Primerica Life Ins. Co. v. Smart

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 FOR THE EASTERN DISTRICT OF CALIFORNIA 9 10 PRIMERICA LIFE INSURANCE No. 2:21-cv-0422 KJM AC COMPANY, 11 Plaintiff,1 12 v. 13 ORDER and PERRY L. SMART; WANDA CLARK; 14 and MORGAN JONES FUNERAL FINDINGS AND RECOMMENDATIONS HOMES INC., 15 Defendants. 16

17 PERRY L. SMART, 18 Cross-Claimant, 19 v. 20 WANDA CLARK and MORGAN JONES 21 FUNERAL HOMES, INC., 22 Cross-Defendants. 23 24 Cross-complainant Perry L. Smart has filed a motion for default judgment against co- 25 defendants Wanda Clark and Morgan Jones Funeral Home (“MJFH”). ECF No. 36. The motion 26

27 1 Plaintiff has been terminated from this action, as reflected on the docket and explained below. The dispute before the court is among defendants. 28 1 is based on Smart’s cross-complaint against Clark and MJFH. ECF No. 28. The Clerk of Court 2 has entered default against Clark and MJFH based on their failure to respond to the cross- 3 complaint. ECF Nos. 34, 35. The undersigned initially recommended denial of the motion for 4 insufficient factual detail, as described below. Smart remedied the issues in objections to the 5 undersigned’s recommendation, and the District Judge referred the motion back to the 6 undersigned. Upon review of the newly provided information, the undersigned recommends the 7 motion for default judgment be granted. 8 I. Procedure for Default 9 A party seeking default judgment must first request entry of default from the Clerk’s 10 Office under Fed. R. Civ. P. 55(a). The Clerk determines whether entry is appropriate by 11 reviewing the requesting party’s request and accompanying documentation. If the Clerk finds 12 that the facts establish a failure to plead or otherwise defend, the Clerk will enter a default 13 without any need for a judicial order. A default entry is not a judgment, but it is a necessary 14 precondition for judgment. 15 If the plaintiff is granted entry of default by the Clerk of the Court, plaintiff may apply to 16 the court to obtain a default judgement. Fed. R. Civ. Proc. 55(b)(2). Plaintiff must file a motion 17 for entry of default judgment and notice the motion for hearing before the undersigned pursuant 18 to Local Rule 230. The motion may be made any time after entry of defendant’s default. 19 However, “[a] defendant’s default does not automatically entitle the plaintiff to a court- 20 ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) 21 (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)); see Fed. R. Civ. P. 55(b) 22 (governing the entry of default judgments). Instead, the decision to grant or deny an application 23 for default judgment lies within the district court’s sound discretion. Aldabe v. Aldabe, 616 F.2d 24 1089, 1092 (9th Cir. 1980). In making this determination, the court will consider the following 25 factors: 26 (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) 27 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 28 1 excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 2 3 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily 4 disfavored. Id. at 1472. 5 As a general rule, once default is entered by the Clerk, well-pleaded factual allegations in 6 the operative complaint are taken as true, except for those allegations relating to damages. 7 TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam). Although 8 well-pleaded allegations in the complaint are admitted by a defendant’s failure to respond, 9 “necessary facts not contained in the pleadings, and claims which are legally insufficient, are not 10 established by default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). 11 Any motion for default judgment under Fed. R. Civ. Proc. 55(b)(2) should address the factors set 12 forth in Eitel v. McCool, above. 13 II. Circumstances of This Case 14 Plaintiff Primerica Life Insurance Company brought its complaint in interpleader against 15 the three co-defendants. ECF No. 1. Primerica alleged that it insured an individual named Aaron 16 L. Macon (“insured”) with a policy that provided payment upon death to a beneficiary designated 17 by the insured. Id. at 3. Following the death of the insured, defendant Smart (the named 18 beneficiary), submitted a claim for the benefit. Id. However, Primerica was informed and 19 believes that defendant Smart purported to assign $6,907.72 of the benefit to the defendant 20 funeral home. Id. Further, Primerica was informed and believes that the insured’s death is being 21 actively investigated as a homicide, and that defendant Smart has not been ruled out as a possible 22 suspect in the ongoing criminal investigation (though Primerica does not assert she is responsible 23 for the death). Id. at 4. Primerica alleged that under California’s “Slayer Statutes” (Cal. Probate 24 Code §§ 250, 252), if defendant Smart were determined to have intentionally killed the insured, 25 the benefit would not be payable to Smart but instead to the contingent beneficiary, defendant 26 Clark. Id. Primerica, concerned about facing competing and adverse claims to the benefit, 27 brought this case in interpleader to place the benefit amount with the court so that the potential 28 claimants could litigate amongst themselves. The funds were deposited in the court registry on 1 May 25, 2021. See docket notation dated May 25, 2021. 2 On September 16, 2021, District Judge Kimberly J. Mueller signed a stipulation 3 discharging Primerica from this lawsuit, awarding it attorneys’ fees, and enjoining the defendants 4 in interpleader from suing Primerica with respect to the policy at issue. ECF No. 25. This left the 5 case with no plaintiff and three defendants, two of whom (Clark and MJFH) the Clerk of Court 6 found in default. ECF Nos. 15, 18. Smart filed a motion for default judgment on July 19, 2021. 7 ECF No. 21. That motion was denied without prejudice because at that time, Smart, Clark and 8 MJFH were all co-defendants and Smart had no claims upon which default judgment could be 9 entered. ECF Nos. 27, 38. On October 3, 2021, Smart filed a cross-complaint against Clark and 10 MJFH. ECF No. 28. Clark and MJFH were served (ECF Nos. 30, 31) and the Clerk entered 11 default against them as to the cross-complaint (ECF Nos. 34, 35). 12 Smart then filed a second motion for default judgment. ECF No. 36. The undersigned 13 reviewed the motion and recommended it be denied because Smart did not include a copy of the 14 life insurance policy at issue and failed to address material issues including the assignment of the 15 benefit money described in the original complaint and the concerns about the application of 16 California’s slayer statute raised in the original complaint. ECF No. 39. 17 Following the undersigned’s issuance of findings and recommendations, Smart submitted 18 a statement under penalty of perjury that she did not kill the insured. ECF No. 42 at 2. Smart 19 also submitted a copy of the insurance application naming Smart as the primary insured’s sole 20 beneficiary, which she states under penalty of perjury was provided to her by former plaintiff 21 Primerica Life Insurance Company. ECF No. 42 at 7. Considering these additional submissions, 22 Chief District Judge Kimberly J. Mueller did not adopt the findings and recommendations and 23 instead submitted the matter back to the undersigned for further review. ECF No. 44. 24 III. Analysis 25 The application for default judgment is made upon plaintiff’s crossclaim for entitlement to 26 interpleaded funds, located at ECF No. 28, pursuant to Fed. R. Civ. P. 22. 27 //// 28 //// 1 A. The Eitel Factors 2 1. Factor One: Possibility of Prejudice to Plaintiff 3 The first Eitel factor considers whether the plaintiff would suffer prejudice if default 4 judgment is not entered, and such potential prejudice to the plaintiff weighs in favor of granting a 5 default judgment. See PepsiCo, Inc., 238 F.Supp.2d at 1177. Here, cross-plaintiff Smart would 6 suffer prejudice if the court did not enter a default judgment because she would be without 7 recourse for recovery of the interpleaded funds. Accordingly, the first Eitel factor favors the 8 entry of default judgment. 9 2. Factors Two and Three: Merits of Claims and Sufficiency of Complaint 10 The merits of plaintiff’s substantive claims and the sufficiency of the complaint are 11 considered here together because of the relatedness of the two inquiries. The court must consider 12 whether the allegations in the cross-complaint are sufficient to state a claim that supports the 13 relief sought. See Danning, 572 F.2d at 1388; PepsiCo, Inc., 238 F.Supp.2d at 1175. The 14 substantive facts alleged in the operative cross-complaint are as follows: 15 In or about 2016, Primerica issued a life insurance policy, number 0490341061 (the ‘Policy’), to Aaron L. Macon (the ‘Insured’). The 16 Policy provided for the payment of a death benefit (the ‘Benefit’) in the event of the Insured’s death, as further set forth in the Policy, to 17 the beneficiary or beneficiaries designated by the Insured. The Insured’s application for the Policy designated Cross-Complainant 18 as the Policy’s sole primary beneficiary, and Clark as the sole contingent beneficiary. 19 20 ECF No. 28 at 2. The cross-complaint states that “[b]ased on the above facts, as sole primary 21 beneficiary under the Policy, Cross-Complainant is entitled to all the funds deposited with the 22 Court in this matter.” Id. at 28. 23 “A named interpleader defendant who fails to answer the interpleader complaint and 24 assert a claim to the res forfeits any claim of entitlement that might have been asserted if service 25 was properly effected upon them.’ The Court may accordingly, in its discretion, grant default 26 judgment against the non-appearing interpleader defendants where the only remaining claimants 27 demonstrate their entitlement to the funds and do not dispute the respective distributions.” 28 Standard Ins. Co. v. Asuncion, 43 F. Supp. 3d 1154, 1156 (W.D. Wash. 2014) (quoting Sun Life 1 Assur. Co. of Canada, (U.S.) v. Conroy, 431 F.Supp.2d 220, 226 (D.R.I. 2006)); see also Cripps 2 v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (appearing claimants must 3 demonstrate entitlement to benefits); Nationwide Mutual Fire Ins. Co. v. Eason, 736 F.2d 130, 4 133 n. 6 (4th Cir. 1984) (“Clearly, if all but one named interpleader defendant defaulted, the 5 remaining defendant would be entitled to the fund.”). 6 Smart adequately alleges she is the sole primary beneficiary of the insurance policy at 7 issue. Clark and MJFH defaulted both in relation to the original interpleader complaint and 8 Smart’s cross-complaint. Accordingly, it is within the court’s discretion to grant default 9 judgment against the non-appearing interpleader defendants. Because Smart is the only 10 interpleader defendant and cross-plaintiff that has appeared and made a claim against the 11 interpleaded funds, the second and third Eitel factors weigh strongly in favor of default judgment. 12 3. Factor Four: The Sum of Money at Stake in the Action 13 Under the fourth Eitel factor, the court considers the amount of money at stake in relation 14 to the seriousness of defendant’s conduct. Because the cross-complaint seeks only issuance of the 15 interpleader death benefit funds deposited with this court, and there is no particular conduct of 16 any defendant at issue, this factor weighs neither for nor against entry of default judgment. 17 4. Factor Five: Possibility of Dispute Concerning Material Facts 18 The court may assume the truth of well-pleaded facts in the operative cross-complaint 19 (except as to damages) following the clerk’s entry of default. See, e.g., Elektra Entm't Group Inc. 20 v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005) (“Because all allegations in a well-pleaded 21 complaint are taken as true after the court clerk enters default judgment, there is no likelihood that 22 any genuine issue of material fact exists.”); accord Philip Morris USA, Inc., 219 F.R.D. at 500; 23 PepsiCo, Inc., 238 F.Supp.2d at 1177. Smart alleges in her cross-complaint that she is the sole 24 primary beneficiary of the policy at issue.2 Taking this pled fact as true, the undersigned finds 25 this factor favors entry of default judgment. 26 //// 27 2 She has also submitted a copy of the policy, which supports the allegation. See ECF No. 42 at 28 4-14 (Exhibit A to Declaration of Perry L. Smart). 1 5. Factor Six: Whether Default Was Due to Excusable Neglect 2 On review of the record before the court, there is no clear indication that either default 3 was the result of excusable neglect. See PepsiCo, Inc., 238 F.Supp.2d at 1177. Plaintiff 4 Primerica served MJFH and Clark with the summons and complaint. ECF Nos. 8 and 9. Cross- 5 plaintiff Perry served Clark and MJFH with the cross-complaint. ECF Nos. 30 and 31. Over 6 eighteen months have passed since Primerica initiated this interpleader action, and neither Clark 7 nor MJFH has taken any action to avoid default or assert a claim to the funds. It does not appear, 8 however, that plaintiff served defendants by mail with notice of the application for default 9 judgment. See ECF No. 36 (no reference to service). On balance, this factor therefore weighs 10 neutrally. 11 6. Factor Seven: Policy Favoring Decisions on the Merits 12 “Cases should be decided upon their merits whenever reasonably possible.” Eitel, 782 13 F.2d at 1472. However, district courts have concluded with regularity that this policy, standing 14 alone, is not dispositive, especially where a defendant fails to appear or defend itself in an action. 15 PepsiCo, Inc., 238 F.Supp.2d at 1177; see also Craigslist, Inc. v. Naturemarket, Inc., 694 16 F.Supp.2d 1039, 1061 (N.D. Cal. Mar. 5, 2010). Accordingly, although the court is cognizant of 17 the policy favoring decisions on the merits – and consistent with existing policy would prefer that 18 this case be resolved on the merits – that policy does not, by itself, preclude the entry of default 19 judgment. 20 7. Conclusion: Propriety of Default Judgment 21 Upon consideration of all the Eitel factors, the court concludes that plaintiff is entitled to 22 the entry of default judgment against Clark and MJFH and is entitled to the insurance funds 23 deposited with the court. 24 IV. Conclusion 25 It is RECOMMENDED THAT Perry Smart’s November 24, 2021 motion for default 26 judgment (ECF No. 36) be GRANTED. Smart’s request for a hearing (ECF No. 43) is DENIED 27 as MOOT. 28 //// ] These findings and recommendations are submitted to the United States District Judge 2 || assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within twenty-one days 3 || after being served with these findings and recommendations, any party may file written 4 | objections with the court and serve a copy on all parties. Id.; see also Local Rule 304(b). Such a 5 || document should be captioned “Objections to Magistrate Judge’s Findings and 6 || Recommendations.” Any response to the objections shall be filed with the court and served on all 7 || parties within fourteen days after service of the objections. Local Rule 304(d). Failure to file 8 | objections within the specified time may waive the right to appeal the District Court’s order. 9 | Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1156-57 10 | (9th Cir. 1991). 11 | DATED: September 29, 2022 ~

13 UNITED STATES MAGISTRATE JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28