A year has passed since multiple non-parties filed motions for
leave to intervene in the CFPB’s enforcement action against the National
Collegiate Student Loan Trusts over abusive servicing and litigation practices. On October 19, 2018, the U.S. District Court of Delaware finally granted the intervenors’ motions
without placing any restrictions on them, finding that they have significant
interests affected by the terms of the proposed consent judgment that was submitted when the CFPB
filed its complaint in September 2017 in the U.S. District Court of Delaware. The intervenors include primary servicer PHEAA (AES), sub-servicer TSI, U.S. National Bank as indenture trustee and special servicers, GSS Data Service, Inc. as Administrator, Wilmington Trust Company as Owner Trustee, bond-insurer Ambac, and investors in the bonds issued by the Trusts. Additionally, a Wall Street industry group submitted an amicus brief.
Two significant events have occurred in the interim: The law
firm that represented the Trusts, McCarter & English, has withdrawn and the
CFPB has undergone a leadership change. Additionally, the deal struck by the CFPB under Richard Cordray and the new owner of the Trusts (Donald Uderitz), which had culminated in the proposed consent judgment (never approved by the court) has come under a barrage of criticism as a sweetheart deal for Uderitz at the expense of other affected parties. The Trusts are currently unrepresented and
are listed as “pro se” of the docket. How the pending enforcement action
against them will proceed is anyone’s guess.
In a footnote the Court acknowledges that one of
the intervenors, Transworld Systems, Inc. (TSI), has raised an issue of
statutory interpretation as to whether the Defendant Trusts properly fall under
the "covered person" definition embodied in the Consumer Financial
Protection Act. The Court notes that this question implicates the Court’s jurisdiction
and might require additional briefing. In 2017 TSI separately signed a consent order to resolve the CFPB's charges against it, which was not subject to court approval and required TSI to pay a civil penalty and implement certain measures to achieve compliance and provide remedies to student loan debtors that were affected by the collection/litigation practices that had brought the collection agency under the regulator's scrutiny.
Also see prior posts on the CFPB v. Nat’l Collegiate
Student Loan Trust and related litigation:
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
THE NATIONAL COLLEGIATE MASTER STUDENT TRUST, et al.,
Defendants.
C.A. No. 17-1323 (MN).
United States District Court, D. Delaware.
October 19, 2018.
 |
| http://www.ded.uscourts.gov/sites/default/files/opinions/mn/2018/october/17-1323.pdf |
Consumer Financial Protection Bureau, Plaintiff,
represented by Carolyn I. Hahn, Consumer Financial Protection Bureau, Colin T.
Reardon, Consumer Financial Protection Bureau Office of Enforcement &
Gabriel S.H. Hopkins, Consumer Financial Protection Bureau Office of
Enforcement.
National Collegiate Master Student Loan Trust, Defendant,
pro se.
National Collegiate Student Loan Trust 2003-1, Defendant,
pro se.
National Collegiate Student Loan Trust 2004-1, Defendant,
pro se.
National Collegiate Student Loan Trust 2004-2, Defendant,
pro se.
National Collegiate Student Loan Trust 2005-1, Defendant,
pro se.
National Collegiate Student Loan Trust 2005-2, Defendant,
pro se.
National Collegiate Student Loan Trust 2005-3, Defendant,
pro se.
National Collegiate Student Loan Trust 2006-1, Defendant,
pro se.
National Collegiate Student Loan Trust 2006-2, Defendant,
pro se.
National Collegiate Student Loan Trust 2006-3, Defendant,
pro se.
National Collegiate Student Loan Trust 2006-4, Defendant,
pro se.
National Collegiate Student Loan Trust 2007-1, Defendant,
pro se.
National Collegiate Student Loan Trust 2007-2, Defendant,
pro se.
National Collegiate Student Loan Trust 2007-3, Defendant,
pro se.
National Collegiate Student Loan Trust 2007-4, Defendant,
pro se.
Structured Finance Industry Group, Inc., Amicus,
represented by A. Thompson Bayliss, Abrams & Bayliss LLP.
Raul Piombo, Movant, pro se.
U.S. Bank National Association, Trustee, represented by
David M. Fry, Shaw Keller LLP & Keith M. Kollmeyer, Jones Day, pro hac
vice.
Ambac Assurance Corporation, Intervenor, represented by
Kurt M. Heyman, Heyman Enerio Gattuso & Hirzel LLP, Melissa N. Brochwicz
Donimirski, Heyman Enerio Gattuso & Hirzel LLP, Erik Haas, Patterson
Belknap Webb and Tyler LLP, pro hac vice, George A. LoBiondo, Patterson Belknap
Webb and Tyler LLP, pro hac vice, Joshua Kipnees, Patterson Belknap Webb and
Tyler LLP, pro hac vice & Peter W. Tomlinson, Patterson Belknap Webb and
Tyler LLP, pro hac vice.
Transworld Systems Inc., Intervenor, represented by Allyson
B. Baker, Venable LLP, pro hac vice, Jamie Lynne Edmonson, Venable LLP,
Katherine M. Wright, Venable LLP, pro hac vice, Meredith L. Boylan, Venable
LLP, pro hac vice & Sameer P. Sheikh, Venable LLP, ro hac vice.
Waterfall Eden Master Fund, Ltd., Intervenor, represented
by Andrew Dieter Cordo, Ashby & Geddes, Michael Hanin, Kasowitz Benson
Torres LLP, pro hac vice & Uri Itkin, Kasowitz Benson Torres LLP, pro hac
vice.
Waterfall Delta Offshore Master Fund, LP, Waterfall
Sandstone Fund, LP., Baldr Sherwood Fund, Inc., One William Street Capital
Master Fund, Ltd., OWS ABS Master Fund II, L.P., OWS COF I Master, L.P., OWS
Credit Opportunity I, LLC, OWS Global Fixed Income Fund (USD-Hedged), Ltd.,
LibreMax Master Fund, Ltd., LibreMax Value Master Fund, Ltd., LibreMax MSW
Fund, Ltd., AG Mortgage Value Partners Master Fund, L.P., AG TCDRS, L.P., AG
Pisgah, L.P., AG Super RMBS LLC & AG Opportunistic Whole Loan Select, L.P.,
Intervenors, represented by Andrew Dieter Cordo, Ashby & Geddes.
GSS Data Services, Inc., Intervenor, represented by Rebecca
Lyn Butcher, Landis Rath & Cobb LLP.
The Pennsylvania Higher Education Assistance Agency,
Intervenor, represented by Stacey A. Scrivani, Stevens & Lee, Elizabeth
Ware, Stevens & Lee, pro hac vice & Nicholas H. Pennington, Stevens
& Lee, pro hac vice.
Wilmington Trust Company, Intervenor, represented by
Stephen B. Brauerman, Bayard, P.A..
MEMORANDUM OPINION
MARYELLEN NOREIKA, District Judge.
Before the Court are eight motions to intervene in the
current litigation between the Consumer Financial Protection Bureau
("CFPB") and fifteen Delaware statutory trusts, called the National
Collegiate Student Loan Trusts (collectively "the Trusts"). The
motions have been filed by Ambac Assurance Corporation ("Ambac")
(D.I. 4); Transworld Systems Inc. ("TSI") (D.I. 9); Objecting
Noteholders ("Noteholders") (D.I. 11); GSS Data Services, Inc.
("GSS") (D.I. 12); the Pennsylvania Higher Education Assistance
Agency d/b/a American Education Services ("PHEAA") (D.I. 20);
Wilmington Trust Company ("WTC") (D.I. 31); U.S. Bank National
Association ("U.S. Bank") in its capacity as Successor Special
Servicer (D.I. 33); and U.S. Bank in its capacity as Indenture Trustee (D.I. 35).
For the reasons discussed below, the Court grants each of the motions to
intervene and places no limitation on the intervenors' participation in this
litigation.
I. BACKGROUND
The Trusts were created between 2001 and 2007 pursuant to
the Delaware Statutory Trust Act, 12 Del. Code § 3801, et. seq., to acquire
private student loans, collect payments from borrowers, and distribute gains to
the holders of notes. (D.I. 54 at 4). The Trusts have no employees or internal
management and rely on certain trust-related agreements to provide their
operating structure. These agreements include trust agreements, administration
agreements, servicing agreements, and indentures (collectively "Trust
Related Agreements") and provide a structure that includes an Owner
Trustee, Administrator, Indenture Trustee, Primary Servicer, Special Servicer,
and Sub-servicers. (D.I. 54, 4-5).
WTC is the Owner Trustee of the Trusts. (D.I. 21 at 1). In
this role, WTC "acts pursuant to the authority granted to it under Trust
Related Agreements and can be directed by the equity owners of the Trust or the
Administrator." (Id. at 2). Should a conflict arise between a directive by
the equity owners and the terms of the Trust Related Agreements, the Trust
Related Agreements control. (Id.).
GSS is the Administrator of the Trusts and is responsible
for the administrative functions set forth in the Trust Related Agreements.
(D.I. 12 at 1-2).
U.S. Bank serves as both the Indenture Trustee and Special
Servicer. As Indenture Trustee, U.S. Bank is pledged all assets of the Trusts including,
but not limited to, "the underlying student loans held by the Trusts, the
collections from such loans, and the contractual agreements governing the
Trusts' activities, including the servicing related agreements." (D.I. 36
at 4). As Special Servicer, U.S. Bank's role is to engage Sub-servicers. (D.I.
24 at 6).
PHEAA is the Primary Servicer for the Trusts and
responsible for "customer service and correspondence, payment posting, and
credit reporting duties" relating to student loans that are current in
making payments or are no more than 30 days delinquent. (D.I. 20 at 2-3). PHEAA
does not, however, file debt collection lawsuits against student loans on
behalf of the Trusts. (Id.)
TSI is one of the Trusts' Sub-servicers and is responsible
for the collection of delinquent debts and oversight of collection lawsuits
against borrowers. (D.I. 54 at 5).
The Noteholders are a group of entities that collectively
own approximately $1.4 billion in notes issued by the Trusts. (D.I. 11 at 1).
Lastly, Ambac is an insurance company that "has
provided financial guarantee insurance with respect to securities in nine of
the fifteen trusts." (D.I. 4 at 5). At times, Ambac is required to
"pay policy beneficiaries the full amont of unpaid interest" as well
as "unpaid principal at final maturity," which had accounted for
payments of more than $350 million as of 2017. (Id.)
On September 18, 2017, following an investigation, the CFPB
brought this action against the Trusts "to obtain permanent injunctive relief,
restitution, refunds, disgorgement, damages, civil money penalties, and other
appropriate relief for Defendants' violations of Federal consumer financial law
in connection with Defendants' servicing and collection of private student loan
debt." (D.I. 1 at 2). Despite alleging that the violations were the
product of actions taken by Defendants' Sub-servicers and their agents and
broadly blaming "Defendants' Servicers" as those at fault, the CFPB
named only the Trusts as Defendants. (Id. at 2-6). The CFPB defined
"Defendants' Servicers" as "any Servicer, Primary Servicer,
Subservicer, Special Servicer, Administrator, and any other individual or
entity acting on behalf of the Trusts with respect to the servicing and
collection of the student loans owned by the Trusts. . . ." (Id.).
On the same day it filed the Complaint, the CFPB filed a
motion for approval of a Proposed Consent Judgment ("PCJ") creating
obligations for the Trusts and their servicers. (D.I. 3-1). The PCJ was signed
by the CFPB and attorneys for the McCarter & English law firm, purportedly
on behalf of the Trusts. (Id.). Provisions of the PCJ include: the creation of
a "Board" made up of a majority of the beneficial interests of each
Trust and provides it oversight power with respect to all submissions and
actions required by the Order, (Id. at 23); a requirement that the Trusts
undertake an audit of all loans and create a compliance plan to be submitted to
the CFPB Enforcement Director for review, (Id. at 15-23); and a requirement
that the Trusts pay a fine, suspend certain collection activities, and redirect
all payments to an escrow account controlled by Defendants. (Id. at 14, 24).
Running concurrently with this litigation are a number of
state-court actions relating to whether the Trusts' equity owners could direct
the WTC to sign the PCJ, whether the McCarter & English law firm had
authority to act on behalf of the Trusts when it signed the PCJ, and whether McCarter
& English is entitled to payment from Trust funds. See e.g. The National
Collegiate Student Loan Master Trust, et al. v. Pennsylvania Higher Education
Assistance Agency D/B/A American Educational Services, No. 12111-VCS (Del.
Ch.); NCSLT v. PHEAA, C.A. No. 12111-VCS (Del. Ch.); NCSLT, et al., v. US. Bank
National Association, et al., C.A. No. 2018-0167-VCS (Del. Ch.).
Movants filed their applications for intervention between
September 20, 2017 and October 10, 2017. In response to the motions, the CFPB
filed an omnibus opposition to five of the motions to intervene but did "not
oppose the motions to intervene filed by Ambac, the insurer for some of
noteholders as well as an investor, and U.S. Bank in its capacity as indenture
Trustee and as Successor Special Servicer." (D.I. 54). The Trusts do not
oppose the motions to intervene. (D.I. 55). On July 10, 2018, the Trusts'
counsel of record, McCarter & English moved to withdraw, (D.I. 79). That
motion was granted by the Court, (D.I. 80) and the Trusts remain unrepresented
in this matter.
II. LEGAL STANDARD
Rule 24 of the Federal Rules of Civil Procedure provides
that a court must permit a non-party to intervene as of right where that
nonparty "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." Fed. R. Civ. P. 24(a)(2). The Third Circuit has
"interpreted Rule 24(a)(2) to require proof of four elements from the
applicant seeking intervention as of right: first, a timely application for
leave to intervene; second, a sufficient interest in the litigation; third, a
threat that the interest will be impaired or affected, as a practical matter,
by the disposition of the action; and fourth, inadequate representation of the
prospective intervenor's interest by existing parties to the litigation."
Kleissler v. US. Forest Serv., 157 F.3d 964, 969 (3d Cir. 1998) (citing
Mountain Top Condo. Ass'n. v. Dave Stabbert Master Builder, Inc., 72 F.3d 361,
365-66 (3d Cir. 1995); Development Fin. Corp. v. Alpha Haus. & Health Care,
Inc., 54 F.3d 156, 161-62 (3d Cir. 1995); United States v. Alcan Alum., Inc.,
25 F.3d 1174, 1181 (3d Cir. 1994); Brody v. Spang, 957 F.2d 1108, 1115 (3d Cir.
1992); Harris v. Pernsley, 820 F.2d 592, 596 (3d Cir. 1987)). The burden to
establish a right to intervene falls squarely on the movant. Delaware Valley
Citizens' Council for Clean Air v. Pennsylvania, 674 F.2d 970, 974 (3d Cir.
1982).
Alternatively, if a court does not find intervention proper
as of right under Rule 24(a), Rule 24(b) provides the court discretion to
permit intervention to any party that "has a claim or defense that shares
with the main action a common question of law or fact," Fed. R. Civ. P.
Rule 24(b)(1)(B), and where such an intervention will not "unduly delay or
prejudice the adjudication of the original parties' rights." Fed. R. Civ.
P. Rule 24(b)(3).
III. DISCUSSION
A. The Parties Do Not Oppose the Motions to Intervene Filed
By Ambac, U.S. Bank as Indenture Trustee, and U.S. Bank as Successor Special
Servicer.
The CFPB and the Trusts do not oppose the motions of Ambac
(D.I. 4), U.S. Bank in its capacity as Successor Special Servicer (D.I. 33),
and U.S. Bank in its capacity as Indenture Trustee (D.I. 35) to intervene in
this action. In the absence of opposition, the Court will grant the motions of
these entities to intervene.
B. The Remaining Entities, TSI, WTC, GSS, PHEAA, and
Noteholders, Have A Right to Intervene Pursuant to Rule 24(a)(2).
1. Movants motions for intervention were timely.
Each of the remaining five movants ("Movants")
has established that its application to intervene was timely.[1] In determining
whether an application is timely, the Court must consider "(1) the stage
of the proceeding; (2) the prejudice that delay may cause the parties; [and]
(3) the reason for the delay." Mountain Top Condo., 72 F.3d at 369. Here,
the Complaint and motion for approval of the PCJ were filed on September 18,
2017. (D.I. 1, D.I. 3). Each of the motions to intervene was submitted within
thirty (30) days thereafter and before any additional substantive filings or
actions in the case. The motions were filed at the earliest stages of this
litigation. There was no delay. The Court concludes that the Movants have
established the first element of the Kleissler test.
2. Movants each have a sufficient interest in the
litigation, which may be affected or impaired by the disposition of the action.
A potential intervenor's interest is sufficient if it
"is specific to them, is capable of definition, and will be directly
affected in a substantially concrete fashion by the relief sought."
Mountain Top, 72 F.3d at 972. When interests are merely economic, indefinite,
remote, or attenuated, the interest is not sufficient. See Harris v. Pernsley,
820 F.2d 592, 601 (3d Cir. 1987); also Kleissler, 157 F.3d at 972; Mountain
Top, 72 F.3d at 366. Non-parties do, however, have a sufficient interest in
contesting the provisions of a consent order if the terms therein will impact
their prior contractual obligations. EEOC v. AT&T, 506 F.2d 735, 739 (3d
Cir. 1974).[2]
Once a potential intervenor establishes a sufficient
interest, it bears the burden of establishing that that interest will be
affected or impaired by disposition of the action. Brody, 957 F.2d at 1123. If
a movant's interest will be impaired, the Court must consider "the
practical consequences of the litigation and also consider any significant
legal effect." Id. The Supreme Court has found that parties "may not
impose duties or obligations on a third party, without that party's
agreement." Local No. 93, Int'l Ass'n of Firefighters, AFL-CIO C.L.C. v.
City of Cleveland, 478 U.S. 501,529 (1986). And in cases involving consent
orders, the Third Circuit has found that "a consent decree affecting third
party rights should not be entered without affording such parties an
opportunity to be heard." Util. Contractors Ass'n of New Jersey, Inc. v.
Toops, 507 F.2d 83, 86 n.2 (3d Cir. 1974).
Here, each of the Movants has contractual obligations
related to the Trusts that would be impacted should this Court grant the PCJ.
Moreover, each Movant has shown that it has interests in the Trust Related
Agreements that are likely to be modified or invalidated or otherwise impacted
by the PCJ.
As noted above, WTC, the Owner Trustee, is a party to
certain Trust Related Agreements that provide WTC with ministerial
responsibilities as well as discretion to act when a directive presented by the
equity owners is contrary to those agreements. (D.I. 31 at 2-3). WTC argues
that it has interests in ensuring compliance with the Trust Related Agreements,
and those interests will be impaired if it is unable to intervene, because
under the PCJ it will be forced to act contrary to contractual obligations.
(D.I. 64 at 3-4). It argues that the PCJ provides the equity owners with the
ability to act on behalf of the Trusts and engenders in the equity owners the
authority to oversee and control compliance with the PCJ. This, WTC asserts,
would impair its own contractual obligations that require WTC to prevent the
Trusts from taking actions in violation of the Trust Related Agreements by the
equity owners. (Id. at 5-6).
GSS, as the Administrator, is party to certain Trust Related
Agreements with the Trusts that govern certain functions of the Trusts'
day-to-day activities. (D.I. 11 at 1-2). GSS asserts that the approval of the
PCJ will create conflicting or unclear obligations for it as the PCJ conflicts
with its obligations under certain Trust Related Agreements with respect to
payments to, collections by, and authority over the Trusts and its servicers.
(Id. at 9-10). Specifically, GSS argues that the PCJ will prevent it "from
carrying out certain of its duties [including payments to noteholders] under
the Administration Agreements and other Trust Related Agreements" and take
instructions from an entity contrary to its requirements under Trust Related
Agreements. (D.I. 66 at 2-3). Moreover, GSS asserts that it falls under the
broad definition of "Defendants' Servicer" in the PCJ and thus may
improperly be forced to act or refrain from acting in accordance with the PCJ.
(Id. at 4).
PHEAA, as the Primary Servicer for the Trusts, has
obligations under Trust Related Agreements including "customer service and
correspondence, payment posting, and credit reporting" duties. (D.I. 20 at
2-3). It is not responsible for collecting delinquent debts or pursuing related
lawsuits. (Id. at 3). PHEAA asserts the PCJ would usurp its current contractual
rights and responsibilities with new "massive obligations . . . that go
well beyond PHEAA's duties under the Servicing Agreement." (Id. at 5). For
example, PHEAA argues that the PCJ "imposes additional obligations that
are beyond what PHEAA agreed in the Servicing Agreement," including
additional extensive audits. (D.I. 65 at 2). According to PHEAA, these new
obligations will cause increases in expenditures and employee time beyond what
was contemplated and agreed to in the Trust Related Agreements. (Id. at 4).
TSI, as one of the Trusts Sub-servicers, has entered into
Trust Related Agreements ("Special Sub-Servicing Agreements") with
the Trusts' Special Servicer, U.S. Bank, which govern TSI's role in collections
and collection lawsuits against borrowers. (D.I. 54 at 5). TSI asserts that the
PCJ will interfere with its contractual obligations with the Special Servicer,
U.S. Bank. (D.I. 9 at 2). Additionally, TSI has already entered a consent
judgment with the CFPB and points out that the approval of the PCJ may create
conflicting obligations relating to reporting structures and compliance
programs. [3] (D.I. 72 at 7).
The Noteholders collectively own an aggregate of
approximately $1.4 billion of notes issued by the Trusts and are subject to
Indentures. (D.I. 11 at 1, 3). Pursuant to the Indentures, the Noteholders have
rights to approve modifications of Indentures and to receive payments from
trust principal and interest. (D.I. 67 at 2). The Noteholders assert that the
PCJ would replace these rights in favor of the equity owners and thus
Noteholders rights would be impacted. (Id. at 1-3).
Based upon the above, the Court finds that each of Movants
has shown a significant interest in the litigation, in that each has shown that
it is a party to certain Trust Related Agreements that will be impacted if the
PCJ is approved. The Court finds that Movants have each shown that their
interests are sufficiently specific and will be directly affected, and thus
each has satisfied the second and third Kleissler factors.
3. Movants interests are not adequately represented by an
existing party.
Movants have also shown that their interests in this
litigation are not adequately represented by any existing party.
"Representation will be considered inadequate on any of the following
three grounds: (1) that although the applicant's interests are similar to those
of a party, they diverge sufficiently that the existing party cannot devote
proper attention to the applicant's interests; (2) that there is collusion
between the representative party and the opposing party; or (3) that the
representative party is not diligently prosecuting the suit." Brody, 957
F.2d at 1123 (citation omitted); Nat'l Collegiate Athletic Ass'n v. Corbett,
296 F.R.D. 342, 349 (M.D. Pa. 2013).
Here, the Trusts do not claim to be representing the
interest of the Movants, and do not appear to be representing those interests.
The Trusts have no employees and no legal representation.[4] This raises the
question whether the Trusts interests are being represented — let alone the
Movant's interests.
Additionally, the CFPB appears to acknowledge that there is
no adequate representation for all but one of the Movants — the Noteholders. In
addressing the fourth Kleissler factor, the CFPB asserts "[t]he
Noteholders do not and cannot credibly argue that there is any collusion
between U.S. Bank and either the Bureau or the Trusts, or that U.S. Bank would
not diligently oppose entry of the Proposed Consent Judgment should the Court
grant its intervention motion as Indenture Trustee." (D.I. 54 at 28). No
rebuttal is offered with respect to the arguments raised by the other Movants.
The Noteholders, in reply, identify divergent interests
from U.S. Bank that may arise during later negotiations or settlements. For
example, the Noteholders assert that where the CFPB has claimed that U.S. Bank
is among the parties responsible for the allegedly improper collections
lawsuits filed on behalf of the Trusts, (D.I. 67 at 6), its misconduct creates
a divergent interest that could prevent U.S. Bank from adequately representing
the interests of the Noteholders in terms of a settlement. (Id.). The Court
agrees that the interests of the Noteholders sufficiently diverge from U.S.
Bank and that U.S. Bank cannot fully represent the Noteholders interests.
C. Intervention is Also Appropriate Under Rule 24(b)
Even if the Movants had failed to make the requisite
showing under Rule 24(a), the Court finds that Movant's motions should be
granted pursuant to Rule 24(b). Rule 24(b) provides the Court with broad
discretion to allow intervention where a movant shows a "claim or defense
that shares with the main action a common question of law or fact," and
that such an intervention would not "unduly delay or prejudice the
adjudication of the original parties' rights." See Brody, 957 F.2d at
1115-16 (describing the decision of whether to grant intervention under 24(b)
as a "highly discretionary decision").
As discussed above, each of the Movants has issues that
share a common question of law or fact with the underlying action — some have
been blamed for the conduct underlying the lawsuit and some have contractual
obligations that will be impacted by approval of the PCJ. With regard to
prejudice and delay, the Court does not find that the participation of relevant
parties in protecting their contractual rights, beginning at the very inception
of this litigation, would create any undue delay or prejudice on the CFPB or
the Trusts. Indeed, where, as here, the Trusts are unrepresented and
significant questions exist regarding the authority of prior counsel to sign
the PCJ on behalf of the Trusts, and over the objection of the Owner Trustee,
WTC, the Court finds that allowing the participation of parties who have an
interest in the litigation to have a say would be judicially expedient.
D. The Court Will Not Limit the lntervenors' Participation.
The CFPB asks that, if the Court grants the motions to
intervene, "it should limit intervenors' participation in this lawsuit to
objecting to entry of the Proposed Consent Judgment." (D.I. 54 at 29). It
asserts that "it can be appropriate to limit an intervenor's participation
to a `discrete phase[] of an action' — such as the `remedial stage' — because
the intervenor `may have a sufficient interest to intervene as to certain
issues in an action without having an interest in the litigation as a whole."
(Id. at 30) (citing Harris v. Pernsley, 820 F.2d 592, 599 (3d Cir. 1987)). The
Court, however, is mindful of the Supreme Court's precedent that "of
course, a court may not enter a consent decree that imposes obligations on a
party that did not consent to the decree." Local No. 93, 478 U.S. at 529
(emphasis added). Here, based on the evidence provided, and a consideration of
the PCJ in light of the Trust Related Agreements, the Court finds that a
later-entered consent decree may well impose obligations on the intervenors
that would require their approval. Thus, the Court will not limit the
intervenors' participation in this litigation.
IV. CONCLUSION
For the foregoing reasons, the Motions to Intervene filed
by Ambac (D.I. 4), TSI (D.I. 9), the Noteholders (D.I. 11), GSS (D.I. 12),
PHEAA (D.I. 20), WTC (D.I. 31), U.S. Bank (D.I. 33, 35) will be GRANTED and the
Court will place no limitation on the Intervenors' right to participate in this
action. An appropriate order will follow.
[1] The CFPB opposes the remaining motions to intervene,
but it has not asserted that the motions are untimely.
[2] In EEOC, a union sought to intervene as a plaintiff to
challenge a consent decree negotiated by the EEOC and AT&T, which would
affect the union's contractual rights as established in a collective bargaining
agreement with AT&T. Id. at 741. Though the Court found that intervention
as a plaintiff under Rule 24(a) was not proper, it found the union would be
entitled to intervention as a party defendant because the movant "has an
interest in the provisions of its collective bargaining agreements . . . which
may well be modified or invalidated by the . . . consent decree . . . made in
its absence and, equally clearly, its continuing ability to protect and enforce
those contract provisions will be impaired or impeded by the consent
decree." Id. at 741-42.
[3] TSI also has raised an issue of statutory
interpretation questioning whether the Defendant Trusts properly fall under the
"covered person" definition embodied in the Consumer Financial
Protection Act, a question that might require further briefing to determine the
Court's jurisdiction over this matter. (Id. at 2).
[4] The law firm representing the Defendants, McCarter
& English, has recently withdrawn, leaving the Trusts unrepresented in this
litigation.
