United Fire & Casualty Company v. Titan Contractors Service, Inc.

Filing 119

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that plaintiff United Fire & Casualty Company's Rule 55(b) Motion for Entry of Default Judgment is DENIED. [Doc. 118 ] IT IS FURTHER ORDERED that this declaratory judgment action brought by plaintiff United Fire & Casualty Company against defendant Titan Contractors Service, Inc. is DISMISSED without prejudice. An Order of Dismissal will accompany this Memorandum and Order. Signed by District Judge Charles A. Shaw on 2/13/15. (KXS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
UNITED FIRE & CASUALTY COMPANY,
Plaintiff,
v.
TITAN CONTRACTORS SERVICE, INC.,
Defendant.

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No. 4:10-CV-2076 CAS

MEMORANDUM AND ORDER
This matter is before the Court on plaintiff United Fire & Casualty Company’s (“United
Fire”) Rule 55(b) Motion for Default Judgment against defendant Titan Contractors Service, Inc.
(“Titan”). Titan has not responded to the motion and has not participated in this action since at least
June 3, 2014; the Court has stricken Titan’s answer for failure to comply with a court order; and it
is unrepresented and in default. Following a review of the opinion and judgment issued in this
action by the United States Court of Appeals for the Eighth Circuit on May 13, 2014 and the
subsequent proceedings in this Court, the Court will deny United Fire’s motion for default judgment
and dismiss its claims.
I.

Background
The background of this declaratory judgment action is fully set out in the Court’s previous

orders dated September 29, 2014 and October 7, 2014, and the Court recites only the facts necessary
to decide the instant motion. See Docs. 114, 115; see also Doc. 88 (denying United Fire’s motion
for summary judgment). On October 28, 2014, pursuant to Federal Rule 55(a) and on United Fire’s
motion, the Clerk of Court entered default against defendant Titan. Shortly thereafter, pursuant to
Federal Rule 55(b), United Fire filed the instant motion for entry of default judgment.

In its motion, United Fire seeks default judgment against defendant Titan declaring: (1) the
insurance policy at issue does not provide coverage for the claims against Titan brought in the
pending underlying state court actions, and United Fire has no duty to defend or indemnify Titan
in those actions; (2) United Fire has not breached any duty owed to Titan with regard to the
underlying claims; (3) United Fire has not breached its contract of insurance with Titan; (4) United
Fire is entitled to recover its costs and expenses in defense of the underlying actions in the amount
of $187,711.81; and (5) judgment shall be entered in favor of United Fire and against Titan in the
amount of $187,711.81.
II.

Discussion
“The entry of default judgment should be a ‘rare judicial act.’” Comiskey v. JFTJ Corp., 989

F.2d 1007, 1009 (8th Cir. 1993) (quoting Edgar v. Slaughter, 548 F.2d 770, 773 (8th Cir. 1977)).
Even when a defendant is technically in default and all of the requirements for a default judgment
are satisfied, a plaintiff is not entitled to default judgment as a matter of right. 10 James Wm.
Moore, et al., Moore’s Federal Practice § 55.31[1] (3d ed. 2014); see Ackra Direct Mktg. Corp. v.
Fingerhut Corp., 86 F.3d 852, 856 (8th Cir. 1996) (review of order entering default judgment is for
abuse of discretion). Prior to the entry of a discretionary default judgment, this Court must satisfy
itself that the moving party is entitled to judgment, including by reviewing the sufficiency of the
complaint, and the underlying substantive merits of its claim. 10 Moore’s Federal Practice §
55.31[2].
As the Eighth Circuit has stated: “It is nearly axiomatic that when a default judgment is
entered, facts alleged in the complaint may not be later contested. However, as we stated in Murray
v. Lene, ‘it remains for the [district] court to consider whether the unchallenged facts constitute a

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legitimate cause of action, since a party in default does not admit mere conclusions of law.’”
Marshall v. Baggett, 616 F.3d 849, 852 (8th Cir. 2010) (citing Murray v. Lene, 595 F.3d 868, 871
(8th Cir. 2010) (quoting 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure §
2688 at 63 (3d ed. 1998)). The Eighth Circuit cautions that “it is incumbent upon the district court
to ensure that the unchallenged facts constitute a legitimate cause of action prior to entering final
judgment.” Id. at 852-53 (internal quotation omitted).
On May 13, 2014, the Eighth Circuit vacated this Court’s grant of summary judgment in
favor of Titan as well as this Court’s denial of United Fire’s motion for summary judgment. See
United Fire & Cas. Co. v. Titan Contractors Serv., Inc., 751 F.3d 880 (8th Cir. 2014). The Eighth
Circuit, however, did not direct this Court to enter summary judgment in favor of United Fire.
Rather, the majority stated as follows:
In addition to contesting whether TIAH constitutes a pollutant, Titan also argued to
the district court that the complaint in the underlying state-court case did not allege
the “discharge, dispersal, seepage, migration, release or escape” of TIAH. This
contention, if correct, would render the absolute pollution exclusion inapplicable in
this case. The district court did not reach this issue, and the parties have not
addressed it on appeal. Because this argument raises complex factual and legal
questions, we believe that “it would be beneficial for the district court to consider
this issue in the first instance.” Loftness Specialized Farm Equip., Inc. v.
Twiestmeyer, 742 F.3d 845, 851 (8th Cir. 2014). Accordingly, we vacate the denial
of United’s motion for summary judgment and remand for further proceedings.
Id. at 887.
On remand, the Eighth Circuit ordered this Court to conduct further proceedings on the
question of whether the underlying state-court case alleged the “discharge, dispersal, seepage,
migration, release or escape” of TIAH. Id. If Titan was correct, and the underlying state-court case
did not make such allegation, the Eighth Circuit stated this “would render the absolute pollution
exclusion inapplicable.” Id. If the pollution exclusion were inapplicable, the policy would provide
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coverage for the underlying claims against Titan, and United Fire would have a duty to defend and
indemnify Titan in the underlying actions.
Before the Court had an opportunity to conduct any further proceedings consistent with the
Eighth Circuit’s opinion, all counsel for defendant Titan moved to withdraw their representation
“due solely to [Titan’s] lack of financial resources.” See Doc. 102 at ¶¶ 2-4. The Court stayed the
action, held defense counsel’s motions in abeyance and imposed a withdrawal notice period. The
Court ordered Titan to obtain substitute counsel within the withdrawal notice period or risk
sanctions, including striking its pleadings. See Doc. 107. Titan did not comply with the Court’s
order, and the Court subsequently allowed counsel to withdraw and ordered Titan’s answer stricken.
See Docs. 110, 115.
Based on Titan’s inaction since early May 2014, it is apparent that Titan has abandoned its
defense of this action. Because of the procedural posture of this declaratory judgment action,
however, the Court cannot enter default judgment in favor of United Fire. The Eighth Circuit has
ordered the Court to conduct further proceedings to resolve what the Eighth Circuit recognized as
“complex factual and legal questions” remaining in the case. United Fire, 751 F.3d at 887. With
only one party remaining in the case, the Court is unable to conduct further proceedings to resolve
these factual and legal questions.
It is incumbent upon the Court in the context of a motion for default judgment to ensure that
the unchallenged facts constitute a legitimate cause of action and entitle United Fire to entry of
judgment. Murray, 595 F.3d at 871. Because complex factual questions remain in this case that
cannot be resolved upon a default judgment for declaratory relief, the Court denies United Fire’s
motion for default judgment.

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Accordingly,
IT IS HEREBY ORDERED that plaintiff United Fire & Casualty Company’s Rule 55(b)
Motion for Entry of Default Judgment is DENIED. [Doc. 118]
IT IS FURTHER ORDERED that this declaratory judgment action brought by plaintiff
United Fire & Casualty Company against defendant Titan Contractors Service, Inc. is DISMISSED
without prejudice.
An Order of Dismissal will accompany this Memorandum and Order.

CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE

Dated this 13th day of February, 2015.

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