A federal district court in California this month denied a restaurant foodservice supplier’s motion to intervene in a franchisor’s action to collect amounts owed by a former franchisee. Jack In The Box, Inc. v. Mehta, 2014 U.S. Dist. LEXIS 50575 (N.D. Cal. Apr. 9, 2014). Jack In The Box (“JIB”) sued Mehta, its former franchisee, for failure to pay amounts owed, and JIB took over Mehta’s restaurants pursuant to a court order in lieu of receivership that authorized JIB to operate the restaurants, collect all revenues, and pay reasonable and necessary bills for the protection of the restaurants. At the time of the takeover, Mehta owed McLane Foodservice, Inc., one of its suppliers, over $500,000. JIB voluntarily paid McLane $127,000 owed for food and supplies in the restaurants at the time of takeover, but denied further payment because JIB had no agreement with McLane. McLane sought to intervene in the action to recover the remaining amounts due.
The court analyzed whether McLane could intervene in the case as a matter of right or with the court’s permission. It first considered the four elements necessary to create a right to intervene: (1) the motion must be timely; (2) the applicant must claim a significantly protectable interest relating to the property or transaction that is the subject of the action; (3) the applicant must be so situated that the disposition of the action may, as a practical matter, impair or impede its ability to protect that interest; and (4) the applicant’s interest must be inadequately represented by the parties to the action. The court determined that McLane satisfied the timeliness element, and that its interest was not represented by the parties in the action. The court, however, found intervention as a right inappropriate because McLane could not establish a significantly protectable interest relating to the subject of the action. McLane’s interest was in its contracts with Mehta, and the relationship between that interest and JIB’s action was “too attenuated to justify intervention.” The court also denied permissive intervention because the determination that McLane’s interest was distinct from the claims in the franchise action meant that McLane had not established the common question of law or fact necessary for permissive intervention.