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Cumis Insurance Society, Inc. v. Gonzalez

United States District Court, Ninth Circuit

June 14, 2013

CUMIS INSURANCE SOCIETY, INC., Plaintiff,
v.
ELIZABETH ZUNIGA CHAVEZ GONZALEZ and DOES 1 to 10, Defendants.

FINDINGS AND RECOMMENDATIONS GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT Doc. 9

BARBARA A. McAULIFFE, Magistrate Judge.

On May 14, 2013, Plaintiff Cumis Insurance Society, Inc. ("Plaintiff" or "Cumis") filed a Motion for Default Judgment against Defendant Elizabeth Zuniga Chavez Gonzalez ("Defendant" or "Gonzalez"). (Doc. 9). Gonzalez has not responded to the motion or otherwise appeared in this lawsuit. The motion was referred to this Court pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 302. The Court deemed the matter suitable for decision without oral argument pursuant to Local Rule 230(g), and vacated the hearing scheduled for May 10, 2013. For the following reasons, Plaintiff's Motion for Default Judgment should be GRANTED.

BACKGROUND

According to the complaint, Gonzalez was the manager of the Merced branch of the Educational Employees Credit Union ("EECU" or the "Credit Union") from approximately May 16, 2005 through her termination on September 23, 2010. Plaintiff's Complaint at ¶¶ 5, 8, Doc. 1. Between no later than June 2006 and September 23, 2010, Gonzalez engaged in a scheme to steal money from the Credit Union along with her co-defendants Does 1 to 10. Id. at ¶¶ 31, 34. Specifically, Gonzalez fraudulently handled approximately 56 unsecured loans from the Credit Union to her friends and family members. Id. at ¶¶ 9, 31. In some cases, Gonzalez forged the Credit Union's signature and made loans to members without their knowledge; then transferred the money to herself. On other occasions, she manipulated friends and family into applying for loans. To perpetrate her scheme, Gonzalez would inform friends and family that they were pre-approved for a loan, and then ask them if she could borrow that identical amount of money; in return, she promised she would repay both the personal loan and the member's existing, legitimate loan with the credit union. Id. at ¶¶ 11-15.

The Credit Union terminated Gonzalez on September 23, 2010, following its discovery that Gonzalez had falsified documents and approved loans to family members. Id. at ¶¶ 18. After an investigation, Plaintiff found that the $182, 800.92 loss to the Credit Union from these 56 loans was covered by an insurance policy provision covering "employee dishonesty." Id. at ¶¶ 19, 20-22. According to exhibits submitting in support of the motion, this coverage decision was made after a formal coverage analysis found that these 56 improper loans were "part of a general scheme to defraud the credit union." See Declaration of Kevin Rainbolt ("Rainbolt Decl."), Ex. 3 (Doc. 10-1 at 11, 18, 28); Ex. 6 (Doc. 10-2 at 71). Pursuant to this insurance policy, Plaintiff indemnified the Credit Union for its $182, 800.92 loss, less a deductible of $10, 000. Compl. at ¶¶ 20-22.

In exchange for this indemnification, the Credit Union assigned to Plaintiff its right to sue for this loss. Id. at ¶ 23. Plaintiff indemnified the Credit Union's entire loss totaling $182, 800.92, which includes the $10, 000 deductible. See Rainbolt Decl., Ex. 6 (Doc. 10-2 at 71).

Plaintiff filed a complaint on November 26, 2012, against Defendants Gonzalez and Does 1 to 10. (Doc. 1). Gonzalez was served on December 22, 2012 and her answer was due by January 14, 2013. (Doc. 5). On January 29, 2013, after Gonzalez failed to answer or otherwise defend against this action and upon Plaintiff's request, the Clerk entered default against Gonzalez. (Docs. 6, 7). On May 14, 2013, Plaintiff moved for default judgment against Gonzalez. (Doc. 9).

Plaintiff seeks default judgment in the amount of $182, 800.92 on the five claims in its complaint: (1) equitable subrogation, (2) unjust enrichment, (3) fraud, (4) conversion, and (5) money had and received. Although the caption of the complaint lists two additional claims, Plaintiff neither pleads these nor pursues them in this motion. Gonzalez did not oppose this motion. The Court has reviewed the motion, the exhibits and affidavits, and the applicable law, and is sufficiently advised on the issues involved.

LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 55(b)(2), a plaintiff can apply to the court for a default judgment against a defendant that has failed to plead or otherwise defend against the action. FED. R. CIV. P. 55(b)(2). "Upon default, the well-pleaded allegations of a complaint relating to liability are taken as true." Dundee Cement Co. v. Howard Pipe & Concrete Products, Inc., 722 F.2d 1319, 1323 (7th Cir. 1983); TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Thus, "[a]t the time of entry of default, the facts alleged by the plaintiff in the complaint are deemed admitted." 10 J. Moore, MOORE'S FEDERAL PRACTICE § 55.11 (3d ed. 2000).

Factors which may be considered by courts in exercising discretion as to the entry of a default judgment include: (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 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).

Although well-pleaded allegations in the complaint are admitted by a defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) ("[A] defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law" (citation and quotation marks omitted)).

DISCUSSION

A. Service of Process and Jurisdiction

Service of process against Gonzalez was adequate. Gonzalez is not an infant, incompetent person, in military service, or otherwise exempted under the Soldiers' and Sailors' Civil Relief Act of 1940. She was properly served with the complaint and summons by substituted service at her home in San Antonio, Texas on December 22, 2013. See Krone Declaration at ¶ 3 (Doc. 11), Id. at Ex. 6 (Doc. 11-1). Gonzalez's answer was due by January 14, 2013. Id. Gonzalez failed to answer and on January 29, 2013, the clerk entered default against her. (Doc. 6).

The allegations in the complaint are sufficient to establish subject matter jurisdiction in this Court pursuant to 28 U.S.C. § 1332(a)(1). Plaintiff and Gonzalez are citizens of different states: Plaintiff is a corporation, incorporated in and with its principal place of business in Wisconsin. Gonzalez resided in the State of California, County of Merced, and currently resides in Texas. The amount in controversy exceeds $75, 000 exclusive of interest and costs.

B. The Eitel Factors

Having considered the Eitel factors as discussed below, the Court finds that default judgment is ...


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