Allstate Fire and Casualty Insurance Company v. McLain et al

Filing 40

ORDER denying 38 Motion for Default Judgment. PLEASE SEE ORDER FOR FULL DETAILS. Signed by Judge Brian Morris on 1/6/2021. (MMS)

Case 4:20-cv-00065-BMM-JTJ Document 40 Filed 01/06/21 Page 1 of 4

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
GREAT FALLS DIVISION

ALLSTATE FIRE AND CASUALTY
INSURANCE COMPANY,

CV-20-65-GF-BMM-JTJ

Plaintiff,
vs.

ORDER DENYING PLAINTIFF’S
MOTION FOR ENTRY OF
DEFAULT JUDGMENT

BRUCE MCLAIN, et al.,
Defendants.

Plaintiff Allstate Fire and Casualty Insurance Company (“Allstate”) filed a
Complaint against Defendant Bruce McLain (“McLain”) and thirty-two other
defendants, seeking a declaratory judgment related to the question of coverage under
an insurance policy that Allstate had issued McLain. Doc. 1. McLain filed an
Answer. Doc. 36. Allstate filed a Motion for Entry of Default against those
defendants that had not responded. Doc. 33. The Clerk of the Court entered default
against the Individual Defendants on October 2, 2020. Doc. 35. After the requisite
time had passed, Allstate filed a Motion for Default Judgment on December 8, 2020.
Doc. 38. For the reasons below, Allstate’s Motion for Default Judgment (Doc. 38)
is denied without prejudice.

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BACKGROUND
Allstate issued McLain an automobile insurance policy from February 22,
2020, to August 22, 2020. Doc. 39 at 2. The policy included liability coverage for
property damage. Allstate alleges that on March 16, 2020, McLain intentionally
drove his car into various other cars and personal property. Except for McLain, the
defendants in this case consist of the owners of those cars and personal property who
might have claims against Allstate. A portion of the defendants have already
submitted claims to Allstate. Doc. 1 at 7.
Allstate filed the present action in federal district court, seeking the following
declaratory judgment: (1) the insurance policy does not cover the damage that
McLain caused on March 16, 2020; and, (2) Allstate has no duty to defend or
indemnify McLain for any losses, damages, judgments, settlements, or claims
stemming from the damage that McLain caused on March 16, 2020. Allstate alleges
that the automobile insurance policy contains an exclusion provision for damages
that McLain caused via intentional acts. Doc. 1 at 10.
McLain filed an Answer on October 9, 2020, in which he argued that the
insurance policy does provide coverage. Doc. 36. Allstate voluntarily dismissed
nine defendants, leaving McLain and twenty-three others (“Individual Defendants”)
as defendants in this case. Doc. 20, 32, 37. Allstate provided McLain and the
Individual Defendants with service of process in July and August of 2020. Doc. 34.
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ANALYSIS
The Clerk of the Court correctly entered default, under Rule 55(a), against the
Individual Defendants on October 2, 2020. Doc. 35. The Individual Defendants had
not responded to Allstate’s Complaint for several months. Doc. 34. Whether to
enter a default judgment remains a decision entrusted to the discretion of the district
court. Unilin Beheer B.V. v. Tropical Flooring, 2014 WL 12700909 (C.D. Cal.
2014) (citing Shanghai Automation Instrument Co. v. Kuei, 194 F.Supp.2d 995,
1005−06 (N.D. Cal. 2001)); In re First T.C. & Inv. Inc., 253 F.3d 520 (2001).
The Federal Rules of Civil Procedure specify that “when multiple parties are
involved, the court may direct entry of a final judgment as to one or more but fewer
than all, claims or parties only upon an express determination that there is no just
reason for delay and upon an express direction for the entry of judgment.” Fed. R.
Civ. P. 54(b). The Individual Defendants are currently in default. The Court must
consider whether there exists “no just reason” to delay granting default judgment
against the Individual Defendants while the same claims against McLain remain
pending. Id.
In Frow v. De La Vega, 82 U.S. 552 (1872), the United States Supreme Court
determined that a district court should not enter default judgment against one or more
defendants when the default judgment is, or is likely to be, inconsistent with
judgment on the merits in favor of the answering defendants. The Ninth Circuit
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specified that the Frow Doctrine applies when the theory of the complaint requires
that liability of all the defendants must be uniform. Unilin Beheer B.V., 2014 WL
12700909, at *3 (citing Shanghai Automation Instrument Co., 194 F.Supp.2d at
1005−06); In re First T.C. & Inv. Inc., 253 F.3d at 531−32.
In the context of a declaratory judgment action to discern coverage under an
insurance policy, the outcome of the action (i.e., whether or not an insurance policy
provides coverage) must be uniform. The risk of arriving at inconsistent outcomes
in the present declaratory judgment action constitutes a just reason to delay under
Rule 54(b). Unilin Beheer B.V., 2014 WL 12700909, at *3
Entry of default judgment proves unwarranted at this time. See id. Allstate
remains free to refile its Motion for Default Judgment after the Court resolves the
question of coverage on the merits. The risk of inconsistent outcomes will be
alleviated at that time.
IT IS HEREBY ORDERED:
1. Allstate’s Motion for Default Judgment (Doc. 38) is DENIED without prejudice.
Dated the 6th day of January, 2020.

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