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Berkley Insurance Co. v. Pilot West Corp.

United States District Court, D. Idaho

November 30, 2016

BERKLEY INSURANCE COMPANY, a Delaware corporation, Plaintiff,
v.
PILOT WEST CORPORATION, an Arizona corporation; DURANGO FAMILY LIMITED PARTNERSHIP; SUMMIT CRUSHING, LLC, a revoked Nevada limited liability company; J & M DEVELOPMENT, INC., a revoked Nevada corporation, Defendants.

          MEMORANDUM DECISION AND ORDER

          B. Lynn Winmill, Chief Judge

         Before the Court is Plaintiff's Motion for Order of Default Against Pilot West Corporation and Default Judgment Against All Defendants (Dkt. 19), which includes a request for attorney fees and costs. For the reasons stated below, the Court will grant the Motion in part, and reserve in part.

         BACKGROUND

         This is an action for breach of an indemnity agreement. Berkley is a commercial surety that issued various surety bonds on behalf of Pilot West, a construction services company. In partial consideration for the posting of the surety bonds, Defendants executed in favor of Berkley a General Agreement of Indemnity dated July 25, 2012. Under the Indemnity Agreement, Defendants agreed to jointly and severally hold Berkley harmless against any and all losses, liability, damages of any type, costs, fees, and expenses that Berkley incurs in connection with the Bonds.

         Pilot West has failed to perform its obligations under six bonded construction projects and, as a result, Berkley has made claim payments and incurred other costs and expenses. Defendants, upon Plaintiff's demand for indemnification under the Indemnity Agreement, have failed and refused to respond to the demand.

         On April 28, 2016, Berkley commenced the present action seeking damages and specific performance under the Indemnity Agreement. The summons and complaint were served on Defendant Pilot West's registered agent on May 5, 2016. Dkt. 8. After being informed that Pilot West's registered agent had resigned, Berkley then served Pilot West with a copy of its summons and complaint via certified mail on June 16, 2016, in accordance with Fed.R.Civ.P. 4(e)(1) and I.R.C.P 4(d)(4)(B). The remaining five Defendants were served with the summons and complaint, but failed to file an answer or otherwise defend, resulting in the Clerk's entry of default on June 22, 2016. See Clerk's Entry of Default, Dkt. 16.

         Plaintiff now brings this Motion for an Order of Default against the remaining Defendant, Pilot West Corporation, and for Default Judgment against all Defendants. Dkt. 19. Plaintiff seeks damages against Defendants, jointly and severally, totaling $864, 741.17, to recover sums already expended by Plaintiff in discharge of its obligations as payment bond surety, together with supplemental judgments at such time and under such circumstances as claims are adjusted and satisfied by Plaintiff, and on further notice to Defendants. Plaintiff also seeks a decree for specific performance of the terms and conditions of the Indemnity Agreement, including: (a) the posting of collateral security; (b) the procurement of a discharge from the bond; and (c) the furnishing of competent evidence of Berkley's discharge, without loss under the bond. Finally, Plaintiff seeks attorney fees and costs.

         Although all Defendants have been properly served with the complaint in this matter and presumably also received the Motion for Default, the Clerk's entry of default, and the pending motion for default judgment, the Defendants have failed to submit any pleadings or otherwise defend against this action as of the date of this Order.

         LEGAL STANDARD

         Under Federal Rule of Civil Procedure 55(b)(2), a party can apply to the district court for entry of judgment by default after the clerk has entered the party's default based on its failure to plead or otherwise defend itself. Whether to enter default judgment is in the sole discretion of the court. See Lau Ah Yew v. Dulles, 236 F.2d 415 (9th Cir. 1956). In Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986), the Ninth Circuit identified seven factors for the court to consider in exercising its discretion to enter default judgment: (1) potential prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the Complaint; (4) the amount 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 favoring a decision on the merits. Id. at 1471-72.

         Additionally, where a party is in default, all well-pleaded factual allegations in the complaint are taken as true, except as to the amount of damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Rule 55(b)(2) states that the Court “may” conduct a hearing prior to entering a default judgment. The Court is not required to do so if the record reveals no issue of material fact. Kashin v. Kent, 457 F.3d 1033, 1043 (9th Cir. 2006).

         DISCUSSION

         A. Application of Eitel Factors

         The majority of the Eitel factors support a default judgment on Plaintiff's claims. Regarding factor (1)-prejudice to the Plaintiff-if the Court wholly denied the motion, Berkley Insurance would be left without a remedy given Defendants' failure to appear and defend themselves. As for factors (5) and (6), by virtue of Defendants' failure to appear, there is no evidence of a potential disputed material fact or meritorious defense, or ...


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