Opinion
20-cv-06519-SVK
07-21-2021
STATE FARM LIFE INSURANCE COMPANY, Plaintiff, v. MICHAEL R. ABLAZA, Defendant.
ORDER FOR REASSIGNMENT TO A DISTRICT JUDGE
REPORT AND RECOMMENDATION GRANTING PLAINTIFF'S REQUEST TO DEPOSIT INTERPLEADER FUNDS AND DISMISS PLAINTIFF; GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
RE: DKT. NO. 19
SUSAN VAN KEULEN, UNITED STATES MAGISTRATE JUDGE
The Clerk of Court entered default against Defendant Michael R. Ablaza (“Defendant Ablaza”) after Defendant failed to respond to the Summons and Complaint within the time prescribed by the Federal Rules of Civil Procedure. Dkts. 12, 14. Before the Court is Plaintiff State Farm Life Insurance Company's (“Plaintiff”) request to deposit interpleader funds and be dismissed and motion for default judgment. Dkt. 19. Defendant Ablaza has not opposed the motion. Pursuant to Civil Local Rule 7-1(b), the Court finds this matter suitable for resolution without oral argument.
Although Plaintiff has consented to the jurisdiction of the undersigned magistrate judge, Defendant Ablaza has not consented. Dkt. 9. Accordingly, this Court directs the Clerk of the Court to REASSIGN this action to a district judge, with the following REPORT AND RECOMMENDATION that Plaintiff's request to deposit interpleader funds and dismiss Plaintiff and motion for default judgment be GRANTED. If all Defendants later consent to magistrate jurisdiction, the case may be reassigned to the undersigned magistrate judge.
I. BACKGROUND
Plaintiff had issued an individual life insurance policy, policy number LF-3554-3706, to Maribeth Garca Ablaza (the “Insured”). Dkt. 1 ¶ 7; Dkt. 19 at 7. At the time of her application dated March 2, 2016, the Insured designated her only child, Defendant Ablaza, as the primary beneficiary to the policy death benefits and did not designate a secondary beneficiary. Dkt. 1 ¶ 8; Dkt. 1-1 Ex. A; Dkt. 19 at 7. The Insured died on or about January 9, 2019, and her death was ruled a homicide. Dkt. 1 ¶ 9; Dkt. 19 at 7. Defendant Ablaza was arrested a few days later for the Insured's murder, and a criminal proceeding has commenced against him in Santa Clara County. Dkt. 1 ¶ 12; Dkt. 19 at 8; Dkt. 19-2 Ex. A. Plaintiff acknowledges that as a result of the Insured's death, policy death benefits became due to a beneficiary or beneficiaries in the amount of $145,841.00. Dkt. 1 ¶ 10; Dkt. 19 at 7. Plaintiff alleges that if Defendant Ablaza is later determined to have feloniously and intentionally killed the Insured, pursuant to Probate Code Section 252, “it would be as if he predeceased the Insured [] and the Death Benefit would be payable to his heirs per stirpes.” Dkt. 1 ¶¶ 13, 14. Plaintiff further alleges that it believes that Defendant Ablaza does not have any children, so the policy death benefits would be payable to the Insured's estate according to the policy terms. Id. ¶ 14.
On September 17, 2020, Plaintiff filed this interpleader action to resolve which claimants are entitled to the policy death benefits of the life insurance policy issued to the Insured, naming both Defendant Ablaza and Defendant Jane Doe (“Defendant Doe”) (collectively, “Defendants”), the Administrator of the Estate of the Insured. Dkt. 1. Defendant Ablaza is currently incarcerated. Dkt. 19-1 (Declaration of John E. Walker) ¶ 3. Accordingly, on October 20, 2020, Plaintiff served Defendant Ablaza by substituted service and filed a proof of service of the Summons and Complaint. Dkt. 11; Dkt. 19-1 ¶ 3. Defendant Ablaza has failed to answer the Complaint or to otherwise appear in this matter. Dkt. 19-1 ¶ 4. At Plaintiff's request, the Clerk entered default against Defendant Ablaza on January 6, 2021. Dkt. 12; Dkt. 14; Dkt. 19-1 ¶¶ 6-7. Plaintiff now moves for default judgment against Defendant Ablaza. Dkt. 19. Plaintiff filed a proof of service of the motion on Defendant Ablaza. Dkt. 19-4. Defendant Ablaza has not filed a response to the motion for default judgment.
Plaintiff indicates that it will amend the Complaint to insert the identity of the Administrator of the Estate of the Insured once an administrator is appointed. Dkt. 1 ¶ 4.
II. REQUEST FOR JUDICIAL NOTICE
Included in Plaintiff's motion for default judgment is a request that the Court take judicial notice of the court docket in the criminal matter The People of the State of California v. Michael Ablaza, Case No. C1900805 (Santa Clara County). Dkt. 19-2 Ex. A. The Court “may take judicial notice of court filings and other matters of public record.” Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006). Accordingly, the Court GRANTS Plaintiff's request for judicial notice of the court docket in the matter The People of the State of California v. Michael Ablaza, Case No. C1900805 (Santa Clara County).
III. PLAINTIFF'S REQUEST TO DEPOSIT INTERPLEADER FUNDS AND DISMISS PLAINTIFF
A. Request to Deposit Interpleader Funds and Discharge of Liability
“In an interpleader action, the ‘stakeholder' of a sum of money sues all those who might have claim to the money, deposits the money with the district court, and lets the claimants litigate who is entitled to the money.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1265 (9th Cir. 1992) (citation omitted). A rule interpleader may be brought pursuant to Federal Rule of Civil Procedure 22. “Rule 22 interpleader is only a procedural device, however-the rule does not convey jurisdiction on the courts.” Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1033 (9th Cir. 2000). “[W]here subject matter jurisdiction exists under the general subject matter and diversity jurisdiction provisions, 28 U.S.C. §§ 1331, 1332, as is the case here, an interpleader action may be brought under Rule 22.” Trustees of IL WU-PMA Pension Plan v. Peters, 660 F.Supp.2d 1118, 1132-33 (N.D. Cal. 2009). Alternatively, a statutory interpleader may be established pursuant to 28 U.S.C. § 1335.
Rule 22 states that “[p]ersons with claims that may expose a plaintiff to double or multiple liability may be joined as defendants and required to interplead.” Fed.R.Civ.P. 22(a)(1). “Interpleader is proper when a stakeholder has at least a good faith belief that there are conflicting colorable claims.” Michelman v. Lincoln Nat'l Life Ins. Co., 685 F.3d 887, 889 (9th Cir. 2012). However, this requirement “is not an onerous requirement” and the “threshold to establish good faith is necessarily low so as not to conflict with interpleader's pragmatic purpose, which is ‘for the stakeholder to protect itself against the problems posed by multiple claimants to a single fund.'” Id. at 894 (quoting Mack v. Kuckenmeister, 619 F.3d 1010, 1024 (9th Cir. 2010)).
Here, State Farm has been willing to pay the policy death benefits but has been unable to do so because of Defendant Ablaza and Defendant Doe's conflicting claims. State Farm brought this interpleader action pursuant to Rule 22 naming both Defendants. The Court has jurisdiction over Plaintiff's interpleader action pursuant to 28 U.S.C. § 1332. Plaintiff alleges that Defendant Ablaza is a citizen of California and State Farm's principal place of business is in Bloomington County, Illinois. Dkt. 1 ¶¶ 2-3, 5. In the Complaint, Plaintiff also named “Jane Doe, ” the future Administrator of the Estate of the Insured, indicating that an administrator has not yet been appointed for the Estate of the Insured. Id. ¶ 4. The amount in controversy in this matter exceeds $75,000. Accordingly, the Court has jurisdiction over this action.
This Court will allow Defendant Doe, and the jurisdictional question will have to be revisited when an actual party is substituted. See Hao v. Chen, No. 10-CV-00826-LHK, 2010 WL 3910165, at *4 (N.D. Cal. Oct. 5, 2010) (finding that “the inclusion of Doe defendants does not destroy diversity, and the Court is not divested of jurisdiction on that ground”).
Further, this interpleader is proper because Plaintiff has a good faith belief that Defendants have claims that may expose Plaintiff to double or multiple liability. Fed.R.Civ.P. 22(a)(1). Although Defendant Ablaza is the listed beneficiary, Plaintiff has alleged that it faces double liability due to Defendant Ablaza's potential disqualification under California's “slayer statute” pursuant to California Probate Code Section 252. Dkt. 1 ¶ 13; Dkt. 19 at 12. Because Plaintiff has a good faith belief that there are conflicting colorable claims of the death policy defendants, this interpleader is proper.
Plaintiff requests that the Court allow Plaintiff to deposit the policy death benefits, plus interest if any, with the Court. The Court finds that Plaintiff is a disinterested stakeholder that has no interest in the controversy between the Defendants. This Court RECOMMENDS granting Plaintiff's request to deposit the policy death benefits with the Court and discharging Plaintiff from this action. See Sun Life Assur. Co. of Canada v. Chan's Estate, No. C-03-2205 SC, 2003 WL 22227881, *2 (N.D. Cal. Sept. 22, 2003) (“If an interpleading plaintiff has no interest in the stake[, the plaintiff] should be dismissed.”) (citation omitted).
B. Injunction
Interpleader under Rule 22 does not explicitly authorize courts to enjoin litigants from pursuing further claims in state or federal court regarding the funds at issue pursuant to 28 U.S.C. § 2361. Pruco Life Ins. Co. v. Tan, No. 19-cv-00335-JCS, 2020 WL 2574662, at *5 (N.D. Cal. May 4, 2020), report and recommendation adopted, No. 19-cv-00335-WHO, 2020 WL 2572804 (N.D. Cal. May 21, 2020). “However, courts have used the All Writs Statute, 28 U.S.C. § 1651, to enjoin defendants in an interpleader action from bringing future proceedings regarding the same claim.” Id. (citations omitted). The party seeking the injunction must prove that it would otherwise suffer irreparable harm. Trustees of IL WU-PMA Pension Plan, 660 F.Supp.2d at 1144-45. The Court will grant such an injunction “where there is a likelihood of costly and judicially wasteful relitigation of claims and issues that were already adjudicated in federal court.” Id. at 1145 (citations omitted).
Plaintiff argues that this Court should enjoin Defendant Ablaza from initiating any action against State Farm regarding the life insurance policy and/or the policy death benefits. Dkt. 19 at 15. Plaintiff would suffer irreparable harm if faced with future claims to the interpleaded funds brought by Defendant Ablaza after this action has been adjudicated. Further, relitigation would defeat the purpose of this interpleader action and subject the parties and the Court to costly and wasteful duplicative judicial proceedings. Pruco Life Insurance Company, 2020 WL 2574662, at *5. Therefore, the Court RECOMMENDS enjoining Defendant Ablaza from bringing any further action in state or federal court regarding his claims to the policy death benefits of Policy Number LF-3554-3706.
IV. MOTION FOR DEFAULT JUDGMENT
A. Legal Standard
After entry of default, a court may, in its discretion, enter default judgment. See Fed. R. Civ. P. 55; Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Before entering default judgment, the Court must assess the adequacy of the service of process on the party against whom default is requested. See Trustees of ILWU-PMA Pension Plan v. Coates, No. C-11-3998 EMC, 2013 WL 556800, at *4 (N.D. Cal. Feb. 12, 2013). The Court must also determine whether it has subject matter jurisdiction over the action and personal jurisdiction over the defaulted defendant. Id. at *3-4.
If the Court concludes that the defaulted defendant was properly served and that the Court has jurisdiction, the Court must next consider whether default judgment is appropriate, considering seven factors set forth by the Ninth Circuit: (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of dispute concerning material facts; (6) whether default was due to excusable neglect; and (7) the strong policy under the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In considering these factors, the Court takes all well-pleaded factual allegations in the complaint as true, except those concerning damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987).
B. Analysis
1. Service and Jurisdiction
As indicated above, “[i]n deciding whether to grant or deny default judgment, the Court must first assess the adequacy of the service of process on the party against whom default is requested.” Folkmanis, Inc. v. Uptown Toys LLC, No. 18-cv-00955-EMC, 2018 WL 4361140, at *2 (N.D. Cal. Sept. 13, 2018) (internal quotation marks and citation omitted). The applicable California statute regarding substituted service of individual defendants permits substituted service by leaving a copy of the summons and complaint at the defendant's usual place of abode (i.e., dwelling), usual place of business, or usual mailing address (other than a U.S. Postal Service post office box). Cal. Code Civ. Proc. § 415.20(b). Copies of the summons and complaint must be left “in the presence of a competent member of the household or a person apparently in charge of [the defendant's] office, place of business, or usual mailing address, ” and copies must thereafter be mailed to the defendant at the same address where the documents were left. Id. Substituted service is permitted only “[i]f a copy of the summons and complaint cannot with reasonable diligence be personally delivered to the person to be served . . . .” Id.
Plaintiff filed a proof of service of the Summons and Complaint on Defendant Ablaza by substituted service by leaving copies with Deputy Reeser. Dkt. 11. Further, the proof of service indicates that Plaintiff mailed a copy of the documents to the same address where substituted service was made. Id. A sworn proof of service constitutes “prima facie evidence of valid service which can be overcome only by strong and convincing evidence.” S.E.C. v. Internet Solutions for Business Inc., 509 F.3d 1161, 1166 (9th Cir. 2007) (internal quotation marks and citation omitted). Accordingly, the Court concludes that service of Defendant Ablaza was adequate.
When a plaintiff seeks entry of default judgment against a party who has failed to plead or otherwise defend, “a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties.” In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). As previously stated in Section III.A., the Court found that it has subject matter jurisdiction over this matter. 28 U.S.C. § 1332. The Court is also satisfied that personal jurisdiction exists over Defendant Ablaza, whose current address is in California. Dkt. 1 ¶ 3. Plaintiff's counsel attests that Defendant Ablaza is not presently in the military service, a minor, or incompetent. Dkt. 19-1 ¶ 9.
2. Eitel Factors
Having concluded that Defendant Ablaza was properly served and the Court has jurisdiction, the Court next considers the Eitel factors and concludes that the majority of those factors weigh in favor of entering default judgment against Defendant Ablaza. As discussed above, Defendant Ablaza was served with copies of the summons and Complaint in this action. Defendant Ablaza therefore had notice of these proceedings. Further, there is no indication that Defendant Ablaza's failure to appear is due to excusable neglect or that there is any indication of a dispute concerning material facts (fifth and sixth factors).
Plaintiff would suffer prejudice if default judgment is not entered. This lawsuit concerns Defendants' potential competing claims to the interpleaded funds. “Without entry of default judgment, those claims cannot be finally resolved.” Am. Gen. Life Ins. Co. v. Radulovic, No. 5:16-cv-02258-HRL, 2016 WL 4447302, at *2 (N.D. Cal. Aug. 24, 2016) (citations omitted).
Plaintiff's claims against Defendants are adequately pleaded and sufficient. Taking the facts pleaded in the Complaint as true, as is required on a motion for default judgment, Plaintiff has identified competing claims to the policy benefits. Interpleader is the proper method for resolving such claims. Id. at *2 (citation omitted). Although Defendant Ablaza has a potential claim to the proceeds, he has failed to pursue his claim, because he has not answered the complaint or otherwise appeared. “As a general rule, after properly effecting service of process in an interpleader action, a named interpleader defendant who fails to answer the interpleader complaint and assert a claim to the res forfeits any claim of entitlement that might have been asserted.” Western Progressive, LLC v. Robles, No. 15-cv-01692-BLF, 2015 WL 8028364, at *4 (N.D. Cal. Dec. 7, 2015) (citation omitted). Accordingly, the Court concludes that the second and third factors weigh in favor of default judgment.
Further, the fourth Eitel factor - the sum of money at stake in the action - is neutral in interpleader actions. Id. (citation omitted).
Accordingly, entry of default judgment is appropriate because most of the Eitel factors favor entry of a default judgment and, taken together, those factors outweigh the general policy favoring decisions on the merits (seventh factor). See J & J Sports Productions, Inc. v. Deleon, No. 5:13-CV-02030-EJD, 2014 WL 121711, at *2 (N.D. Cal. Jan. 13, 2014).
V. CONCLUSION
For the reasons stated above, the Court orders the Clerk to REASSIGN this case to a district judge, and the Court RECOMMENDS that:
1) Plaintiff is to deposit the policy death benefits into the Court's registry;
2) Plaintiff is discharged from liability from the claims regarding the benefits of Policy Number LF-3554-3706;
3) Plaintiff is dismissed from this action; and
4) Defendant Ablaza is permanently enjoined and restrained from instituting against Plaintiff any suit, action, or proceeding, administrative or otherwise, related to his claims to the subject benefits of Policy Number LF-3554-3706; and
5) Plaintiff's motion for default judgment be GRANTED as to Defendant Ablaza. Plaintiff shall promptly serve Defendant Ablaza with this Report and Recommendation and
file a proof of service with the Court. Any party may file objections to this Report and Recommendation within fourteen days. Fed.R.Civ.P. 72(b)(2); Civ. L.R. 72-3.
SO ORDERED.