United States District Court, E.D. California
ORDER AND FINDINGS AND RECOMMENDATIONS
KENDALL J. NEWMAN UNITED STATES MAGISTRATE JUDGE.
pending before the court is plaintiff Atain Specialty
Insurance Company's ("plaintiff") motion for
default judgment against defendant Richard Szetela d.b.a. D&D
Pilot Car Services ("Szetela"). (ECF No. 52.) To
date, Szetela has not opposed plaintiff's motion, or
otherwise made an appearance in this action. Pursuant to the
court's minute order issued on June 10, 2016,
plaintiff's motion for default judgment was taken under
submission on the papers and without oral argument. (ECF No.
55.) For the reasons stated below, the undersigned recommends
that plaintiff's motion for default judgment be granted,
that judgment be entered in plaintiff's favor and against
Szetela, and a declaratory judgment be issued declaring that
plaintiff owes no duty to defend or indemnify Szetela for the
claims asserted against him in Sacramento Superior Court Case
background facts are taken from plaintiff's complaint,
unless otherwise noted. (See ECF No. 1.) Plaintiff
alleges that defendant Szetela, a pilot car driver for
oversized loads, is the insured under an insurance policy
issued by plaintiff, numbered CIP112913, for a period
commencing January 11, 2012, through January 11, 2013 (the
"Insurance Policy"). (Id. ¶ 10.)
Plaintiff alleges that on July 17, 2013, defendant Alterra
American Insurance Company ("Alterra") filed an
action in the Sacramento County Superior Court against
Szetela, Case No. 34-2013-00148105 ("Underlying
Action"). (Id. ¶ 12.) On or about
September 16, 2014, defendants Duffy Crane, Inc. d/b/a Duffy
Crane and Hauling, Inc. ("Duffy Crane") and Duffy
Holdings, LLC ("Duffy Holdings") filed a complaint
in intervention in the Underlying Action. (Id.
Underlying Action, Alterra alleges that it insured Duffy
Holdings, a hauling business, in the transport of a UE
Compression filter skid to from Henderson, Colorado to Desert
Springs, California. (Id. ¶¶ 14-15.) Duffy
Holdings allegedly contracted with Szetela to secure pilot
car services for the transport of the UE Compression filter
skid on April 2, 2012, ("Duffy/Szetela Contract").
(Id. ¶ 15.) That contract allegedly required
Szetela to "select the transportation route, secure and
pay all permits and fees necessary for proper execution and
completion of the route, and take all reasonable safety
precautions with respect to completion of the route."
(Id. ¶ 16.) The contract allegedly provided
further that Szetela shall include Duffy Crane "as an
additional insured on [his] General Liability and Commercial
Automobile Insurance Policy." (Id. ¶ 17.)
Under the alleged terms of the Duffy/Szetela Contract,
Szetela agreed "to defend, indemnify and hold [Duffy
Crane], harmless from any and all claims, suits, losses or
liability" arising out of Szetela's performance or
breach of that agreement. (Id. ¶ 18.) Alterra,
Duffy Crane, and Duffy Holdings allege in the Underlying
Action that Szetela breached the Duffy/Szetela Contract and
acted negligently "by failing to prevent the UE
Compression filter skid from striking [an] overpass"
when he was engaging in pilot car services pursuant to the
Duffy/Szetela Contract. (Id. ¶ 19.) They allege
further that Szetela breached the Duffy/Szetela Contract
"by failing to indemnify Duffy [Crane] and/or Duffy
Holdings for damages incurred as a result of the
collision." (Id. ¶ 20.)
alleges that Szetela tendered the claims made against him in
the Underlying Action to plaintiff "who accepted
[Szetela's] tender under a full and complete reservation
of rights." (Id. ¶ 22.) Plaintiff alleges
that it "has paid and continues to pay a portion of the
defense fees and costs incurred in the defense of the
Underlying Action." (Id. ¶ 23.) It alleges
further that the Insurance Policy contains a
"Professional Services Exclusion" clause and a
"Contractual Liability Exclusion" clause that
exclude certain activities from coverage. Plaintiff alleges
that "[i]n selecting the route of transportation for the
UE Compression filter . . . and in escorting Duffy's
driver on that route, [Szetela] was rendering a professional
service." (Id. ¶ 28.) Accordingly,
plaintiff alleges, Szetela's activities at issue in the
Underlying Action fell within both the "Professional
Services Exclusion" and the "Contractual Liability
Exclusion" in the Insurance Policy, therefore meaning
that plaintiff "owes no duty to defend or indemnify
[Szetela] against the claims made by Alterra, Duffy [Crane]
or Duffy Holdings." (Id. ¶ 29.)
on the above allegations, plaintiff seeks relief in the form
of a declaratory judgment pursuant to 28 U.S.C. § 2201
that plaintiff owes no duty to defend or indemnify Szetela
for the claims asserted in the Underlying Action and that
Alterra, Duffy Crane, and Duffy Holdings have no right of
subrogation or contribution against plaintiff for claims
asserted in the Underlying Action. (Id. at 7.)
Plaintiff also seeks recovery of the attorney fees and costs
it incurred in defending Szetela in the Underlying Action.
complaint and summons were served upon defendant
Alterra's agent for service on January 7, 2015, by
substituted service at Alterra's place of business. (ECF
No. 7.) Summonses were served on defendants Duffy Crane's
and Duffy Holdings' agent for service on January 8, 2015,
by personal service at those defendants' shared place of
business. (ECF Nos. 8, 9.) Plaintiff's complaint and
summons were served upon defendant Szetela on January 15,
2015, by personal service at his address. (ECF No. 10.)
February 27, 2015, Alterra answered the complaint and filed a
counterclaim seeking a declaratory judgement finding that the
events alleged in the Underlying Action are not excluded from
plaintiff's coverage of Szetela under the Insurance
Policy. (ECF No. 12.) None of the other defendants answered
the complaint or otherwise appeared in this action.
Accordingly, on May 1, 2015, plaintiff filed a request for
entry of default against Szetela. (ECF No. 16.) On May 5,
2015, the Clerk of Court entered defendant Szetela's
default. (ECF No. 18.) On May 20, 2015, plaintiff dismissed
defendants Duffy Crane and Duffy Holding from this action.
(ECF No. 23.)
and defendant Alterra filed cross-motions for summary
judgment, and plaintiff also filed a motion for default
judgment against Szetela. (ECF Nos. 24, 31.) On March 23,
2016, Judge Mueller granted plaintiff's motion for
summary judgement and denied Alterra's motion for summary
judgment. (ECF No. 45.) In granting plaintiff's motion,
Judge Mueller found that Szetela's actions giving rise to
the claims in the Underlying Action fell within the
professional services exclusion in the Insurance Policy,
thereby withdrawing those claims from coverage.
(Id.) Judge Mueller also denied plaintiff's
motion for default judgment against Szetela without prejudice
on procedural grounds. (Id.) On May 18, 2016, plaintiff
filed a renewed motion for default judgment against Szetela.
(ECF No. 52.) Despite being served with process and all
papers filed in connection with plaintiff's requests for
entry of default and renewed motion for default judgment,
defendant Szetela failed to respond to any of these filings
and has yet to make an appearance in this action.
to Federal Rule of Civil Procedure 55, default may be entered
against a party against whom a judgment for affirmative
relief is sought who fails to plead or otherwise defend
against the action. See Fed.R.Civ.P. 55(a). However,
"[a] defendant's default does not automatically
entitle the plaintiff to a court-ordered judgment."
PepsiCo, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172,
1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792
F.2d 915, 924-25 (9th Cir. 1986)). Instead, the decision to
grant or deny an application for default judgment lies within
the district court's sound discretion. Aldabe v.
Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making
this determination, the court considers the following
(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
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir.
1986). Default judgments are ordinarily disfavored.
Id. at 1472.
general rule, once default is entered, well-pleaded factual
allegations in the operative complaint are taken as true,
except for those allegations relating to damages.
TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915,
917-18 (9th Cir. 1987) (per curiam) (citing Geddes v.
United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977)
(per curiam)); accord Fair Housing of Marin v.
Combs, 285 F.3d 899, 906 (9th Cir. 2002). In addition,
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. Hoa Huynh, 503 F.3d 847, 854 (9th Cir.
2007) (stating that a defendant does not admit facts that are
not well-pled or conclusions of law); Abney v.
Alameida, 334 F.Supp.2d 1221, 1235 (S.D. Cal. 2004)
("[A] default judgment may not be entered on a legally
insufficient claim."). A party's default
conclusively establishes that party's liability, but it
does not establish the amount of damages. Geddes,
559 F.2d at 560.
Appropriateness of the Entry of Default Judgment Under
the Eitel Factors For the reasons stated below, the
undersigned finds that the material allegations of the
complaint support plaintiff's request for entry of
default judgment under the Eitel factors.
Factor One: Possibility of Prejudice to Plaintiff
first Eitel factor considers whether the plaintiff
would suffer prejudice if default judgment is not entered,
and such potential prejudice to the plaintiff militates in
favor of granting a default judgment. See PepsiCo,
Inc., 238 F.Supp.2d at 1177. Here, plaintiff would
potentially face prejudice if the court did not enter a
default judgment. Specifically, plaintiff could be forced to
incur additional costs in defending Szetela in the Underlying
Action absent entry of a default judgment. ...