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Microsoft Corporation v. World Tech Investments LLC

United States District Court, N.D. Ohio

May 31, 2019

MICROSOFT CORPORATION, Plaintiff,
v.
WORLD TECH INVESTMENTS LLC, et al., Defendants.

          OPINION & ORDER [RESOLVING DOC. 22]

          JAMES S. GWIN UNITED STATES DISTRICT JUDGE.

         Plaintiff 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.[1] 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.[2]

         For the following reasons, the Court DENIES State Farm's motion to intervene.

         I. Discussion

         There are two intervention types, intervention of right and permissive intervention.

         A. Intervention of Right

         For 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.[3]

         The 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.[4] The would-be intervenor has the burden of showing that it satisfies all these factors.

         i. State Farm's Motion is Timely

         As to the first factor, timeliness favors Movant.[5] The case has not progressed far, and the parties have not yet conducted extensive discovery.

         ii. Whether State Farm Has a Substantial Legal Interest in the Litigation

         State 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.

         The 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, [6] 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.[7] This potential interest does not support intervention.

         This 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.[8] Unlike the duty to indemnify, the duty to defend ...


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