Opinion
3:23-cv-00713-YY
09-19-2023
SCOTTSDALE INSURANCE COMPANY, an Ohio corporation, Plaintiff, v. SIX STARS CONSTRUCTION, LLC, an Oregon Limited Liability COMPANY; ROBERT COLE TOZER, PERSONAL REPRESENTATIVE OF THE ESTATE OF JOEL VALDEZ COVARRUBIAS, DECEASED, Defendants.
FINDINGS AND RECOMMENDATIONS
Youlee Yim You United States Magistrate Judge
FINDINGS
Plaintiff Scottsdale Insurance Company (“Scottsdale”) has brought this suit seeking a declaratory judgment that it has no duty to defend or indemnify defendant Six Stars Construction, LLC (“Six Stars”) in a wrongful death action currently pending in Multnomah County Circuit Court. Six Stars has failed to appear in this case, and the clerk entered a default on August 23, 2023. ECF 16; see FED. R. CIV. P. 55(a). Scottsdale has now filed a Motion for Entry of Default Judgment regarding its duty to defend Six Stars (ECF 17), which should be granted. The remaining issue of whether Scottsdale has a duty to indemnify has been stayed pending resolution of the underlying state court case. See Order on Stipulated Motion to Stay, ECF 19.
See Estate of Joel Valdez Covarrubias v. Katerra Construction LLC, Katerra, Inc., Amberglen South Sr Development, LLC, N.W. Framing & Const LLC, Six Stars Construction LLC, et al, Multnomah County Circuit Court No. 22CV14786 .
I. Subject Matter Jurisdiction
The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 based on diversity of citizenship and an amount in controversy in excess of $75,000. Scottsdale is a citizen of Ohio and Arizona and defendants are citizens of Oregon.
II. Personal Jurisdiction
A district court “has an affirmative duty” to determine whether it has personal jurisdiction over a defendant before entering a default judgment. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). “A judgment entered without personal jurisdiction over the parties is void.” Id.
The court has personal jurisdiction over Six Stars, which is an Oregon limited liability company. See Daimler AG v. Bauman, 571 U.S. 117, 137 (2014) (“With respect to a corporation, the place of incorporation and principal place of business are ‘paradig[m] . . . bases for general jurisdiction.'”) (citation omitted).
III. Service of Process
Before entering a default judgment, the court must “assess the adequacy of the service of process on the party against whom default is requested.” Bank of the West v. RMA Lumber Inc., No. C 07-06469 JSW, 2008 WL 2474650, at *2 (N.D. Cal. June 17, 2008). “[I]n the absence of proper service of process, the district court has no power to render any judgment against the defendant's person or property unless the defendant has . . . waived the lack of process.” S.E.C. v. Ross, 504 F.3d 1130, 1138-39 (9th Cir. 2007).
Under Federal Rule of Civil Procedure 4(e), service on an individual within a judicial district of the United States may be accomplished by following state law or “(A) delivering a copy of the summons and of the complaint to the individual personally; (B) leaving a copy of each at the individual's dwelling or usual place of abode with someone of suitable age and discretion who resides there; or (C) delivering a copy of each to an agent authorized by appointment or by law to receive service of process.” Here, service was made on Six Stars' registered agent. See Decl. Service, ECF 6.
IV. Eitel Analysis
The district court must exercise its decision in determining whether to enter a default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising its discretion, the court considers the following factors under Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986):
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.Id. at 1471-72. As discussed below, the Eitel factors weigh heavily in favor of default judgment in this case.
A. Factor One: Possibility of Prejudice to Plaintiff
In assessing the possibility of prejudice, courts have considered whether a plaintiff would be without recourse for recovery if the motion for default judgment is not granted. See, e.g., J &J Sports Prods., Inc. v. Cardoze, No. C 09-05683 WHA, 2010 WL 2757106, at *5 (N.D. Cal. July 9, 2010); PepsiCo, Inc. v. California Sec. Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002). Here, Scottsdale has no recourse for recovery other than to file this action.
B. Factors Two and Three: Merits of Claims and Sufficiency of Complaint
Upon entry of default, this court must take the well-pleaded factual allegations of the complaint as true. See Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (“In reviewing a default judgment, this court must take the well-pleaded factual allegations of [the complaint] as true.”); Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (“The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.”).
Scottsdale's well-pleaded complaint alleges facts establishing that it is entitled to declaratory relief regarding duty to defend. Scottsdale's claims are brought pursuant to 28 U.S.C. § 2201, which provides:
In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.28 U.S.C. § 2201(a). The underlying state court action alleges that, on October 13, 2019, the deceased individual, Joel Valdez Covarrubias, and other construction workers were riding in a van operated by Niceforo Ruben Ortiz Franco, who was supplying labor for Six Stars and other contractors and acting as their employee and/or agent, when the van collided with another vehicle and Covarrubias died from his injuries. Compl., Ex. A, ECF 1, at 19. Scottsdale alleges it has no duty to defend because the policy that it issued to Six Stars contains both an “Auto” exclusion and an “Injury or Damage to Employee or Worker” exclusion. Compl. ¶¶ 24-26, ECF 1; see also id., Ex. B (copy of policy for period May 9, 2019, to May 9, 2020). Notably, the personal representative of Covarrubias's estate does not object to Scottsdale's motion for declaratory judgment on the issue of duty to defend. Assuming the facts alleged in the complaint are true, due to the auto and personal injury exclusions, Scottsdale prevails on its claim for declaratory judgment that it has no duty to defend.
C. Fourth Factor: Sum of Money at Stake
Under the fourth Eitel factor, “the court must consider the amount of money at stake in relation to the seriousness of [defendant's conduct.” PepsiCo, 238 F.Supp.2d at 1176-77; see also J & J Sports, 2010 WL 2757106, at *5 (“a large sum of money at stake would disfavor default damages,” such as a request for $114,200 in damages); Board of Trustees of the Sheet Metal Workers v. Vigil, No. C 07-01508 WHA, 2007 WL 3239281, at *2 (N.D. Cal. Nov. 1, 2007) (“[D]efault judgment is disfavored if there were a large sum of money involved.”).
Here, the sum of money at issue is large-the policy limit is $1,000,000 for each occurrence. However, because of the exclusions in the policy, Scottsdale has established that it is entitled to a declaratory judgment that it has no duty to defend.
D. Fifth Factor: Possibility of Dispute Over Material Facts
In addressing the fifth factor, the court considers the possibility that there is a dispute concerning material facts. “The fifth factor . . . weighs in favor of default judgment when the claims in the complaint are well-pleaded.” Joe Hand Prods. v. Holmes, No. 2:12-cv-00535-SU, 2015 WL 5144297, at *7 (D. Or. Aug. 31, 2015). “Because all allegations in a well-pleaded complaint are taken as true after the court clerk enters default judgment, there is no likelihood that any genuine issue of material fact exists.” Elektra Entm't Grp., Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005).
Here, as noted, Scottsdale's complaint is well-pleaded, and the policy presented by plaintiff contains exclusions that establish it has no duty to defend Six Stars. Thus, while it is possible there is a dispute regarding material facts, the possibility is low.
E. Sixth Factor: Excusable Neglect
The sixth factor pertains to the possibility that the default resulted from excusable neglect. “This factor favors default judgment where the defendant has been properly served or the plaintiff demonstrates that the defendant is aware of the action.” Wecosign, Inc. v. IFG Holdings, Inc., 845 F.Supp.2d 1072, 1082 (C.D. Cal. Jan. 23, 2012). As noted, Six Stars' was served through its registered agent. There is no indication of excusable neglect.
F. Policy Favoring Decision on the Merits
Factor seven is “the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits,” specifically the policy that “[c]ases should be decided upon their merits whenever reasonably possible.” Eitel, 782 F.2d at 1472. However, “this policy, standing alone, is not dispositive, especially where a defendant fails to appear or defend itself in an action.” Joe Hand Promotions, Inc. v. Machuca, No. 2:13-cv-1228 GEB KJN, 2014 WL 1330749, at *6 (E.D. Cal. Mar. 31, 2014). Where a defendant has failed to answer a complaint, this “makes a decision on the merits impractical, if not impossible.” PepsiCo, 238 F.Supp.2d at 1177. “[T]he mere existence of Fed.R.Civ.P. 55(b) indicates that ‘this preference, standing alone, is not dispositive.'” Id. “Thus, the preference to decide cases on the merits does not preclude a court from granting default judgment.” Id. (internal quotation omitted).
Here, a decision on the merits is impossible because Six Stars has failed to appear, plead, or defend this action. But, as noted, that factor is not dispositive. All of the other Eitel factors support the court's exercise of discretion in entering a default judgment.
RECOMMENDATIONS
Scottsdale Insurance Company's Motion for Entry of Default Judgment Re Duty to Defend Six Stars (ECF 17) should be GRANTED and a declaratory judgment should be issued that Scottsdale Insurance Company has no duty to defend Six Stars Construction LLC in the matter of Robert Cole Tozer, Personal Representative of the Estate of Joel Valdez Covarrubias v. Six Stars Construction LLC, et al., Multnomah County Circuit Court No. 22CV14786.
SCHEDULING ORDER
These Findings and Recommendations will be referred to a district judge. Objections, if any, are due Tuesday, October 03, 2023. If no objections are filed, then the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within 14 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement.
NOTICE
These Findings and Recommendations are not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any Notice of Appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of a judgment.