Ohio Security Insurance Company v. Ridgecrest Restoration Ministries ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 OHIO SECURITY INSURANCE Case No. 1:23-cv-00191-ADA-CDB COMPANY, 12 FINDINGS AND RECOMMENDATION Plaintiff, TO GRANT PLAINTIFF’S MOTION FOR 13 DEFAULT JUDGMENT v. 14 (Doc. 21) RICHARD ROMEO DAIGLE, et al., 15 14-DAY DEADLINE Defendants. 16 17 18 Plaintiff Ohio Security Insurance Company initiated this action with the filing of a 19 complaint against Defendants Ridgecrest Restoration Ministries (“Ridgecrest”), Ridgecrest 20 Vineyard Church, Akop Agazaryan, Gohar Hekimian, and Richard Romeo Daigle on February 8, 21 2023. (Doc. 1). According to the complaint, Defendants Agazaryan and Hekimian filed a lawsuit 22 in the Superior Court of California, County of Kern, in which they allege that on October 24, 23 2022, Agazaryan was injured by a vehicle that was owned and registered by Defendant 24 Ridgecrest and operated by Defendant Daigle. (Doc. 1 at ⁋⁋ 10, 12-13). 25 Plaintiff issued an insurance policy (“the Ohio Security Policy”) to Ridgecrest as the 26 named insured for a term from November 30, 2021, to November 30, 2022. (Id. ⁋ 14). The 27 insurance policy provides in relevant part: / / / 1 1. Insuring Agreement 2 We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” 3 to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. 4 However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to 5 which this insurance does not apply 6 2. Exclusions 7 This insurance does not apply to: 8 g. Aircraft, Auto Or Watercraft 9 “Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or 10 watercraft owned or operated by or rented or loaned to any insured. Use includes operation and “loading and unloading”. 11 This exclusion applies even if the claims against any insured allege 12 negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the 13 “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of 14 any aircraft, “auto” or watercraft that is owned or operated by or rented or loaned to any insured. 15 SECTION II – WHO IS AN INSURED 16 If you are designated in the Declarations as: 17 d. An organization other than a partnership, joint venture or 18 limited liability company, you are an insured. Your “executive officers” and directors are insureds, but only with respect to their 19 duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders. 20 2. Each of the following is also an insured: 21 a. Your “volunteer workers’ only while performing 22 duties related to the conduct of your business, or your “employees”, other than either your “executive officers” (if you are an organization 23 other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only 24 for acts within the scope of their employment by your or while performing duties related to the conduct of your business. . . 25 (Doc. 1-1 at pp. 81, 87).1 26 Ridgecrest and Daigle tendered their defense and indemnity in the underlying lawsuit to 27 1 Plaintiff. (Doc. 1 at ⁋ 17). Plaintiff agreed to defend Ridgecrest and Daigle, “subject to a full and 2 complete reservation of [Plaintiff’s] rights under the policy and applicable law, including the right 3 to seek a judicial declaration as to its rights and obligations, if any, under the Ohio Security 4 Policy[.]” (Id. ⁋ 18). 5 Plaintiff alleges that it had no contractual duty to defend Ridgecrest and Daigle, as Daigle 6 was either a “volunteer worker” or an “employee” of Ridgecrest as defined by the insurance 7 agreement at the time of the accident. (Id. ⁋ 26). Plaintiff asserts that since Daigle qualifies as an 8 “insured” under the insurance agreement, Plaintiff is not required to defend or indemnify him 9 under the Ohio Security Policy because the auto insurance exclusion provision applies. (Id.) 10 The complaint raises three causes of action. First, Plaintiff claims that it is entitled to a 11 declaration that it has no duty to defend Ridgecrest and Daigle in the underlying lawsuit. (Id. ⁋ 12 28). Second, Plaintiff seeks a declaration that it has no duty to indemnify Ridgecrest or Daigle for 13 the liability they may incur to Agazaryan or Hekimian in the underlying lawsuit. (Id. ⁋ 31). 14 Finally, Plaintiff seeks reimbursement from Ridgecrest and Daigle for ongoing costs incurred in 15 their defense of the underlying lawsuit. (Id. ⁋ 36). 16 On March 28, 2023, Plaintiff filed a summons returned executed which indicates that 17 Defendant Daigle was personally served on March 20, 2023. (Doc. 9). Following his failure to 18 timely respond to the complaint, on May 19, 2023, Plaintiff filed a request for entry of default as 19 to Defendant Daigle, which was entered by the Clerk of the Court on the same day. (Docs. 13, 20 14). On August 14, 2023, Plaintiff voluntarily dismissed Defendants Agazaryan, Hekimian, and 21 Ridgecrest pursuant to Rule 41(a). (Doc. 22). Now before the Court is Plaintiff’s motion for 22 default judgment against Defendant Daigle, the only remaining defendant, filed on August 2, 23 2023. (Doc. 21).2 24 Plaintiff’s motion attaches court records reflecting that Defendant Daigle was born in 25 2001.3 (Doc. 21-1). Thus, Daigle was not a minor at the time he allegedly injured Agazaryan. 26 2 The matter is referred to the undersigned for issuance of findings and recommendations pursuant to Local Rule 27 302(c)(19). 3 1 (Doc. 1 at ⁋ 11). Because Plaintiff seeks default only as to its declaratory judgment claims and 2 there are no special considerations related to Defendant Daigle, the Court deems Plaintiff’s 3 motion for default judgement suitable for disposition without hearing or oral argument. See Local 4 Rule 230(g). 5 Legal Standard 6 In general, “default judgments are ordinarily disfavored,” as “[c]ases should be decided 7 upon their merits whenever reasonably possible.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 8 616 (9th Cir. 2016) (quoting Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986)). Prior to 9 entry of default judgment, there must be an entry of default. See Fed. R. Civ. P. 55. Upon entry 10 of default, the factual allegations of the complaint, save for those concerning damages, are 11 deemed to have been admitted by the defaulting party. Fed. R. Civ. P. 8(b)(6); see Geddes v. 12 United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (per curiam). Where the damages claimed is 13 a liquidated sum or ascertainable by mathematical calculation, the Court may enter a default 14 judgment without a hearing. See Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981); Mesa 15 Underwriters Specialty Ins. Co. v. Paradise Skate, Inc., 2016 WL 9045622, at *10 (N.D. Cal. 16 Apr. 11, 2016), F&R adopted, 2016 WL 9180434 (N.D. Cal. May 2, 2016). Likewise, courts 17 have found that it is not necessary to hold a hearing regarding damages or require a plaintiff to 18 file an affidavit providing evidence for damages where the only claims for relief against a 19 defaulting defendant are for a declaratory judgment. E.g., United Specialty Ins. Co. v. Valdez, 20 2018 WL 2121632, at *2 (D. Mont. Apr. 16, 2018). 21 However, “a defendant is not held to admit facts that are not well-pleaded or to admit 22 conclusions of law.” United States v. Cathcart, 2010 WL 1048829, at *4 (N.D. Cal. Feb. 12, 23 2010) (citing Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th 24 Cir.1975)); accord DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (allegations 25 that do no more than “parrot” the elements of a claim not deemed admitted). “[F]acts which are 26 not established by the pleadings of the prevailing party, or claims which are not well-pleaded, are 27 not binding and cannot support the judgment.” Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1 A district court has discretion to grant or deny a motion for default judgment. Aldabe v. 2 Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (per curiam); see TeleVideo Sys., Inc. v. Heidenthal, 3 826 F.2d 915, 917 (9th Cir. 1987) (“Rule 55 gives the court considerable leeway as to what it may 4 require as a prerequisite to the entry of a default judgment.”) (per curiam). The Ninth Circuit has 5 set out seven factors to be considered by courts in reviewing a motion for default judgment: “(1) 6 the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim (3) the 7 sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a 8 dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) 9 the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the 10 merits.” Eitel, 782 F.2d at 1471–72. Entry of default judgment is not appropriate where the 11 second and third factors weigh against plaintiff. See Mnatsakanyan v. Goldsmith & Hull APC, 12 2013 WL 10155707, *10 (C.D. Cal. May 14, 2013) (“The fact that factors two and three weigh 13 against the entry of default judgment is particularly significant, as courts often treat these as the 14 most important factors.”) (citing cases). 15 “If the court determines that the allegations in the complaint are sufficient to establish 16 liability, it must then determine the ‘amount and character’ of the relief that should be awarded.” 17 Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp.2d 916, 920 (C.D. Cal. 2010) (quoting 18 10A Charles Alan Wright et al., Fed. Prac. and Proc. § 2688, at 63 (3d ed. 1998)). However, 19 courts may decline to enter default judgment if a party’s claims are legally insufficient. Cripps v. 20 Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992); Aldabe, 616 F.2d at 1092-93 21 (“Given the lack of merit in appellant’s substantive claims, we cannot say that the district court 22 abused its discretion in declining to enter a default judgment in favor of appellant”). 23 Discussion 24 1. Possibility of Prejudice to the Plaintiffs 25 The first Eitel factor contemplates the possibility of prejudice to the plaintiff if a default 26 judgment is not entered. Eitel, 782 F.2d at 1471. Prejudice may be shown where failure to enter 27 a default judgment would leave plaintiff without a proper remedy. Philadelphia Indem. Ins. Co. 1 773419, at *3 (E.D. Cal. Feb. 18, 2020) (citing Landstar Ranger, Inc, 725 F. Supp.2d at 920). 2 Plaintiff seeks injunctive relief which can only be obtained through a judgment. (Doc. 21 3 p. 5).4 Without entry of default, Plaintiff would be “continuously exposed to liability” in the 4 underlying action. Kemper Indep. Ins. Co. v. Boyer, Case No. 2:22-cv-1458-MCE-DB, 2023 WL 5 4014658, at *3 (E.D. Cal. June 15, 2023) (quoting Aspen Ins. UK Ltd. v. Killarney Const. Co., 6 Inc., 2012 WL 1831498, at *2 (N.D. Cal. May 18, 2012)). Since Daigle has refused to defend this 7 action, if default judgment is not entered, Plaintiff would be left without a proper remedy. The 8 Court finds that the first Eitel factor weighs in favor of granting default judgment to Plaintiff. 9 2. Sufficiency of the Complaint and the Likelihood of Success on the Merits 10 The second and third Eitel factors are the merits of the plaintiff’s substantive claim and 11 the sufficiency of the complaint. Eitel, 782 F.2d at 1471-72. The Court considers these two 12 factors together given the close relationship between the two inquiries. Craigslist, Inc. v. 13 Naturemarket, Inc., 694 F.Supp.2d 1039, 1055 (N.D. Cal. 2010). These two factors will favor 14 entry of default judgment where the complaint sufficiently states a claim for relief upon which the 15 plaintiff may recover. PepsiCo, Inc. v. California Security Cans, 238 F. Supp.2d 1172, 1177 16 (C.D. Cal. 2010). 17 Federal courts are courts of limited jurisdiction and their power to adjudicate is limited to 18 that granted by Congress. U.S. v. Summer, 226 F.3d 1005, 1009 (9th Cir. 2000). A district court 19 has diversity jurisdiction where the matter in controversy exceeds the sum or value of $75,000 20 and is between citizens of different states. 28 U.S.C. § 1332(a)(1)-(2). Section 1332 requires 21 complete diversity, i.e., that “the citizenship of each plaintiff is diverse from the citizenship of 22 each defendant.” Caterpillar Inc. v. Lewis, 519 U.S. 61, 67-68 (1996). The burden of proving the 23 amount in controversy depends on the allegations in the plaintiff’s complaint. Lowdermilk v. U.S. 24 Bank Nat’l Ass’n., 479 F.3d 994, 998-1000 (9th Cir. 2007). 25 Here Plaintiff is a corporation organized and existing under the laws of New Hampshire, 26 with its principal place of business in Boston, Massachusetts. (Doc. 1 at ⁋ 2). A corporation is 27 deemed to be a citizen of any State by which it has been incorporated and of the State where it 1 has its principal place of business. Lincoln Prop. Co. v. Roche, 546 U.S. 81, 94 (2005) (citing 28 2 U.S.C. § 1332(c)(1). Thus, Plaintiff is a citizen of New Hampshire and Massachusetts. 3 The Complaint alleges that Defendant Ridgecrest is a nonprofit public benefit 4 organization organized and existing under the laws of California, with its principal place of 5 business in Ridgecrest, California. Daigle is alleged to be a citizen of California residing in Kern 6 County. Defendants Agazaryan and Hekimian are alleged to be citizens of California residing in 7 Los Angeles County. (Doc. 1 at ⁋⁋ 3-7). 8 The Complaint alleges that this Court has subject matter jurisdiction under 28 U.S.C. § 9 1332(a)(1) because there is complete diversity between Plaintiff and all the defendants, and 10 because the amount in controversy exceeds $75,000. Plaintiff has plausibly alleged that diversity 11 jurisdiction is present in this case. 12 The Complaint further alleges that the Court has original jurisdiction under the 13 Declaratory Judgments Act, 28 U.S.C. § 2201(a). The Declaratory Judgments Act states, “In a 14 case of actual controversy within its jurisdiction . . . any court of the United States . . . may 15 declare the rights and other legal relations of any interested party seeking such declaration.” 28 16 U.S.C. § 2201(a). Plaintiff seeks a declaratory judgment as to the scope the Ohio Security Policy, 17 which is a subject ripe for review under the Declaratory Judgments Act. Atain Specialty Ins. Co. 18 v. All New Plumbing, Inc., Case No. 2:18-cv-02746-MCE-KJN, 2019 WL 3543854, at *3 (E.D. 19 Cal. Aug. 5, 2019). 20 Where a declaratory judgment action is based on diversity jurisdiction, California law 21 controls. See St. Paul Mercury Inc. Co. v. Ralee Eng’g Co., 804 F.2d 520, 522 (9th Cir. 1986). 22 “California and federal courts have held that declaratory relief is appropriate to negate an 23 insurer’s duty to defend.” Mesa, 2016 WL 9045622, at * 5; see Atain, 2019 WL 3543854, at *4 24 (E.D. Cal. Aug. 5, 2019) (finding that the merits of a declaratory judgment action are sound 25 where the underlying bodily injury suit is plainly contemplated in the policy as being excluded, 26 and the policy at issue explicitly stated that the defendant would have no duty to defend where the 27 issue was excluded); RLI Ins. Co. v. City of Visalia, 297 F.Supp.3d 1038, 1053 (E.D. Cal. 2018) 1 cleaning up environmental contamination. Therefore, there can be no doubt that RLI had no duty 2 to defend insofar as plaintiff in the Underlying Action sought damages for the cost of removing, 3 nullifying or cleaning up contaminating substances.”). 4 Taken as true, Daigle was a “volunteer worker” or “employee,” which qualified him as an 5 “insured” under the Ohio Security Policy. (Doc. 1 at ⁋ 26). The Ohio Security Policy also 6 excludes bodily injury or property damage claims for autos loaned to any insured. (Id. ⁋ 23). 7 Accordingly, since Agazaryan and Hekimian’s injuries occurred out of the use of an auto 8 operated by Daigle, the Ohio Security Policy does not provide coverage for their injury claims 9 against Daigle in the underlying lawsuit due to the exclusion clause pertaining to autos. (Docs. 1. 10 p. 5, 1-1 p. 81). The Court finds that the allegations of the complaint are sufficient and state a 11 meritorious claim. These two Eitel factors weigh in favor of granting default judgment. 12 3. Sum of Money at Stake 13 Under the fourth Eitel factor, “the court must consider the amount of money at stake in 14 relation to the seriousness of the defendant’s conduct.” PepsiCo, Inc., F.Supp.2d at 1176-77. 15 Where a large sum of money is at stake, this factor disfavors default judgment. Eitel, 782 F.2d at 16 1472. Plaintiff abandoned its reimbursement claim and seeks no monetary relief against the 17 defendant. (Doc. 21 p. 6). Accordingly, this factor does not weigh against entry of default 18 judgment. Kemper, 2023 WL 4014658, at *4. 19 4. Possibility of Disputed Material Facts. 20 The fifth Eitel factor examines whether a dispute exists regarding material facts. Eitel, 21 782 F.2d at 1471-72. Since Daigle is in default, all of Plaintiff’s well pleaded factual allegations 22 are taken as true. TeleVideo Sys., Inc., 826 F.2d at 918 (citing Geddes, F.2d at 560). There is no 23 possible dispute of material fact that would preclude the grant of default judgment in Plaintiff’s 24 favor. This factor weighs in favor of granting default judgment. 25 5. Whether the Default was Due to Excusable Neglect 26 The sixth Eitel factor examines whether a defendant’s default was due to excusable 27 neglect. PespiCo, 238 F.Supp.2d at 1177; Eitel, 782 F.2d at 1471-72. This factor considers due 1 of the pendency of the action and be afforded opportunity to present their objection before a final 2 judgment is rendered.” Phillip Morris USA, Inc. v. Castworld Productions, 219 F.R.D. 494, 500 3 (C.D. Cal. 2003). Daigle was served with the summons and complaint. (Doc. 9). In addition, 4 Plaintiff informed Daigle via e-mail that his default had been entered and that it intended to move 5 for default judgment. (Doc. 21-2). Daigle has not appeared in this action, nor has he responded 6 to any of Plaintiff’s communications. Accordingly, this factor favors entry of default judgment. 7 See Magic Leap, Inc. v. Tusa Tuc, 2017 WL 10456729, at *3 (N.D. Cal. Aug. 17, 2017). 8 6. Policy of Deciding Cases on the Merits 9 The seventh Eitel factor emphasizes the “general rule that default judgments are ordinarily 10 disfavored.” Eitel, 782 F.2d at 1472. “Cases should be decided upon the merits whenever 11 reasonably possible.” Id. (citing Pena v. Seguros La Comersial, S.A., 770 F.2d 811, 814 (9th Cir. 12 1985)). Daigle’s refusal to participate in this action rendered a decision on the merits impossible. 13 This factor does not weigh against default judgment. 14 * * * * * 15 The Court has considered all the Eitel factors and finds that Plaintiff is entitled to a default 16 judgment against Defendant Daigle because all the factors weigh in favor of granting Plaintiff’s 17 motion. 18 Findings and Recommendation 19 Under Federal Rule of Civil Procedure 54(c) “A default judgment must not differ in kind 20 from, or exceed in amount, what is demanded in the pleadings.” Plaintiff’s motion for a default 21 judgment seeks declaratory relief which is consistent with the relief sought by the complaint. 22 PepsiCo, Inc., 238 F.Supp.2d at 1177. 23 As noted above, Plaintiff is entitled to declaratory judgment declaring that it owes 24 Defendant Daigle neither a duty to defend him in the underlying lawsuit nor an obligation to 25 indemnify him. Plaintiff does not seek any other form of relief in this action. (Doc. 21 p. 7). 26 Accordingly, IT IS HEREBY RECOMMENDED that: 27 1. Plaintiff’s Motion for Default Judgment be GRANTED. (Doc. 21). 1 3. The Court declare that Plaintiff had and has no duty to defend or indemnify Defendant 2 Richard Romeo Daigle in the underlying action; and 3 4. This action be closed. 4 And, IT IS HEREBY ORDERED that Plaintiff Ohio Security Insurance Company serve a 5 | copy of these findings and recommendations on Defendant Richard Romeo Daigle within three 6 | days. 7 These findings and recommendations are submitted to the United States District Judge 8 | assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within 14 days after 9 | being served with these findings and recommendations, any party may file written objections with 10 | the court and serve a copy on all parties. Such a document should be captioned “Objections to 11 || Magistrate Judge's Findings and Recommendations.” Any reply to the objections shall be served 12 | and filed within fourteen days after service of the objections. The parties are advised that failure 13 | to file objections within the specified time may waive the right to appeal the District Court's 14 | order. Martinez v. YIst, 951 F.2d 1153 (9th Cir. 1991). 15 | IT IS SO ORDERED. '© | Dated: _ September 5, 2023 | Wr bo 17 UNITED STATES MAGISTRATE JUDGE 18 19 20 21 22 23 24 25 26 27 28 10