Don't Bet the Business

Here is an issue that comes up with surprising frequency. A client learned of a pending lawsuit that could affect his rights, but he was not named as a party to the action. 

The question was put to me, “what options do I have?” The litigation answer that was directly on point was “intervention.” The client’s response, predictably, was “what is that?”

Intervention is exactly what the word suggests, a third-party to a lawsuit. It is someone who has a stake in the outcome and joins the lawsuit even though he was not originally named as a party. Michigan’s Court Rules allow this to happen in several circumstances.

Nonparties can intervene in an existing lawsuit as a matter of “right,” under MCR2.209(A) by making a timely application and demonstrating:

1. that a Michigan statute or court rule gives the person or entity an unconditional right to intervene;
2. all the existing parties to the case agree that the new party can join as a party, or
3. when the new party is able to show an “interest relating to the property or transaction which is the subject of the action and is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.”

In my experience, the most common basis to intervene as of right occurs under subsection (3) of this rule. The rationale makes perfect sense – a lawsuit may decide an issue that affects me, no one in the case is looking out for my interest, so I need to be a party to the case. An obvious example would be when a court is asked to decide rights to a parcel of real estate, and one claiming to be a part owner is not named to the original lawsuit.

Under the rules in Michigan, intervention as of right is not automatic. The party seeking to intervene must make a timely request by filing a motion with the court.  In the motion, the intervenor must state the reasons why intervention is needed and include a draft of a pleading – a complaint or an answer – that spells out the new party’s interest according to the rules governing pleading in any lawsuit. Even if all that happens, it will be up to the judge to decide if intervention is to be permitted.

If the outsider cannot satisfy the standards for intervention as of right, “permissive” intervention may still be possible. The procedural hurdles are the same as when seeking intervention as of right, but the standards for admission are different. To gain permissive intervention under MCR 2.209(B) applicants must show:

1. that a Michigan statute or court rule allows for a conditional right to intervene; or
2. when the applicant's claim or defense and existing action share a question of law or fact.

In addition to considering whether an applicant can intervene as of right, when deciding whether to allow permissive intervention, the court must exercise discretion when considering if allowing the new party to intervene will unduly delay or prejudice the rights of the existing parties. This frequently is the case when the interests of the intervenor come too late. Permissive intervene also might be denied if a common question of law or fact exists, but that commonality is only tangentially related to the existing case, or the new claims would needlessly complicate, delay or confuse the resolution of the existing disputes.

The need for intervention into a lawsuit is not a typical procedure, particularly when understanding that other court rules are designed to encourage the inclusion of all parties having an interested in a particular case. However, when someone is overlooked, or intentionally omitted, despite possessing an identifiable interest in the outcome of a case, intervention is there for the asking.