Berkley Insurance Company v. Pilot West Corporation et al

Filing 27

MEMORANDUM DECISION AND ORDER. IT IS ORDERED THAT: Plaintiff's Motion 19 is GRANTED insofar as it seeks an entry of default as to Defendant Pilot West. Plaintiff's Motion 19 is RESERVED as to Plaintiff's request for default judg ment. Consistent with the above Memorandum Decision, Plaintiff shall file supplementary evidence in support of its motion on or before 12/16/2016. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (st)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

BERKLEY INSURANCE COMPANY, a
Delaware corporation,

Case No. 1:16-cv-00178-BLW
MEMORANDUM DECISION AND
ORDER

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.

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

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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

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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

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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 that Defendants’ default was due to excusable neglect. See Fair Housing of Marin v.
Combs, 285 F.3d 899, 906 (9th Cir. 2002).
Factors (2) and (3), regarding the sufficiency and merits of Plaintiff’s claims, also
favor a default judgment. The Court has reviewed the Complaint and is satisfied that it
sets forth a viable cause of action for breach of contract. The Complaint specifically
pleads that (a) Defendants entered into an Indemnity Agreement pursuant to which they

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promised to indemnify Berkley Insurance in connection with the surety bonds; (b)
Berkley Insurance incurred substantial losses and expenses on those bonds, and faces the
prospect of significant further liabilities; and (c) Defendants failed to perform their
indemnification and other obligations to Berkley Insurance. Because these well-pleaded
factual allegations are deemed admitted by virtue of Defendants’ default, the Court finds
that the allegations in the Complaint adequately establish the merits of Plaintiff’s breach
of contract claim.
Two factors weigh against default judgment. First, as to factor (4), Plaintiff is
seeking over $864,741, which is a relatively large amount. In addition, factor (7)—the
policy favoring decisions on the merits—weighs against default judgment.
On examination of each of the Eitel factors, the Court concludes that on balance,
default judgment against Defendants is appropriate.
B.

Calculation of Damages

While the factual allegations in the complaint must be accepted as true, the Court
must make an independent determination of the damages for which Defendants are liable.
TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987).
Berkley Insurance, in its motion for default judgment, is seeking the following
relief: (1) claim payments, consulting fees, legal fees and costs, and expenses totaling
$864,741.12; (2) a reserve in the amount of $50,000 for outstanding claims; (3) an
injunction against all defendants to perform all terms and conditions of the Indemnity
Agreement; (4) and for attorney fees and costs in bringing this action. Dkt. 19.

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Notwithstanding the propriety of a default judgment, the Court finds the proofs
submitted in support of the motion are inadequate to support an award of damages at this
time. First, as to the request for $864,741.12 in claim payments and related costs, Berkley
Insurance relies primarily on the following conclusory statement in the Complaint
regarding amounts paid:
With respect to the State of Washington contractor surety bond, Bond No.
0172471, claims have been made and Berkley has paid the sum of $12,000. With
respect to the City of Orville Project, Bond No. 1178221, claims have been made
and Berkley has paid the sum of $66,603.70. With respect to the City of Pullman
Bond, Bond No. 0183438, claims have been made and Berkley has paid the sum
of $423,324.87. With respect to the Oden Water Association Bond, Bond No.
0183439, claims have been made and Berkley has paid the sum of $4,244.37. With
respect to the City of Whitefish Bond, Bond No. 0188994, claims have been made
and Berkley has paid the sum of $252,949.91. Finally, with respect to the Bonner
County Road Department Bond, Bond No. 0183446, the County has filed a claim
and has filed litigation seeking the penal sum of the bond, $50,000. Berkley has
also incurred legal and consulting fees in responding to and investigating the
claims against the Bonds in the amount of $106,018.32.
Compl. at ¶ 16, Dkt. 1. Berkley Insurance also submits a single Exhibit which appears to
be an internal document listing Pilot West’s outstanding surety bonds. That Exhibit lists
the bond amounts but provides no documentation of any claims paid out under these
bonds. Id. at Ex. A. Berkley Insurance has failed to submit invoices, claim documents, or
other documentary support substantiating these claims or indicating how the damage
amounts were calculated.
Furthermore, the Court is unprepared to determine Plaintiff’s entitlement to any
sums resulting from “further claims [that] may be made against the Bond in amounts
currently unknown, but in an amount of no less than $50,000 . . . .” Id. at ¶ 20. Plaintiff is

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directed to submit additional documentation demonstrating expenses actually incurred or
anticipated under bond not already encompassed in the $864,741.12 figure above,
including but not limited to the Bonner County Road Department Bond, Bond No.
0183446.
Finally, Plaintiff has provided insufficient authority as to its entitlement to
attorney fees. Federal Rule of Civil Procedure 54(d)(2)(B) states that a claim for attorney
fees must “specify the judgment and the statute, rule, or other grounds entitling the
movant to the award.” Plaintiff contends that “under the terms of the Indemnity
Agreement, Berkley is entitled . . . to its reasonable attorney fees which may be awarded
by the court.” Compl. at ¶ 23. However, Plaintiff has failed to submit a copy of the
parties’ Indemnity Agreement to support this assertion that it entitles Berkley Insurance
to attorney fees.
Therefore, Plaintiff is directed to submit supplemental evidence (in the form of
affidavits and supporting exhibits) to support and clarify its requests for damages and
attorney fees. The evidentiary submissions shall include, at minimum, (1) the parties’
General Agreement of Indemnity dated July 25, 2012 and (2) invoices or detailed
affidavits, or both, documenting the claims paid and any legal and consulting fees
incurred in responding to such claims.
CONCLUSION
The Court finds in this Order that entry of default judgment against all Defendants
is appropriate. However, in light of the foregoing evidentiary deficiencies, the Court

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reserves its ruling as to the amount and form of that judgment. Plaintiff is ordered to file
supplementary evidence in support of its request for damages and attorney fees on or
before December 16, 2016. Should those materials be sufficient to comport with the
requirements set forth above, the Court will enter default judgment accordingly.
ORDER
IT IS ORDERED THAT:
1.

Plaintiff’s Motion (Dkt. 19) is GRANTED insofar as it seeks an entry of
default as to Defendant Pilot West. It appearing by affidavit from the record
that the summons and complaint have been served upon Pilot West, and
that Pilot West has failed to plead or otherwise defend this action, the Clerk
of Court shall enter an Order of Default against Defendant, pursuant to
Federal Rule of Civil Procedure 55(a).

2.

Plaintiff’s Motion (Dkt. 19) is RESERVED as to Plaintiff’s request for
default judgment. Consistent with the above Memorandum Decision,
Plaintiff shall file supplementary evidence in support of its motion on or
before December 16, 2016.

DATED: November 30, 2016

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

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