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North American Specialty Insurance Co. v. Campbell

May 17, 2010

NORTH AMERICAN SPECIALTY INSURANCE COMPANY, PLAINTIFF,
v.
JOSEPH C. CAMPBELL, INDIVIDUALLY AND ALSO KNOWN AS JOE CAMPBELL, AND JOSEPH CHARLES CAMPBELL, AND DBA JC SHOW HORSES; JC SHOW HORSES, LLC; AND DEBORAH SAUERS, INDIVIDUALLY, DEFENDANTS.



FINDINGS AND RECOMMENDATIONS

This matter was referred to the undersigned pursuant to Eastern District of California Local Rule 302(c)(19) and 28 U.S.C. § 636(b)(1) for hearing on plaintiff's motion for entry of default judgment against defendants Joseph Campbell and JC Show Horses LLC.*fn1 On March 3, 2010, a hearing on the motion was held. Attorney Enrique Marinez appeared at the hearing on behalf of plaintiff. No appearance was made on behalf of defendants. For the reasons that follow, and as stated on the record at the hearing, the court recommends that plaintiff's application for entry of default judgment against Campbell and JC Show Horses be granted.

I. BACKGROUND

Plaintiff initiated this action on July 27, 2009 against Campbell, JC Show Horses, and Deborah Sauers, to enforce the rescission of an insurance contract plaintiff entered into with, and issued to, JC Show Horses, or to adjudicate plaintiff's rights and obligations under that insurance contract. Compl., Dckt. No. 1. The complaint alleges that JC Show Horses is the sole named insured under a horse mortality insurance policy issued by plaintiff, which was effective December 21, 2007 until cancelled on August 12, 2008 (the "Policy"); that Campbell, who completed and signed the application for the Policy on behalf of JC Show Horses, knowingly misstated and omitted material facts in the application; that "[h]ad the true facts been disclosed as requested and required, the Policy would not have been issued by [plaintiff]"; and that the application contained an acknowledgment which stated, "I agree that this application and its attachment shall be the basis of the contract. If anything is falsely stated, or information withheld to influence the company's decision, the insurance shall be null and void." Id. ¶¶ 11, 12, 15, 17.

According to the complaint, two of the horses that were insured under the Policy died in May and August 2008; thereafter, Campbell made claims, on behalf of JC Show Horses, related to each horse's death. Id. ¶ 20. The complaint alleges that during its investigation of the claims, plaintiff obtained information supporting various misrepresentations and/or omissions that were made in the application for the Policy, including misrepresentations regarding the ownership of the horses covered by the Policy; misrepresentations regarding the purchase price of the horses; omissions regarding horses previously owned by Campbell and Sauers which had died in the past 24 months; and omissions regarding another insurance company's denial of a claim for a horse owned by Campbell because the horse died "under suspicious circumstances." Id. ¶ 35.

Plaintiff now seeks rescission of the Policy, retroactive to its inception date as if no policy ever issued, and agrees that upon rescission of the Policy, plaintiff will restore to JC Show Horses the policy premium it paid. Id. ¶ 38. In the alternative, plaintiff seeks a declaration that it has no obligation to indemnify JC Show Horses or Campbell for the death of either of the two horses at issue.*fn2

The complaint alleges that the court has diversity jurisdiction pursuant to 28 U.S.C. § 1332, since plaintiff was incorporated in New Hampshire and has its principal place of business in New Hampshire; Campbell is a citizen of California and JC Show Horses is the same entity as Campbell; and Sauers is a citizen of Washington. Compl. ¶¶ 1-6.

Certificates of service, filed on August 13, 2009, demonstrate that defendants Campbell and JC Show Horses were personally served with the complaint and summonses on July 31, 2009 in Lodi, California. Dckt. Nos. 7, 8. On August 26, 2009, pursuant to plaintiff's request, the Clerk of Court entered the default of defendants Campbell and JC Show Horses. Dckt. Nos. 10, 12, 14. Plaintiff's requests for entry of default state that both Campbell and JC Show Horses failed "to plead or otherwise defend" this action. Dckt. Nos. 10, 12. On October 19, 2009, plaintiff filed a motion for default judgment against Campbell and JC Show Horses, and mail served a copy of the motion on those defendants. Dckt. Nos. 23, 30.

The motion for default judgment was originally scheduled for hearing on November 25, 2009. Because neither Campbell nor JC Show Horses had filed an opposition to the motion or otherwise appeared in the action, the motion was submitted without oral argument. Dckt. No. 44. However, on the date of the scheduled hearing, Campbell filed a document entitled "answer," in which he denies the allegations in plaintiff's complaint, contends that he was not properly served with the summons, and asserts that since he learned of the summons, he has been attempting to retain an attorney to represent him in this action. Dckt. No. 46. He also requested time to raise the "balance of the funds necessary to retain [counsel]" but did not indicate how much time he would need to do so. Id.

In light of Campbell's November 25, 2009 filing, on December 3, 2009, plaintiff's motion for default judgment was rescheduled for hearing on January 27, 2010. Dckt. No. 47. Campbell and JC Show Horses were directed to file, on or before January 13, 2010, "an opposition or a statement of non-opposition to plaintiff's motion and/or . . . a request that the court set aside the Clerk's August 26, 2009 entry of default. See Fed. R. Civ. P. 55(c)." Id.

On January 13, 2010, because neither Campbell nor JC Show Horses had complied with the December 3 order, plaintiff filed a "notice of non-receipt of documents ordered by the court and request for entry of default judgment." Dckt. No. 48. Plaintiff acknowledged that "[t]o the extent that Campbell filed a document entitled 'Answer,' after plaintiff had already obtained a Clerk's entry of default, such 'Answer' may be treated by the Court as a motion to set aside entry of default," but argued that the court should not set aside default because Campbell and JC Show Horses had not shown good cause to do so.*fn3 Id. at 2. Plaintiff argued that the court should "pronounce 'enough is enough'" and grant plaintiff's motion for default judgment. Id.

On January 20, 2010, because neither Campbell nor JC Show Horses, LLC had filed an opposition or a statement of non-opposition to plaintiff's motion and/or a request that the court set aside the Clerk's August 26, 2009 entry of default, as required by the court's December 3, 2009 order, the court issued an order to show cause to Campbell and JC Show Horses. Dckt. No. 49. The order stated, in part:

Although Campbell has called the undersigned's courtroom deputy clerk indicating that he is unsure what to file or how to do so, his obligations to comply with the December 3, 2009 order have not been excused.*fn4 Pro se litigants are bound by the rules of procedure, even though pleadings are liberally construed in their favor. King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987). Local Rule 230(c) provides that "[n]o party will be entitled to be heard in opposition to a motion at oral arguments if opposition to the motion has not been timely filed by that party." Additionally, Local Rule 110 provides that failure to comply with the Local Rules or with an order of the court "may be grounds for imposition by the Court of any and all sanctions authorized by statute or Rule or within the inherent power of the Court." See also E.D. Cal. L.R. 183 (governing persons appearing in pro se and providing that failure to comply with the Federal Rules of Civil Procedure and Local Rules may be ground for dismissal, judgment by default, or other appropriate sanction); Ghazali v. Moran, 46 F.3d 52, 53 (9th Cir. 1995) ("Failure to follow a district court's local rules is a proper ground for dismissal.").

Id. The order then continued the hearing on plaintiff's motion for default judgment to March 3, 2010, and directed Campbell and JC Show Horses LLC to file, on or before February 10, 2010, an opposition or a statement of non-opposition to plaintiff's motion and/or a request that the court set aside the Clerk's August 26, 2009 entry of default, and directed them to show cause in writing why one or both of them should not be sanctioned for failing to comply with the December 3, 2009 order. Id. at 3. The order added that "[i]f Campbell and/or JC Show Horses LLC fails to comply with this order, the March 3, 2010 hearing will be vacated, sanctions may be imposed against Campbell and/or JC Show Horses LLC, and default judgment may be entered against one or both of those defendants." Id. The Clerk was directed to serve a copy of the order on defendants Campbell and JC Show Horses LLC.

On February 10, 2010, Campbell filed a letter to the court denying the allegations in plaintiff's complaint, and stating that he does not have the funds to hire an attorney to handle the collection in this case or the education to handle it pro se. Dckt. No. 50. He stated that he prayed "that somehow the federal court will help in the collection of the ...


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