California Department of Toxic Substances Control et al v. Jim Dobbas, Inc. et al

Filing 221

ORDER signed by Senior Judge William B. Shubb on 10/22/2019 DENYING 196 Traveler's Motion to Intervene. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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CALIFORNIA DEPARTMENT OF TOXIC
SUBSTANCES CONTROL and the TOXIC
SUBSTANCES CONTROL ACCOUNT,
Plaintiffs,

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No. 2:14-CV-00595 WBS EFB

ORDER RE: MOTION TO INTERVENE
AND SET ASIDE DEFAULT

v.
JIM DOBBAS, INC. a California
corporation; CONTINENTAL RAIL,
INC., a Delaware corporation;
DAVID VAN OVER, individually;
PACIFIC WOOD PRESERVING, a
dissolved California
corporation; WEST COAST WOOD
PRESERVING, LLC., a Nevada
limited liability company; and
COLLINS & AIKMAN PRODUCTS, LLC,
a Delaware limited liability
company,
Defendants.

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----oo0oo---Plaintiffs Department of Toxic Substances Control and
the Toxic Substances Control Account (collectively “DTSC”) sought
recovery of costs and interest incurred during the cleanup of a

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wood preserving operation in Elmira, California against multiple

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defendants under the Comprehensive Environmental Response,

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Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et

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seq.

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of default against a canceled Delaware corporation, defendant

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Collins & Aikman Products, LLC (“C&A Products”) in 2015 after it

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failed to respond to DTSC’s First Amended Complaint.

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129.)

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Company’s (“Travelers”) motion to intervene as a defendant in

(First Am. Compl. (“FAC”) at ¶ 19.)

DTSC obtained an entry

(Docket No.

Presently before the court is The Travelers Indemnity

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this matter and vacate default against its insured, C&A Products.

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(Mot. to Intervene and Vacate Default (“Mot.”) at 2 (Docket No.

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196).)

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I.

Motion to Intervene

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Travelers seeks to intervene as of right or, in the

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alternative, permissively under Federal Rule of Civil Procedure

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Rule 24.

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(Mot. at 6.)
In order to intervene as of right, the party must

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demonstrate that it has an interest in the litigation and that

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interest would be practically impaired if the intervention was

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not granted.

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Commercial Realty Projects, Inc., 309 F.3d 1113, 1119 (9th Cir.

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2002) (quoting United States v. State of Washington, 86 F.3d

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1499, 1503 (9th Cir. 1996)).

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not have an interest in actions between those they insure and

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another party when they deny coverage and refuse to provide a

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defense.

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2010).

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Cal. Dep’t. of Toxic Substances Control v.

Ordinarily, insurance companies do

Gray v. Begley, 182 Cal. App. 4th 1509, 1522 (2d Dist.

However, “an insurer providing a defense under a
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reservation of rights has not lost its right to control the

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litigation” and thus retains an interest in the action.

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Motor Am. v. Nat’l Union Fire Ins. Co. of Pittsburgh, No. SACV

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08-00020-JVS (RNBx), 2010 WL 11468348, at *3 (C.D. Cal. Oct. 26,

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2010) (citing Gray, 182 Cal. App. 4th at 1523-24)).

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California law, where the insured defendant is “legally

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incapacitated” because of suspension or cancelation, the insurer

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can intervene in the action under a reservation of rights because

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“if an insurer were unable to intervene . . . the insurer would

Hyundai

Under

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be deprived of any opportunity to ‘contest its insured’s fault or

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the available damages.’”

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No. CV 10-9749 GAF (RZx), 2011 WL 13129968, at *5 (C.D. Cal. Sep.

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27, 2011) (citing APL Co. Pte. Ltd. v. Valley Forge Ins. Co., No.

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C 09-05641 MHP, 2010 WL 1340373, at *4 (N.D. Cal. Apr. 5, 2010).

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B.G.N. Fremont Square Ltd. v. Chung,

But here, Travelers has both disclaimed coverage and

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any duty to defend C&A Products (See Decl. of Alexander E.

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Potente (“Potente Decl.”) at Exs. B & C (Docket Nos. 197-2, 197-

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3)) and refused to provide a defense under a reservation of

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rights.1

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(Docket No. 215-1).)

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interest in the action and the court will not permit it to

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intervene as of right.

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(Decl. of Laura J. Zuckerman (“Zuckerman Decl.”) at 2
Accordingly, Travelers forfeited any direct

Alternatively, permissive intervention may be granted

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by the district court under its broad discretion.

Perry v.

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Schwarzenegger, 630 F.3d 898, 905 (9th Cir. 2011) (per curiam).

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DTSC offered to stipulate to Travelers’ intervention if
it provides a defense under a reservation of rights. Travelers
refused. (Zuckerman Decl. at 2.)
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Courts may consider the “nature and extent of the intervenors’

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interest” and “whether intervention will prolong or unduly delay

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the litigation.”

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Educ., 552 F.2d 1326, 1329 (9th Cir. 1977)).

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above, the court finds Travelers does not have an interest in

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this litigation and its intervention would only serve to prolong

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the action.

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permissively, and the court will deny Travelers’ motion to

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intervene.

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II.

Id. at 905 (citing Spangler v. Pasadena Bd. of
For the reasons

The court will not permit Travelers to intervene

Motion to Vacate Default
Under Federal Rule of Civil Procedure Rule 55(c), a

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court may set aside an entry of default for good cause.

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determine good cause, a court will consider: (1) whether the

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party seeking to set aside default engaged in culpable conduct

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that led to the default; (2) whether the party had a meritorious

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defense; and (3) whether reopening the default would prejudice

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the other party.

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of Yubran Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (internal

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quotations omitted).

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is true is sufficient reason for the district court to refuse to

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set aside the default.”

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To

United States v. Signed Personal Check No. 730

“[A] finding that any one of these factors

Id.

Looking to the Signed Personal Check No. 730 of Yubran

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Mesle considerations, even if Travelers were permitted to

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intervene, it has failed to establish good cause to set aside C&A

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Products’ default.

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Travelers itself engaged in any culpable conduct, the conduct of

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its insured corporation, through its duly authorized receiver,

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can be considered culpable.

First, although there is no claim that

C&A Products was a Delaware limited
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liability company.

Under Delaware law, a cancelled limited

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liability company can be sued if the Delaware Court of Chancery

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appoints a trustee or receiver for the company.

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805.

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had “the power, but not the obligation, to defend, in the name of

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Collins & Aikman Products, LLC, any claims made against it in

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DTSC v. Dobbas.”

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CB, 2014 WL 6907689, at *1-2 (Del. Ch. Dec. 8, 2014) (Docket No.

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73-1).

6 Del. C. § 18-

The Court of Chancery’s appointed receiver, Brian Rostocki,

In re Collins & Aikman Prods., LLC, No. 10348-

Mr. Rostocki accepted service of DTSC’s First Amended

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Complaint and failed to respond, leading to the entry of default.

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(Docket No. 129.)

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Second, Travelers has not offered or suggested any

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meritorious defense that C&A Products would have to the complaint

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if its default were set aside.

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Rostocki’s decision not to respond does not rise to the level of

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a “meritorious defense” necessary to show good cause.

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the court expresses no opinion as to the merits of Travelers’ own

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declaratory relief action against DTSC, except to note that the

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relief sought in that action would not constitute a defense which

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C&A Products could assert to liability in this action.

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Travelers’ disagreement with Mr.

Further,

Third, Travelers has failed to show that reopening the

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default would not prejudice DTSC.

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than “simply delaying the resolution of the case.”

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Ins. Plan v. Knoebber, 244 F.3d 691, 701 (9th Cir. 2001),

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overruled on other grounds by Egelhoff v. Egelhoff ex rel.

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Breiner, 532 U.S. 141 (2001).

DTSC sought entry of default

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against C&A Products in 2015.

Neither C&T Products nor Travelers

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did anything to attempt to set aside that default for over three
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The harm here is “greater”
TCI Grp. Life

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years.

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the litigation expenses associated with preparing and filing a

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motion for entry of judgment on that default.

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court will deny Travelers’ motion to vacate entry of default.

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DTSC relied in good faith on that default and incurred

Accordingly, the

IT IS THEREFORE ORDERED that Traveler’s Motion to

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Intervene and Motion to Vacate Default (Docket No. 196) be, and

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the same thereby is, DENIED.

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Dated:

October 22, 2019

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