Red Rock Sourcing LLC v. JGX, LLC

Background

The plaintiffs alleged that the defendants participated in a scheme to produce and sell counterfeit URBĀNE Brand hand sanitizer. The plaintiffs asserted claims under the Racketeer Influenced and Corrupt Organizations Act, the federal trademark statute known as the Lanham Act, and New York law.

The plaintiffs sought permission to file a second amended complaint adding trademark claims against Pilot Travel Centers, LLC and Love’s Travel Stops & Country Stores, Inc. Rigz LLC, which was not a party to the case, sought to intervene for the limited purpose of opposing that amendment motion.

Rigz stated that it and the plaintiffs had entered into a settlement agreement before the lawsuit began. As described in the opinion, the agreement released Rigz and its customers from claims arising through the agreement’s date involving trademark infringement, counterfeiting, or theft of intellectual property. Rigz argued that the agreement barred the proposed claims against the retail defendants and that the plaintiffs had not shown good cause for waiting to add those claims.

Legal standard

Federal Rule of Civil Procedure 24 provides two forms of intervention. Intervention as of right is required when the applicant satisfies specified requirements concerning the timeliness of the request, an interest in the case, possible impairment of that interest, and inadequate protection by the existing parties. Permissive intervention under Rule 24(b) is discretionary. It may be allowed when the proposed intervenor has a claim or defense sharing a common question of law or fact with the main action, so long as intervention will not cause undue delay or prejudice.

Court’s analysis

The court did not decide whether Rigz qualified for intervention as of right because it found permissive intervention appropriate.

The court found Rigz’s request timely. Rigz responded shortly after learning that the plaintiffs wanted to add the retail defendants and sought intervention soon after the court allowed the plaintiffs to file their amendment motion.

The court also found a sufficient common interest and factual connection. Rigz’s interest in protecting the settlement agreement could affect the proposed claims against the retail defendants. The court reasoned that, if Rigz were correct about the settlement and possible indemnity obligations, the retail defendants might have little incentive to defend the settlement because they might be able to transfer a judgment against them to Rigz.

The court further found that Rigz could contribute substantially to the factual development of the case. According to the proposed complaint, Rigz was allegedly the plaintiffs’ primary contact, helped develop the counterfeit product, and first contacted other defendants about producing it. Rigz had also participated extensively in early discovery.

Finally, the court found that intervention would not cause significant prejudice or undue delay. Discovery was still ongoing, the amendment motion remained pending, and both groups of existing defendants had filed briefs supporting Rigz’s intervention.

Disposition

The court granted Rigz’s motion to intervene under Rule 24(b). It directed Rigz to respond to the plaintiffs’ motion to amend within seven days. The court also identified issues Rigz should address, including whether Rigz had standing to object on behalf of the retail defendants, whether the court could consider the settlement agreement in deciding whether amendment would be futile, and whether the plaintiffs had unduly delayed seeking to add the retail defendants. The opinion did not decide those issues or the plaintiffs’ underlying claims.