In Re: Ross

United States Court of Appeals
Fifth Circuit

FILED
September 21, 2005
In the United States Court of Appeals

For the Fifth Circuit Charles R. Fulbruge III
Clerk
_________________________

No. 03-20989

_________________________

DWAYNE ROSS; MARIA ROSS, individually and as next friend of
Sydney Ross and Johnathon Ross, minor children; SYDNEY ROSS,
minor child; JOHNATHON ROSS, minor child,

Plaintiffs - Appellees,

versus

MATTHEW CURTIS MARSHALL; ET AL,

Defendants,

ALLSTATE TEXAS LLOYDS INSURANCE CO.,

Movant - Appellant.

_________________________

Appeals from the United States District Court
For the Southern District of Texas
_________________________

Before HIGGINBOTHAM, DAVIS, and GARZA, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

An insurer sought to intervene as of right in a suit against

its insured for the purpose of appealing a judgment holding the

insured vicariously liable for $10 million in damages. The

district court denied the intervention and struck the insurer’s

answer and notice of appeal. The insured subsequently abandoned

his appeal and assigned all rights and claims against his insurer
to the plaintiffs. The insurer appealed. After first addressing

our jurisdiction, we conclude that the district court erred in

denying intervention and abused its discretion in entering an

amended judgment holding the insured vicariously liable for the

criminal acts of his child. Accordingly, we reverse the district

court’s order denying intervention and its amended final judgment,

and remand with instructions.

I

On the night of June 18, 2000, Wayne Mathews, then a 20-year

old college student, gathered with some of his friends outside his

parents’ home in Katy, Texas. At approximately 10:30 p.m., Wayne’s

father Kent Mathews instructed Wayne to “wrap things up,” and then

retired for the evening to go to sleep. The record indicates that

Wayne and his friends were drinking at this time, but is

inconclusive as to whether Kent was aware of this fact.

Far from “wrapping things up,” Wayne and his friends continued

imbibing alcohol, and decided to construct a large wooden cross and

burn it in front of an African-American family’s home. Using

materials gathered in part from the garage of the Mathews’

residence, the group set to work on the cross in the driveway and

front lawn of the Mathews’ home. This activity took place during

the early morning hours of June 19. After completing the cross,

the group of friends transported it to the home of the Rosses, an

African-American family, placed it in their yard and set it

2
ablaze.1

The Rosses filed a civil suit against Wayne and his friends,

alleging various intentional torts and civil rights violations.2

In addition, the Rosses sought to recover from Wayne’s parents,

Kent and Sally Mathews, on grounds that they “knew or should have

known that their properties and household effects were being used

in [] a negligent and reckless manner.” At the time of the cross-

burning incident, Kent and Sally Mathews owned a homeowner’s

insurance policy issued by Allstate covering “damages because of

bodily injury . . . caused by an occurrence” for which coverage was

provided. Allstate provided an attorney to defend Kent and Sally

Mathews subject to a reservation of rights.3

The court initially dismissed Kent and Sally Mathews from the

suit pursuant to Federal Rule of Civil Procedure 12(b)(6), but

reinstated them as defendants when the Rosses clarified that they

were seeking to hold them directly liable under a negligence

theory, and vicariously liable as principals for their son’s

1
After a federal investigation, the members of the group were apprehended.
Wayne pleaded guilty to one count of conspiracy to commit civil rights violations
and served time in a federal penitentiary.
2
Although originally filed in state court, the suit was quickly removed
by the U.S. Attorney’s office to the federal district court for the Southern
District of Texas.
3
Pursuant to its reservation of rights, Allstate later filed a declaratory
judgment action seeking a judicial determination that it had no obligation under
the homeowner’s policy to defend or indemnify Kent, Sally or Wayne in the present
suit. This action remains pending before the same court that tried this case.
See Allstate Tex. Lloyds Ins. Co. v. Mathews, No. 4:02-CV-0964 (S.D. Tex., filed
Mar. 12, 2002).

3
intentional acts. The Rosses eventually dismissed their claims

against Sally, and went to trial on their claims against Kent,

Wayne, and Wayne’s friends.

Following trial, a jury found Wayne and his friends liable for

approximately $10 million in damages. The jury also found that

Kent had delegated his authority to Wayne over the Mathews’

property on the night in question, and that this delegation was

negligent. However, the jury concluded that this negligent

delegation of authority was not a proximate cause of the cross-

burning. Based on these findings, the court concluded that

while it is undisputed that Wayne Mathews’ use of the
Mathews’ property was within the scope of [the delegated]
authority, the wrongful acts were not. Therefore, the
Court holds that the plaintiff shall take-nothing against
Kent Mathews for his wrongful act. Moreover, the
wrongful acts and the damages found against Wayne Mathews
are not attributable to him.4

The Rosses filed a motion to amend the judgment, arguing that

they were entitled to recover against Kent on a theory of vicarious

liability. Conceding that the jury verdict precluded a finding of

direct liability under a negligence theory, the Rosses urged the

court to amend its judgment to reflect that they could recover

against Kent, as principal, for the acts of his agent, Wayne. They

argued that the existence of a principal-agent relationship was

supported by the jury’s finding that Kent had delegated authority

over the Mathews’ house to Wayne on the night of the cross-burning.

4
Ross v. Marshall, No. H-01-1311, at 2 (S.D. Tex. May 28, 2003)
(unpublished final judgment).

4
Further, they contended that Wayne’s acts, while not necessarily

foreseeable to Kent, were within the scope of authority delegated

to Wayne. Kent opposed this motion, arguing that he could not be

found liable as a principal because his son’s criminal acts fell

outside the scope of Wayne’s delegated authority.

On August 20, 2003, the district court entered is amended

final judgment, finding as a matter of law that Kent was

vicariously liable for Wayne’s conduct. Despite the jury’s finding

that Kent’s negligent delegation of authority did not cause the

Ross’s injury, the court found “that it is undisputed that Wayne

Mathews’ use of the Mathews’ property was within the scope of

authority granted by Kent Mathews. Therefore, the Court holds that

while Kent Mathews is not directly liable, he is, nevertheless,

indirectly liable.”5 In its Order on Motion to Amend Judgment, the

Court explained that it “erroneously circumscribed and omitted a

treatment of Kent Mathews’ conduct under a vicarious liability

theory” in its original judgment.6 The court then recounted

evidence that Kent was aware of his son’s extensive problems with

alcohol, noting that a jury could have inferred that Kent knew that

Wayne was not a person to whom authority over his personal and real

property should be granted. The court continued:

5
Ross v. Marshall, No. H-01-1311, at 2 (S.D. Tex. Aug. 20, 2003)
(unpublished amended final judgment).

6
Ross v. Marshall, No. H-01-1311, at 1-2 (S.D. Tex. Aug. 20, 2003)
(unpublished order).

5
 Based on the jury’s findings and the reasonable
inferences to be drawn from their findings, the Court
concludes that Kent Mathews is, as a matter of law,
vicariously liable for delegating authority over his
premises and materials to an untrustworthy son. The
Court also finds and holds that the act of delegation of
authority by Kent Mathews was negligent, and [more so] an
accident as that term is defined in the policy of
insurance.7

On September 3, 2003, Kent, through counsel appointed by

Allstate, filed a notice of appeal from the amended judgment. On

that same day, Allstate filed a post-judgment answer, notice of

appeal, and motion to intervene as of right based in part on the

district court’s coverage finding, and in part on its concern that

Kent would not appeal the judgment. Allstate also sought to

supersede the judgment by agreeing to a bond in the full amount of

its $300,000 policy limit. On September 4, 2003, Kent filed a

motion to alter or amend the court’s amended judgment. On

September 12, 2003, the court struck Allstate’s answer and notice

of appeal, and denied its motion to intervene and Kent’s motion to

amend judgment. In addition, the court denied the motion for

approval of Allstate’s supersedeas bond without opinion. Allstate

timely appealed the court’s denial of its motion to intervene.

Following these events, Kent agreed to fire his appellate

counsel, dismiss his appeal, and assign all his rights against

Allstate to the Rosses. In exchange, the Rosses agreed to delay

filing writs of execution against his property. We dismissed

7
Id. at 3.

6
Kent’s appeal for want of prosecution on February 5, 2004.

II

Allstate contends that the district court erred in denying its

motion to intervene as of right. In addition, Allstate attacks the

amended judgment of the district court on several grounds. First,

it argues that the district court erred in making findings on an

agency theory that had been waived by the Rosses. Second, it

contends that the district court erred in entering judgment against

Kent as a matter of law based on the agency theory. Third,

Allstate urges that the district court abused its discretion by

amending its judgment under Rule 59(e) to find Kent liable on a

theory that had previously been abandoned. Finally, Allstate

argues that the court erred in attempting to hold Kent liable on a

negligence theory that was expressly rejected by the jury.

In response, the Rosses contend that this appeal must be

dismissed because the district court lacked jurisdiction to rule on

Allstate’s motion to intervene after Kent filed his notice of

appeal. The Rosses also argue that Allstate failed to satisfy the

requirements for intervention as of right. Finally, the Rosses

argue that they neither waived nor abandoned their agency theory,

and that the district court’s judgment was supported by both the

jury’s finding that Kent negligently delegated his authority to

Wayne, and undisputed evidence that Wayne’s acts were within the

scope of that authority.

III

7
 We first address the Rosses’s argument that this appeal must

be dismissed because the district court lacked jurisdiction to

decide Allstate’s motion to intervene. Although this argument was

raised for the first time at oral argument, we must consider it as

it goes to our jurisdiction.8

The substance of the argument is straightforward. The

district court entered its amended final judgment holding Kent

liable on August 20, 2003. On September 3, Kent filed a notice of

appeal, and Allstate filed its motion to intervene. The district

court did not deny Allstate’s motion to intervene until September

12. Our court follows the general rule that “the filing of a valid

notice of appeal from a final order of the district court divests

that court of jurisdiction to act on the matters involved in the

appeal, except to aid the appeal, correct clerical errors, or

enforce its judgment so long as the judgment has not been stayed or

superseded.”9 We have found that this rule deprives a district

court of jurisdiction to entertain a motion to intervene after a

valid notice of appeal has been filed.10 Thus, under the general

8
See Hernandez ex rel. Hernandez v. Tex. Dep’t. of Protective & Regulatory
Servs., 380 F.3d 872, 878 (5th Cir. 2004) (“Prior to reaching the merits, we must
verify, sua sponte, that our jurisdiction . . . is proper.”); In re McCloy, 296
F.3d 370, 373 (5th Cir. 2002) (“[A] lack of subject matter jurisdiction may be
raised at any time, and we can examine the lack of subject matter jurisdiction
for the first time on appeal.”).
9
Avoyelles Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897, 928 (5th Cir.
1983).
10
See Nicol v. Gulf Fleet Supply Vessels, Inc., 743 F.2d 298, 299 (5th
Cir. 1984) (district court lacked jurisdiction to entertain motion to intervene
filed seven days before notice of appeal, but not ruled on until after appeal was

8
rule, the district court lacked jurisdiction to entertain

Allstate’s motion to intervene.

Responsive to our request for supplemental briefing, Allstate

urges that the notice of appeal filed on September 3 was rendered

ineffective by the filing of Kent Mathews’ Rule 59(e) motion to

amend judgment filed on September 4, and revived only when the

district court entered its ruling denying the Rule 59(e) motion on

September 15. As a result, Allstate concludes that the district

court had jurisdiction to deny Allstate’s motion to intervene on

September 12.

Federal Rule of Appellate Procedure 4(a)(4)(B)(i) provides:

If a party files a notice of appeal after the court
announces or enters a judgment--but before it disposes of
any motion listed in Rule 4(a)(4)(A)--the notice becomes
effective to appeal a judgment or order, in whole or in
part, when the order disposing of the last such remaining
motion is entered.11

Our court has found that the timely filing of a motion listed in

Rule 4(a)(4)(A) suspends or renders dormant a notice of appeal

until all such motions are disposed of by the trial court.12 This

taken); Avoyelles Sportsmen’s League, Inc., 715 F.2d at 927-28 (district court
lacked jurisdiction to entertain motion to intervene filed more than one month
after a timely notice of appeal).
11
FED. R. APP. P. 4(a)(4)(B)(i).
12
See Simmons v. Reliance Standard Life Ins. Co. of Tex., 310 F.3d 865,
868 (5th Cir. 2002) (“Rule 4(a)(4) suspends the time for review by this Court
because, until the district court addresses all post-judgment motions specified
by the rule, it has not entirely finished with a case.”); Bann v. Ingram Micro,
Inc., 108 F.3d 625, 626 (5th Cir. 1997) (“Bann’s notice of appeal, filed after
the entry of the judgment but before the disposition of his motion to reinstate
the case, was ineffective to appeal from the judgment until the entry of the
order disposing of that motion.”); Burt v. Ware, 14 F.3d 256, 258 (5th Cir. 1994)

9
holds true regardless of whether the motion was filed before or

after the notice of appeal.13

One of the motions listed in Rule 4(a)(4)(A) is a motion “to

alter or amend the judgment under Rule 59.”14 Because Kent Mathews’

timely filed his Rule 59 motion to alter of amend judgment, his

motion suspended the effectiveness of his earlier filed notice of

appeal until September 15, the date on which the district court

entered is order denying the motion.15 Thus, the district court had

jurisdiction to deny Allstate’s motion to intervene on September

12.

(treating a notice of appeal filed before disposition of a post-judgment motion
listed in Rule 4(a)(4)(A) as “dormant”).
13
An Advisory Committee note to Paragraph (a)(4) provides: “A notice
filed before the filing of one of the specified motions or after the filing of
a motion but before disposition of the motion is, in effect, suspended until the
motion if disposed of, whereupon, the previously filed notice effectively places
jurisdiction in the court of appeals.” FED. R. APP. P. 4 Advisory Committee note
(1993 Amendments) (emphasis added). Although “Advisory Committee Notes do not
have the force of law, [] they are instructive in determining Congress’s intent
in amending a statute.” Moody Nat’l Bank of Galveston v. GE Life & Annuity
Assurance Co., 383 F.3d 249, 253 (5th Cir. 2004).
In United States v. Silvers, the Fourth Circuit applied the 1993 amendments
to Rule 4, finding:
Under the 1993 amendments to the Federal Rules of Appellate
Procedure, when a party files a timely notice of appeal followed by
a timely Rule 59 motion, the notice of appeal is tolled and does not
become effective to confer jurisdiction on the court of appeals
until the entry of an order disposing of the Rule 59 motion.
90 F.3d 95, 98 (4th Cir. 1996).

14
FED. R. APP. P. 4(a)(4)(A)(iv).
15
See FED. R. APP. P. 4(a)(4)(B)(i) (notice of appeal becomes effective
“when the order disposing of the last such remaining motion is entered” (emphasis
added)); cf. Burt, 14 F.3d at 258 (“Under amended Rule 3(d), the district court
is required to send a copy of any later docket entry in [plaintiff’s] case to the
court of appeals. Those docket entries will serve to advise this court of the
date on which [plaintiff’s] notice of appeal becomes effective.”).

10
 The Rosses contend that this conclusion is inaccurate, and

cite to Katz v. Berisford International, PLC16 for the proposition

that Rule 4(a)(4) only applies to extend the appellate deadline for

“parties.” In Katz, two creditors sought to intervene for the

purpose of moving to amend a final judgment pursuant to Rule 59(e)

or 60(b). They filed their motion to intervene, along with a

motion to alter or amend judgment, on September 11, 2000. Before

the district court ruled on their motion to intervene, the

defendant filed a timely notice of appeal.

The district court found that because “the filing of a notice

of appeal divests [a] district court of jurisdiction and transfers

it to the Court of Appeals . . . this court does not have

jurisdiction to decide this motion to intervene.”17 The court then

rejected the intervenors’ contention that their motion to alter or

amend tolled the effectiveness of the notice of appeal. In so

holding, the court found that Rule 4(a)(4)(B)(i) specifically

provides that a notice of appeal will be tolled only if a “party”

files a motion to alter or amend. The court then observed that

Rule 4(a)(4)(B)(i) “does not apply to [the motion to intervene]

because the Intervenors are not yet ‘parties’ to the case.”18 The

court concluded: “For the Intervenors to file a Rule 59 motion,

16
No. 96-CIV-8695, 2000 WL 1760965 (S.D.N.Y. Nov. 30, 2000).
17
Id. at *2 (citing Nicol, 743 F.2d at 299).
18
Id.

11
this Court would have to grant their Rule 24(a) motion, which it

cannot do because it does not have jurisdiction to decide that

motion.”19

Unlike the Rule 59(e) motion in Katz, which was filed by non-

parties who were seeking to intervene, the Rule 59(e) motion in

this case was filed by a party, Kent Mathews. Consequently, we

find that Katz is inapplicable here, and conclude that the district

court properly had jurisdiction to deny Allstate’s motion to

intervene.20

IV

We turn to the contention that the district court erred in

denying Allstate’s motion to intervene as of right. We review

denials of intervention of right de novo.21

In the absence of a federal statute conferring an

19
Id.
20
In the alternative, Allstate urges that the district court retained
jurisdiction to rule on its motion to intervene because such action would “aid
the appeal.” This argument finds support in Professors Wright, Miller and
Cooper’s treatise on federal practice:
There is a split of opinion on the question whether the district
court loses jurisdiction to grant intervention to appeal after a
notice of appeal has been filed. Although a notice of appeal ousts
district court jurisdiction for most purposes, it would be better to
recognize that the district court can act. The district court need
not be given a preliminary education about the case to support an
intelligent ruling, and its action is in support of the appeal
process, not in derogation of it.
15A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3902.1 (2d. ed. 1992)
(citations omitted). Although not without force, we need not reach this argument
here as the district court retained jurisdiction following the filing of Kent
Mathews’ Rule 59 motion to alter or amend judgment.

21
Trans Chem. Ltd. v. China Nat’l Mach. Imp. & Exp. Corp., 332 F.3d 815,
822 (5th Cir. 2003).

12
unconditional right to intervene, a motion to intervene as of right

is governed by Federal Rule of Civil Procedure 24(a)(2). A motion

to intervene under Rule 24(a)(2) is proper when:

(1) the motion to intervene is timely; (2) the potential
intervener (sic) asserts an interest that is related to
the property or transaction that forms the basis of the
controversy in the case into which she seeks to
intervene; (3) the disposition of that case may impair or
impede the potential intervener's ability to protect her
interest; and (4) the existing parties do not adequately
represent the potential intervener's interest.22

Although failure to satisfy any one element precludes the

applicant’s right to intervene, we have noted that “the inquiry

under subsection (a)(2) is a flexible one, which focuses on the

particular facts and circumstances surrounding each application,”

and concluded that “intervention of right must be measured by a

practical rather than technical yardstick.”23 Intervention should

generally be allowed where “no one would be hurt and greater

justice could be attained.”24

A

Our first task is to determine whether Allstate’s motion to

intervene was timely. While we normally review a district court’s

finding of timeliness for an abuse of discretion, we review the

timeliness element de novo where, as here, the district court fails

22
Saldano v. Roach, 363 F.3d 545, 551 (5th Cir. 2004).
23
Edwards v. City of Houston, 78 F.3d 983, 999 (5th Cir. 1996) (internal
quotation marks and citations omitted).

24
Sierra Club v. Espy, 18 F.3d 1202, 1205 (5th Cir. 1994) (internal
quotation marks and citation omitted).

13
to articulate reasons for its timeliness determination.25

In Stallworth v. Monsanto Co.,26 we set forth four factors that

must be considered when evaluating whether a motion to intervene

was timely:

Factor 1. The length of time during which the would-be
intervenor actually or reasonably should have known of
his interest in the case before he petitioned for leave
to intervene.
*****
Factor 2. The extent of prejudice that the existing
parties to the litigation may suffer as a result of the
would-be intervenor’s failure to apply for intervention
as soon as he actually knew or reasonably should have
known of his interest in the case.
*****
Factor 3. The extent of the prejudice that the would-be
intervenor may suffer if his petition for leave to
intervene is denied.
*****
Factor 4. The existence of unusual circumstances
militating either for or against a determination that the
application is timely.27

Although these factors give structure to our timeliness analysis,

we have explicitly observed that the timeliness analysis remains

“contextual,” and should not be used as a “tool of retribution to

punish the tardy would-be intervenor, but rather [should serve as]

a guard against prejudicing the original parties by the failure to

apply sooner.”28 With this caveat in mind, we examine each of the

25
See John Doe No. 1 v. Glickman, 256 F.3d 371, 376 (5th Cir. 2001);
Edwards, 78 F.3d at 1000.
26
558 F.2d 257 (5th Cir. 1977).
27
Id. at 264-66 (italics omitted).
28
Sierra Club, 18 F.3d at 1205.

14
Stallworth factors in turn.

1

The first Stallworth factor “focuses on the time lapse between

the applicant’s receipt of actual or constructive knowledge of his

interest in the litigation and the filing of his motion for

intervention.”29 The Rosses contend that this factor cuts against

Allstate because it was aware of its interest in the present suit

at the latest on March 12, 2002, when it filed its declaratory

judgment action, yet waited until September 3, 2003, to file its

motion to intervene. In addition, the Rosses argue that Allstate’s

motion is untimely ex lege because it was filed after the district

court entered its final judgment. Allstate contends that its

motion to intervene was timely as it was filed as soon as

practicable after its insured was held liable and within the time

for filing an appeal from the judgment.

While it is true that motions for intervention filed after

judgment is entered are frequently denied as untimely,30 we have

found that there are no “absolute measures of timeliness,”31 and

have allowed post-judgment intervention of right in some cases.32

29
Edwards, 78 F.3d at 1000.

30
See id. at 1001 (collecting cases).

31
Sierra Club, 18 F.3d at 1205.

32
See, e.g., Ceres Gulf v. Cooper, 957 F.2d 1199, 1203-04 (5th Cir. 1992);
Baker v. Wade, 769 F.2d 289, 291 (5th Cir. 1985) (en banc), rev’d on other
grounds by Lawrence v. Texas, 539 U.S. 558 (2003).

15
Indeed, in Stallworth we observed that “whether the request for

intervention came before or after the entry of judgment [is] of

limited significance,” noting that intervention could be allowed

post-judgment provided that the rights of existing parties were not

prejudiced and intervention did not interfere with the orderly

processes of the court.33

A common example of post-judgment intervention that satisfies

these criteria is intervention for the purpose of appealing a

decision that the existing parties to a suit have decided not to

pursue.34 In United Airlines v. McDonald,35 the Supreme Court found

that a flight attendant’s post-judgment motion to intervene for the

purpose of appealing the district court’s denial of class

certification was timely when she filed her motion “as soon as it

became clear . . . that [her] interests . . . would no longer be

protected by the named class representatives.”36 The district court

had denied class certification, and after securing a judgment for

damages nearly three years later, the named class representatives

33
558 F.2d at 266; see also McDonald v. E.J. Lavino Co., 430 F.2d 1065,
1072 (5th Cir. 1970) (noting that while it is true that post-judgment
intervention is normally looked upon with a “jaundiced eye,” the “rationale which
seems to underlie this general principle . . . is the assumption that allowing
intervention after judgment will (1) prejudice the rights of the existing parties
to the litigation or (2) substantially interfere with the orderly processes of
the court.”).
34
See 6 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE ¶ 24.24[3] (3d. ed.
1998).
35
432 U.S. 385 (1977).
36
Id. at 395.

16
opted not to appeal the district court’s class certification

ruling. The Court observed that its decision to allow the flight

attendant to intervene post-judgment was consistent with the

decisions of several federal courts, finding that in each case the

“critical inquiry . . . is whether in view of all the circumstances

the intervenor acted promptly after the entry of final judgment.”37

Specifically, the Court found that the flight attendant had “filed

her motion within the time period in which the named plaintiffs

could have taken an appeal.”38

In this case, Allstate sought to intervene for the purpose of

appealing an adverse judgment against its insured that it rightly

believed would not be appealed by the existing parties. Allstate

filed its motion promptly after the district court entered its

amended final judgment, and within the time in which a named party

could have taken an appeal. Because Allstate sought to intervene

solely for the purpose of taking an appeal, granting its motion

would not have affected the orderly processes of the court.

Further, we note that although Allstate was aware that its

interests were at stake long before it sought to intervene,

intervention prior to judgment would have been pointless as

Allstate’s interests were being adequately represented by counsel

37
Id. at 395-96.
38
Id. at 396; see also MOORE, supra note 34, ¶ 24.24[3] (“The general rule
is that a post-judgment motion to intervene is timely if filed within the time
allowed for the filing of an appeal.”).

17
for Kent Mathews--counsel that was being provided by Allstate.39

Given these circumstances, we find that Allstate’s motion to

intervene was not impermissibly tardy.

2

The second Stallworth factor requires that we determine the

extent to which the Rosses will be prejudiced by Allstate’s failure

to seek intervention at an earlier time. “This factor is concerned

only with the prejudice caused by the applicants’ delay, not that

prejudice which may result if intervention is allowed.”40

The Rosses claim that if Allstate is allowed to intervene,

they will suffer a “mountain of prejudice” in the form of wasted

resources and delay caused by frivolous motions and “this frivolous

appeal.” These inconveniences, while not insubstantial, are all

the result of Allstate’s decision to appeal both the district

court’s denial of its motion to intervene and the amended judgment.

In order to show prejudice, the Rosses must point to results that

would not have obtained but-for Allstate’s failure to file its

motion to intervene earlier.41 The inconveniences cited by the

39
In Sierra Club v. Espy, we noted that “[c]ourts should discourage
premature intervention that wastes judicial resources. A better gauge of
promptness is the speed with which the would-be intervenor acted when it became
aware that its interests would no longer be protected by the original parties.”
18 F.3d at 1206 (internal citation omitted).
40
Edwards, 78 F.3d at 1002 (citing Stallworth, 558 F.2d at 265); accord
Ceres Gulf, 957 F.2d at 1203; Sierra Club, 18 F.3d at 1206.
41
See John Doe No. 1, 256 F.3d at 378; Stallworth, 558 F.2d at 265 (“[T]o
take any prejudice that the existing parties may incur if intervention is allowed
into account under the rubric of timeliness would be to rewrite Rule 24 by
creating an additional prerequisite to intervention as of right.”).

18
Rosses are those commonly associated with defending a ruling or

judgment on appeal, and would have arisen regardless of whether

Allstate sought to intervene before the district court entered its

amended judgment. Accordingly, we find that Rosses will suffer no

prejudice as a result of Allstate’s failure to seek intervention at

an earlier time.

3

The third Stallworth factor “focuses on the prejudice the

potential intervenor would suffer if not allowed to intervene.”42

The Rosses argue that Allstate will suffer no prejudice if not

allowed to intervene because it has no interest at stake in the

present suit. Specifically, the Rosses contend that Allstate’s

interest in contesting coverage under the policy cannot be impaired

by the dictum in the district court’s order referencing coverage

because such dictum is non-binding. The Rosses also argue that

Allstate’s interest in defending its insured will not be impaired

because it abandoned Kent Mathews by failing to post a supersedeas

bond in the full amount of the judgment. Finally the Rosses note

that Allstate’s attempted bond is not at risk because it was

rejected by the district court.

These contentions ignore the prejudice that Allstate will

suffer if it is not allowed to contest a judgment against its

insured that may expose it to significant liability both in a

42
John Doe No. 1, 256 F.3d at 378-79.

19
subsequent coverage suit and in a suit for extra-contractual

damages. Allstate’s interest in protecting itself from liability

by minimizing the liability of its insured is strong, particularly

in light of the fact that Allstate provided Mathews with a defense

in this case subject to a reservation of rights and is bound by the

district court’s judgment.43 Allstate will suffer considerable

prejudice if it is denied the opportunity to challenge this

judgment on appeal.

4

Under the fourth Stallworth factor, we must ascertain whether

any unusual factors weigh in favor of a finding of timeliness. We

find that the Kent Mathews’ decision to abandon his appeal and fire

his appellate counsel at the behest of the Rosses, and the Rosses’

subsequent attempt to deny Allstate the opportunity to seek

appellate review of the district court’s amended judgment

constitutes an unusual circumstance favoring a finding of

timeliness in this case.

5

In sum, we find based upon our analysis of the Stallworth

factors as applied to the facts of this case that Allstate’s motion

to intervene was timely.

B

The second element that an applicant must satisfy in order to

43
See infra Part IV.B.

20
intervene as of right is the assertion of an interest related to

the property or transaction at issue in the case. We have held

that in order to meet this requirement, an applicant must point to

an interest that is “direct, substantial, [and] legally

protectable.”44 This requires a showing of something more than a

mere economic interest; rather, the interest must be “one which the

substantive law recognizes as belonging to or being owned by the

applicant.”45 In addition, “the intervenor should be the real party

in interest regarding his claim.”46 Despite these requirements, we

have observed that “the interest ‘test’ is primarily a practical

guide to disposing of lawsuits by involving as many apparently

concerned persons as is compatible with efficiency and due

process.”47

44
See New Orleans Pub. Serv., Inc. v. United Gas Pipe Line Co., 732 F.2d
452, 463 (5th Cir. 1984) (en banc) (internal quotation marks and citation
omitted).
45
Id. at 464.

46
Saldano, 363 F.3d at 551. We articulated the “real party in interest”
requirement in New Orleans Public Service, Inc., 732 F.2d at 464, in which we
observed that the real party in interest requirement of FED. R. CIV. PROC. 17(a)
applies to potential intervenors as well as parties. Our application of this
rule here is complicated by the fact that “Rule 17(a) applies only to those who
are asserting a claim and thus is of most importance with regard to plaintiffs.”
6A CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 1543 (1990) (emphasis
added). With respect to a potential intervenor seeking to defend an interest
being attacked by a plaintiff in a lawsuit, we have observed that the intervenor
is a real party in interest when the suit was intended to have a “direct impact”
on the intervenor. See Sierra Club v. Glickman, 82 F.3d 106, 109 (5th Cir. 1996)
[hereinafter Glickman]. Given the terms of the Rosses’ agreement with Kent
Mathews, it is beyond peradventure that the present litigation is designed to
have a direct impact on Allstate.
47
Espy, 18 F.3d at 1207 (some internal quotation marks omitted) (quoting
Ceres Gulf, 957 F.2d at 1203 n.10).

21
 Allstate argues that it must be allowed to intervene in order

to appeal a substantial judgment against its insured; that it is a

real party in interest up to the $300,000 limit of Kent Mathews’

insurance policy. Although a close call, we are persuaded that

this interest is sufficient to meet the second requirement of

intervention under Rule 24(a)(2). Without question, an insurer has

a financial stake in securing a favorable outcome for its insured

in a lawsuit alleging potentially covered claims. This financial

interest is particularly strong when, as here, the insurer has been

given an opportunity to defend the suit, and therefore is in

privity with the insured as to the ensuing judgment.48 For this

reason, insurers frequently have a contractual right and duty to

defend their insureds against a suit alleging a covered claim.

Recognizing this, the Texas Supreme Court has found that a

liability insurance policy “may grant the insurer the right to take

‘complete and exclusive control’ of the insured’s defense.”49

However, when an insurer offers to defend pursuant to a reservation

of rights, thereby preserving its ability to raise coverage

defenses, the insured may properly refuse the tender of defense and

48
See Ridgway v. Gulf Life Ins. Co., 578 F.2d 1026, 1029 (5th Cir. 1978)
(finding that a liability insurer with a right to defend and adequate notice of
a claim, while “not necessarily a formal party to the suit,” is not “a stranger
to the judgment,” and concluding that the “contractual relation of liability and
social policy supply the necessary privity of party between insured and insurer
to bind the latter”).

49
State Farm Mut. Auto. Ins. Co. v. Traver, 980 S.W.2d 625, 627 (Tex.
1998).

22
“choose to defend the suit personally.”50 An insurer that reserves

its rights does not surrender its interest in minimizing the

liability of its insured. Accordingly, the insurer may still

assume the defense of its insured if the insured so permits.

Further, an insured who rejects an insurer’s offer of a qualified

defense must either reach a reasonable settlement or provide a

reasonable defense in order for its insurer to be bound by any

ensuing judgment.51

A more difficult question is whether the insurer’s interest in

minimizing its insured’s liability is sufficiently direct to permit

intervention as of right when the insurer defends under a

reservation of rights. Two of our sister circuits have answered

this query in the negative. In Restor-A-Dent Dental Laboratories,

Inc. v. Certified Alloy Products, Inc.,52 the Second Circuit

examined whether an insurer had the right to intervene in an

ongoing lawsuit filed against its insured. The insurer was

defending under a reservation of rights, and sought to intervene

50
Arkwright-Boston Mfrs. Mut. Ins. Co. v. Aries Marine Corp., 932 F.2d
442, 445 (5th Cir. 1991); see also Housing Auth. of Dallas v. Northland Ins. Co.,
333 F. Supp. 2d 595, 600 (N.D. Tex. 2004); Am. Eagle Ins. Co. v. Nettleton, 932
S.W.2d 169, 174 (Tex. App.--El Paso 1996, writ denied).
51
See U.S. Aviation Underwriters, Inc. v. Olympia Wings, Inc., 896 F.2d
949, 955 (5th Cir. 1990) (holding that, under Texas law, an insurer that offers
to defend under a reservation of rights is not bound by an unreasonable
settlement reduced to a consent judgment); Britt v. Cambridge Mut. Fire Ins. Co.,
717 S.W.2d 476, 482 (Tex. App.--San Antonio 1986, writ ref’d n.r.e.) (holding
that doctrine of collateral estoppel may not be raised by insured to bind insurer
to a judgment of liability against the insured when the insured failed to conduct
a reasonable defense and colluded with the plaintiff to defraud the insurer).
52
725 F.2d 871 (2d Cir. 1984).

23
for the purpose of submitting interrogatories instructing the jury

to specify the basis for any damages it awarded.53 The court

identified the “critical inquiry” as whether the insurer possessed

a sufficient interest in the suit against its insured. Noting that

an interest sufficient to justify intervention under Rule 24(a)

“must be direct, as opposed to remote or contingent,” the court

found that an insurer defending under a reservation of rights has

no direct interest in a suit against its insured for which it may

ultimately be liable.54 The court explained that the insurer’s

interest in reducing or even eliminating its own liability, while

implicated by the suit, was too remote because it was dependent

upon two contingencies: a jury verdict finding the insured liable

for damages; and an adverse coverage determination in a future

lawsuit.55

In Travelers Indemnity Co. v. Dingwell,56 the First Circuit

affirmed the denial of a motion to intervene as of right filed by

a group of insurers seeking to oppose entry of a consent judgment

against their insured when the insurers had reserved the right to

53
In support of its motion to intervene, the insurer argued that “it was
critical to ‘know with certainty the exact dollar amount of the damages assessed
against [the insured] for which [the insured] claims to be entitled to
indemnification from [the insurer],’ in the event that the jury found for [the
plaintiff].” Id. at 873.
54
Id. at 874-75 (citing Cascade Natural Gas Corp. v. El Paso Natural Gas
Co., 386 U.S. 129, 154 (1967) (Stewart, J., dissenting)).

55
Id. at 875.
56
884 F.2d 629 (1st Cir. 1989).

24
deny coverage. Addressing the insurers’ interest in minimizing the

liability of their insured, the court conceded that “[t]here can be

no dispute that an insurer has a direct interest in a lawsuit

brought by an injured party against its insured when the insurer

admits that the claim is covered by the policy in question.”57 The

court observed, however, that “[w]hen the insurer offers to defend

the insured but reserves the right to deny coverage . . . the

insurer’s interest in the liability phase of the proceeding is

contingent on the resolution of the coverage issue.”58 The court

rejected the notion that this position was “overly ‘legalistic’ or

‘mechanical,’” noting that it reflected the “well-established

policy that an insurer who reserves the right to deny coverage

cannot control the defense of a lawsuit brought against its insured

by an injured party.”59 Elaborating on this proposition, the court

observed that “[a]llowing the insurer to intervene to protect its

contingent interest would allow it to interfere with and in effect

control the defense. Such intervention would unfairly restrict the

insured, who faces the very real risk of an uninsured liability,

and grant the insurer ‘a double bite at escaping liability.’”60

57
Id. at 638.
58
Id. (citing Restor-A-Dent Dental Laboratories, Inc., 725 F.2d at 874-
76).
59
Id. at 638-39 (quoting Guar. Nat’l Ins. Co. V. Pittman, 501 So. 2d 377,
384 (Miss. 1987)).

60
Id. (citation omitted); accord Nieto v. Kapoor, 61 F. Supp. 2d 1177,
1192-93 (D.N.M. 1999); Chrysler Corp. v. Haden Uniking Corp., 158 F.R.D. 405,
407-08 (N.D. Ill. 1994).

25
 We find both Restor-A-Dent and Travelers to be distinguishable

from the facts of the present case in two significant ways. First,

unlike the insurers in Restor-A-Dent and Travelers which sought to

intervene before a judgment was entered holding their insureds

liable, Allstate seeks to intervene for the purpose of appealing an

existing judgment holding its insured liable for $10 million.

Importantly, by seeking to intervene solely to appeal the judgment,

Allstate is not attempting to “interfere” with the defense of its

insured. There is no danger that Allstate will attempt to steer

the jury towards a verdict holding its insured liable on non-

covered grounds, or interject interrogatories harmful to its

insured’s interests. Rather, Allstate’s interest in minimizing its

potential liability exposure is aligned with Mathews’ interest in

avoiding a $10 million judgment.

Second, although some contingency remains in that Allstate may

still avoid liability if it prevails in its coverage action, we

find this contingency insufficient to preclude intervention. In

both Restor-A-Dent and Travelers, the insurers sought to intervene

when two contingencies separated them from possible liability: a

judgment against their insureds, and an adverse judgment in a

subsequent coverage suit. Here, Allstate is already bound by the

present judgment, and may not re-litigate Mathews’ liability in a

subsequent lawsuit. All that remains in order for Allstate to be

fully liable for the judgment up to its policy limits is a finding

26
of coverage or liability in a suit on extra-contractual damages.61

Further, although there is a dearth of authority on the

question of whether an insurer that reserves its rights has a

sufficiently direct interest to intervene as of right in a suit

against its insured for the purpose of appealing the judgment, a

handful of courts have held that insurers may intervene to contest

various aspects of judgments entered against their insureds

following a reservation of rights.62 These cases point up the

absence of a monolithic opposition to insurers intervening in cases

brought against their insureds, and are consistent with the

toleration shown in our case law for some degree of contingency in

61
In its order addressing the Rosses’ motion to amend the judgment, the
district court found that Mathews was vicariously liable for the acts of his son,
and that “the act of delegation of authority by Kent Mathews was negligent, as
found by the jury, and moreso an accident as that term is defined in the policy
of insurance.” Ross, No. H-01-1311, at 3 (unpublished order). Although dictum,
this statement is significant because Allstate’s declaratory judgment suit
regarding coverage is pending before the same district court that authored the
order.
62
See Bridge v. Air Quality Technical Servs., Inc., 194 F.R.D. 3, 7 (D.
Me. 1999) (holding that an insurer had a sufficiently direct interest to
intervene under Rule 24(a) at the damages phase of a trial following entry of
default judgment against its insured); Campbell v. Plank, 133 F.R.D. 175, 176 (D.
Kan. 1990) (holding that an insurer had an interest sufficient to support
intervention under Rule 24(a) when both the plaintiff and the defendant in the
underlying action were insured by the insurer, and the parties entered into a
collusive agreement whereby the defendant agreed not to oppose entry of judgment
against him in exchange for the plaintiff’s agreement to limit his recovery to
insurance proceeds and amounts received as damages for any extra-contractual
claims); see also Davila v. Arlasky, 141 F.R.D. 68, 72-73 (N.D. Ill. 1991)
(noting that the word “contingent” in cases such as Restor-A-Dent and Travelers
“is often used as a proxy for evaluating the importance of the interest and the
likelihood that it could be impaired,” and concluding that “a close examination
of the facts is more helpful to determine whether there is a sufficient interest
for 24(a) intervention than categorizing is”).

27
the interests of persons seeking intervention as of right.63

Finally, we note that the Rosses have made Allstate the

central focus of their collection efforts by agreeing to delay

executing on Kent Mathews’ property in exchange for a full

assignment of his rights against Allstate. We also recognize that

this assignment transferred not only Mathews’ right to collect from

Allstate under his insurance contract, but also any claim he may

have relating to Allstate’s refusal to settle within policy limits.

Thus, Allstate has a second interest at stake in the underlying

litigation: minimizing its potential exposure in a bad faith

settlement practices claim. While this interest is also contingent

upon an adverse finding in a separate suit, Allstate may minimize

or eliminate this exposure by contesting the judgment against

Mathews on appeal.

In sum, we conclude that Allstate has a sufficient interest in

the present suit to merit intervention as of right for the purpose

of appealing the judgment against its insured.

C

63
See Glickman, 82 F.3d at 109-10 (holding that the interest of farmers
in drawing water from an aquifer was sufficient to justify intervention as of
right by Farm Bureau in a suit brought by the Sierra Club against the USDA
seeking to enjoin the expenditure of “any funds to the farmers that directly or
indirectly support pumping from the [a]quifer” (emphasis added)); Edwards, 78
F.3d at 1004 (holding that interest of police officers in having equal access to
a promotion system was sufficient to justify intervention as of right by
officers’ associations and unions to contest entry of a consent decree in an
employment discrimination case against the City of Houston requiring a series
of remedial promotions for members of certain minority groups); see also Ceres
Gulf, 957 F.2d at 1203 (noting that Rule 24(a)(2) “property or transaction” need
not be defined in an unduly narrow fashion).

28
 The third criterion that an applicant for intervention must

satisfy is that the disposition of the case into which he seeks to

intervene “may, as a practical matter, impair or impede his ability

to protect [that] interest.”64 The Rosses argue that a judgment

against Mathews in no way impairs or impedes Allstate’s ability to

protect its interest in minimizing its liability because Allstate

may still avoid liability entirely by prevailing in its coverage

suit. This argument conflates Allstate’s interest in avoiding

coverage with its interest in minimizing or eliminating the

liability of its insured.

An insurer may avoid liability for a claim made against its

insured in one of two ways: the insurer may either defeat the claim

on its merits, or establish that coverage is not available for the

claim.65 By effectively settling with the Rosses following entry

of judgment against him, Mathews eliminated any possibility that

Allstate could avoid liability by challenging the judgment against

its insured on appeal. This result leaves Allstate with potential

liability exposure in its coverage suit up to $300,000, and with

potential liability exposure for additional amounts in a bad faith

64
Sierra Club, 18 F.3d at 1207; see John Doe No. 1, 256 F.3d at 380.

65
See Ideal Mut. Ins. Co. v. Myers, 789 F.2d 1196, 1205-06 (5th Cir. 1996)
(Higginbotham, J., concurring in part and dissenting in part) (noting that, prior
to the execution of a settlement agreement between the plaintiff and the insured,
the insurer could have avoided liability both by establishing non-coverage and
by showing that its insured was not liable); see also Douglas R. Richmond,
Walking a Tightrope: The Tripartite Relationship Between Insurer, Insured, and
Insurance Defense Counsel, 73 NEB. L. REV. 265, 269 (1994) (“Because of its
financial interest in the effective resolution of a claim, the insurer has a
contractual right to control its insured’s defense.”).

29
suit--all without being afforded the opportunity to appeal a

judgment in a suit which it defended. These large stakes make

clear that the disposition of the underlying suit has, at the very

least, the potential to impair Allstate’s interest.

D

The final criterion that a potential intervenor must satisfy

in order to intervene as of right is that “the existing parties do

not adequately represent” his interest.66 We have described this

burden as “minimal,” noting that a potential intervenor need only

show that “representation by the existing parties may be

inadequate.”67 We find that Allstate has met this burden by

demonstrating that Mathews both fired counsel provided to him by

Allstate and abandoned his appeal of the district court’s judgment.

Although these events occurred after the district court denied

Allstate’s motion to intervene, the motion was premised in part on

Allstate’s well-founded belief that Mathews had ceased to cooperate

and would not pursue an appeal. This is sufficient to meet

Allstate’s minimal burden of showing inadequate representation.

E

In sum, we hold that the district court erred in denying

66
John Doe No. 1, 256 F.3d at 380 (citing Trbovich v. United Mine Workers,
404 U.S. 528, 538 n.10 (1972); Espy, 18 F.3d at 1207).
67
Heaton v. Monogram Credit Card Bank of Ga., 297 F.3d 416, 425 (5th Cir.
2002); but see Bush v. Viterna, 740 F.2d 350, 355 (5th Cir. 1984) (“However
‘minimal’ this burden [of showing inadequate representation] may be, it cannot
be treated as so minimal as to write the requirement completely out of the
rule.”).

30
Allstate’s motion to intervene as of right. Accordingly, we now

turn to the merits of Allstate’s appeal.68

V

As we have already noted, Allstate challenges the amended

final judgment on a number of grounds.69 We will limit our analysis

to Allstate’s claim that the district court was incorrect in its

assessment that Mathews should be held vicariously liable for the

criminal acts of his son.

In their pleadings and at trial, the Rosses sought to hold

Kent Mathews liable on both negligence and agency theories. At the

charge conference, the district court proposed special

interrogatories inquiring (1) whether Mathews delegated authority

over his property to his son on the night of the cross-burning; (2)

whether this delegation constituted negligence; and (3) whether

this negligence was a proximate cause of the Rosses’ damages. The

Rosses objected and requested a definition of “authority” as used

in the context of a principal-agent relationship. Mathews’

attorney objected on grounds that an agency question must be

68
The Rosses claim that the only issue properly before us is intervention,
and that Allstate cannot appeal the judgment because it is not a party to it.
We are cognizant of the “well-settled” rule that “one who is not a party to a
lawsuit, or has not properly become a party, has no right to appeal a judgment
entered in that suit.” Edwards, 78 F.3d at 993. In this case, however, remand
to the district court would be futile given that Allstate’s motion to intervene
was for the sole purpose of taking an appeal. As the issues have been fully
briefed and argued, we will proceed to the merits. See Ceres Gulf, 957 F.2d at
1204-05 (reversing district court’s denial of intervention as of right and
reaching the merits of the intervenor’s claim on appeal).
69
See supra Part II.

31
accompanied by instructions regarding the elements of agency as

well as a question asking whether the agent’s actions came within

the scope of authority granted. The court responded:

The question is whether or not--The threshold entry
question is whether or not there was negligence in
granting authority with whatever knowledge Kent Mathews
had, granting any authority to his son to do anything as
it relates to handling the property. That’s a threshold
question.

It doesn’t require a finding that there was some use
of that property that was improper, because the only
question that’s being asked--And it doesn’t require any
agency relationship. I don’t have to establish an agency
relationship to be negligent in handing something or
passing something off to someone.

That’s my view of negligence. Negligence is a duty,
a breach of duty and damages. What is the negligence?
The authority given to his son should or should not have
been given to him. That’s the question that’s being
raised, the negligent act. The authority given to him
either should or should not have been given to him.

If it should not have been given to him, was there
a duty not to and was there a breach of that duty?
That’s what I’m raising here in this particular
interrogatory. It doesn’t go to this agency relationship
or theory.

The jury answered questions 1 and 2 in the affirmative, but

returned a negative answer to question 3. Alleging that the jury’s

affirmative answer to question 1 established a basis for finding

that Mathews delegated actual authority over his house to his son

on the night of the cross-burning, the Rosses moved the court to

enter judgment holding Mathews liable under a vicarious liability

theory. The court entered judgment on the verdict for Mathews,

holding that he was not liable under either a negligence or agency

32
theory because his “negligence was not a proximate cause of the

harm inflicted on the plaintiffs,” and his son’s wrongful acts were

not within the scope of delegated authority.70

The Rosses subsequently filed a Rule 59(e) motion requesting

that the court alter its judgment to hold Mathews liable under an

agency theory. The court granted this motion, and entered an

amended final judgment in which it held that “it is undisputed that

Wayne Mathews’ use of the Mathews’ property was within the scope of

authority given by Kent Mathews’.”71 In its order on the Rosses’

motion to amend, the court observed that its prior judgment had

“erroneously circumscribed and omitted a treatment of Kent Mathews’

conduct under a vicarious liability theory.”72 The court then

detailed evidence that Wayne Mathews regularly consumed alcohol,

had been arrested for consuming alcohol while in high school and

received counseling, and “had many problems associated with alcohol

70
Ross, No. H-01-1311, at 2 (unpublished final judgment). Because a
question regarding scope of authority was not submitted to the jury and no
objection was lodged, the court’s finding on this question was made pursuant to
Rule 49(a) which provides: “As to an issue omitted [from the jury instructions]
without . . . demand the court may make a finding.” FED. R. CIV. P. 49(a). We
recognize, based on the colloquy between the attorneys and the court at the
charge conference, that the interrogatories submitted to the jury contained no
questions relating to the Rosses’ agency theory, raising the question of whether
this theory was completely waived. Compare Newberry v. E. Tex. State Univ., 161
F.3d 276, 281 (5th Cir. 1998) (failure to object to the omission of a claim from
the jury instructions results in waiver), with MBank Fort Worth, N.A. v. Trans
Meridian, Inc., 820 F.2d 716, 722-24 (5th Cir. 1987) (finding that a court
considered and rejected a theory omitted from the jury instructions pursuant to
Rule 49(a)). We need not pause before this tiger in the reeds beside our path,
however, given that we can resolve this case on different grounds.
71
Ross, No. H-01-1311, at 2 (unpublished amended final judgment).
72
Ross, No. H-01-1311, at 1-2 (unpublished order).

33
that were ignored by Kent Mathews.”73 “Hence,” the court observed,

“the jury could have inferred that Kent Mathews knew that his son

was not a person to whom he should grant authority or control over

his property.”74 The court then concluded that “Kent Mathews is,

as a matter of law, vicariously liable for delegating authority

over his premises and materials to an untrustworthy son.”75

We will “generally review a decision on a motion to alter or

amend judgment under Rule 59(e) for abuse of discretion.”76

However, “[t]o the extent that a ruling was a reconsideration of a

question of law . . . the standard of review is de novo.”77 A

motion to alter or amend judgment must “clearly establish either a

manifest error of law or fact or must present newly discovered

evidence. These motions cannot be used to raise arguments which

could, and should, have been made before the judgment issued.

Moreover, they cannot be used to argue a case under a new legal

theory.”78 A district court abuses its discretion if it “bases its

decision on an erroneous view of the law or on a clearly erroneous

73
Id. at 3.
74
Id.
75
Id.
76
Pioneer Natural Res. USA, Inc. v. Paper, Allied Indus. & Energy Workers
Int’l Union Local, 328 F.3d 818, 820 (5th Cir. 2003).

77
Id.

78
Simon v. United States, 891 F.2d 1154, 1159 (5th Cir. 1990) (internal
quotation marks and citation omitted).

34
assessment of the evidence.”79

Under Texas law, a principal “is vicariously liable for the

torts of [his agents] committed in the course and scope of their

employment.”80 “To find that the employee acted within the scope of

employment, the action of the employee must be: (1) within the

general authority given him; (2) in furtherance of the employer’s

business; and (3) for the accomplishment of the object for which

the employee was employed.”81 Moreover, “[t]o be within the scope

79
Hesling v. CSX Transp., Inc., 396 F.3d 632, 638 (5th Cir. 2005)
(internal quotation marks and citation omitted); see Jethroe v. Omnova Solutions,
Inc., 412 F.3d 598, 600 (5th Cir. 2005) (“Because a court, by definition, abuses
its discretion when it makes an error of law, an appellate court may correct such
mistakes.”).
80
GTE S.W., Inc. v. Bruce, 998 S.W.2d 605, 617 (Tex. 1999); see Medina v.
Herrera, 927 S.W.2d 597, 601 (Tex. 1996) (“Generally, a master is vicariously
liable for the torts of its servants committed in the course and scope of their
employment.”); RESTATEMENT 2D AGENCY § 219(2)(b) (1958) (“A master is not subject
to liability for the torts of his servants acting outside the scope of their
employment unless: . . . the master was negligent or reckless.”). Under § 219
of the Restatement, “[l]iability exists only if all the requirements of an action
of tort for negligence exists.” Id. at § 213 cmt. a (emphasis added).

81
Williams v. United States, 71 F.3d 502, 506 (5th Cir. 1995) (citation
omitted); see Leadon v. Kimbrough Bros. Lumber Co., 484 S.W.2d 567, 569 (Tex.
1972) (“It is not essential that the negligent act or omission should have been
expressly authorized by the employer so long as it is in furtherance of the
employer’s business and for the accomplishment of the object for which the
employee is employed.”); Arbelaez v. Just Brakes Corp., 149 S.W.3d 717, 720 (Tex.
App.--Austin 2004, no pet.) (“To ultimately prove that an employee acted within
the course and scope of employment, however, [plaintiff] must [establish] that
the act was (1) within the general authority given to the employee; (2) in
furtherance of the employer’s business; and (3) for the accomplishment of the
object for which the employee was employed.”); Millan v. Dean Witter Reynolds,
Inc., 90 S.W.3d 760, 767-68 (Tex. App.--San Antonio 2002, pet. denied) (“To
determine whether an employee’s acts are within the scope of his or her
employment, we ask whether the employee’s actions fall within the scope of the
employee’s general authority, are in furtherance of the employer’s business, and
are for the accomplishment of the object for which the employee was hired.”);
Chesshir v. Sharp, 19 S.W.3d 502, 504 (Tex. App.--Amarillo 2000, no pet.)
(“Whether one is acting within the scope of his employment depends upon whether
the general act from which injury arose was in furtherance of the employer’s
business and for the accomplishment of the object for which the employee was
employed.”).

35
of employment, the conduct must be of the same general nature as

that authorized or incidental to the conduct authorized.”82 As a

general rule, “[c]ourse and scope of employment is . . . a fact

issue like negligence or proximate cause.”83 However, scope of

authority may be a question of law in the absence of disputed

questions of fact.84

Assuming arguendo that Wayne Mathews was Kent Mathews’ agent

for the purpose of “wrapping things up” around the Mathews’

residence on the night of the cross-burning, the record is devoid

of facts suggesting that Wayne acted within the scope of that

authority when he participated in the cross-burning. Kent Mathews’

testimony clearly demonstrates that when he told Wayne to “wrap

things up,” he intended for Wayne to send his friends home. Any

suggestion that he implicitly gave Wayne authority to construct a

large wooden cross on his lawn, transport that cross to the home of

an African-American family, and set it on fire is the height of

absurdity. The fact that Mathews knew or should have known of his

son’s difficulties with alcohol does not alter this analysis; that

Kent Mathews may have been negligent in delegating authority over

his property to an untrustworthy son does not serve to expand the

82
Williams, 71 F.3d at 506 (internal quotation marks and citations
omitted).

83
Arbelaez, 149 S.W.3d at 720.

84
See Gen. Prod. Co. v. Black Coral Invests., 715 S.W.2d 121, 123-24 (Tex.
App.--Houston [14th Dist.] 1986, writ ref’d n.r.e.).

36
scope of authority given to encompass unimaginable criminal conduct

wholly unrelated to the task assigned.

Relatedly, we have found that, under Texas law, an agent’s

“serious criminal activity” is almost never taken within the scope

of authority granted by the principal:

Indeed, an employee’s willful and malicious actions made
in the scope of his employment, or any acts which are so
connected with and immediately grow out of another act of
the employee imputable to the employer, are imputed to
the employer unless the employee’s actions involve
serious criminal activity. Under the exception, an
employer is not liable for the employee’s intentional or
malicious actions that are unforeseeable considering the
employee’s duties. Thus, even criminal acts can be in
the course and scope and impute liability if the acts are
foreseeable considering the employee’s duties.85

There are no facts in the record suggesting that it was foreseeable

to Kent Mathews that his son would commit an act of racial

terrorism upon receipt of authority to “wrap things up.” Indeed,

the jury explicitly found that Wayne’s acts were unforeseeable to

Kent in its response to jury interrogatory 3.

Because the record contains no facts suggesting that Wayne

Mathews’ criminal activity was taken within the scope of authority

granted him by Kent Mathews, we conclude that the district court’s

85
Williams, 71 F.3d at 506 n.10 (emphasis added) (citations omitted); see
also Hooper v. Pitney Bowes, Inc., 895 S.W.2d 773, 778 (Tex. App.--San Antonio
1995, writ denied) (“An exception to [the rule that a master is liable for his
servant’s willful or malicious acts taken within the scope of his employment],
usually applied in cases involving serious criminal activity, is that an employer
is not liable for intentional and malicious acts that are unforeseeable
considering the employee’s duties.”); Adami v. Dobie, 440 S.W.2d 330, 334 (Tex.
Civ. App.--San Antonio 1969, writ dism’d) (“A master is not liable for
unauthorized intended tortious conduct of his servant, even when the act was done
in connection with the servant’s employment, where the wrongful act was
unexpectable, in view of the duties of the servant.”)

37
finding to the contrary was clearly erroneous. Accordingly, the

district court abused its discretion in granting the Rosses’ Rule

59(e) motion to amend the judgment.

VI

For the foregoing reasons, both the order denying intervention

and the amended final judgment are REVERSED and this case is

REMANDED with instructions to enter a take-nothing judgment as to

Kent Mathews.

REVERSED and REMANDED.

38