United States District Court, N.D. California
ATAIN SPECIALTY INSURANCE COMPANY, a Michigan Corporation, Plaintiff,
GREEN EARTH MANAGEMENT, LLC, Defendant.
ORDER GRANTING MOTION FOR DEFAULT JUDGMENT
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE
insurance action, plaintiff moves for default judgment. For
the reasons stated herein, the motion is
Green Earth Management, LLC is a wood-chipping and
green-waste recycling business in San Jose. In November 2017,
a fire of unknown cause broke out on its property. At the
time, it had an insurance policy from plaintiff Atain
Specialty Insurance Company. The policy provided coverage for
Green Earth's building or personal property, business
income or extra expenses, and specific equipment. Under each
part, the policy stated that coverage would be void in any
case of fraud, misrepresentation, or intentionally concealed
material facts. On the same day as the fire, Green Earth
notified Atain of property loss and allegedly demanded
payment for damage resulting from “suspected
arson.” Green Earth supported its claim with an expense
report alleging loss to real and personal property along with
lost income and extra expenses (Dkt. No. 22 at 4-11).
retained forensic accountants to review Green Earth's
report of income loss. Atain also used an independent
adjuster and fire consultant to assist in investigating the
rest of the reported damage. The adjuster and consultant
interviewed Green Earth personnel and inspected the premises
from November 2017 through January 2018. During the
investigation, Atain “determined that Green Earth's
claim was rife with intentional material misrepresentations
regarding losses under both Coverage Parts” (Dkt. No.
32 at 8, 13-15).
adjusting the claim amounts, Atain made three payments to
Green Earth which collectively amounted to $83, 326.05. With
each payment, Atain reserved the right to adjust or seek
reimbursement for amounts not covered by the policy. Because
Green Earth subsequently disagreed with the amount paid under
the policy, Atain demanded an appraisal. Both parties,
however, agreed to suspend the appraisal because Green Earth
amended its claim in August 2018. Although Green Earth
adjusted some amounts, Atain alleges that the amended claim
still contradicted the damages calculated in its
investigation (Dkt. No. 22 at 11-14).
December 2018, Atain filed a complaint for declaratory
judgment and reimbursement and served Green Earth two weeks
later. Originally assigned to Magistrate Judge Nathanael
Cousins, this action was reassigned to the undersigned
because Atain did not consent to the jurisdiction of a
magistrate judge. In February 2019, the clerk entered default
against Green Earth. Green Earth failed to respond to
Atain's complaint and failed to appear at the case
management conferences in March and April 2019 (Dkt. Nos. 1,
8, 11, 14).
April 5, 2019, Atain filed an amended complaint and served
Green Earth by process server three days later, rendering an
answer due by April 29, 2019 (Dkt. No. 23). On April 25,
2019, an order required Atain to notify Green Earth's
prior counsel in “attempt to promptly alert defendant
of the possibility of a default judgment” (Dkt. No.
25). Five days later, Atain moved for entry of default
against Green Earth on the ground that Green Earth failed to
appear or otherwise respond to the amended complaint (Dkt.
No. 27). The clerk entered default judgment against Green
Earth on May 1, 2019. On October 23, 2019, Atain moved for
default judgment. Green Earth “has been effectively
unreachable throughout this litigation” (Dkt. No. 25).
This order follows oral argument.
entry of default, a court may exercise its discretion to
grant default judgment on the merits of the case. See
Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980);
see also FRCP 55. The factual allegations of the
complaint, except those concerning damages, are deemed to
have been admitted by the non-responding party and are taken
as true. Geddes v. United Fin. Grp., 559 F.2d 557,
560 (9th Cir. 1977). The following factors may be considered
in determining whether or not to enter default judgment: (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).
majority of the Eitel factors support default
judgment. First, if this motion were to be denied,
then Atain would likely be left without a remedy given Green
Earth's failure to appear or otherwise defend this
action. See Pepsico, Inc. v. Cal. Sec. Cans, 238
F.Supp.2d 1172, 1176-77 (C.D. Cal. 2002) (Judge Nora Margaret
Manella). Second, Atain properly served Green Earth
with both complaints and there is no evidence in the record
that Green Earth's failure to appear and otherwise defend
this action was the result of excusable neglect.
Third, the sum of money being sought by Atain is
reasonable in that it is “directly proportional to the
harm that [Atain] suffered in paying out insurance policy
benefits” for Green Earth's misrepresentation and
fraudulent claims (Dkt. No. 32 at 12). Fourth,
because Green Earth has not answered the complaint or
otherwise appeared in this action, the possibility of a
dispute concerning material facts is unknown.
Finally, a decision on the merits is impossible due
to Green Earth's failure to respond.
determined that on balance the Eitel factors
discussed above support Atain's motion, this order turns
to the merits of Attain's substantive claims and the
sufficiency of the evidence (the second and third
Eitel factors). These factors require Atain to state