A One Commer. Ins. Risk Retention Group v. Le
United States District Court for the Central District of California, Southern Division
June 24, 2021, Decided; June 24, 2021, Filed
Case No.: SACV 20-01929-CJC(ADSx)
2021 U.S. Dist. LEXIS 119185 *
A-ONE COMMERCIAL INSURANCE RISK RETENTION GROUP, INC., Plaintiff, v. MICHAEL HONG LE, Defendants.
ORDER GRANTING PLAINTIFF’S APPLICATION FOR DEFAULT JUDGMENT [Dkt. 57]
I. INTRODUCTION & BACKGROUND
On October 6, 2020, Plaintiff A-One Commercial Insurance Risk Retention Group, Inc. filed this lawsuit against Defendants United Clean Trucks, Inc. (“UCT”), Francisco Jesus Arrieran (“Arrieran”)—CEO, Secretary, and CFO of UCT—Alain Montoya Arboleda (“Arboleda”), and Michael Hong Le (“Le”), seeking declaratory relief. (Dkt. 1 [Complaint, hereinafter “Compl.”].)
Plaintiff issued a motor carrier liability insurance policy (“the Policy”) to UCT for the period from April 1, 2019 to April 1, 2020. (Id. ¶ 12.) The Policy provides a $1,000,000 per accident limit for “bodily injury” arising from the use of a “covered auto,” which is limited by the policy to “Specifically Described Autos.” (Id.) The Policy includes a Scheduled Driver Endorsement which provides no coverage for any loss in excess of the state minimum financial [*2] responsibility requirements that involves a driver not identified on an attached Driver Schedule. (Id. ¶ 13.) The Policy also requires UCT to give Plaintiff prompt notice of any accident or loss and further requires the insured to “[c]ooperate with [Plaintiff] in the investigation or settlement of the claim.” (Id. ¶ 14.)
The Policy also attaches mandatory forms MCS-90 and DMV-67, which require Plaintiff to indemnify members of the public injured by the UCT’s negligent use, operation, or maintenance of any vehicles used in UCT’s commercial transportation business whether or not the specific vehicles are covered by the insurance policy, up to the minimum financial responsibility requirements. (Id. ¶ 19.) According to these mandatory forms and federal and state law, Plaintiff has a right to recoup any payment it is required to make because of the application of the MCS-90 and DMV-67 endorsements from Arrieran and UCT. (Id.)
On August 30, 2019, Le sustained serious injuries to his hand while assisting Arboleda at the Port of Long Beach. (Id. ¶ 9.) Arboleda was an independent contractor hired by UCT to pick up a load of cargo at the port using his own tractor. (Id. ¶ 10.) While at the Port, [*3] Arboleda sought to extend the length of the trailer chassis and asked Le to assist in the extension. (Id.) Le’s hand was seriously injured during the trailer extension effort. (Id.) On July 27, 2020, Le sued Arboleda and UCT in Los Angeles Superior Court alleging negligence, negligence per se, vicarious liability, and negligent training (“Underlying Action”). (Id. ¶ 11.)
On September 6, 2019, Plaintiff received notice of the accident involving Le and Arboleda. (Id. ¶ 14.) Despite repeated requests for information from UCT, Plaintiff has not obtained UCT’s assistance in the investigation or the Underlying Action. (Id.) Plaintiff alleges that neither the tractor Arboleda was driving at the time of the accident nor the trailer Arboleda attempted to pick up at the Port were Specially Described Autos under the Policy and that Arboleda was not a Scheduled Driver on the Policy. (Id. ¶¶ 16-18.)
As a result, Plaintiff filed this action seeking, in relevant part, (1) a declaration that Plaintiff has no obligation to defend UCT or Arrieran under the Policy and (2) a declaration that Plaintiff is entitled to reimbursement from UCT and Arrieran for any payments Plaintiff is required to make in the [*4] Underlying Action pursuant to the MCS-90 or DMV-67 endorsements. (Id. at 7.) On January 13, 2021, Plaintiff settled with Le in the Underlying Action for $750,000. (App. at 3.)
After Defendants UCT and Arrieran failed to appear in this action and the clerk entered default against them, (Dkts. 29, 32), Plaintiff filed the instant application for default judgment. (Dkt. 57 [hereinafter “App.”].) For the following reasons, the application is GRANTED.1
A. Jurisdiction and Service of Process
In considering whether to enter default judgment against a defendant, a court must first determine whether it has jurisdiction over the subject matter and the parties. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Courts must also determine whether there was sufficient service of process on the party against whom default judgment is requested. See Mason v. Genisco Tech. Corp., 960 F.2d 849, 851 (9th Cir. 1992).
The Court has diversity jurisdiction over Plaintiff’s claims because there is complete diversity among the parties and because the amount in controversy exceeds $75,000. (Compl. ¶¶ 1-8, 12); see 42 U.S.C. § 1332. It has personal jurisdiction over UCT and Arrieran because they are domiciled in this District. (Compl. ¶¶ 4-5.) And there has been adequate service of process pursuant to the Federal Rules of [*5] Civil Procedure as UCT was served by substituted service with the summons and complaint on November 9, 2020, (Dkt. 16), and Arrieran was served by personal service on October 16, 2020, (Dkt. 14).
B. Procedural Requirements for Default Judgment
Rule 55(b)(2) of the Federal Rules of Civil Procedure and this Court’s Local Rule 55-1 require that applications for default judgment set forth the following information: “(1) when and against which party default was entered; (2) the identification of the pleadings to which default was entered; (3) whether the defaulting party is an infant or incompetent person, and if so, whether the person is adequately represented; (4) that the Soldiers’ and Sailors’ Civil Relief Act of 1940 does not apply; and (5) that notice of the application has been served on the defaulting party, if required.” Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003).
Here, the procedural requirements for default judgment have been satisfied: (1) the clerk entered default against UCT and Arrieran on December 22, 2020, (Dkts. 29, 32); (2) default was entered as to the Complaint, (id.); (3) Defendant is neither an infant nor incompetent, (App. at 14 [Declaration of Douglas A. Greer, hereinafter “Greer Decl.”] ¶ 9); and (4) the Soldiers’ and Sailors’ Relief Act of 1940 does not apply, (id.). The [*6] fifth requirement also does not apply because Defendants failed to appear in this action. Fed. R. Civ. P. 55(b)(2). Nevertheless, Plaintiff served notice of its motion for default judgment on UCT on May 28, 2021, (Dkt. 56), and Arrieran on June 1, 2021, (Dkt. 55).
C. Merits of the Motion for Default Judgment
After entry of default, a court may grant a default judgment on the merits of the case. Fed. R. Civ. P. 55(a)—(b). “The district court’s decision whether to enter a default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). A court may consider the following factors articulated in Eitel v. McCool in exercising such discretion:
(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.
782 F.2d 1470, 1471-72 (9th Cir. 1986). Because default has been entered in this case, the Court must construe as true all of “the factual allegations of the complaint, except those relating to the amount of damages.” Tele Video Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Here, the Eitel factors weigh in favor of [*7] default judgment.
1. Possibility of Prejudice to the Plaintiff
The first Eitel factor requires the Court to consider the harm to the plaintiff if the Court does not grant default judgment. See PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). This factor weighs in Plaintiff’s favor because, without a default judgment, he would lack any other recourse for recovery since Defendants have failed to appear or defend this suit. See Seiko Epson Corp. v. Prinko Image Co. (USA), 2018 WL 6264988, at *2 (C.D. Cal. Aug. 22, 2018) (“Given Defendant’s unwillingness to answer and defend, denying default judgment would render Plaintiffs without recourse.”).
2. & 3. The Merits of the Claim and the Sufficiency of the Complaint
The second and third Eitel factors, taken together, “require that a plaintiff state a claim on which [it] may recover.” Philip Morris, 219 F.R.D. at 499. The Court finds that the Complaint adequately states a claim for declaratory relief.
The Declaratory Judgment Act requires that a party seeking declaratory relief must allege (1) an actual controversy (2) regarding a matter within federal subject matter jurisdiction. 28 U.S.C. § 2201(a). Once these two requirements are met, a presumption exists that a court may hear a declaratory judgment action. Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1224 (9th Cir. 1998). Declaratory relief is often sought in actions between insurers and insureds to determine rights and obligations under an insurance [*8] policy. See United States v. Transp. Indem. Co., 544 F.2d 393, 395 (9th Cir. 1976); see also Essex Ins. Co. v. Yi, 795 F. Supp. 319, 322 (N.D. Cal. 1992) (collecting cases showing that declaratory relief is appropriate to negate an insurer’s duty to defend).
Here, Plaintiff’s Complaint asserts a genuine controversy regarding A-One’s rights under the Policy. Under California law, “[a]n insurer has a duty to defend its insured against claims that are potentially covered under the insurance policy.” Saarman Construction, Ltd. v. Ironshore Specialty Ins. Co., 230 F. Supp. 3d 1068, 1076 (N.D. Cal. 2017). Plaintiff alleges that the vehicle involved in the Le accident was not covered under the Policy nor was Arboleda a scheduled driver under the Policy. (Compl. ¶¶ 17-18.) As a result, Plaintiff asserts that it has no obligation under the policy to defend UCT or Arrieran and that it is entitled to reimbursement for payments made pursuant to the MCS-90 or DMV-67 endorsements. (Id. at 7.) Accordingly, the second and third Eitel factors weigh in favor of entering default judgment on Plaintiff’s ADA claim.
4. The Sum of Money at Stake
The fourth Eitel factor requires the Court to “consider the amount of money at stake in relation to the seriousness of [the defendant’s] conduct.” PepsiCo, Inc., 238 F. Supp. 2d at 1176. “Default judgment is disfavored where the sum of money at stake is too large or unreasonable in relation to defendant’s conduct.” Vogel v. Rite Aid Corp., 992 F. Supp. 2d 998, 1012 (C.D. Cal. 2014). Here, the amount [*9] at stake is $750,000 for Plaintiff’s settlement with Le in the Underlying Action, which Plaintiff is entitled to recoup under the application of the MCS-90 or DMV-67 endorsements. (Mot. at 9.) This sum of money is not too large or unreasonable, particularly where Plaintiff’s right to reimbursement is established by law.
5. & 6. The Possibility of a Dispute Concerning Material Facts and Whether the Default was Due to Excusable Neglect
The fifth and sixth Eitel factors require the Court to determine whether it is likely that there would be a dispute as to material facts and whether the defendant’s failure to litigate is due to excusable neglect. When a plaintiff’s complaint is well-pleaded and the defendant makes no effort to properly respond, the likelihood of disputed facts is low. See Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp. 2d 916, 921 (C.D. Cal. 2010). There is also no indication that Defendants’ default was due to excusable neglect because they failed to appear despite being served with the Complaint and the application for default judgment. See Adobe Sys. Inc. v. Kern, 2009 WL 5218005, at *6 (N.D. Cal. Nov. 24, 2009) (“Defendant’s voluntary decision to allow default to be entered contradicts any argument for excusable neglect.”). Given that Plaintiff’s factual allegations are taken as true and Defendants have failed to [*10] oppose Plaintiff’s motion, the Court is not aware of any factual disputes that would preclude entry of default judgment.
7. The Public Policy Favoring Decisions on the Merits
Because public policy dictates that courts prefer to rule on the merits, this factor will always weigh against granting a motion for default judgment. “The mere enactment of Rule 55(b), however, indicates that ‘this preference, standing alone, is not dispositive.'” Prinko Image Co., 2018 WL 6264988, at *3 (quoting PepsiCo, Inc., 238 F. Supp. 2d at 1177). Indeed, Defendants’ choice not to defend themselves renders a decision on the merits “impractical, if not impossible.” PepsiCo Inc., 238 F. Supp. 2d at 1177. Because all the other Eitel factors weigh in Plaintiff’s favor, the Court will exercise its discretion and grant Plaintiff’s motion for default judgment.
D. Relief Sought
Once a court concludes that default judgment is appropriate, it must determine what relief is warranted. Plaintiff carries the burden of proving his requests for relief. See Bd. of Trs. of the Boilermaker Vacation Tr. v. Skelly, Inc., 389 F. Supp. 2d 1222, 1226 (N.D. Cal. 2005). Here, Plaintiff seeks declaratory relief and an award of costs. (Mot. at 12-13.) For the reasons discussed above, the Court finds Plaintiff is entitled to declaratory relief as to UCT and Arrieran.2
Plaintiff also seeks an award of its costs of suit. “The moving party has the burden to ‘prove [*11] up’ the amount of damages.” Mesa Underwriters Specialty Ins. Co. v. Paradise Skate, Inc., 2016 WL 9045622, at *10 (N.D. Cal. Apr. 11, 2016). Plaintiff has failed to offer any evidence to “prove up” the costs of suit. Accordingly, it has failed to carry its burden for an award of costs.
For the foregoing reasons, Plaintiff’s motion for default judgment is GRANTED IN SUBSTANTIAL PART. Plaintiff is awarded declaratory relief that (1) it has no obligation under the Policy to defend UCT or Arrieran in the Underlying Action and (2) it is entitled to reimbursement of $750,000 from UCT and Arrieran for the settlement with Le in the Underlying Action pursuant to the MCS-90 and DMV-67 endorsements. A judgment consistent with this Order will be issued forthwith.
DATED: June 24, 2021
/s/ Cormac J. Carney
CORMAC J. CARNEY
UNITED STATES DISTRICT JUDGE
This matter came before the Court on Plaintiff’s motion for default judgment. On June 24, 2021, the Court granted Plaintiff’s motion in substantial part. In accordance with the Court’s Order, IT IS HEREBY ORDERED that judgment is entered in favor of Plaintiff for declaratory relief that (1) Plaintiff has no obligation under the Policy to defend UCT or Arrieran in the Underlying Action and (2) Plaintiff is entitled to reimbursement of $750000 [*12] from UCT and Arrieran for the settlement with Le in the Underlying Action pursuant to the MCS-90 or DMV-67 endorsements.
DATED: June 24 2021
/s/ Cormac J. Carney
CORMAC J. CARNEY
UNITED STATES DISTRICT JUDGE