State ex rel. Napolitano v. Brown & Williamson Tobacco Corp.

OPINION ZLAKET, Chief Justice. ¶ 1 We are asked to decide whether the trial court abused its discretion in denying a motion to intervene filed nearly two and one-half years after this litigation began, and fifteen days after a consent decree and final judgment were entered. We hold that it did not. ¶ 2 On August 20, 1996, the State of Arizona and the Arizona Health Care Cost Containment System (AHCCCS) (“the State”) filed suit against the tobacco industry and its trade associations (“the tobacco companies”) seeking damages as well as declaratory and injunctive relief. The State alleged, among other things, that the tobacco companies had conspired to mislead consumers about the adverse health effects of tobacco products. In late 1998, the State agreed to dismiss its lawsuit and join a global settlement agreement the tobacco companies had negotiated with forty-five other states. Under the agreement, Arizona would receive substantial injunctive relief and a $3.1 billion share of the total settlement. A consent decree and final judgment were entered against the tobacco companies on December 1, 1998. Fifteen days later, on December 16, 1998, a group of thirteen Arizona counties (“the Counties”) sought to intervene in the lawsuit, claiming an interest in the settlement proceeds. ¶ 3 Under the terms of the Master Settlement Agreement (MSA), the tobacco companies. agreed to compensate the State for expenses incurred by it and its political subdivisions as a result of tobacco-related illnesses.1 However, they would make payment only to the State; the MSA provided no mechanism for apportioning shares of the settlement fund and distributing them to individual counties. Moreover, according to the language of the MSA, the State purported to release any past, present or future claims that its political subdivisions might have against the tobacco companies.2 Fearing that their claims might barred by the MSA, and that the State would never pay them a fair share of the settlement, the Counties filed a motion to intervene pursuant to Rule 24 of the Arizona Rules of Civil Procedure. ¶ 4 The trial court denied the motion as untimely. It reasoned that to grant the motion “after the settlement has been negotiated and approved ... would cause delay, if not the unraveling of an historic settle-ment____” The Counties appealed and later filed a motion to transfer the ease to this 384 court. We granted the motion and now affirm. ¶ 5 Rule 24 of the Arizona Rules of Civil Procedure permits intervention in an action only “[u]pon timely application.” In determining whether a motion is timely, the trial court must consider several factors, including the stage to which the lawsuit has progressed when intervention is sought and whether the applicant could have attempted to intervene earlier. See State Farm Mut. Ins. Co. v. Paynter, 118 Ariz. 470, 471, 577 P.2d 1089, 1090 (App.1978). The most important consideration, however, is whether the delay in moving for intervention will prejudice the existing parties in the ease. See Winner Enters., Ltd. v. Superior Court, 159 Ariz. 106, 109, 765 P.2d 116, 119 (App.1988). Because granting a post-judgment motion to intervene is especially likely to prejudice the parties, such motions are disfavored, see In re One Cessna 206 Aircraft, FAA Registry No. N-72308, License No. U-206-1361, 118 Ariz. 399, 401, 577 P.2d 250, 252 (1978), and should be granted only in the most exceptional circumstances. See Weaver v. Synthes, Ltd. (U.S.A.), 162 Ariz. 442, 446, 784 P.2d 268, 272 (App.1989). We will not set aside the court’s ruling on the timeliness of a motion to intervene absent a clear abuse of discretion. See In re One Cessna 206 Aircraft, 118 Ariz. at 402, 577 P.2d at 253; William Z. v. Arizona Dep’t of Econ. Sec., 192 Ariz. 385, 387, 965 P.2d 1224, 1226 (App. 1998). ¶ 6 In this case, we cannot say that the trial court abused its discretion. This lawsuit had been going on for nearly two and one-half years and had settled by the time the Counties sought to intervene. The fact that they waited so long should “weigh heavily against [them].” County of Orange v. Air California, 799 F.2d 535, 538 (9th Cir.1986) (holding that a motion to intervene made shortly after settlement was properly denied as untimely); see also Aleut Corp. v. Tyonek Native Corp., 725 F.2d 527, 530 (9th Cir. 1984) (holding that a motion to intervene made on the eve of settlement was properly denied as untimely). ¶ 7 We agree that the prejudice to the State and the tobacco companies would have been too great to permit intervention at such a late date. Under the MSA, the State will not begin receiving payments until “State Specific Finality” is achieved. This occurs once the trial court approves the settlement and either (i) the time to appeal has run; or (ii) all appeals have been exhausted. Arizona must achieve State Specific Finality by December 31, 2001, or lose the $3.1 billion settlement. If the Counties were allowed to intervene, the State quite possibly would not receive payment until after it litigated the apportionment issue with each of them. Given today’s legal culture, this would likely involve extensive discovery, motion practice, and possibly a trial, followed by multiple rounds of appeals. It would be expensive and time-consuming, to say the least. Further, the litigation could drag on past the December 31, 2001 deadline. In that case, the State would lose not only the monetary settlement, but also substantial injunctive relief that, it asserts without challenge, was far greater than could have been achieved without the tobacco companies’ consent. ¶ 8 Having litigated this case for two and one-half years, the State would suffer an immense burden if it were required to delay receipt of the settlement funds until the apportionment claims of the Counties are resolved. It would also prejudice the tobacco companies to keep them in this litigation while the State and the Counties settled their disputes. On this record, the trial court was well within its discretion to deny the motion. ¶ 9 The Counties argue that they had no reason to intervene until after they reviewed the Master Settlement Agreement. They essentially contend that prior to such time, they did not know the Attorney General was not adequately representing their interests. We disagree. The day the Counties reviewed the MSA may have been when they first “realized that the end result of the protracted litigation would not be entirely to [their] liking.” Air California, 799 F.2d at 538. However, they should have recognized long before then that intervention might be necessary. ¶ 10 In the first place, the Counties were not named as plaintiffs in this lawsuit. They 385 point to a single allegation in the State’s 164-page complaint in which the Attorney General purported to bring the action on behalf of “all of the political subdivisions of the State.” This language, they say, shows that the State advanced the action on their behalf. But as the Counties themselves repeatedly assert, the Attorney General never notified any of them, pursuant to A.R.S. § 41 — 192(A)(5), that the State was representing them. Without such notification, the Counties could not reasonably believe that they were being represented. Secondly, the State deleted the “political subdivisions” language from its First and Second Amended Complaints; it was not until a year later, when the Third Amended Complaint was filed, that the words reappeared. If the Counties were relying on that language, they should have seriously questioned whether the State was representing them during the year in which it was absent. ¶ 11 Other credible evidence suggests that the State did not represent the Counties. For example, after filing the lawsuit, then-Attorney General Grant Woods specifically urged certain Maricopa County Supervisors and the Maricopa County Attorney to consider filing their own actions against the tobacco companies. Woods indicated by affidavit that he never led county officials to believe the State was representing them, nor did they convey such a belief. In addition, attorney Steve Berman, Special Counsel for the State, said in a written declaration that he met with representatives of Maricopa County in 1997. At that meeting, Berman discussed the status of the State’s ease and explored the possibility of having his firm represent the County in an action against the tobacco companies. However, Berman never undertook any representation of the County as a result of that meeting. Given these facts, we think the Counties should have known — or at least suspected — that they were not being represented by the State and should have sought to intervene long before the consent decree and final judgment were entered. See Air California, 799 F.2d at 538 n. 1 (taking note of credible evidence in the record suggesting that the intervenor should have recognized that its interests were not being fully represented by the existing parties). ¶ 12 Moreover, the Counties obviously knew that they had not reached an agreement with the State regarding allocation of the settlement. It was common knowledge that negotiations for a global settlement were under way. Had the Counties wished to ensure that some portion of the proceeds would be apportioned and paid to them, thus bypassing the state treasury, they could have — and should have — -moved to intervene before the settlement was fashioned and an initial distribution of proceeds was imminent. Thus, even if we agreed with the Counties’ contention that the State represented them, their motion to intervene would still be untimely. ¶ 13 Assuming, arguendo, that the Counties had no reason to intervene until they saw the MSA, the trial court was still within its discretion to deny the motion. The Counties obtained a copy of the MSA on November 17,1998. They then waited twenty-eight days to intervene. As noted earlier, the motion came fifteen days after the consent decree and final judgment were entered. Armed with actual knowledge that they risked losing hundreds of millions of dollars, it was “incumbent upon the [Counties] ... to take immediatef,] affirmative steps to protect their interests,” NAACP v. New York, 413 U.S. 345, 367, 93 S.Ct. 2591, 2604, 37 L.Ed.2d 648 (1973), by filing a motion to intervene. See Banco Popular de Puerto Rico v. Greenblatt, 964 F.2d 1227, 1232 (1st Cir.1992) (stating that once a party has actual knowledge that his interests are not adequately represented by the existing parties, “the tempo of the count accelerates,” and the party must intervene promptly to protect his rights). ¶ 14 Instead of intervening, however, county officials wrote to Governor Jane Dee Hull and Attorney General Grant Woods. On November 18, 1998, Janice Brewer, the Chairwoman of the Maricopa County Board of Supervisors, urged Hull and Woods by letter to discuss the issue of apportionment with the County “as soon as your schedules allow.” Brewer acknowledged that “time is of the essence” and that “it may be necessary to file a Motion to Intervene in the litigation in 386 order to protect County taxpayer interests.” The following day, Les Thompson, President of the County Supervisors Association of Arizona, wrote a similar letter to Hull, emphasizing the Counties’ “strong belief’ that they were entitled to part of the settlement proceeds. Thompson also asked to meet with Hull to discuss the issue “at your earliest convenience.” The Governor’s response to Brewer’s letter on November 25th plainly indicated that the State had no intention of meeting with the Counties to discuss how the settlement funds would be divided. Hull said that she and the Attorney General had already announced their proposal for distributing the settlement funds to the Counties in the form of “health care block grants.” ¶ 15 Thus, on November 25,1998, it should have been absolutely clear to the Counties that intervention was necessary. Yet, they waited another three weeks to file their motion. If the Counties wished to safeguard their interests, swift, decisive action was in order. Their efforts in this ease fell short of the mark. Under the circumstances, we cannot say that the trial court abused its discretion in denying the motion to intervene as untimely. See NAACP, 413 U.S. at 367, 93 S.Ct. at 2604 (motion to intervene filed four days after judgment, and eighteen days after intervenor had actual knowledge that intervention was necessary, was properly denied as untimely); Alaniz v. Tillie Lewis Foods, 572 F.2d 657, 659 (9th Cir.1978) (motion to intervene filed seventeen days after entry of consent decree was properly denied as untimely). ¶ 16 The Counties make no claim that the amount of the settlement was inadequate or unreasonable. In fact, they agree that it was quite good. Because we find the timeliness question dispositive, we decline to reach the other issues raised by the Counties. Specifically, we take no position as to whether they are entitled to a share of the settlement proceeds. That issue is not before us. Furthermore, nothing we have said today prohibits the Counties from pursuing their claims in another forum or action.3 We merely hold that they may not intervene in this lawsuit. The judgment of the trial court is affirmed. CONCURRING: STANLEY G. FELDMAN, Justice, and RUTH V. McGREGOR, Justice. Footnotes [1] Before the advent of AHCCCS in 1981, Arizona’s fifteen counties paid for all indigent health care. Since 1982, Arizona counties have been responsible for about 32% of the state’s Medicaid costs. Thus, the Comities claim a share of the settlement proceeds as compensation for their treatment of indigents with tobacco-related illnesses. [2] Although the Counties urge us to do so, we decline to reach the issue of whether the State wás empowered to and did release their claims against the tobacco companies. The Attorney General, however, conceded at oral argument that the State had no such authority. Not surprisingly, the tobacco companies did not agree to be bound by that concession. [3] In fact, the Counties have filed a lawsuit against the State in Maricopa County Superior Court, Apache County, et al. v. State of Arizona, No. CV99-20533 (filed Nov. 16, 1999), in an attempt to secure a share of the settlement proceeds. The fact that the Counties are actively seeking relief in this separate action bolsters our conclusion that intervention here is simply unnecessary.