## Facts

- A landlord leased retail premises in a New Jersey shopping center to a tenant under a term lease with renewal options.
- The tenant agreed to sell substantially all assets to Michaels Stores, Inc., and to assign the lease; Michaels agreed to assume substantially all liabilities and tenant obligations.
- The lease allowed assignment without landlord consent to a purchaser of substantially all tenant assets that assumes substantially all liabilities.
- Michaels intended to operate an arts-and-crafts retail store at the premises.
- Another shopping-center tenant, Rag Shop, operated an arts-and-crafts business under a separate lease that it asserted contained an exclusivity clause granting it the exclusive right to operate an arts-and-crafts store in the center.
- After notice of the assignment, the landlord informed Michaels it would not permit Michaels to operate an arts-and-crafts store due to Rag Shop’s objection, and later refused rent tendered by Michaels.
- Michaels filed a federal declaratory-judgment action seeking a declaration construing the lease and permitting Michaels’ intended use.
- Rag Shop moved to intervene as a defendant under Federal Rule of Civil Procedure 24(a)(2) or, alternatively, Rule 24(b).

## Issues

1. Whether Rag Shop satisfied Rule 24(a)(2) requirements for intervention as of right, including timeliness, a significantly protectable interest, practical impairment, and inadequate representation by existing parties.
2. If not entitled to intervene as of right, whether permissive intervention was warranted under Rule 24(b) based on common questions of law or fact.

## Decision

- The court granted Rag Shop’s motion to intervene.
- The court held Rag Shop satisfied intervention as of right under Rule 24(a)(2).
- The application was timely because the case was in its early stages and intervention would not prejudice existing parties.
- Rag Shop asserted a significantly protectable contractual interest based on its alleged exclusivity clause directly implicated by the declaratory relief sought.
- Disposition without Rag Shop could practically impair its interest because a declaration permitting Michaels’ use would weaken or defeat the asserted exclusivity right.
- Existing parties would not adequately represent Rag Shop’s interest because the landlord’s economic incentives could diverge from Rag Shop’s interest in strict enforcement of exclusivity.
- Because intervention as of right applied, the court did not need to rely on permissive intervention, though common questions supported it.

## Legal Principles

- Rule 24(a)(2) requires a timely application, a significantly protectable interest related to the action, a risk that disposition may practically impair that interest, and inadequate representation by existing parties.
- A “significantly protectable” interest must be legally cognizable (not a generalized or indefinite concern) and subject to a tangible threat from the litigation’s outcome.
- Practical impairment may be shown where declaratory relief could erode the value or enforceability of a contractual right, even if the effect is indirect.
- Representation may be inadequate when an existing party’s interests are not identical to the proposed intervenor’s, including where economic incentives differ.

## Conclusion

The court permitted a shopping-center tenant to intervene as of right in a declaratory action over another tenant’s proposed use because the intervenor’s alleged exclusivity clause created a legally cognizable interest that could be practically impaired, and the landlord’s aligned position did not ensure adequate representation of the intervenor’s distinct contractual and economic interests.


Michaels Stores, Inc. v. Castle Ridge Plaza Assocs., 6 F. Supp. 2d 360 (D.N.J. 1998)