California Department of Toxic Substances Control et al v. Jim Dobbas, Inc. et al
Filing
270
ORDER signed by Senior Judge William B. Shubb on 2/16/2023 GRANTING 196 , 205 , 217 , 222 that the insurers' motions to set aside the default of Collins & Aikman Products, LLC.(Reader, L)
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
9
EASTERN DISTRICT OF CALIFORNIA
10
----oo0oo----
11
12
CALIFORNIA DEPARTMENT OF TOXIC
SUBSTANCES CONTROL, et al.,
13
14
15
16
17
No. 2:14-cv-00595 WBS EFB
Plaintiff,
ORDER RE: MOTIONS TO SET
ASIDE DEFAULT
v.
JIM DOBBAS, INC., a California
corporation, et al.,
Defendant.
18
19
20
----oo0oo---When the Ninth Circuit reversed this court’s order
21
denying the insurers’ motions to intervene, the panel remanded
22
the matter to this court with instructions to reconsider its
23
denial of the motions to set aside the clerk’s default of their
24
insured, Collins & Aikman Products, LLC (“C&A Products”).
25
Cal. Dep’t of Toxic Substances Control v. Jim Dobbas, Inc., 54
26
F.4th 1078 (9th Cir. 2022).
27
reasons discussed below concludes that the motions to set aside
28
the default must now be granted.
See
The court does so now, and for the
1
1
In its Order of October 22, 2019 (Docket No. 221), this
2
court denied Travelers’ motion to vacate the default of C&A
3
Products and explained in detail its reasons for the denial.
4
court first articulated the considerations which the Ninth
5
Circuit has held must be taken into account in determining
6
whether good cause exists under Rule 55(c) of the Federal Rules
7
of Civil Procedure to set aside an entry of default.
8
considerations are, as this court stated, (1) whether the party
9
seeking to set aside default engaged in culpable conduct that led
The
Those
10
to the default; (2) whether the party had a meritorious defense;
11
and (3) whether reopening the default would prejudice the other
12
party.
13
Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (internal quotations
14
omitted).
15
sufficient reason for the district court to refuse to set aside
16
the default.”
17
United States v. Signed Personal Check No. 730 of Yubran
“[A] finding that any one of these factors is true is
Id.
After specifically addressing each of those three
18
considerations, this court concluded that even if Travelers were
19
permitted to intervene, it had failed to establish good cause to
20
set aside C&A’s default.
21
22
23
24
25
26
27
28
This court held:
First, although there is no claim that Travelers
itself engaged in any culpable conduct, the conduct of
its insured corporation, through its duly authorized
receiver, can be considered culpable. C&A Products
was a Delaware limited liability company. Under
Delaware law, a cancelled limited liability company
can be sued if the Delaware Court of Chancery appoints
a trustee or receiver for the company. 6 Del. C. §
18-805. The Court of Chancery’s appointed receiver,
Brian Rostocki, had “the power, but not the
obligation, to defend, in the name of Collins & Aikman
Products, LLC, any claims made against it in DTSC v.
Dobbas.” In re Collins & Aikman Prods., LLC, No.
10348-CB, 2014 WL 6907689, at *1-2 (Del. Ch. Dec. 8,
2014) (Docket No. 73-1). Mr. Rostocki accepted
2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
service of DTSC’s First Amended Complaint and failed
to respond, leading to the entry of default. (Docket
No. 129.)
Second, Travelers has not offered or suggested any
meritorious defense that C&A Products would have to
the complaint if its default were set aside.
Travelers’ disagreement with Mr. Rostocki’s decision
not to respond does not rise to the level of a
“meritorious defense” necessary to show good cause.
Further, the court expresses no opinion as to the
merits of Travelers’ own declaratory relief action
against DTSC, except to note that the relief sought in
that action would not constitute a defense which C&A
Products could assert to liability in this action.
Third, Travelers has failed to show that reopening the
default would not prejudice DTSC. The harm here is
“greater” than “simply delaying the resolution of the
case.” TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d
691, 701 (9th Cir. 2001), overruled on other grounds
by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141
(2001). DTSC sought entry of default against C&A
Products in 2015. Neither C&T Products nor Travelers
did anything to attempt to set aside that default for
over three years. DTSC relied in good faith on that
default and incurred the litigation expenses
associated with preparing and filing a motion for
entry of judgment on that default.
For those reasons, the court denied Travelers’ motion
to vacate entry of default.
Subsequently, the other insurers, Continental, Century,
19
and Allianz, made similar motions to intervene and set aside the
20
default, and in its order of December 4, 2019, this court denied
21
those motions, noting that those insurers “offer many of the same
22
arguments Travelers did in its motion, with some important
23
differences.”
24
discuss those differences, concluding that Continental’s position
25
was “substantially indistinguishable” from Traveler’s and that
26
Century “offers the same arguments Travelers did.”
27
With regard to Allianz’s motion, the court concluded that
28
although it did not disclaim coverage it was an excess insurer,
(Docket No. 237 at 2-3.)
3
The court went on to
(Id. at 3.)
1
and because the court could not conclude that primary coverage
2
was exhausted, Allianz’s motion to intervene would also be
3
denied.
4
(Id. at 4-6.)
As none of the alleged distinctions between Travelers
5
and the other insurers had any effect on the court’s decision to
6
deny the motion to set aside C&A Products’ default, there was no
7
need to readdress that motion.
8
denied, and that decision was the law of the case.
9
That motion had already been
This court felt it had clearly explained the reasons
10
for its denial of Travelers’ motion to set aside the default, and
11
there was no reason to restate those reasons when denying the
12
exact same motions by the other insurers.
13
Ninth Circuit in its Opinion stated that this court denied the
14
motions to set aside the default “for reasons that are unclear.”
15
Dobbas, 54 F.4th at 1081.
16
that it lacked jurisdiction over an appeal from an order denying
17
a motion to set aside the entry of default alone, it seemingly
18
went out of its way at the end of the Opinion to reiterate that
19
the reasons for the denial of the insurers’ motions to set aside
20
the default were “unclear at best.”
21
Nevertheless, the
Although the panel expressed the view
See id. at 1092 n.18.1
This court must assume that its orders of October 22,
22
2019, and December 4, 2019, were both before the Ninth Circuit on
23
appeal.
24
denial of the motions to set aside the default than it did in its
25
October 22, 2019 order.
26
this court’s decision, the court must assume that if it were
27
28
This court cannot more clearly state its reasons for
In light of the panel’s assessment of
There is no indication that any party requested
rehearing of that decision. See Fed. R. App. P. 40.
4
1
1
again to deny the motions to set aside the default for the same
2
reasons, when the matter finally becomes ripe for appeal, the
3
Ninth Circuit would again find those reasons to be “unclear at
4
best” and thus insufficient.
5
There is another, more compelling, reason to grant the
6
motion this time around, however.
The Ninth Circuit held that
7
the insurers have a right to intervene in this action.
8
explaining its decision to allow the insurers to intervene, the
9
Ninth Circuit cited Clemmer v. Hartford Insurance Co., 587 P.2d
In
10
1098 (Cal. 1978), overruled on other grounds by Ryan v.
11
Rosenfeld, 395 P.3d 689 (Cal. 2017), for the proposition that an
12
insurer has an interest under the direct action statute in
13
preventing its noncooperating insured’s default.
14
Circuit observed:
15
16
17
18
19
The Ninth
The California Court of Appeal has since consistently
followed Clemmer and repeatedly held that insurers
have a protectable interest under § 11580 in
preventing defaults by their insureds that are
incapable of defending themselves or otherwise
unwilling to do so.
Dobbas, 54 F.4th at 1090 (emphasis added).
20
In other words, the whole purpose of permitting the
21
insurers to intervene is to prevent the default of their insured.
22
That purpose would be defeated in this case if the court were to
23
permit the insured’s default.
24
insurers would be a meaningless sham if the default of their
25
insured has already been entered.
26
default of C&A Products would be inconsistent with the Ninth
27
Circuit’s decision in this case allowing its insurers to
28
intervene.
Obviously, intervention by the
5
In short, permitting the
1
IT IS THEREFORE ORDERED that the insurers’ motions to
2
set aside the default of Collins & Aikman Products, LLC (Docket
3
Nos. 196, 205, 217, 222) be, and the same hereby are, GRANTED.
4
Dated: February 16, 2023
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?