Principal Life Insurance Company v. The Estate of Sergio Botello Diaz

• Court: District Court, E.D. California
• Decided: January 3, 2024
• Docket: 1:23-cv-00261
• Status: Unknown

Opinion

1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 8 PRINCIPAL LIFE INSURANCE Case No. 1:23-cv-00261-CDB COMPANY, 9 FINDINGS AND RECOMMENDATION Plaintiff, TO GRANT PRINCIPAL LIFE 10 INSURANCE COMPANY’S MOTION v. FOR DEFAULT JUDGMENT 11 THE ESTATE OF SERGIO BOTELLO (Doc. 25) 12 DIAZ, et al., 14-DAY DEADLINE 13 Defendants. Clerk of Court to Assign District Judge 14 15 Pending before the Court is the motion of Plaintiff Principal Life Insurance Company 16 (“Principal”) for default judgment against Defendant Rogelio Botello Diaz (“Rogelio”)1, filed on 17 November 21, 2023. (Doc. 25). No Defendant filed an opposition to the motion and the time to 18 do so has expired. On December 27, 2023, the Court convened for hearing on the motion. (Doc. 19 26). Attorney Cindy Rucker appeared on behalf of Principal via Zoom videoconference and no 20 other parties made an appearance. Id. For the reasons set forth below, the undersigned 21 recommends that Principal’s motion be granted. 22 Background 23 Principal initiated this action with the filing of a complaint in interpleader on February 17, 24 2023. (Doc. 1). Principal’s claims arise in connection with the passing of Sergio Botello Diaz 25 (the “Decedent”), who was an employee of Grimmway Enterprises, Inc., and a participant in a 26 Grimmway-sponsored, ERISA-governed employee welfare benefit plan (the “Plan”). Id. ⁋11. 27

1 The undersigned shall refer to Defendant Rogelio Botello Diaz as “Rogelio” for the sake 1 Decedent was covered under a group term life policy and other components of the Plan, issued by 2 Principal to Grimmway. Id. 3 The Decedent passed away on September 5, 2021, in Arvin, California, as a result of 4 multiple gunshot wounds. Id. ⁋14. Decedent’s death was confirmed to be a homicide. Following 5 his death, the Decedent’s benefits under the Plan became payable, including group term life 6 benefits in the amount of $10,000, voluntary term life benefits valued at $500,000, and accidental 7 death and dismemberment benefits in the amount of $500,000. Id. ⁋15. 8 At the time of the Decedent’s passing, Rogelio was designated as the primary beneficiary 9 of the Plan benefits. Id. ⁋16. The Plan does not name any contingent beneficiaries. Furthermore, 10 the Plan provides that if no beneficiary survives the Decedent, or if no beneficiary is named, then 11 the Plan provides payments in the following order of precedence: 12 to your spouse or Domestic Partner; 13 to your children born to or legally adopted by you; 14 to your parents; 15 to your brothers and sisters; 16 if none of the above, to the executor or administrator of your estate or other persons as provided in the Group Policy. 17 However, if a beneficiary is suspected or charged with your death, 18 the Death Benefit may be withheld until additional information has been received or the trial has been held. If a beneficiary is found 19 guilty of your death, such beneficiary may be disqualified from receiving any benefit due. Payment may then be made to any 20 contingent beneficiary or to the executor or administrator of your state. 21 22 (Doc. 1 p. 5). 23 Rogelio submitted a claim for benefits under the Plan on or around September 8, 2021. 24 Id. ⁋18. Thereafter on November 5, 2021, Principal contacted the Arvin Police Department 25 seeking information regarding Decedent’s death, including whether anyone was arrested in 26 connection with his homicide. At the time of its filing of the complaint, Principal maintained 27 regular communication with the Arvin Police Department and represents that Decedent’s death is 1 death. Id. ⁋⁋21-22. 2 Based in part in the provisos quoted above, Principal maintains that it is “unable to 3 determine without peril the party to whom the benefits under the Policies are payable.” Id. ⁋24. 4 By its action, Principal requests that the Court (1) place the policy benefits into an interest bearing 5 account for future disbursement; (2) adjudicate the issue of who among the interpleader 6 defendants is rightfully entitled to the benefits under the policies; (3) enjoin the interpleader 7 defendants from maintaining any action against Principal, Grimmway, or the Plan for recovery of 8 any claim related to the benefits; (4) award Principal reimbursement for the costs, attorneys’ fees, 9 and other expenses it expended in the prosecution of this interpleader lawsuit out of the funds to 10 be deposited; (5) dismiss Principal with prejudice from this action; and (6) award Principal with 11 other further relief, as appropriate. (Doc. 1 p. 7). 12 On October 18, 2023, Principal requested entry of default against Rogelio since he was 13 served with a summons and complaint on April 28, 2023, but has not filed an answer or otherwise 14 appeared in this action. (Docs. 8, 22). The Clerk of the Court entered default on the same day. 15 (Doc. 23). 16 Legal Standard 17 In general, “default judgments are ordinarily disfavored,” as “[c]ases should be decided 18 upon their merits whenever reasonably possible.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 19 616 (9th Cir. 2016) (quoting Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986)). Prior to 20 entry of default judgment, there must be an entry of default. See Fed. R. Civ. P. 55. Upon entry 21 of default, the factual allegations of the complaint, save for those concerning damages, are 22 deemed to have been admitted by the defaulting party. Fed. R. Civ. P. 8(b)(6); see Geddes v. 23 United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (per curiam). However, “a defendant is not 24 held to admit facts that are not well-pleaded or to admit conclusions of law.” United States v. 25 Cathcart, No. C 07-4762-PJH, 2010 WL 1048829, at *4 (N.D. Cal. Feb. 12, 2010) (citing 26 Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir.1975)); accord 27 DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (allegations that do no more than 1 pleadings of the prevailing party, or claims which are not well-pleaded, are not binding and 2 cannot support the judgment.” Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978). 3 A district court has discretion to grant or deny a motion for default judgment. Aldabe v. 4 Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (per curiam); see TeleVideo Sys., Inc. v. Heidenthal, 5 826 F.2d 915, 917 (9th Cir. 1987) (“Rule 55 gives the court considerable leeway as to what it may 6 require as a prerequisite to the entry of a default judgment.”) (per curiam). The Ninth Circuit has 7 set out seven factors to be considered by courts in reviewing a motion for default judgment: “(1) 8 the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim (3) the 9 sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a 10 dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) 11 the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the 12 merits.” Eitel, 782 F.2d at 1471–72. Entry of default judgment is not appropriate where the 13 second and third factors weigh against plaintiff. See Mnatsakanyan v. Goldsmith & Hull APC, 14 No. CV-4358 MMM (PLAx), 2013 WL 10155707, *10 (C.D. Cal. May 14, 2013) (“The fact that 15 factors two and three weigh against the entry of default judgment is particularly significant, as 16 courts often treat these as the most important factors.”) (citing cases). 17 “If the court determines that the allegations in the complaint are sufficient to establish 18 liability, it must then determine the ‘amount and character’ of the relief that should be awarded.” 19 Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp.2d 916, 920 (C.D. Cal. 2010) (quoting 20 10A Charles Alan Wright et al., Fed. Prac. and Proc. § 2688, at 63 (3d ed. 1998)). However, 21 courts may decline to enter default judgment if a party’s claims are legally insufficient. Cripps v. 22 Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992); Aldabe, 616 F.2d at 1092-93 23 (“Given the lack of merit in appellant’s substantive claims, we cannot say that the district court 24 abused its discretion in declining to enter a default judgment in favor of appellant”). 25 Discussion 26 1. This Action Was Properly Brought as an Interpleader Action 27 The Court has original jurisdiction over this action pursuant to 28 U.S.C. § 1331 because 1 29 U.S.C. § 1001, et seq. See Herman Miller, Inc. Ret. Income Plan v. Magallon, No. 2:07-cv- 2 00162-MCE-GGH, 2008 WL 2620748, at *2 (E.D. Cal. July 2, 2008) (“[U]nder ERISA, a cause 3 of action exists which establishes subject-matter jurisdiction, based on the existence of a federal 4 question”). 5 An interpleader action involves a two-step process. “‘First, the court determines the 6 propriety of interpleading the adverse claimants and relieving the stakeholder from liability. The 7 second stage involves an adjudication of the adverse claims of the defendant claimants.’” Metro 8 Life Ins. Co. v. Billini, No. S-06-02918 WBS KJM, 2007 WL 4209405, at *2 (E.D. Cal. Nov. 27, 9 2007) (quoting First Interstate Bank of Or. v. U.S., 891 F. Supp. 543, 546 (D. Or. 1995)). 10 “The primary test for determining the propriety of interpleading the adverse claimants and 11 discharging the stakeholder . . . is whether the stakeholder legitimately fears multiple vexation 12 against a single fund.” Big Island Yacht Sales v. Dowty, 848 F. Supp. 131, 133 n.1 (D. Haw. 13 1993) (quoting 7 Charles Alan Wright, et al., Fed. Prac. and Proc. § 1704 (1986)). “Discharge is 14 normally granted absent bad faith by the stakeholder.” Western Conference of Teamsters Pension 15 Plan v. Jennings, No. C-10-03629-EDL, 2011 WL 2609858, at *5 (N.D. Cal. June 6, 2011) 16 (hereinafter “Jennings”). 17 Principal alleges that Decedent’s death benefits have multiple possible claimants. (Doc. 1 18 ⁋24). As there is no alleged bad faith by Principal, Rogelio properly is subject to interpleader and 19 litigation of any claims he may have to the benefits under the Plan. 20 2. Adequacy of Service of Process 21 “As a threshold matter in considering a motion for default judgment, the Court must first 22 assess the adequacy of the service of process on the party against whom default is requested.” 23 Trustees of ILWU-PMA Pension Plan v. Coates, No. C-11-3998 EMC, 2013 WL 556800, at *4 24 (N.D. Cal. Feb. 12, 2013) (internal quotation and citation omitted). 25 Here, the summons returned executed represents that Rogelio was personally served with 26 process at an address in the Eastern District of California. (Doc. 8). This is adequate service 27 under Rule 4(e), Fed. R. Civ. P. 1 3. The Eitel Factors 2 A. Possibility of Prejudice to Principal 3 The first Eitel factor requires the Court to consider the possibility of prejudice to the 4 plaintiff if a default judgment is not entered. Eitel, 782 F.2d at 1471. Prejudice may be shown 5 where failure to enter a default judgment would leave plaintiff without a proper remedy. 6 Philadelphia Indem. Ins. Co. v. United Revolver Club of Sacramento, Inc., No. 2:18-cv-2960- 7 KJM-DB, 2020 WL 773419, at *3 (E.D. Cal. Feb. 18, 2020) (citing Landstar Ranger, Inc, 725 F. 8 Supp.2d at 920). 9 Since Rogelio has refused to defend this action, if default judgment is not entered, 10 Principal would be left without a proper remedy. See Primera Life Ins. Co. v. Annalyn Ngo, No. 11 2:23-CV-01478-JLS-AFM, 2023 WL 7308310, at *2 (C.D. Cal. Oct. 20, 2023); Am. Gen. Life 12 Ins. Co. v. Durbin, No. CV 15-4137 MO (Ex) 2016 WL 3583826, at *3 (C.D. Cal. June 10, 13 2016) (“[Plaintiff] would be prejudiced if default judgment is not entered because it would be 14 denied the benefits of the interpleader device”). In addition, without entry of default judgment, 15 the other interpleader defendants will be unable to resolve their competing claims. Jennings, 16 2011 WL 2609858, at *3. Indeed, granting Principal’s motion would not substantially affect 17 Rogelio’s ability to seek a share of the proceeds, but rather would clear an impediment of the 18 resolution of this matter due to his refusal to appear and litigate. The Court finds that the first 19 Eitel factor weighs in favor of granting default judgment to Principal. 20 B. Sufficiency of the Complaint and the Likelihood of Success on the Merits 21 The second and third Eitel factors require the Court to consider the merits of the plaintiff’s 22 substantive claim and the sufficiency of the complaint. Eitel, 782 F.2d at 1471-72. The Court 23 considers these two factors together given the close relationship between the two inquiries. 24 Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp.2d 1039, 1055 (N.D. Cal. 2010). 25 These two factors will favor entry of default judgment where the complaint sufficiently 26 states a claim for relief upon which the plaintiff may recover. PepsiCo, Inc. v. California 27 Security Cans, 238 F. Supp.2d 1172, 1177 (C.D. Cal. 2010). Relevant here, the primary purposes 1 secondary, follow-up actions and (2) to protect the resources of the interpleading party.” Western 2 Reserve Life Assur Co. of Ohio v. Canul, No. 1:11-cv-01751-AWI-JLT, 2012 WL 844589, at * 2 3 (E.D. Cal. Mar. 12, 2012) F&R adopted, 2012 WL 1074952 (E.D. Cal. Mar. 29, 2012) (citing 4 Mack v. Kuckenmeister, 619 F.3d 1010, 1024 (9th Cir. 2010)). Principal’s complaint seeks 5 protection from potentially conflicting claims of the interpleader defendants. (Doc. 1 ⁋28). 6 Principal further alleges that it faces substantial risk of suffering multiple duplicate and 7 inconsistent rulings if it is not afforded protection from the Court. Id. The Court finds that these 8 factors favor default judgment. 9 C. Sum of Money at Stake 10 Under the fourth Eitel factor, “the court must consider the amount of money at stake in 11 relation to the seriousness of the defendant’s conduct.” PepsiCo, Inc., 238 F. Supp.2d at 1176-77. 12 Where a large sum of money is at stake, this factor disfavors default judgment. Eitel, 782 F.2d at 13 1472. However, in an interpleader action, this factor typically is neutral where the insurer does 14 not assert an interest in the funds and, instead, seeks to deposit the funds at issue with the court. 15 See Transamerica Life Ins. Co. v. Estate of Ward, No. CIV S-11-0433 JAM EFB, 2011 WL 16 5241257, at *4 (E.D. Cal. Oct. 31, 2011). Here the net amount of benefits payable under the Plan 17 exceeds one million dollars. (Doc. 1 ⁋15). Although that is a large amount, Principal disclaims 18 interest in the benefits and asks only that the Court adjudicate the disbursement of funds in 19 accordance with the insurance policy. Trustees of ILWU-PMA Pension Plan, 2013 WL 556800, 20 at *6. The Court finds that this factor is neutral. 21 D. Possibility of Disputed Material Facts 22 The fifth Eitel factor requires the Court to consider whether a dispute exists regarding 23 material facts. Eitel, 782 F.2d at 1471-72. Where a plaintiff has filed a well-pleaded complaint, 24 the possibility of dispute concerning material facts is unlikely. Landstar Ranger, 725 F. Supp. 2d 25 at 921-22. Here, since Rogelio is in default, all of Principal’s well pleaded factual allegations are 26 taken as true. TeleVideo Sys., Inc., 826 F.2d at 918 (citing Geddes, F.2d at 560). 27 Rogelio is unlikely to dispute Principal’s grounds for interpleader. As a neutral arbiter, 1 disbursement of those funds in accordance with the relevant policies. (Doc. 1 p. 7). See 2 Transamerica Life Ins. Co., 2011 WL 5241257, at *4. This factor favors default judgment. 3 E. Whether the Default was Due to Excusable Neglect 4 The sixth Eitel factor requires the Court to consider whether a defendant’s default was due 5 to excusable neglect. PespiCo, 238 F. Supp.2d at 1177; Eitel, 782 F.2d at 1471-72. This factor 6 implicates due process and whether defendants are “given notice reasonably calculated to apprise 7 them of the pendency of the action and be afforded opportunity to present their objection before a 8 final judgment is rendered.” Phillip Morris USA, Inc. v. Castworld Productions, 219 F.R.D. 494, 9 500 (C.D. Cal. 2003). 10 Rogelio was served with the summons and complaint. (Doc. 8). The Clerk of the Court 11 entered default on October 18, 2023. (Doc. 22). Rogelio has not appeared in this action, and 12 although Principal avers that Rogelio orally agreed to disavow any interest he may have to the 13 benefits under the Plan, he made no effort to either confirm or deny Principal’s averment. (Doc. 14 25-1 pp. 2-3). It is evident that Rogelio received reasonable notice of the pendency of this action, 15 but nevertheless declined to appear. Accordingly, this factor favors entry of default judgment. 16 See Magic Leap, Inc. v. Tusa Tuc, No. 17-cv-00264 NC, 2017 WL 10456729, at *3 (N.D. Cal. 17 Aug. 17, 2017). 18 F. Policy of Deciding Cases on the Merits 19 The seventh Eitel factor emphasizes the “general rule that default judgments are ordinarily 20 disfavored.” Eitel, 782 F.2d at 1472. “Cases should be decided upon the merits whenever 21 reasonably possible.” Id. (citing Pena v. Seguros La Comersial, S.A., 770 F.2d 811, 814 (9th Cir. 22 1985)). Rogelio’s refusal to participate in this action renders a decision on the merits virtually 23 impossible. This factor does not weigh against default judgment. 24 * * * * * 25 The Court has considered all the Eitel factors and finds that they weigh in favor of 26 granting Principal’s motion for entry of default judgment against Rogelio. 27 The Court notes that the proposed order on default filed by Principal in connection with its 1 complaint. Thus, for instance, Principal presently does not seek an order enjoining Rogelio from 2 maintaining any future action against it or the Plan for the recovery of any claim regarding the 3 benefits. Cf. Doc. 1 (Complaint), Prayer for Relief ⁋3. Nor does Principal seek as part of any 4 default judgment against Rogelio a determination or declaration as to whether and the extent to 5 which Rogelio may (or may not) be entitled to benefits. 6 Indeed, at this juncture, it would be premature for the Court to entertain what appears to 7 be Principal’s primary request for relief: to “adjudicate the issue of who among the Interpleader 8 Defendants is rightfully entitled to the benefits under the Policies.” Id. ⁋2. In particular, 9 notwithstanding that Rogelio is deemed to have admitted the well-pleaded allegations of 10 Principal’s complaint upon entry of default judgment (see Fed. R. Civ. P. 8(b)(6); Geddes, 559 11 F.2d at 560), based on a tentative review of those allegations, the undersigned is uncertain that 12 Rogelio’s admission of those facts necessarily disentitles him to any rightful claim to the benefits. 13 See State Farm Life Ins. Co. v. Ablaza, No. 20-cv-06519-BLF, 2021 WL 4077980, at *2 (N.D. 14 Cal. Sept. 8, 2021) (overruling R&R and denying insurer’s request for entry of default judgment 15 as premature where allegations of complaint established that beneficiary would be disentitled to 16 policy benefits only following any conviction for murder); UNUM Life Ins. Co. of Am. v. Jace, 17 No. EDCV 15-2265 JGB (SPx), 2016 WL 11747187, at *2 (C.D. Cal. Feb. 23, 2016) (same; “As 18 the Complaint is currently pleaded, there are no facts before the Court demonstrating that Michael 19 Jace is disqualified by operation of law from receiving the policies’ benefits. His mere failure to 20 appear in the case, without more, is insufficient to entitle UNUM to the relief it requests.”). 21 Although the Court acknowledges the attestation of counsel for Principal that Rogelio 22 verbally has “disclaim[ed] his right to the Polices’ benefits” (Doc. 25-1 ⁋4), in connection with 23 any future grant of relief sought by Principal, the Court is constrained to deeming Rogelio only to 24 have admitted the well-pleaded allegations of the operative complaint. See Danning, 572 F.2d at 25 1388 (“[F]acts which are not established by the pleadings of the prevailing party, or claims which 26 are not well-pleaded, are not binding and cannot support the judgment.”). 27 / / / 1 | Findings and Recommendation 2 For the forgoing reasons, the Clerk of Court is DIRECTED to randomly assign a district 3 | judge to this matter. 4 Further, the Clerk of Court is DIRECTED transmit a copy of these findings and 5 || recommendations to Defendant Rogelio Botello Diaz at his last known address (920 Fox Court, 6 | Arvin CA 93203). 7 Further, it is HEREBY RECOMMENDED that Principal’s Motion for Default Judgment 8 | (Doc. 25) be GRANTED and that default judgment be entered against Defendant Rogelio Botello 9 | Diaz. The entry of default judgment shall not be construed as any determination of entitlement by 10 | Plaintiff Principal Life Insurance Company to any affirmative relief pleaded in its Complaint 11 | (Doc. 1). 12 These findings and recommendations are submitted to the United States District Judge 13 | assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within 14 days after 14 | being served with these findings and recommendations, any party may file written objections with 15 || the court and serve a copy on all parties. Such a document should be captioned “Objections to 16 | Magistrate Judge's Findings and Recommendations.” Any reply to the objections shall be served 17 | and filed within fourteen days after service of the objections. The parties are advised that failure 18 | to file objections within the specified time may waive the right to appeal the District Court's 19 | order. Martinez v. Yist, 951 F.2d 1153 (9th Cir. 1991). 20 | □□ □□ SO ORDERED. Dated: _ January 3, 2024 | Wr bo 22 UNITED STATES MAGISTRATE JUDGE 23 24 25 26 27 28 10