First Data Merchant Services LLC v. MM Development Company

Background

First Data Merchant Services LLC brought an interpleader action against nine defendants. In an interpleader action, a party holding disputed property asks the court to resolve competing claims to that property. First Data represented that each defendant had asserted a claim to funds in its possession and that it could not determine who was entitled to them.

The disputed funds totaled $619,560.55. First Data had held $22,235 in connection with GIVY, Inc. d/b/a The Pelican Group’s account and $597,325.55 in connection with Pelican Communications, Inc. d/b/a The Pelican Group’s account, to address possible payment reversals or chargebacks. The case also involved claims by MM Development Company d/b/a Planet 13; Sistem Commerce City LLC d/b/a Silver Stem Fine Cannabis; KTZ Holdings, Inc. d/b/a Silver Stem; GTR Source, LLC; New York City Marshal Stephen W. Biegel; ML Factors Funding Limited Liability Company; Pelican Communications, Inc. d/b/a The Pelican Group; Linx Card, Inc.; and GIVY, Inc.

Strand View Enterprises, LLC; Sunrise Pharmacy LLC; Blue Wave Management LLC; and Inland Medical Consultants, LLC d/b/a Advanced Therapeutics, collectively called the Intervenor-Defendants, moved to join the case under Rule 24 of the Federal Rules of Civil Procedure. They sought intervention as of right or, alternatively, permission to intervene. Their motion was unopposed.

The Intervenor-Defendants’ asserted interest

The Intervenor-Defendants alleged that Linx issued each of them a promissory note for a loan. They alleged that the notes became due six months after issuance, that Linx failed to pay, and that Linx remained in default. They further alleged that the disputed funds were Linx assets and collateral under the notes, giving them a claim to the funds in partial satisfaction of the amounts owed.

Court’s analysis

The court applied Rule 24(a)(2), which allows intervention as of right when four conditions are met: the request is timely; the applicant has an interest connected to the property or transaction at issue; resolving the case without the applicant could impair the applicant’s ability to protect that interest; and the existing parties do not adequately represent the applicant’s interest.

The court found all four conditions satisfied. The motion was timely because it was filed less than three months after the action began, while the case was still in its early stages. The court found no prejudice to the existing parties or the progress of the case from allowing intervention. It also noted that the Intervenor-Defendants said they learned of Linx’s inability to repay the loans through news articles about the litigation.

The court found that the Intervenor-Defendants had a direct, substantial, and legally protectable interest in the disputed funds based on their asserted promissory notes, Linx’s alleged default, and their alleged collateral rights. The court also concluded that denying intervention could further impair their ability to recover because Linx had limited assets apart from the disputed funds.

Finally, the court found that none of the existing parties adequately represented the Intervenor-Defendants’ interests. The existing defendant-claimants were competing for the same limited funds, while the Intervenor-Defendants sought to litigate their own claims.

Ruling

Judge P. Castel granted the Intervenor-Defendants’ motion to intervene as of right. The Clerk was directed to terminate the motion, identified as docket entry 66. The opinion did not decide which claimant ultimately was entitled to the disputed funds.