The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge
ORDER DENYING WITHOUT PREJUDICE DEFENDANTS' STIPULATION FOR DISTRIBUTION OF FUNDS AND DISMISSAL OF ACTION (Docket No. 50)
This is an interpleader action brought by Plaintiff Transamerica Life Insurance ("Plaintiff"), based on concerns that it may be subject to multiple conflicting claims regarding the distribution of a deferred life insurance annuity ("Annuity") payable on behalf of Annuitant/Owner Jeri Wood-Shubin ("Wood-Shubin"). (Doc. 2.)
On October 25, 2012, Defendants James Shubin ("James"), Gary Shubin ("Gary")*fn1 , and Roberto Garcia ("Garcia," collectively, "Defendants"), the purportedly designated beneficiaries of the Annuity, filed a Stipulation for Distribution of Remaining Funds and Dismissal of Action ("Stipulation"). (Doc. 50.) For the reasons set forth below, Defendants' request to distribute the remaining funds and to dismiss the action is DENIED without prejudice.
On August 24, 2012, Plaintiff deposited $118,467.48 -- the disputed one-third of the Annuity purportedly owed to Garcia -- with the Court, and on October 10, 2012, Plaintiff was discharged and dismissed from this interpleader action. (Doc. 47.) The Stipulation is between the remaining parties in this action. (Doc. 50.) The Stipulation requests that the disputed funds on deposit with the Court be placed in a trust fund account held by Wild, Cart & Tipton, APC, counsel for James and Gary. (Doc. 50, ¶ 5a.) The Stipulation sets forth that the "funds shall be held therein, in a fiduciary capacity by Wilder, Carter & Tipton, for the benefit of all parties until either a further joint stipulation between the parties for distribution thereof is signed, or Order of the Fresno County Superior Court in consolidated case captioned Lauderdale v. Garcia, Fresno County Court Case No. 11CECG02841, regarding disposition of the funds and entitlement thereto." (Doc. 50, ¶ 5a.) The Stipulation further requests that, subsequent to the distribution of the funds, this action be dismissed in its entirety, all remaining proceedings be taken off calendar, and the Court reserve jurisdiction to enforce the Stipulation if necessary. (Doc. 50, ¶ 5b-d.)
The Court has concerns regarding the course of action requested by Defendants. Specifically, neither James nor Gary filed answers in this case, the Clerk of the Court entered default against them (Docs. 11, 36), and, as such, they have no right to appear in this action. Further, the Stipulation indicates that the Fresno County Superior Court may order distribution of the disputed Annuity funds, but it is unclear how the Annuity falls under the purview of the state court.
A. Defaulting Defendants May Not Appear in an Action
Gary and James are currently in default. Gary was served on December 9, 2011, and James was served on January 19, 2012. (Docs. 7, 14.) James and Gary failed to file responsive pleadings. On January 20, 2012, Plaintiff requested entry of default against Gary, which was entered by the Clerk of the Court on January 23, 2012. (Docs. 10, 11.) On April 11, 2012, Plaintiff filed a Request for Entry of Default as to James. (Doc. 24.) Default was entered by the Clerk of the Court on May 29, 2012. (Doc. 36.)
The Clerk of Court's entry of default cuts off a defendant's right to appear in an action. Clifton v. Tomb, 21 F.2d 893, 897 (4th Cir.1927); see also Great Am. Ins. Co. v. M.J. Menefee Const., Inc., No. CV F06-0392 AWI DLB, 2006 WL 2522408, at *2 (E.D. Cal. Aug. 29, 2006) ("Entry of a defendant's default cuts off a defendant's right to appear in an action or to present evidence"); Cohen v. Murphy, 2004 WL 2779942, *1 (N.D. Cal. 2004) (the same); Newhouse v. Probert, 608 F. Supp. 978, 985 (D.C. Mich. 1985) ("When a party is in default the party himself has lost his standing in court, cannot appear in any way, cannot adduce any evidence, and cannot be heard at the final hearing"); In re Uranium Antitrust Litigation, 473 F. Supp. 382, 386 (D.C. Ill.1979) ("the defaulting defendant loses his standing to defend on the merits . . .").
Here, James and Gary are in default and thus cannot appear. As such, James and Gary have not established how they can enter into the Stipulation when they are not permitted to appear in this action.
"A defendant's remedy if a defendant wants to set aside default . . . is for the defendant to file a motion to set aside entry of default pursuant to Rule 55(c) of the Federal Rules of Civil Procedure." Great Am. Ins. Co., 2006 WL 2522408, at *2. James and Gary were previously advised in the October 19, 2012, Court order of the need to move set aside default. (Doc. 48, 5:3-7 ("The Court notes that Gary and James are both currently in default. (Docs. 11, 36.) As such, if either Gary or James seek to claim any or all of the disputed funds, they would have to each move to set aside their defaults.").) Accordingly, the Court cannot currently consider the Stipulation submitted by Defendants. James and Gary must either move to set aside default, or establish how they are able to enter into a stipulation in this action when they are not permitted to appear.*fn2
B. Fresno County Superior Court Appears to Lack Authority to Issue an Order on these Disputed Funds The Stipulation states that following the distribution of the disputed Annuity funds currently
deposited with the Court into a trust fund account held by James and Gary's counsel, the funds shall be held in the trust account "for the benefit of all parties until either a further joint stipulation between the parties for distribution thereof is signed, or Order of the Fresno County Superior Court in consolidated case captioned Lauderdale v. Garcia, Fresno County Court Case No. 11CECG02841, regarding disposition of the funds and entitlement thereto." (Doc. 50, ¶ 5a.) Defendants are also requesting that the instant case be dismissed in its entirety. (Doc. 50, ¶ 5b.) As such, it appears that Defendants are implying ...