Opinion
Civil Action No. 6:03CV447.
June 21, 2004
ORDER
Plaintiff, an insurance company, filed the above-styled lawsuit on October 6, 2003, seeking a declaratory judgment that it does not have a duty to defend the Defendants, West Machine Tool, Inc., and William Preston West, in an underlying state court lawsuit, styled Jimmy Hamilton v. William West and West Machine and Tool, Inc., in the 188th Judicial District Court, Gregg County, Texas. The case was transferred to the undersigned with the consent of the parties pursuant to 28 U.S.C. § 636.
Procedural History
On February 17, 2004, Plaintiff filed a Motion for Entry of Default Judgment or, in the Alternative, Summary Judgment Against William Preston West (docket #12). West was served on October 13, 2003, but he has not answered or otherwise responded to the complaint. Accordingly, Plaintiff's Motion for Entry of Default Judgment was granted on March 29, 2004, and a default judgment was entered on May 10, 2004. The case, as it pertains to West Machine Tool, Inc., is still pending and is set for a bench trial on November 30, 2004.
The plaintiff in the underlying state court lawsuit, Jimmy Hamilton, filed a Motion to Intervene in this lawsuit. Hamilton additionally filed a Motion to Set Aside Default Judgment (docket #24) and a Motion for New Trial (docket #23). Hamilton essentially seeks the same relief in both motions. Hamilton seeks to set aside the default judgment that was entered against West pursuant to Fed.R.Civ.P. 55(c). He argues that Plaintiff's insurance policy covers the Defendants and the accident at issue. Plaintiff filed an opposition to Hamilton's motions on June 7, 2004, to which Hamilton filed a reply on June 11, 2004.
Discussion and Analysis
Pursuant to Fed.R.Civ.P. 55(c), an entry of default may be set aside for good cause shown. Further, a default judgment may be set aside in accordance with Fed.R.Civ.P. 60(b). Rule 60(b) provides that a final judgment may be rescinded for mistake, inadvertence, surprise, excusable neglect, newly discovered evidence or any other reason justifying relief.
In this case, a default judgment was entered against West because West was served with a summons and a copy of the complaint in this lawsuit and he failed to answer or otherwise respond. To date, West has not filed any pleadings or made an appearance in this lawsuit. Hamilton, who now seeks to intervene in this case, was not a party to the lawsuit at the time the default was entered and asserts that he did not know about this lawsuit at that time. Nevertheless, there is no basis for setting aside the default judgment. Hamilton's participation in this lawsuit has no effect on the default entered against West. Hamilton has not cited any cases, and the Court is unaware of any precedent, that would allow Hamilton to answer the lawsuit for West. Hamilton cannot overcome West's failure to file an answer or make an appearance. Despite Hamilton's compelling argument that he has an strong interest in the outcome of this lawsuit and in any decision as to whether Plaintiff must provide a defense and indemnification for Defendants in the underlying lawsuit, Hamilton would not have had a legal basis to oppose the default judgment even if he had been a party in this case from the beginning.
The cases cited by Hamilton support his assertion that he has an interest in this lawsuit, but are unpersuasive on the issue of whether he has a basis for setting aside the default entered against West. Hamilton cites the case of Dairyland Insurance Company v. Makover, 654 F.2d 1120 (5th Cir. 1981), for the proposition that injured victims have standing to appeal judicial declarations that a liability insurance policy does not cover a putative insured. Dairyland involved an insurance company that filed a declaratory judgment action seeking a declaration that a driver involved in an automobile accident was not covered under its policy because she did not have permission to use the covered vehicle at the time of the accident. The insurance company, in addition to naming the driver of the covered automobile, named the other parties that were injured in the automobile accident. The Court held that the other injured drivers, named as defendants by the insurance company, had standing to appeal the trial court's decision that the insurance policy did not provide coverage. The Court further stated, however, that it was decisive to the holding that the insurance company had named the other injured drivers as defendants in the lawsuit. While Dairyland may offer support to Hamilton's request to intervene and participate in this lawsuit, it does not address the issue of an intervenor's ability to set aside a default judgment issued against another party.
Likewise, the other three cases cited by Hamilton, Federal Kemper Insurance Company v. Rauscher, 807 F.2d 345 (3rd Cir. 1986), Hawkeye-Security Insurance Co. v. Schulte, 302 F.2d 174 (7th Cir. 1962), and Standard Accident Ins. Co. v. Meadows, 125 F.2d 422 (5th Cir. 1942), bolster Hamilton's argument that he is an interested party. There does not appear to be any dispute as to Hamilton's right to intervene in this lawsuit, as no response was filed to his Motion to Intervene. These cases, however, do not establish that an injured party, who intervenes in a declaratory judgment action filed by an insurance company against its insured, is in a position to set aside a default judgment that has been entered against one of the insureds. In Kemper, the Court held that an injured party's rights are not merely derivative of the insured's, such that the trial court should not have entered summary judgment against the injured party merely because a default was entered against the insured. Kemper, a case decided in the Third Circuit, holds that an injured party, brought into the declaratory judgment lawsuit by the insurance company, should have an opportunity to present his case, rather than have it summarily dismissed as a result of the insured's default. The Court did not squarely address the propriety of the default that was entered against the insured.
Given the lack of persuasive case law on the issue, the Court is not inclined to disturb the default entered against West at this time. The issue of coverage and indemnity as to West Machine Tool, Inc., has yet to be decided. Simultaneous with the issuance of this Order, the Court is issuing an Order granting Hamilton's motion to intervene. As a result, Hamilton will have an opportunity to be heard in this case. For these reasons, after due consideration, it is hereby
ORDERED that the Intervenor's Motion to Set Aside Default Judgment (docket #24) and Motion for New Trial (docket #23) are DENIED.
So ORDERED.