Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 80 C 12 -- Milton I. Shadur, Judge.
Pell, Robert A. Sprecher*fn* and Cudahy, Circuit Judges.
This case involves the petition of Jerome and Philip Prassas to intervene in an action brought by Meridian Homes Corporation ("Meridian") against Nicholas W. Prassas & Company (the "Prassas Company"). The underlying lawsuit concerns a joint venture agreement. The Prassas brothers sought to intervene because they own an undivided one-half share of the Prassas Company's "rights and interests" in several real estate developments, including the property which is the subject of the joint venture. The district court denied the petition to intervene. We affirm.
The joint venture which is the focus of this action was formed in 1961 between George W. Prassas & Company and Alexander Construction Company. Nine acres were purchased by the joint venture in Romeoville, Illinois, and were planned for development as a shopping center. Although a shopping center ultimately was constructed on the site, less than the total nine acres were developed.
At the time the joint venture agreement was signed, George W. Prassas & Company was a closely held Illinois corporation with two principal stockholders, George Prassas (51%) and Nicholas Prassas (49%). George Prassas died in December, 1966. Pursuant to George's will, Nicholas Prassas received stock equivalent to an additional 1% interest in the company, and the balance of George's stock was put into a trust for the benefit of George's sons, Jerome and Philip Prassas. In August, 1974, the trust made an agreement with George W. Prassas & Company whereby the company purchased all the stock owned by the trust and the corporate name was changed to Nicholas W. Prassas & Company. The trust received, inter alia, an undivided one-half interest in the company's rights and interests in various properties, including the nine-acre Romeoville site. The portion of the agreement which described the nature of the interest acquired by the trust stated:
If any of the interests of the Company referred to in subparagraphs (b) through (g) above is a partnership interest, an undivided one-half of such partnership interest shall be deemed to have been assigned by the Company to you but you shall not thereby become a partner of such partnership. The relationship between the Company and you shall not be one of partnership.
(emphasis added). In March, 1978, the trust terminated and the Prassas brothers, as beneficiaries of the trust, acquired the one-half interest free of trust.
Meridian eventually succeeded to Alexander Construction Company's interest in the joint venture (after an intervening transaction wherein Alister Construction Company had purchased the assets of Alexander Construction Company). Meridian initiated an action to dissolve the joint venture in January 1980, claiming that the joint venture's purpose, development of a shopping center, had been completely fulfilled. The Prassas Company answered that the joint venture could not be terminated because the company had never accepted Meridian as its joint venture partner, and that the purpose of the joint venture had not been completed because the entire nine-acre parcel had not been developed. The parties presented cross-motions for summary judgment based on these positions. On December 30, 1980, the district court held in favor of Meridian as to the developed portion of the property, and ordered a judicial sale of that part of the property. The court found, however, that the parties remained joint venturers as to the undeveloped portion of the property. The company's appeal of that decision is currently pending before this court. Meridian Homes Corp. v. Nicholas W. Prassas & Co., 687 F.2d 228.
On October 14, 1980, prior to the issuance of the district court's summary judgment decision, Jerome and Philip Prassas filed their petition to intervene and cross claim. The petition to intervene outlined the brothers' interest in the Romeoville property and noted that they had filed suit against the Prassas Company and Meridian in state court requesting specific performance and other relief in relation to the Romeoville property. The petition requested leave to file a cross-claim against the Prassas Company alleging breach of fiduciary duty, requesting injunctive relief and an accounting, and seeking termination of the joint venture.
The district court, 89 F.R.D. 552, entered an opinion and order on March 9, 1981, finding that the brothers were not joint venturers, but rather merely owned a right to half of the profits to which the Prassas Company was entitled from the joint venture. Because the subject of the action between Meridian and the Prassas Company was the status of the joint venture, the court found that the brothers did not have an interest in the subject of the litigation. Further, although the brothers had an interest that would be affected by the litigation, the district court ruled that their interest was not in danger of being impeded or impaired, and could be protected without intervention. Finally, the court found that the brothers' interest in maximizing the profits of the joint venture was adequately represented by the Prassas Company. The court therefore denied the petition to intervene as of right and additionally denied permissive intervention. The brothers appeal that portion of the judgment denying intervention as of right.
Rule 24(a) of the Federal Rules of Civil Procedure sets out four requirements for intervention as of right: (1) timely application; (2) an interest relating to the subject matter of the action; (3) potential impairment, as a practical matter, of that interest by the disposition of the action, and (4) lack of adequate representation of the interest by the existing parties to the action.*fn1 See Federal Deposit Insurance Corp. v. Hanrahan, 612 F.2d 1051, 1053 (7th Cir. 1980); Central States, Southeast & Southwest Areas Health & Welfare Fund v. Old Security Life Insurance Co., 600 F.2d 671, 679 (7th Cir. 1979). Because no question ...