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Mohammed E. Lasheen v. the Loomis Company

March 7, 2011

MOHAMMED E. LASHEEN, PLAINTIFF,
v.
THE LOOMIS COMPANY, ET AL., DEFENDANTS.



FINDINGS AND RECOMMENDATIONS AND RELATED CROSS CLAIM

This matter was referred to the undersigned pursuant to Local Rule 302(c)(19). See 28 U.S.C. § 636(b)(1). Defendant and cross-claimant, The Loomis Company ("Loomis"), moves for entry of default judgment against the Arab Republic of Egypt, the Embassy of the Arab Republic of Egypt, and the Cultural and Educational Bureau (collectively, the "Egyptian defendants"). For the reasons stated below, the undersigned recommends that the motion be granted.

I. BACKGROUND

Plaintiff, Mohammed E. Lasheen ("Lasheen"), was an Egyptian citizen who came to the United States in 2000 as a visiting scholar at the University of California, Davis. Lasheen was enrolled in the Embassy of Egypt Health Care Benefits Plan ("Plan") provided through the Embassy. Under the Benefit Services Management Agreement ("Agreement"), Loomis agreed to provide administrative services for the Plan.

While Lasheen was in the United States, he was diagnosed with liver cancer. Lasheen's physicians determined that he needed a liver transplant, but when he submitted a claim to Loomis requesting coverage for the procedure, the claim was denied. Loomis took the position that Lasheen's previous diagnosis with Hepatitis C constituted a pre-existing condition with respect to his cancer and related problems, and that the transplant was therefore not covered under the Plan. After unsuccessful attempts to challenge that decision, plaintiff died on December 3, 2000. Plaintiff is survived by his wife and three children.

Lasheen's estate filed this action in February 2001 against, among others, the Egyptian defendants and Loomis. Plaintiff alleged claims pursuant to the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001, et seq., and for breach of contract and fiduciary duties.

On April 17, 2001, default was entered against the Egyptian defendants for failure to answer or otherwise timely respond to the complaint. See Dckt. Nos. 21, 22. On June 5, 2003, the Egyptian defendants moved to set aside the entry of default judgment. On July 16, 2003, the district judge determined that default was entered prematurely, as these defendants were entitled to sixty days to serve an answer under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602, et seq. See July 16, 2003 Order, Dckt. No. 80. While the district judge was troubled by the Egyptian defendants' two-year delay in moving to set aside the default, the court granted their motion in the interest of deciding the case on its merits. Id. The defaults were vacated and the Egyptian defendants filed an answer on September 4, 2003.

Loomis continued to defend against Lasheen's claims, and the Egyptian defendants reimbursed it for legal fees and costs associated with that litigation, up to and through July 2005. See Pierce Decl., Dckt. No. 309-2, ¶¶ 2-3. The reimbursements were made pursuant to the terms of the Agreement, which provides that the Egyptian defendants were to indemnify Loomis for expenses "occasioned by claims, demands or lawsuits brought against Loomis to recover benefits under [the Plan]." Id. ¶ 2; Ex. J at 4. When the Egyptian defendants stopped reimbursing Loomis, Loomis continued to defend against Lasheen's lawsuit and provided them with updates regarding the litigation, including notice of a pending settlement with Lasheen. Id. ¶ 3. The Egyptian defendants continued to refuse to indemnify Loomis further, and on November 30, 2005, Loomis filed a cross-claim against them for breach of contract. The Egyptian defendants did not file an answer or otherwise respond to the cross-complaint.

On November 7, 2005, the district judge allowed the attorney for the Egyptian defendants to withdraw as counsel of record, and directed the parties to have counsel appear at a December 19, 2005, status conference. Only counsel for Loomis appeared at that conference. See Dckt. No. 196. In light of the failures to respond or to appear as ordered, on March 2, 2006, the district judge ordered that the Egyptian defendants' September 4, 2003, answer to the complaint be stricken, and directed the Clerk to enter default against them with respect to both the complaint and the cross-claim. The court further directed both Loomis and Lasheen to move for default judgment. See March 2, 2006 Order, Dckt. No. 221.

Before they could do so, the case was administratively terminated pending an appeal by Loomis with respect to the denial of its summary judgment motion regarding the alleged lack of subject matter jurisdiction over plaintiff's claims. See March 22, 2006 Order, Dckt. No. 229. Specifically, Loomis appealed the district court's order finding that it had jurisdiction and that ERISA's exception for foreign plans was not applicable in this case. Pursuant to the parties' stipulation, the appeal was dismissed without prejudice to reinstatement, pending approval of the parties' tentative settlement agreement. See August 6, 2007 Order, Dckt. No. 238.

On November 6, 2007, Loomis and Lasheen filed a joint special motion requesting the court to find that the Egyptian defendants had no immunity to suit due to the inapplicability of FSIA in this case. On December 5, 2007, the Egyptian defendants abruptly reinserted themselves into the case by filing an ex parte request for additional time to oppose the joint special motion.

On December 7, 2007, the district judge ordered the Egyptian defendants to show cause why sanctions should not issue for the delay and inconvenience and advised them that, in order to contest the joint motion, they would first have to move to set aside the default previously entered against them.

On December 19, 2007, the Egyptian defendants moved to set aside the default and responded to the order show cause. They argued that they were never properly served, and that as a result of such improper service, "a former attach© of the Egyptian Cultural Office was led to believe that counsel had been retained by an insurance broker who ostensibly acted as an intermediary between" it and Loomis. It further argued that it was immune from suit under FSIA. See Dckt. No. 355 at 2.

On January 3, 2008, the district judge found that the Egyptian defendants had waived any objection to service long ago, and granted their request to set aside default only to the extent necessary to allow them to oppose the jurisdictional motion. The judge denied the motion to set aside default in all other respects. See January 3, 2008 Order, Dckt. No. 261.*fn1 On February 1, 2008, the district judge granted the joint motion filed by Loomis and Lasheen, and found that the Egyptian defendants were not immune from suit given the inapplicability of FSIA in this case. In that order, the court held that the Agreement between Loomis and the Egyptian defendants constituted a waiver of sovereign immunity as to claims brought by Loomis, and the court further held that the Egyptian defendants' contract with Loomis constituted "commercial activity" outside the scope of the FSIA. Id. at 6, 10. The court noted that "the moving parties ha[d] only argued that the [exceptions] applie[d] to the Agreement between Loomis and the Egyptian defendants. Accordingly, the court [did] not reach the issue of whether the Egyptian defendants [were] entitled to sovereign immunity against Lasheen." Id. at 10 n.4. Nonetheless, the court granted the joint motion in full.

The Egyptian defendants appealed that order, and Loomis and Lasheen moved for entry of default judgment against them. The undersigned held a hearing on the default judgment motion on April 16, 2008, and on July 22, 2008, issued findings and recommendations, stating that Loomis was entitled to default judgment against the Egyptian defendants but recommending denial of the motion without prejudice because the court could not determine, from the evidence presented, whether Loomis was entitled to the specific amount it requested. Dckt. Nos. 296, 297. The district judge adopted the findings and recommendations on September 23, 2008. Dckt. No. 298.

On May 10, 2010, the Ninth Circuit issued an opinion affirming the district judge's determination that the Egyptian defendants were not immune to Loomis's claims because of the commercial activity exceptions to the FSIA. Dckt. No. 301; Embassy of the Arab Republic of Egypt v. Lasheen, 603 F.3d 1166, 1169 (9th Cir. 2010). The Ninth Circuit did not reach the district judge's alternate holding regarding waiver. Id. at 1171-72. The Ninth Circuit remanded to this court for a determination as to "whether either the commercial activities or waiver exception permits Lasheen's claims to proceed." Id. at 1172; Dckt. No. 302. Therefore, on July 8, 2010, the district judge issued an order setting forth a briefing schedule on the issue. Dckt. No. 306.

On August 2, 2010, the Egyptian defendants filed a motion to dismiss and/or for summary judgment. Dckt. No. 307. On September 1, 2010, the district judge issued an order stating that Lasheen had met his burden of establishing that the Egyptian defendants had waived FSIA immunity. Dckt. No. 312. The district judge further stated that "Insofar as the Egyptian defendants instead contend that plaintiff's ERISA claim fails on the merits, rather than for lack of FSIA immunity, the Egyptian defendants have defaulted on this argument." Id. at 10-11 (citing Dckt. No. 268, in which the court had refused to consider a statute of limitations argument because default was set aside solely as to the FSIA issue). The Egyptian defendants have appealed that order. Dckt. No. 314.

Loomis now seeks default judgment against the Egyptian defendants for Loomis's attorneys fees, costs, and amounts paid in defense and settlement of the claims brought against it by Lasheen. Dckt. No. 309. Loomis seeks judgment in the amount of $270,419.65 plus $55,195.06 in pre-judgment interest, for a total of $325,614.71. Those totals are based on $259,768.43 in attorneys fees ($212,327.50 plus $47,440.93 in interest); $9,672.28 in costs ($8,092.15 plus $1580.13 in interest); and $56,174.00 from the payment of four settlement checks ($50,000.00 plus $6,174.00 in interest).*fn2 Dckt. No. 323 at 2; see also Supp. Pierce Decl., Dckt. No. 323-1, ¶¶ 5-8. A hearing was held on the default judgment motion on October 20, 2010, and the parties subsequently submitted briefs as ordered at that hearing. See Dckt. Nos. 322-24.

II. DISCUSSION

Pursuant to Federal Rule of Civil Procedure 55(a), the Clerk is required to enter default when the fact of default is established by affidavit or otherwise. Fed. R. Civ. P. 55(a). In this case, default was entered by the Clerk on March 2, 2006. Now before the court is Loomis's application for entry of default ...


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