Securities & Exchange Commission v. Prudential Securities Inc.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 20, 1998 Decided February 20, 1998

No. 97-5109

Securities and Exchange Commission,

Appellee

John H. Lomax, et al.,

Appellants

v.

Prudential Securities Incorporated,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 93cv02164)

Graeme W. Bush argued the cause for appellants, with

whom Albert G. Lauber, Carl S. Kravitz and Peter Van

Lockwood were on the briefs.

Arthur F. Mathews argued the cause for appellee Pruden-

tial Securities Incorporated, with whom Stephen F. Black was

on the brief.

Jacob H. Stillman, Associate General Counsel, argued the

cause for appellee Security & Exchange Commission, with

whom Richard H. Walker, General Counsel, Susan S. Mc-

Donald, Senior Litigation Counsel, and Paul Gonson, Solici-

tor, were on the brief.

Before: Edwards, Chief Judge, Wald and Rogers, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: Appellants John H. Lomax, Ann D.

Lomax, Emory C. Camp, and Robert A. Callewart appeal the

denial of their motion to intervene in the ongoing enforce-

ment of a consent decree negotiated by the Securities and

Exchange Commission and Prudential Securities Inc. Under

the decree, Prudential provided a "claims resolution process"

as an alternative to judicial relief for certain investors whom

Prudential had allegedly defrauded. Appellants, former in-

vestors, voluntarily submitted their claims to this process and

received damage awards, but they then sought to intervene as

representatives of a class in the enforcement of the consent

decree, claiming that Prudential had violated the consent

decree by making initial damage award offers that were

improperly low. In their "complaint in intervention," they

sought enforcement of their interpretation of the decree's

terms through common law claims based in contract, fraud,

and unjust enrichment. Under Blue Chip Stamps v. Manor

Drug Stores, 421 U.S. 723 (1975), and its progeny, the district

court denied intervention as of right under Federal Rule of

Civil Procedure 24(a)(2) and permissive intervention under

Rule 24(b). In light of the express language in the consent

decree indicating the parties' intention not to confer standing

on third parties to enforce the decree, we affirm.

I.

On October 20, 1993, the Securities and Exchange Commis-

sion ("SEC" or "the Commission") sought an order under

section 21(e) of the Securities Exchange Act of 1934, 15

U.S.C. s 78u(e) (1988), and other equitable relief against

Prudential Securities Inc. ("Prudential") on the ground that

Prudential had violated federal securities laws and an earlier

SEC order by "misrepresent[ing] speculative, illiquid limited

partnerships as safe, income-producing investments suitable

for safety-conscious and conservative investors." As a result,

the Commission asserted, Prudential "sold limited partner-

ships to a significant number of investors for whom the

investments were not suitable." Concurrently, the Commis-

sion and Prudential submitted a consent decree, which the

district court approved on October 21, 1993.

Under the terms of the consent decree, Prudential institut-

ed a process to resolve the claims of the approximately

340,000 investors whom Prudential had allegedly defrauded

over an eleven year period through offer and sale of interests

in over 760 limited partnerships. Under this claims resolu-

tion process, an investor could choose to submit claims to

Prudential for evaluation of their merit, after which Pruden-

tial would decide to make a settlement offer or to reject the

claim. Any investor who was dissatisfied with this initial

offer, or whose claim was rejected, could submit the claim to

binding arbitration, subject to appeal to the court-appointed

Claims Administrator. Alternatively, such an investor could

forgo arbitration and pursue judicial relief. Similarly, the

consent decree did not affect the rights of investors who did

not submit their claims to Prudential for evaluation; these

investors retained all rights to seek relief in the courts. Any

investor who chose to submit a claim to arbitration was

required, however, to sign a form acknowledging that the

arbitrator's decision was final, subject to appeal to the Claims

Administrator, and any investor who accepted the initial

settlement offer was similarly required to sign a release

preventing any future legal action against Prudential based

on the limited partnership interests.

Other terms of the consent decree further show the intent

of the Commission and Prudential that the claims resolution

process be final for those accepting settlement offers or

entering binding arbitration. Paragraph nine of the decree

provides that "nothing herein shall be deemed to confer

standing upon any persons other than plaintiff COMMIS-

SION, defendant [Prudential] and the CLAIMS ADMINIS-

TRATOR." Paragraph twelve of the decree adds that, "[e]x-

cept as explicitly provided in this FINAL ORDER and the

CONSENT, nothing herein is intended to or shall be con-

strued to have created, compromised, settled or adjudicated

any claims, causes of action, or rights of any person whomso-

ever, other than as between the COMMISSION and [Pruden-

tial], in accordance with the CONSENT."

Following district court approval of the consent decree,

Prudential notified its investors that it had established this

claims resolution process. In this notice, Prudential ex-

plained the origin of and reasons for the process and outlined

its basic terms. The explanation noted that Prudential had

"established court-supervised procedures pursuant to the

SEC settlement to resolve claims for compensatory dam-

ages." Prudential stressed that participation in the process

was voluntary: "If you decide not to resolve your claim

through the [process], your rights to pursue any legal reme-

dies will not be restricted or expanded in any way." Pruden-

tial also made clear that investors who accepted initial settle-

ment offers had to release Prudential from future liability

with respect to the limited partnership interests, and that

investors who submitted claims to binding arbitration had to

acknowledge that "[t]he arbitrator's awards shall be final and

binding on the parties with respect to all claims submitted,"

subject to appeal to the Claims Administrator.

Over the course of four years, Prudential paid more than

$938 million to over 110,000 investors pursuant to the consent

decree. The Claims Administrator filed quarterly reports in

the district court on the progress of the claims resolution

process, addressing various issues, including the net tax

benefit policy of concern to appellants,1 and describing the

__________

1 Appellants asserted in their memorandum in support of the

motion to intervene that the Claims Administrator had stated in his

Third Quarterly Report that Prudential was to account for claim-

ants' tax benefits on a net basis, so that tax benefits in early years

procedures taken to ensure the fairness and efficiency of the

process. The claims resolution process was nearly complete

when, on August 1, 1996, appellants filed a motion to inter-

vene and a "class complaint in intervention" on behalf of

themselves and a class of similarly situated claimants.2

Appellants had purchased limited partnership interests

through Prudential in 1980, 1983, and 1984.3 All submitted

their claims to Prudential under the consent decree, and,

after receiving initial settlement offers, consented to binding

arbitration. Two of the appellants, John H. Lomax and Ann

D. Lomax, settled before the arbitrator made an award, while

appellants Emory C. Camp and Robert A. Callewart received

arbitration awards that they appealed, unsuccessfully, to the

Claims Administrator. In a memorandum in support of their

motion to intervene, as well as in their class complaint in

intervention, appellants asserted that Prudential had inten-

tionally and systematically understated the damages due to

claimants under the consent decree. Specifically, appellants

claimed that in calculating settlement offers pursuant to the

terms of the consent decree, Prudential did not properly

account for the tax that investors would have to pay on their

__________

would be offset by tax costs incurred later. Appellants quoted the

following language from the Third Quarterly Report:

In general, purported tax benefits will not be allowed to reduce

offers or awards if they will be offset by recapture or offset in

later years. Suspended losses are not allowed unless they can

be used advantageously by claimants.

2 Originally, the claims resolution process was scheduled to be

completed around October 20, 1996. After the delay caused by the

motion to intervene, the fund was actually closed a year later, with

the final report filed by the Claims Administrator on October 21,

1997.

3 Notably, in the consent decree, Prudential agreed not to

assert a statute-of-limitations defense against any claimants who

entered the claims resolution process. The Commission hypothe-

sizes that this provision of the consent decree was the only reason

appellants were able to receive any compensation for their claims at

all, and appellants do not contest this.

damage awards or for the tax that investors would have to

pay when realizing the "residual value" of their investments.

Appellants alleged that Prudential had breached its agree-

ment to resolve their claims fairly, intentionally defrauded

them through misrepresentations and omissions, and was

unjustly enriched as a result of its miscalculation of tax

benefits. Asserting that the Commission and the Claims

Administrator refused to rectify the problem, appellants

sought judicial orders directing Prudential to enforce the

terms of the consent decree as they interpreted it and to

make the additional claims payments.

The district court denied the motion to intervene. Assum-

ing the truth of the facts alleged in appellants' complaint,4 the

district court ruled that they could not show a legally protect-

ed interest in the proceedings between the Commission and

Prudential because, under Blue Chip Stamps v. Manor Drug

Stores, 421 U.S. 723 (1975), and this court's interpretations of

it, third party beneficiaries of a government consent decree

may not enforce it when the consent decree contains unam-

biguous language establishing that the government did not

intend them to have enforcement rights. The district court

concluded that their common law claims were in reality claims

for enforcement of the consent decree. Consequently, the

district court concluded that appellants had no right to inter-

vene under Federal Rule of Civil Procedure 24(a)(2), or, for

the same reason, Rule 24(b).5

__________

4 "An application to intervene should be viewed on the tendered

pleadings--that is, whether those pleadings allege a legally suffi-

cient claim or defense and not whether the applicant is likely to

prevail on the merits." Williams & Humbert, Ltd. v. W. & H.

Trade Marks (Jersey), Ltd., 840 F.2d 72, 75 (D.C. Cir. 1988).

5 The district court rejected the Commission's argument that

section 21(g) of the Securities Exchange Act of 1934, 15 U.S.C.

s 78u(g) (1988), bars intervention in enforcement actions brought

by the Commission. The Commission does not press this argument

on appeal. The Commission does contend on appeal that any order

reviewing the arbitration awards would violate section 10 of the

Federal Arbitration Act, 9 U.S.C. s 10 (1988), but given our analy-

sis, we have no need to address this argument.

II.

Parties have the right under Rule 24(a)(2) to intervene in

an action if they meet four requirements: (1) the application

to intervene must be timely; (2) the applicant must demon-

strate a legally protected interest in the action; (3) the action

must threaten to impair that interest; and (4) no party to the

action can be an adequate representative of the applicant's

interests. See Williams & Humbert, Ltd. v. W. & H. Trade

Marks (Jersey), Ltd., 840 F.2d 72, 74 (D.C. Cir. 1988). Con-

sideration of the second requirement alone is sufficient to

dispense of the instant appeal.6 We review the district

court's resolution of a legal question in the context of a denial

of a motion to intervene de novo, see Massachusetts Sch. of

Law v. United States, 118 F.3d 776, 779 (D.C. Cir. 1997), and

we affirm.7

Our inquiry into the enforcement rights of third party

beneficiaries to consent decrees begins with Blue Chip

Stamps, in which the Supreme Court decided that the protec-

tions against insider trading codified in the Commission's

Rule 10b-5 apply only to actual purchasers and sellers of

securities and not those who are merely offered a stock. See

Blue Chip Stamps, 421 U.S. at 725. The case involved an

antitrust consent decree and, in the course of ruling that

those not involved in an actual sale of stock had no legitimate

claim, the Court held that "a well-settled line of authority

__________

6 Prudential also disputes whether appellants have shown the

Commission to be an inadequate representative of their interests.

7 Our review of the district court's denial of permissive inter-

vention under Rule 24(b)(2) is for abuse of discretion, see Twelve

John Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir.

1997), and we find none. Rule 24(b) permits the district court to

allow intervention "(1) when a statute of the United States confers a

conditional right to intervene; or (2) when the applicant's claim or

defense and the main action have a question of law or fact in

common." Fed. R. Civ. P. 24(b). While appellants do fall within the

ambit of the second criterion, their intervention would have no

effect because they have no standing to enforce the consent decree,

as we explain herein.

from this Court establishes that a consent decree is not

enforceable directly or in collateral proceedings by those who

are not parties to it even though they were intended to be

benefited by it." Id. at 750.

Subsequent decisions in this court have narrowed the effect

of the broad language in Blue Chip, but not enough to allow

these appellants to enforce the terms of this consent decree.

In Beckett v. Air Line Pilots Ass'n, 995 F.2d 280 (D.C. Cir.

1993), the court held that nonunion pilots who were not

parties to a consent decree between a union and another

group of pilots could sue the union to enforce the terms of the

consent decree. See id. at 286-89. The court emphasized,

however, that its holding did not imply that all third parties

could seek judicial enforcement of the terms of consent

decrees; this case was special because the consent decree

established a trust and named the plaintiff nonunion pilots as

beneficiaries. See id. at 285. The court interpreted Blue

Chip only to prohibit enforcement by incidental third party

beneficiaries, see id. at 288, whereas "intended third party

beneficiaries of a consent decree have standing to enforce the

decree," id. at 286 (quoting Hook v. Department of Ariz.

Corrections, 972 F.2d 1012, 1014 (9th Cir. 1992)) (emphasis

added) (internal quotation marks omitted). In so holding, the

court reasoned that "consent decrees are generally construed

according to the basic principles of contract law, and it is a

fundamental principle of contract law that parties to a con-

tract may create enforceable contract rights in a third party

beneficiary." Id. (citations omitted). Because the nonunion

pilots were not incidental beneficiaries but instead "direct

beneficiaries," as the trust provisions made clear, they could

sue to enforce the consent decree. Id.

Although this result might have conflicted with a broad

reading of the language in Blue Chip, the Beckett court

distinguished Blue Chip based on five considerations to nar-

row the scope of the restriction on third party enforcement of

consent decrees. Among its five considerations, the court

observed that Blue Chip involved a consent decree resulting

from a government enforcement action: "Only the Govern-

ment can seek enforcement of its consent decrees; therefore,

even if the Government intended its consent decree to benefit

a third party, that party could not enforce it unless the decree

so provided." Id. at 288 (citation omitted). Because applica-

tion of this rule alone would have barred a third party from

attempting to enforce the government consent decree in Blue

Chip, the Beckett court concluded that Blue Chip should not

be read so expansively that it would bar all third party

enforcement of consent decrees. See id.; see also Hook, 972

F.2d at 1015.

In Rafferty v. NYNEX Corp., 60 F.3d 844 (D.C. Cir. 1995),

the court again addressed the enforcement rights of third

party beneficiaries of government consent decrees. In that

case, the district court had granted summary judgment

against a terminated employee who claimed he was fired

because he knew his employer had violated a government

consent decree and who alleged violations of antitrust laws

and the consent decree, misrepresentation, wrongful dis-

charge, and breach of contract. See id. at 846-47. In

affirming the judgment, the court held that the plaintiff could

not enforce the terms of a consent decree that was the result

of an antitrust enforcement action brought by the govern-

ment: "Unless a government consent decree stipulates that it

may be enforced by a third party beneficiary, only the parties

to the decree can seek enforcement of it." Id. at 849 (citing

Beckett, 995 F.2d at 288). The court further emphasized that

the plaintiff was not an intended third party beneficiary of the

consent decree. See id.

Struggling under the weight of this precedent, appellants

contend nonetheless that they have a legally protected inter-

est in enforcing the terms of a consent decree resulting from

an SEC enforcement action. Appellants maintain that this

court has never held squarely that intended third party

beneficiaries, as distinct from incidental third party beneficia-

ries, cannot enforce a government consent decree when the

decree establishes a process to resolve private damage claims

including the prospective intervenors' claims. Beckett, appel-

lants insist, only stated that Blue Chip might "perhaps" bar

suits by third party beneficiaries of government consent

decrees,8 see Beckett, 995 F.2d at 289, while Rafferty only

pronounced this in dictum.9 Appellants suggest that the

court should look for guidance to the Second Circuit's decision

in Berger v. Heckler, 771 F.2d 1556 (2d Cir. 1985), in which

that court concluded that, in granting benefits to third parties

in a consent decree, the government necessarily "agreed to

the enforcement of the decree in favor of nonparties." Id. at

1567.

Appellants focus, to their detriment, on showing that there

is no categorical bar against third party enforcement of

consent decrees involving the government. This much is

true; the fact that the government is involved is not in itself

fatal to a third party enforcement effort. Rather, the key

determination is whether the particular third party beneficia-

ry who seeks to bring a claim based on alleged noncompliance

with the consent decree is an intended beneficiary of the

decree or only an incidental beneficiary. As the Beckett court

indicated, the reason that courts are more loath to allow third

parties to enforce consent decrees when the government is

involved is that, because the government usually acts in the

general public interest, third parties are presumed to be

incidental beneficiaries. See Beckett, 995 F.2d at 288 (citing

Restatement (Second) of Contracts s 313(2) & cmt. a (1979)).

Indeed, there could well be merit to appellants' argument

that the lack of an express stipulation authorizing third party

enforcement should not automatically preclude enforcement

even of government consent decrees. The argument might

be that the presence of the government should raise the

presumption that third parties are incidental beneficiaries,

but that presumption could be overcome by contrary evidence

__________

8 Although the court did use the word "perhaps" once, the court

elsewhere stated unequivocally (albeit without elaboration or fur-

ther analysis) that "[o]nly the Government can seek enforcement of

its consent decrees." Beckett, 995 F.2d at 228.

9 In fact, the court's conclusion that third party beneficiaries of

government consent decrees cannot enforce those decrees was an

integral step in the analysis in Rafferty. See Rafferty, 60 F.3d at

849.

other than an express stipulation. When the court can

determine the parties' intent from the consent decree, the

fact that one of the parties is the government arguably should

make little difference, and an express stipulation is not nor-

mally necessary to find that a third party is an intended

beneficiary. See Fed. R. Civ. P. 71; Beckett, 995 F.2d at 287-

88; Berger, 771 F.2d at 1565. Yet this circuit has opted for a

bright line rule, effectively acknowledging both the sophistica-

tion of government agencies entering into consent decrees

and the broad social significance of such decrees. See Raffer-

ty, 60 F.3d at 849. In any event, contrary to appellants'

position, the instant case presents no occasion for the court to

reexamine its declarations in Beckett and Rafferty that third

parties to government consent decrees cannot enforce those

decrees absent an explicit stipulation by the government to

that effect. Compare id. ("Unless a government consent

decree stipulates that it may be enforced by a third party

beneficiary, only the parties to the decree can seek enforce-

ment of it."); Beckett, 995 F.2d at 288 (same); and Hook, 972

F.2d at 1015 (same), with Berger, 771 F.2d at 1567 (allowing

third party enforcement of consent decrees pursuant to Rule

71, without regard to the involvement of a government party).

No matter the evidence we may require to show that third

parties to government consent decrees are intended beneficia-

ries, appellants cannot make this showing, and thus we leave

for another day consideration of whether government authori-

zation of third party enforcement must invariably be explicit.

Third parties to a consent decree, involving the government

or not, must demonstrate that they are intended beneficiaries

in order to have enforcement rights, and appellants fail to do

so. Instead, they rely on the mistaken belief that a third

party is an intended beneficiary if the parties to the consent

decree had any intent to benefit that third party and that the

clear intent in the consent decree to benefit defrauded inves-

tors thus necessarily gives them enforcement rights. To the

contrary: a third party to a consent decree is not an "intend-

ed beneficiary" unless the parties "intended that a third party

should receive a benefit which might be enforced in the

courts." Corrugated Paper Prods. v. Longview Fibre Co.,

868 F.2d 908, 911 (7th Cir. 1989) (quoting Brooklawn v.

Brooklawn Housing Corp., 11 A.2d 83 (N.J. 1940)) (emphasis

added); see also Restatement (Second) of Contracts

s 302(1). The test is not, as appellants appear to suggest,

only whether the contracting parties intended to confer a

benefit directly on the third parties, but also whether the

parties intended the third party to be able to sue to protect

that benefit.

The consent decree could hardly make clearer that the

parties did not intend others to be able to enforce its terms in

court. The Commission and Prudential stated in paragraph

nine of the consent decree that "nothing herein shall be

deemed to confer standing upon any persons other than

plaintiff COMMISSION, defendant [Prudential] and the

CLAIMS ADMINISTRATOR." Furthermore, in paragraph

twelve of the decree, they added that, "[e]xcept as explicitly

provided in this FINAL ORDER and the CONSENT, noth-

ing herein is intended to or shall be construed to have

created, compromised, settled or adjudicated any claims,

causes of action, or rights of any person whomsoever, other

than as between the COMMISSION and [Prudential], in

accordance with the CONSENT." It is difficult to imagine

how the Commission and Prudential could have stated more

explicitly that they did not want third parties enforcing the

terms of the consent decree.10 As the district court conclud-

ed, "the unambiguous language of the consent decree clearly

establishes that the government did not intend for third

parties to enforce the consent decree." When a consent

__________

10 Appellants' attempt to limit the meaning of these provisions

is unconvincing. Appellants contend that paragraph nine is irrele-

vant because they do not rely on the consent decree for constitu-

tional standing to bring their complaint. Paragraph twelve, appel-

lants add, does not concern those in appellants' position, for their

rights are among those "[e]xplicitly provided" in this consent de-

cree. Yet, paragraph nine clearly intends to use "standing" in the

sense of enforceable rights under the consent decree, not in the

constitutional sense, and paragraph twelve preempts any enforce-

ment rights in third parties because none were "[e]xplicitly provid-

ed" elsewhere in the consent decree.

decree or contract explicitly provides that a third party is not

to have enforcement rights, that third party is considered an

incidental beneficiary even if the parties to the decree or

contract intended to confer a direct benefit upon that party.

See Morse/Diesel Inc. v. Trinity Indus., Inc., 859 F.2d 242,

249 (2d Cir. 1988).

Despite appellants' protestations, their assertions of unfair-

ness in this result are unpersuasive. The consent decree was

the result of an agreement between the Commission and

Prudential, and appellants' participation in the claims resolu-

tion process was voluntary. Appellants' right to bring their

claims against Prudential to the courts was not affected by

the consent decree; indeed, without the consent decree, ap-

pellants might have received no relief at all. See supra note

3. Furthermore, appellants did not have to settle or submit

their initial settlement offers to binding arbitration if these

offers were too low. They did or should have known at the

time of the initial offers that Prudential was applying a

method of calculation different from the one they now advo-

cate was intended to be applied, and they could have exited

the claims resolution process at that point, resorting to the

courts for relief.11 Instead, appellants now hope to bind the

Commission and Prudential to their own interpretation of one

portion of the consent decree's requirements while ignoring

the consent decree's limitation of third party enforcement

rights.

Because the parties to the consent decree clearly indicated

that third parties such as appellants are not intended third

party beneficiaries, appellants have no legally protected inter-

est in enforcing the terms of the consent decree. Hence, they

__________

11 Even accepting their assertion in support of the motion to

intervene that Prudential's refusal to disclose its working papers

prevented immediate discovery of its methodology, appellants do

not explain why knowledge of this methodology was necessary for

them to know what their settlement offers should have been under

the terms of the consent decree; in particular, because their claims

were for fairly large amounts of money, it is reasonable to assume

some vigilance on their part.

have no right to intervene in the proceedings between the

Commission and Prudential to enforce the decree.

III.

In the alternative, appellants contend that, even if they

cannot sue to enforce the consent decree directly, they have a

legally protected interest in the proceedings between the

Commission and Prudential, and thus a right under Rule

24(a)(2) to intervene in the proceedings, based on their com-

mon law claims against Prudential on theories of contract,

fraud, and unjust enrichment. A glance at the nature of

these claims shows, however, that as the district court indicat-

ed, these claims are "inextricably intertwined with [appel-

lants'] claim of noncompliance with the consent decree" and

do not constitute a valid independent basis for intervention.

Appellants' common law claims turn on their allegation that

Prudential violated the consent decree. In the contract claim,

appellants allege that in representing to the investors that it

would comply with the consent decree, Prudential made a

separate offer to investors, which investors accepted for

consideration, thereby forming a contract separate from the

consent decree itself but based on the same terms, and that

Prudential violated this contract when it violated the consent

decree. Similarly, in the fraud and unjust enrichment claims,

appellants allege that by misrepresenting that it would con-

form to the terms of the consent decree, Prudential defrauded

investors and was unjustly enriched. Fairly read, the com-

plaint in intervention only seeks enforcement on the basis of

the common law claims; there is no request for declaratory

or similar relief.

These common law claims represent transparent attempts

to avoid the effect of Blue Chip and its progeny. As the

district court stated, "the actions [appellants] complain of

arise out of alleged noncompliance with the consent decree."

If third parties in appellants' position could bring such claims,

then the Blue Chip line of cases would be eviscerated: any

time a party to a consent decree indicated to a third party

that it would abide by the consent decree, such third party

could bring a claim in contract (as appellants attempt here) to

enforce the terms of the consent decree. If the court will not

permit consent decree enforcement claims, it cannot permit

the same invalid claims dressed in new formalist attire.

Hence, it follows that appellants' common law claims must

fail.12 Cf. Lyle v. Food Lion, Inc., 954 F.2d 984, 987 (4th Cir.

1992).

Appellants contend that to disallow such claims would

unfairly immunize parties to consent decrees against all ordi-

nary claims by nonparties relating to performance under such

decrees, but this is not true as a broad proposition. If

appellants asserted genuinely independent common law

claims, they could press them. As counsel for the Commis-

sion conceded at oral argument, there are still instances when

third parties may bring independent claims based on malfea-

sance by the parties to a consent decree: for instance, when a

third party can substantiate allegations of fraud. By con-

trast, a disagreement over the proper interpretation of a

decree's terms, as is present here, does not present a circum-

stance in which third parties can avoid the force of Blue Chip

and its progeny.

Much as appellants have no valid interest in enforcing the

terms of the consent decree directly, they have no valid

interest in doing so by repackaging a noncompliance claim in

the shells of common law contract, fraud, and unjust enrich-

ment. Accordingly, because appellants have no legally pro-

tected interest in the proceeding between the Commission

and Prudential, we affirm the district court's order denying

their motion to intervene under Rule 24(a)(2) or 24(b).

__________

12 Appellants maintain, unpersuasively, that Beckett and Raffer-

ty establish that such common law claims are independently viable.

In Beckett, the court did consider claims raised by the plaintiffs

other than their claim for noncompliance with the consent decree,

but this is unenlightening, for the court in that case decided that the

plaintiffs could enforce the decree as intended third party beneficia-

ries. See Beckett, 995 F.2d at 284-89. In Rafferty, the court

refused to allow the plaintiff to enforce the terms of a consent

decree yet did address the merits of other claims, but these other

claims were substantively different from and not simply restate-

ments of the noncompliance claim. See Rafferty, 60 F.3d at 849-51.