Philadelphia Indemnity Insurance Company v. Power Home Technologies, LLC
Filing
17
ORDER granting 13 Motion for Default Judgment. Signed by District Judge Martin Reidinger on 07/31/2014. (thh)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:13-cv-299-MR
PHILADELPHIA INDEMNITY INSURANCE
COMPANY,
)
)
)
Plaintiff,
)
)
vs.
)
)
)
POWER HOME TECHNOLOGIES, LLC,
)
)
Defendant.
)
_____________________________________)
DEFAULT
JUDGMENT
THIS MATTER is before the Court on the Plaintiff’s Motion for Default
Judgment. [Doc. 13]. For the reasons that follow, Plaintiff’s motion will be
granted.
PROCEDURAL BACKGROUND
Plaintiff
Philadelphia
Indemnity
Insurance
Company
(“PIIC”),
commenced this action against Defendant Power Home Technologies, LLC
(“PHT”), on November 12, 2013, by filing its “Complaint for Declaratory
Judgment.” [Doc. 1]. Plaintiff forwarded a copy of its Complaint together
with a Request for Waiver of Service of Process to the Registered Agent for
PHT. [Doc. 2].
On December 13, 2013, counsel for PHT entered an
appearance in this matter [Doc. 5], and PIIC filed the Waiver of Service of
Process executed by PHT’s counsel. [Doc. 6].
PHT, by consent motion
filed January 3, 2014 [Doc. 7], requested additional time to answer or
otherwise respond to PIIC’s Complaint. The Court entered an Order
January 6, 2014, [Doc. 8], granting PHT until February 3, 2014, to file
pleadings responsive to PIIC’s Complaint.
On January 13, 2014, PIIC filed its “First Amended Complaint for
Declaratory Judgment.” [Doc. 9].
PHT failed to answer or otherwise
respond to either PIIC’s original Complaint or PIIC’s Amended Complaint.
On March 17, 2014, PIIC filed its motion for entry of default against PHT.
[Doc. 10]. The Clerk entered default against PHT on March 19, 2014.
[Doc. 12]. On April 11, 2014, PIIC filed its motion for default judgment
against PHT. [Doc. 13].
PHT has not responded to PIIC’s motion for
default judgment and the same, therefore, is ripe for resolution.
FACTUAL BACKGROUND1
PIIC issued policies of insurance to PHT covering the general liability
of PHT’s commercial property and business automobiles, as well as
1
Following the Clerk’s Entry of Default [Doc. 12], PIIC’s Amended Complaint allegations
concerning PHT’s liability are admitted and deemed true. Fed.R.Civ.P. 8(b)(6)
(allegations other than those relating to damages are admitted if a responsive pleading
is required and the allegations are not denied); Banco Bilboa Vizcaya Argentaria v.
Family Rests., Inc., 285 F.3d 111, 114 (1st Cir. 2002) (party who defaults is taken to
have conceded truth of factual allegations in complaint as establishing grounds for
liability).
2
protecting PHT against commercial crime. [Doc. 1 at 4]. These policies are
the Commercial General Liability policy [Doc. 1-1], and the Commercial
Excess Liability policy.
[Doc. 1-2].
Before PIIC filed its declaratory
judgment Complaint against PHT herein, PHT had been named as a
defendant in two actions brought by persons claiming that PHT had
violated the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq.,
and similar state statutes. Generally speaking, these laws prohibit
unsolicited sales calls once an individual has placed his/her telephone
number on the applicable “Do Not Call” registry. One action against PHT
was brought in Mississippi [Doc. 1-5] and the other action was brought in
Georgia. [Doc. 1-8]. PHT had submitted a claim for coverage and defense
to PIIC based upon the first such action brought in Mississippi. [Doc. 16 at
4]. While investigating the Mississippi action, PIIC discovered the Georgia
action. [Id.]. While PIIC prophylactically undertook representation of PHT
in the Mississippi matter, it notified PHT that it was doing so “pending a
judicial determination as to whether there is any potential for coverage for
such claims under the Philadelphia Indemnity Policy.” [Doc. 1-6 at 2].
On January 13, 2014, PIIC filed its Amended Complaint. [Doc. 9].
PIIC asserted the same claim as set forth in its original Complaint but
expanded its request for relief to include a declaration of non-coverage of
3
PHT with regard to a third action filed against PHT. [Doc. 9 at 11-13]. The
third action against PHT was brought in California and, like the Mississippi
and Georgia matters, was based on allegations that PHT had violated the
federal Telephone Consumer Protection Act by making unsolicited sales
calls to individuals on the “Do Not Call” registry.
In this matter, PIIC contends that its policies issued to PHT
specifically exclude coverage for any misconduct of its insured alleged to
be in violation of the Telephone Consumer Protection Act and similar state
statutes. PIIC seeks a declaration of non-coverage under its insurance
policies issued to PHT with regard to the allegations PHT faces as a result
of the Mississippi, Georgia, and California actions. [Doc. 9].
PHT’s response to PIIC’s Amended Complaint would have been due
on January 30, 2014, by operation of Rule 15(a)(3), absent the Court’s prior
Order enlarging PHT’s time to February 3, 2014. According to email
transcripts filed with PIIC’s Affidavit in Support of Entry of Default [Doc. 11],
PIIC’s counsel was willing to consent to an additional extension of time to
March 14, 2014, in order to permit PHT to respond to the Amended
Complaint. [Docs. 11-4; 11-5]. PHT neither accepted PIIC’s extension offer
nor filed any motions or pleadings in response to the Amended Complaint.
PIIC moved for entry of default on March 17, 2014 (three days beyond the
4
period for which an extension of time had been offered to PHT by PIIC).
[Doc. 10]. The Clerk entered PHT’s default on March 19, 2014. [Doc. 12].
Since the Clerk’s entry of PHT’s default, the record discloses that PHT has
not filed an answer or any pleading responsive to the Amended Complaint
nor has it moved to have the entry of default set aside.
DISCUSSION
Federal Rule of Civil Procedure 55(b)(1) permits the Clerk, in limited
circumstances not present here, to enter a default judgment against a
party. “In all other cases, the party must apply to the court for a default
judgment.” Fed.R.Civ.P. 55(b)(2). A claimant is not entitled to a judgment
by default as a matter of right. “The dispositions of motions for entries of
defaults and default judgments … are left to the sound discretion of a
district court because it is in the best position to assess the individual
circumstances of a given case and to evaluate the credibility and good faith
of the parties.” Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993).
The Court begins by addressing two preliminary issues beginning
with its jurisdiction. PIIC is a Pennsylvania corporation. [Doc. 9 at 2]. PHT
was incorporated in Delaware but was later converted to a North Carolina
limited liability company. [Doc. 15-1]. The parties are thus citizens of
different states. For purposes of determining the amount in controversy in
5
a claim exclusively for a declaratory judgment, the Court considers “the
value of the object of the litigation.” Hunt v. Washington State Apple
Advertising Comm’n, 432 U.S. 333, 348 (1977), superseded on other
grounds, United Food & Commer. Workers Union Local 751 v. Brown
Group, 517 U.S. 544 (1996). The object of this litigation is PIIC’s costs for
defending PHT as well as its potential indemnification amount for which
PHT could be held liable if the plaintiffs in any of the three underlying
actions prevail against PHT.
While PIIC has not alleged its costs of
defending PHT to date, it has attached as an exhibit to its Amended
Complaint the complaint filed in the Mississippi action which seeks a
penalty of $385,000, an amount obviously greater than the $75,000
threshold.
The Court, therefore, notes that it possesses subject-matter
jurisdiction pursuant to 28 U.S.C. § 1332 due to the diversity of the parties
and due to the amount in controversy exceeding $75,000.
The second preliminary issue the Court addresses is PIIC’s
application for judgment by default. Since PHT has appeared in this matter
through counsel, PHT is entitled to at least seven days’ notice of PIIC’s
request for judgment before the Court may render its decision.
Fed.R.Civ.P. 55(b)(2). PIIC filed its motion and memorandum for default
judgment on April 11, 2014, indicating that the Clerk’s electronic filing
6
system sent notice of these documents to counsel for PHT. [Docs. 13; 16].
The Clerk’s docket sheet indicates that PHT has filed nothing responsive to
PIIC’s motion and memorandum for default judgment. Given the span of
time from April, 2014, to the present, PIIC has satisfied the seven-day
notice requirement.
The Court turns now to the consideration of whether a default
judgment in favor of PIIC is appropriate in this case. Viewing the matter
from the reverse angle, the Court “logically should consider whether factors
are present that would later oblige the court to set that default judgment
aside.” 10 Moore’s Federal Practice, § 55.31[2] (Matthew Bender 3d Ed.
2013) (footnote omitted).
The factors the Fourth Circuit identifies as
necessary for a party to set aside a default 2 are: (1) whether the defaulting
party has a meritorious defense, (2) whether the defaulting party acts with
reasonable promptness, (3) the personal responsibility of the defaulting
party, (4) the prejudice to the non-defaulting party, (5) whether there is a
2
Reviewing the denial of a Fed.R.Civ.P. 55(c) motion to set aside entry of default is not
the same as reviewing the denial of a Rule 60(b) motion for relief from a default
judgment. Although the Fourth Circuit has analyzed Rule 55(c) and Rule 60(b) motions
using the same factors, see United States v. Moradi, 673 F.2d 725, 727–28 (4th Cir.
1982), the burden on a movant seeking relief under the two rules differs. While an
analysis under each rule weighs similar factors, Rule 60(b)'s “excusable neglect”
standard is a more onerous standard than Rule 55(c)'s “good cause” standard, which is
more forgiving of party who has merely had default entered since that does not
implicate any interest in the finality of a judgment. Colleton Prep. Academy, Inc. v.
Hoover Univ., Inc., 616 F.3d 413, 420 (4th Cir. 2010).
7
history of dilatory action, and (6) where appropriate, the availability of
sanctions less drastic. Payne ex rel. Estate of Calzada v. Brake, 439 F.3d
198, 203 (4th Cir. 2006). Several of these factors need not detain the
Court long.
Factors two and six are not at issue in this case. With regard to
factor two, PHT has not sought to set aside its default nor has it filed any
response to PIIC’s motion for default judgment. Factor six is not at issue
because the Clerk’s entry of default was consistent with PHT’s failure to
plead or otherwise answer PIIC’s Amended Complaint and was not a
sanction, as that term is commonly understood. See, e.g., Fed.R.Civ.P.
37(b)(2)(A)(vi) (if a party fails to obey a discovery order, the court may
sanction the party by “rendering a default judgment against the disobedient
party”).
An analysis of factors three and five weigh in favor of PIIC. The
responsibility for PHT’s default rests with PHT’s counsel. PHT’s counsel
agreed to waive service of process [Doc. 6] and entered a formal
appearance on behalf of PHT.
[Doc. 5].
Similarly, PHT’s counsel
obtained an order extending PHT’s time to answer or otherwise plead to
PIIC’s Complaint [Doc. 8] but failed, ultimately, to do so. Finally, PIIC’s
counsel was willing to consent to an additional extension of time to March
8
14, 2014, in order to permit PHT to respond to the Amended Complaint.
[Docs. 11-4; 11-5]. PHT, however, neither accepted PIIC’s extension offer
nor filed any motions or pleadings in response to the Amended Complaint.
The Court concludes, therefore, that the history of this case suggests a
conscious decision on the part of PHT to ignore PIIC’s allegations and its
duty to respond thereto, and not merely “dilatory action” on the part of PHT.
When considering whether the PHT has a meritorious defense under
factor one, the Court concludes it does not. To enter default judgment, a
court must find that the complaint alleges a legitimate cause of action and
“the well-pleaded allegations of the complaint support the relief sought.”
Ryan v. Homecomings Financial Network, 253 F.3d 778, 780 (4th Cir.
2001). In this diversity action, North Carolina law – the substantive law of
the forum state – applies. Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt
Beverage Co., 433 F.3d 365, 369 (4th Cir. 2005). This is so since the law of
the state where the last binding act occurred controls the interpretation of
the contract. Fortune Ins. Co. v. Owens, 351 N.C. 424, 428, 526 S.E.2d
463, 466 (2000) (the general rule, with regard to insurance contracts, is that
the principle of lex loci contractus mandates that the substantive law of the
state where the last act to make a binding contract occurred, usually
delivery of the policy, controls the interpretation of the contract). As “well9
pleaded” by PIIC, the insurance policies at issue in this matter were
entered into and delivered in North Carolina. [Doc. 9 at 5]. Therefore,
North Carolina law applies to the evaluation of coverage and PIIC’s duty, if
any, to defend PHT.
Under North Carolina law, the party claiming the benefit of coverage
bears the initial burden of proof. Fortune, 351 N.C. at 430, 526 S.E.2d at
467. The insured is usually the party claiming the benefits of coverage and,
therefore, the insured is usually the party bearing the burden of proving
coverage. In such a circumstance where the insured makes a prima facie
case for coverage, the burden would shift to the insurer to show the
insured’s coverage is barred by any policy exclusion. Id.
Even if the
general terms of PIIC’s policies mandated coverage of PHT such that PIIC
must defend and indemnify PHT based on the claims made against PHT in
the Mississippi, Georgia, and California matters, the Court concludes that
the policies’ exclusion provisions negate such coverage. These exclusions
explicitly preclude coverage for liability of the type resulting from the
improper solicitation allegations raised in the Mississippi, Georgia, and
California matters.
In each of the Mississippi, Georgia, and California matters, the
respective plaintiffs generally assert that PHT unlawfully: (1) made or
10
caused to be made in the respective States unauthorized telephone
solicitations to registered numbers listed in an approved “no-call” database,
(2) made or caused to be made in the respective States unauthorized
telephone solicitations without the consent of the person called and for no
“emergency purpose,” and (3) utilized an automated dialing system or any
like system that used a recorded voice message to communicate with the
consumers in making or causing to be made said unauthorized telephone
solicitations. [Docs. 9-5 at p.4; 9-8 at pp.3-4; 9-10 at pp.4-6]. The plaintiff
in the Mississippi action alleged that PHT committed these acts in violation
of the Mississippi Telephone Solicitation Act, Miss. Code Ann. § 77-3-701
et seq. [Doc. 9-5 at 2]. The plaintiffs in the Georgia and California actions
alleged that PHT committed these acts in violation of the federal Telephone
Consumer Protection Act, 47 U.S.C. § 227, et seq. [Docs. 9-8 at 3; 9-10 at
6]. The policies of insurance issued to PHT included an exclusion that
specifically states that PIIC’s insurance coverage does not apply to “bodily
injury,” “property damage,” or “personal and advertising injury,” as those
terms are defined in the policies, arising directly or indirectly out of any
action or omission that violates or is alleged to violate the “federal
Telephone Consumer Protection Act” or “any federal, state or local statute,
ordinance or regulation, that addresses, prohibits, or limits the printing,
11
dissemination, disposal, collecting,
recording, sending, transmitting,
communicating or distribution of material or information.” [Doc. 9-1 at 18].
It is clear that improper solicitation allegations raised in the Mississippi,
Georgia, and California matters fall squarely within the purview of PIIC’s
exclusion from coverage contained in the policies issued to PHT. The
analysis of this factor weighs in favor of PIIC.
Turning to the final factor, whether any prejudice would flow to PIIC,
as the non-defaulting party, should the Court refrain from entering judgment
by default against PHT, the Court concludes PIIC would suffer prejudice.
PIIC’s insurance policies issued to PHT cover not only PIIC’s duty to
indemnify PHT, in the event it is found liable for some compensable
occurrence listed in the policies, but also its duty to provide a defense for
PHT during any litigation that may lead to a finding of liability for some
compensable occurrence.
PIIC’s primary purpose in bringing this
declaratory judgment suit is to obtain a judicial determination as whether it
must pay to defend PHT in the Mississippi, Georgia, and California matters
first and foremost. Because the Court has determined that PIIC, under the
exclusion provisions of the insurance policies issued to PHT, is absolved
from providing any such defense, PIIC’s additional expenditure of funds to
pay counsel to represent PHT would be unnecessary.
12
Therefore, the
analysis of this last factor weighs in favor of PIIC.
In sum, the Court determines in its discretion that default judgment in
favor of PIIC is appropriate in this case. After considering the six factors
identified by the Fourth Circuit that could lead the appellate court to set
aside the default judgment herein, the Court concludes that four factors
(numbers 1, 3, 4, and 5) weigh in favor of granting PIIC judgment by
default, and that two factors (numbers 2 and 6) are not at issue in this case.
ORDER
Accordingly,
IT
IS,
THEREFORE,
ORDERED
that
Plaintiff
Philadelphia Indemnity Insurance Company’s Motion for Default Judgment
[Doc. 13] as to Defendant Power Home Technologies, LLC, is hereby
GRANTED;
IT IS FURTHER ORDERED AND DECLARED that the insurance
policies issued by PIIC to PHT as alleged in the Amended Complaint: (1)
do not provide coverage applicable to the relief demanded by the plaintiffs
in the Mississippi, Georgia, and California matters (as those matters are
more identified by PIIC in its Amended Complaint); (2) do not obligate PIIC
to defend PHT against the claims raised by the plaintiffs in the Mississippi,
Georgia, and California matters (as those matters are more fully identified
by PIIC in its Amended Complaint); do not obligate PIIC to indemnify PHT
13
for any loss PHT may sustain from the acts alleged in the Mississippi,
Georgia, and California matters (as those matters are more identified by
PIIC in its Amended Complaint).
FINALLY IT IS ORDERED that the costs be taxed to the Defendant.
IT IS SO ORDERED.
Signed: July 31, 2014
14
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?