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Maxum Indemnity Company v. Court Services

June 8, 2012



This case 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 Maxum Indemnity Company's motion for entry of default judgment against defendant Court Services, Inc. Dckt. No. 19. A hearing on the motion was held on May 16, 2012. Attorney Elizabeth Musser appeared at the hearing on behalf of plaintiff; defendant failed to appear. For the reasons stated on the record at the hearing, as well as for the reasons stated herein, the undersigned recommends that plaintiff's motion for default judgment be granted.


In this action, plaintiff Maxum Indemnity Company ("Maxum") seeks "a declaration that it has no duty to defend or indemnify Court Services in connection with Mays v. Board of County Commissioners, Case No. 1:09-cv-00662-WJ-KBM (D.N.M.) (the "Underlying Action"), under a general liability insurance policy issued to Court Services, policy no. PRO 0031780-01, effective June 18, 2008 to June 18, 2009 (the "Maxum Policy")." First Am. Compl. ("FAC"), Dckt. No. 7, ¶ 1. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a)(1), because Maxum is a citizen of the States of Delaware and Georgia and Court Services is a citizen of the States of Nevada and California, and the amount in controversy exceeds $75,000, exclusive of interests and costs. FAC ¶ 10.

The Underlying Action was commenced in July 2009 by Magan Marie Mays ("Mays"), who "alleges that she was taken to hotels and raped repeatedly by Court Services employee Albert Preston Long while she was being transferred from a prison in Tennessee to a prison in New Mexico." FAC ¶ 16. Mays' Second Amended Complaint in the Underlying Action asserts negligent hiring and supervision claims against Court Services, asserts that Court Services is negligent per se because it failed to comply with federal regulatory standards for transporting prisoners, asserts that Court Services violated Mays's Eighth and Fourteenth Amendment rights by failing to implement standards that would ensure her personal safety, and asserts a claim for false imprisonment. Mays seeks compensatory damages, punitive damages, and costs of suit.

Maxum is currently defending Court Services under the Maxum Policy, subject to a complete reservation of rights. FAC ¶ 23. The Maxum Policy provides coverage for "property damage" and "bodily injury" caused by an "occurrence," and certain "personal and advertising injury" enumerated offenses, including false imprisonment. FAC ¶¶ 26-33. In this action, Maxum seeks a declaration that it has no duty to defend (first cause of action) or indemnify (second cause of action) Court Services in connection with the Underlying Action, alleging declaratory relief is proper since "[t]here exists a genuine and bona fide dispute, and an actual controversy and disagreement between Maxum and Defendants about whether Maxum has a duty to defend [or indemnify] Court Services in connection with the Underlying Action." FAC ¶¶ 35, 40.

A certificate of service, filed December 14, 2011, demonstrates that the summons and complaint were served on Eric Scott Kindley, a person authorized to accept service of process for defendant, by leaving the first amended complaint and summons with "UPS Store Clerk Jane Doe," the person in charge of the UPS office at 1169 South Main Street, #295, Manteca, California on December 9, 2011, and by thereafter mailing the documents to Kindley on December 9 via First Class mail, postage prepaid. Dckt. No. 13. On February 14, 2012, pursuant to Maxum's request, the Clerk of Court entered defendant's default. Dckt. Nos. 15, 17. On April 2, 2012, Maxum moved for default judgment against defendant, Dckt. No. 19, and mail served a copy of the motion on defendant, Dckt. No. 19-12. Defendant has not filed any opposition to the motion and, as noted above, failed to appear at the May 23, 2012 hearing on the motion.


A. Standards

It is within the sound discretion of the district court to grant or deny an application for default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court considers the following factors:

(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 the 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.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). "In applying this discretionary standard, default judgments are more often granted than denied." Philip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003) (quoting PepsiCo, Inc. v. Triunfo-Mex, Inc., 189 F.R.D. 431, 432 (C.D. Cal. 1999)).

As a general rule, once default is entered, the factual allegations of the complaint are taken as true, except for those allegations relating to damages. TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (citations omitted). However, although well-pleaded allegations in the complaint are admitted by defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally ...

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