United States District Court, N.D. Ohio
OPINION & ORDER [RESOLVING DOC. 22]
S. GWIN UNITED STATES DISTRICT JUDGE.
Microsoft Corporation claims that Defendants violated its
intellectual property rights by fraudulently selling
Microsoft product keys. Defendants' insurer, Movant State
Farm Fire and Casualty Company (“State Farm”), is
providing defense to Defendants under a reservation of
rights. State Farm now moves to intervene under Federal Rule
of Civil Procedure 24. State Farm seeks intervention for the
limited purpose of conducting discovery and pursuing a
declaratory judgment claim that State Farm does not need to
defend or indemnify Defendants.
following reasons, the Court DENIES State
Farm's motion to intervene.
are two intervention types, intervention of right and
Intervention of Right
intervention of right, Federal Rule 24(a) provides in
relevant part that “on timely motion, ” a court
must permit anyone to intervene who . . . claims an interest
relating to the property or transaction that is the subject
of the action, and is so situated that disposing of the
action may as a practical matter impair or impede the
movant's ability to protect its interest, unless existing
parties adequately represent that interest.
Court considers four factors when ruling on a motion to
intervene of right: 1) whether the movant has timely sought
intervention; 2) that they have a substantial legal interest
in the pending litigation, 3) that their ability to protect
the interest is impaired; and 4) that the parties presently
before the court do not adequately represent that
interest. The would-be intervenor has the burden of
showing that it satisfies all these factors.
State Farm's Motion is Timely
the first factor, timeliness favors Movant. The case has not
progressed far, and the parties have not yet conducted
Whether State Farm Has a Substantial Legal Interest in the
Farm argues that it has a substantial legal interest in the
litigation. It may or may not need to indemnify Defendants
for their losses, and it is obligated provide them with a
defense. Plaintiff and Defendants argue that State Farm lacks
a direct and immediate interest in the underlying
intellectual-property claims-State Farm's only interest
is the amount it might owe the insured, and argue that this
is an insufficient interest.
Court agrees that an insurer's potential interest in
indemnifying Defendants is not enough to satisfy Rule 24(a).
Although the factual issues in this suit and State Farm's
proposed declaratory judgment coverage claim are factually
intertwined,  State Farm's interest is contingent.
State Farm will only cover Defendants' losses if
Defendants lose the case and State Farm loses the
coverage dispute. This potential interest does not support
still leaves the question whether State Farm's duty to
defend in this action is a substantial legal interest
justifying intervention. While there is little case law on
this issue, most courts have found that a contested duty to
defend is a substantial interest for intervention
purposes. Unlike the duty to indemnify, the duty to