.” (Code. Civ. Proc., § 387, subd. (d)(2).) This is referred to as permissive intervention.

In general, the party seeking to intervene must have a direct and immediate interest in the outcome of the litigation (i.e., he or she must stand to gain or lose by direct operation of the judgment). (See Fireman’s Fund Ins. Co. v. Gerlach (1976) 56 Cal.App.3d 299, 303-305.)

“A person has a direct interest justifying intervention in litigation where the judgment in the action of itself adds to or detracts from his legal rights without reference to rights and duties not involved in the litigation.” (Continental Vinyl Prods. Corp. v. Mead Corp. (1972) 27 Cal.App.3d 543, 549.)

Examples of direct interests include a class member’s interest in class recovery, (see Mann v. Super. Ct. (1942) 53 Cal.App.2d 272, 280); an assignee’s interest in a plaintiff’s claim, (see Marc Bellaire v. Fleischman (1960) 185 Cal.App.2d 591, 597), or the interest of parties that might be subject to secondary or derivative liability following a judgment against the defendant, (see Robinson v. Crescent City Mill & Trans. Co. (1892) 93 Cal. 316, 319.

In considering whether to exercise the court’s discretion to permit intervention, the court considers whether intervention will enlarge the issues raised by the original parties, and whether the reasons for intervention outweigh any opposition by the existing parties. (Truck Ins. Exch. v. Superior Court (1997) 60 Cal.App.4th 342, 346.)

The court has discretion to deny intervention where a “direct interest” is shown, but the intervention would retard the principal suit, require a reopening of the case for further evidence, delay the trial of the action, or change the position of the original parties. (See City of Malibu v. California Coastal Comm’n (2005) 128 Cal. App. 4th 897, 906; Marriage of Kerr (1986) 185 Cal.App.3d 130, 134.)

Whether intervention should be allowed in a particular case “is best determined by a consideration of the facts of that case” and the decision is ordinarily left to the sound discretion of the trial court. (Fireman’s Fund Ins. Co. v. Gerlach, supra, 56 Cal.App.3d 299, 302.)

Direct and Immediate Interest

James Toone, Chi An Chou, Richard Lee Folsom, Yeuk Ming Scot Mok, Ming Dai, Sheng Zhang, and Fremont Investment LLC (collectively, Proposed Intervenors) all argue that their Motions to Intervene should be granted because each has a direct and immediate interest in the litigation.

Proposed Intervenors cite to Alphonzo E. Bell Corp. v. Bell View Oil Syndicate (1938) 24 Cal.App.2d 587, to support that contention. In that case, the complaint alleged that defendants’ oil wells encroached onto the plaintiff’s property and an adjoining property, and extracted oil from both properties. (See id. at pp. 591-592.) Both properties were leased by a single oil company. (Id. at pp. 591, 593.)

The owner of the adjoining property and the oil company sought to intervene. (See id. at pp. 593-594.) The Court of Appeal stated, “[T]he right of the owners of the [adjoining] property and of the Union Oil Company as the lessee of the property owned by the [plaintiff] to intervene, appears to us so clearly and convincingly established that we need only cite section 387 of the Code of Civil Procedure.” (Ibid.)

Alphonzo E. Bell Corp. v. Bell View Oil Syndicate is distinguishable from our case. In that case, defendants’ actions directly encroached upon the property of the adjoining landowner. In addition, defendants were also extracting oil from plaintiff’s property, which directly interfered with the oil company’s rights under its lease with the plaintiff. In this case, the Proposed Intervenors do not assert that they have a direct interest in the property that is the subject of Plaintiff’s action (i.e., the $500,000 invested by Plaintiff in MissFresh).

One of the other cases cited by Proposed Intervenors is distinguishable on a similar basis. In People v. Superior Court (1976) 17 Cal.3d 732, 737, the Supreme Court held that individual defrauded investors and a class of defrauded investors had a direct interest in the state’s action seeking, among other things, restitution of the money lost by those investors.

The third case cited by Proposed Intervenors is so dissimilar as to have no application here. In In re Baby Girl A. (1991) 230 Cal.App.3d 1611, the Court of Appeal held that a Native American tribe did not have an automatic right to intervene under the Indian Child Welfare Act, but that interests of the tribe under ICWA “are sufficiently important to support allowing [the tribe] it to join” the voluntary adoption proceeding of a child of a tribal member.” (Id. at pp. 1618-1619.) The Proposed Intervenors’ interest in seeking monetary compensation cannot be likened to the Native American tribe’s interest in the well-being of one of its children.

This case is more analogous to Malibu v. California Coastal Commission (2005) 128 Cal.App.4th 897. There, the court found no direct interest in the outcome of a litigation by plaintiff where “the [adjoining landowners] can only speculate that members of the public will trespass and litter on the property of the beach that the [adjoining landowners] own and thereby ultimately affect the quiet enjoyment of their property.”].) Here, Proposed Intervenors can only speculate as to how this lawsuit will affect their monetary interests.

Proposed Intervenors argue they have a direct interest in this litigation because if Defendants prevail at trial, “there can be no doubt that Defendants would at the very least rely heavily on that judgment in opposing Intervenors’ claims, if not make an outright argument that a victory here, even in Intervenors’ absence, has preclusive effects.” (Reply at pp. 5:21-6:1.)

However, Proposed Intervenors cite to no authority that preclusion would apply against them in a future suit, as indeed, res judicata or claim preclusion applies only if both lawsuits are “between the same parties” and collateral estoppel or issue preclusion may only be used “against a party who had a full and fair opportunity to litigate the issue in the first case but lost.” (DKN Holdings, LLC v. Faerber (2015) 61 Cal.4th 813, 824, 826.)

In addition, collateral estoppel applies only if an issue is “actually litigated and necessarily decided in the first suit” and “an identical issue” is raised in the second lawsuit. Here, the representations that are at the heart of both this action and the proposed Complaints in Intervention were made by different persons and to different persons.

For example, the proposed Complaints in Intervention allege that misrepresentations were made by nonparty Hanyang Hu aka David Hu to nonparty James A. Toone. (See Toone Prop. Compl., ¶¶ 17-18, 20-21; Fremont Prop. Compl., ¶¶ 12-13, 15-16). The proposed Complaints in Intervention then assert that James A. Toone repeated the misrepresentations to Proposed Intervenors Chi An Chou and Fremont Investment LLC, and that Chou passed on the misrepresentations to the other five Proposed Intervenors. (See Toone Prop. Compl., ¶ 28; Fremont Compl., ¶ 23).

By contrast, the allegations in this case revolve around alleged misrepresentations made by Defendant Carl Chang and Trevor Schuesler to Plaintiff’s manager Michael Carazza. Yet there is no allegation that any of the Proposed Intervenors every spoke to or met with Defendant Chang, Schuesler, or Carazza.

Thus, even if the alleged misrepresentations made to the Proposed Intervenors was identical word-for-word to the alleged misrepresentations made to Plaintiff here (a proposition which appears to be unlikely), the manner, timing, and context of the alleged misrepresentations would be different. So too would the witnesses and evidence.

However, even if Proposed Intervenors could show that they had a direct and immediate interest in this action, the court still must consider whether intervention would unduly enlarge the issues raised by the original parties, retard the principal suit, require a reopening of the case for further evidence, and delay the trial of the action.

For the reasons stated above, because the misrepresentations alleged in the proposed Complaints in Intervention were made by different people to different people than the misrepresentations alleged in the First Amended Complaint in this case. Further, the manner, timing, and context of the alleged misrepresentations will be different.

Thus, allowing intervention would require a significant enlargement of the issues and a substantial number of additional witnesses and evidence. This would only slow the progress of this action and delay the trial, which is scheduled in less than 3 months. The court would gain little countervailing benefit as the First Amended Complaint in this case and the proposed Complaints in Intervention share only a few legal issues in common, but almost no factual issues. The court would not avoid much in the way of repetition while greatly expanding the size of the case and making it less manageable.

Proposed Intervenors have not shown that they are entitled to intervene as a matter of right as the evidence does not show that Proposed Intervenors have a direct and immediate interest to the property or transaction that is the subject of this action or that the disposition of this action might impair or impede their ability to protect their interests and that the Plaintiff cannot adequately protect their interests.

Proposed Intervenors also have not shown that they are entitled to permissive intervention, as they have not proven that they have a direct and immediate interest in the outcome of this litigation. And even if they had, the court would exercise its discretion and deny permissive intervention because the disadvantages of allowing intervention outweigh the benefits.

Defendants shall give notice of this ruling.