National Interstate Insurance Company v. Colon-Rodriguez ( 2023 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * * 7 NATIONAL INTERSTATE INSURANCE Case No. 2:21-CV-479 JCM (VCF) COMPANY, 8 ORDER Plaintiff(s), 9 v. 10 BENNY COLON-RODRIGUEZ, et al., 11 Defendant(s). 12 13 Presently before the court is plaintiff National Interstate Insurance Company’s motion for 14 default judgment. (ECF No. 24). No responses have been filed and the time to do so has passed. 15 For the reasons stated below, the court grants the plaintiff’s motion in part. 16 I. Background 17 Plaintiff filed its complaint in 2021 based on diversity jurisdiction and received a clerk’s 18 entry of default against all the defendants in 2022. (ECF Nos. 1, 23). Because the clerk of the 19 court has entered default against the defendants, the well-pled “factual allegations of the complaint, 20 except for those allegations relating to damages, will be taken as true.” Geddes v. United Fin. 21 Grp., 559 F.2d 557, 560 (9th Cir. 1977). The court thus treats the plaintiff’s asserted facts as true 22 and provides a summary of the complaint below. 23 This case involves an insurance dispute arising out of a car accident. Defendant Monique 24 Meneses rented a car from ARK Cash Car Rental in August 2015. (ECF No. 1, at 2). The day 25 after Meneses rented the car, she permitted defendant Benny Colon-Rodriguez to drive it. (Id. at 26 8). Colon-Rodriguez then crashed the rental car into defendant Blake Swearingen’s car. (Id. at 8– 27 28 1 10). Swearingen sued Meneses and Colon-Rodriguez in state court and received a default 2 judgment.1 (Id.). 3 Unfortunately, Meneses had listed herself as the “main”—and only—driver of the rental 4 car in the ARK rental agreement. (Id. at 2). Under the terms of the rental agreement, only drivers 5 listed in the agreement are deemed “authorized drivers.” (Id.). Colon-Rodriguez was therefore 6 not an authorized driver when the accident occurred. Use of the rental car by an unauthorized 7 driver is considered a material breach of the rental agreement, making the main driver responsible 8 for all damages resulting from that breach. (Id. at 3). 9 Meneses, by entering into the rental agreement, also stipulated that she had her own car 10 insurance policy. (Id. at 3). She did not. (Id. at 8). The rental agreement expressly stated that it 11 was a material breach for the renter to misrepresent whether she had her own car insurance, and 12 that this breach would void ARK’s liability under the agreement. (Id.). 13 At all relevant times, ARK was covered under a policy issued by the plaintiff, National 14 Interstate Insurance Company. (Id. at 4–5). The policy also provided limited coverage to 15 authorized drivers in ARK’s rental agreements. (Id. at 5). However, the policy was “subject to 16 the terms, conditions, restrictions and limitations in the rental agreement,” and disclaimed liability 17 in the event of concealment, misrepresentation, or fraud by an insured “relating to a claim” under 18 the policy. (Id. at 6–7). 19 Plaintiff’s complaint contains four causes of action: (1) misrepresentation; (2) 20 “unauthorized use of a rental car”; (3) breach; and (4) in the alternative,2 “declaratory relief 21 limiting recovery.” Plaintiff requests a judicial declaration that Meneses breached the ARK rental 22 agreement and that, as a result, the rental agreement is void and plaintiff need not indemnify 23 Meneses and Colon-Rodriguez under its policy or pay any judgment taken by Swearingen against 24 either, or both, of them. (Id. at 11). 25 26 1 Case number A-17-759440-C in the Eighth Judicial District Court in Clark County, Nevada. 27 2 Plaintiff’s complaint requests that, in the event the court finds that Meneses did not breach 28 the rental agreement, the court instead limits the defendants’ recovery under the policy. (ECF No. 1, at 11–12). 1 II. Legal Standard 2 Federal courts sitting in diversity apply the relevant state substantive law and federal 3 procedural law unless state law conflicts with a valid federal statute or procedural rule. E.g., 4 Feldman v. Allstate Ins. Co., 322 F.3d 660, 666 (9th Cir. 2003) (quoting Erie R.R. v. Tompkins, 5 304 U.S. 64, 78 (1938)); MRO Commc'ns, Inc. v. Am. Tel. & Tel. Co., 197 F.3d 1276, 1282 (9th 6 Cir. 1999). 7 Obtaining a default judgment is a two-step process governed by Federal Rule of Civil 8 Procedure 55. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). The moving party must first 9 seek, and obtain, an entry of default from the clerk of court. FED. R. CIV. P. 55(a). After a clerk’s 10 default is entered, the party may apply to the court for a default judgment. Id. The court will 11 take the factual allegations in the complaint as true, except for those relating to damages. Geddens, 12 559 F.2d at 560. 13 The choice of whether to enter a default judgment lies within the court’s discretion. Aldabe 14 v. Aldabe, 616 F.3d 1089, 1092 (9th Cir. 1980). The Ninth Circuit has identified several factors 15 to consider when determining whether to grant default judgment, including: (1) the possibility of 16 prejudice to the plaintiff if default judgment is not entered; (2) the merits of the claims; (3) the 17 sufficiency of the complaint; (4) the amount of money at stake; (5) the possibility of a dispute 18 concerning material facts; (6) whether default was due to excusable neglect; and (7) the strong 19 policy favoring a decision on the merits. Eitel, 782 F.2d at 1471–72. 20 III. Discussion 21 Plaintiff moves for default judgment against the defendants and requests that the court grant 22 declaratory relief. (ECF No. 24, at 10). Because the court finds that the Eitel factors weigh in 23 favor of default judgment on one of plaintiff’s claims, the motion is granted in part. 24 District courts generally consider the first Eitel factor to weigh in favor of default judgment 25 because a defendant’s failure to appear in a case prejudices the plaintiff’s ability to pursue its claim 26 on the merits. E.g., PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal 2002); 27 Nationstar Mortg. LLC v. Operture, Inc., No. 217CV03056GMNPAL, 2019 WL 1027990, at *2 28 1 (D. Nev. Mar. 4, 2019). The court agrees and finds that the first factor weighs in favor of the 2 plaintiff. 3 The second and third Eitel factors weigh against default judgment for plaintiff’s first claim. 4 The claim, though styled only as “misrepresentation,” is actually one for fraudulent 5 misrepresentation. (See ECF No. 1, at 7, ¶ 25, 26). But it was not pled sufficiently in the complaint 6 because plaintiff fails to allege a required element—that Meneses “intended to induce plaintiff to 7 act or refrain from acting upon the misrepresentation.” Childs v. Selznick, 281 P.3d 1161 (Nev. 8 2009) (emphasis added). Fraud-based claims are also subject to the heightened pleading standards 9 of Rule 9(b) and must be pled “with particularity [as to] the circumstances constituting fraud or 10 mistake.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124–25 (9th Cir. 2009). Plaintiff has not 11 pled its fraudulent misrepresentation claim with particularity. 12 Plaintiff’s second claim, “unauthorized use of a rental car,” is not a recognized cause of 13 action in Nevada and is therefore neither meritorious nor sufficiently pled. However, plaintiff did 14 sufficiently plead facts establishing its third claim for breach of the rental agreement. Plaintiff 15 identified the relevant portions of the rental agreement and insurance policy, provided those 16 documents as exhibits to the complaint, and set forth the factual details of Meneses and Colon- 17 Rodriguez’s actions that amounted to breach. NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 18 (9th Cir. 2016) (affirming entry of default judgment on similar grounds). This claim is meritorious 19 because the Nevada Supreme Court has affirmed summary judgment against a defendant based on 20 similar facts. Ferreira v. P.C.H. Inc., 774 P.2d 1041, 1043 (Nev. 1989). 21 The fourth Eitel factor, the amount of money at stake, weighs in favor of default judgment. 22 Plaintiff seeks only declaratory relief and no monetary damages against the defendants. The fifth 23 Eitel factor, the possibility of a dispute concerning material facts, favors the plaintiff on its breach 24 claim because the clerk has already entered default, which means that all well-pled factual 25 allegations in the complaint are taken as true. As addressed earlier, plaintiff’s breach claim is well- 26 pled and supported by specific factual allegations. 27 The court also finds that the defendants’ failure to appear was not due to excusable neglect. 28 Swearingen was served on April 13, 2021; Meneses was served on May 3, 2021; and Colon- 1 Rodriguez was served on May 8, 2021. (ECF Nos. 9, 10, 11). The clerk did not enter default 2 against the defendants until July 25, 2022, which wad more than a year after the defendants were 3 served. Plaintiff also waited more than six months after entry of the clerk’s default to file the 4 instant motion. The defendants’ failure to appear in this case cannot be said to be due to excusable 5 neglect. 6 Finally, as to the last Eitel factor, while public policy favors decisions on the merits, the 7 defendants’ failure to appear in the case means that the merits of the case cannot actually be 8 litigated. However, the existence of Rule 55(b) also “indicates that this preference, standing alone, 9 is not dispositive.” PepsiCo, Inc. v. Cal. Security Cans, 283 F.Supp.2d 1127, 1177 (C.D. Cal. 10 2002). The court concludes that, in light of all the Eitel factors, default judgment is warranted on 11 plaintiff’s third claim for breach. 12 IV. Conclusion 13 Accordingly, 14 IT IS HEREBY ORDERED, ADJUDGED, and DECREED that plaintiff’s motion for 15 default judgment (ECF No. 24) be, and the same hereby is, GRANTED in part and DENIED in 16 part. 17 IT IS FURTHER ORDERED that default judgment be entered in favor of the plaintiff, and 18 against the defendants, on plaintiff’s third cause of action. Plaintiff’s first, second, and fourth 19 causes of action are DISMISSED. 20 The clerk of the court is INSTRUCTED to close this case and enter judgment accordingly. 21 DATED December 1, 2023. 22 __________________________________________ UNITED STATES DISTRICT JUDGE 23 24 25 26 27 28