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). On December 5, 2012, the court held a hearing on plaintiff's motion 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"). Dckt. No. 345. Attorney Randy Andrus appeared on behalf of plaintiff; attorney John Hermina appeared on behalf of the Egyptian defendants. For the reasons stated below, the undersigned recommends that the motion be granted.
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"), The Loomis Company ("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.*fn2 Plaintiff asserted 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. Compl., Dckt. No. 1.
On April 17, 2001, default was entered against the Egyptian defendants for failure to answer or otherwise timely respond to the complaint. Dckt. Nos. 21, 22. On June 5, 2003, the Egyptian defendants moved to set aside the entry of default. 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. Dckt. No. 80. While the court 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. Accordingly, the defaults were vacated and the Egyptian defendants filed an answer on September 4, 2003. Answer, Dckt. No. 95.
Loomis initially defended against Lasheen's claims, and the Egyptian defendants indemnified it for its legal fees and costs, up to and through July 2005. 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. 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 court allowed the attorney for the Egyptian defendants to withdraw as counsel of record. The court also directed the parties to appear at a December 19, 2005 status conference. Only counsel for Loomis appeared at that conference. Dckt. No. 196. In light of the Egyptian defendants' failure to appear, 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. He further directed both Loomis and Lasheen to move for default judgment. 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. 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. Dckt. No. 238. The tentative settlement agreement was conditioned upon Loomis and Lasheen's ability to recover from the Egyptian defendants.
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. Dckt. No. 239. On December 5, 2007, the Egyptian defendants suddenly reinserted themselves into the case by filing an ex parte request for additional time to oppose the joint special motion. Dckt. No. 246.
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. Dckt. No. 252.
On December 17, 2007, the Egyptian defendants moved to set aside the default and responded to the order show cause. Dckt. No. 255. They argued that they were never properly served, and that as a result of such improper service, "a former attache 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. The Egyptian defendants further argued that they were immune from suit under FSIA.
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.*fn3 Dckt. No. 261.
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. Dckt. No. 268. 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. Dckt. Nos. 274, 275, 282. The undersigned held hearings on the default judgment motions on March 19, 2008 and April 16, 2008, Dckt. Nos. 293, 296, and on July 22, 2008, issued findings and recommendations, recommending that Lasheen's motion for default judgment be denied without prejudice to renewal upon submission of additional briefing and evidence.*fn4 Dckt. No. 297. Those findings and recommendations were adopted on September 23, 2008. Dckt. No. 298.
On May 10, 2010, the U.S. Court of Appeals for 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 this court'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. Lasheen filed an opposition on August 16, 2010. Dckt. No. 308. The district judge held a hearing on the matter on August 30, 2010, and on September 1, 2010, issued an order stating that Lasheen had met his burden of establishing that the Egyptian defendants had waived FSIA immunity. Dckt. No. 312. The court further explained 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 refused to consider a statute of limitations argument because default was set aside solely as to the FSIA issue).
The Egyptian defendants appealed that order. Dckt. No. 314. In July 2012, the Ninth Circuit affirmed this court's order, finding that because Lasheen's claims arise out of the Egyptian defendants' commercial activity, the Egyptian defendants fall under a statutory exception of the FSIA and are not entitled to sovereign immunity. Dckt. No. 341. The Circuit also granted Lasheen's unopposed motion to transfer consideration of attorney's fees on appeal to the district court. Dckt. No. 343.
While the appeal was pending as to Lasheen, Loomis once again sought default judgment. Dckt. No. 309. After a hearing on the motion, the undersigned issued findings and recommendations, recommending that Loomis's application for entry of default judgment against the Egyptian defendants be granted; and Loomis be awarded $270,419.65 in attorneys fees and costs, plus $55,195.06 in prejudgment interest, for a total of $325,614.71. Dckt. No. 326. The findings and recommendations were adopted in full on April 15, 2011. Dckt. No. 329.
Lasheen now seeks default judgment against the Egyptian defendants
jointly and severally, in the amount of $604,580.51,*fn5
Dckt. No. 345, which the Egyptian defendants oppose, Dckt.
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 ...