Opinion
6:22-cv-01696-MK
04-21-2023
SWISS RE CORPORATE SOLUTIONS AMERICA INSURANCE CORPORATION, fka North American Specialty Insurance Company, a Missouri insurance company Plaintiff, v. JEFF CARTER CONSTRUCTION, INC., an Oregon corporation; JEFF CARTER, an individual; and AIMEE CARTER, an individual, Defendants.
FINDINGS AND RECOMMENDATION
MUSTAFA T. KASUBHAI, UNITED STATES MAGISTRATE JUDGE
Plaintiff Swiss Re Corporate Solutions America Insurance Corporation, fka North American Specialty Insurance Company (“Swiss Re”) filed this action against Defendants Jeff Carter Construction, Inc., Jeff Carter, and Aimee Carter (collectively, “Defendants”) for obligations arising out of a June 14, 2021 Indemnity Agreement between Swiss Re and Defendants. See Pl.'s Compl. ¶¶ 8-29, ECF No. 1; see also Decl. of William Sanford (“Sanford Decl.”) Ex. 1, ECF No. 16. Swiss Re now moves for entries of default judgment against Defendants pursuant to Rule 55(b). See ECF No. 14. For the reasons that follow, the Court should grant Swiss Re's motion.
BACKGROUND
Swiss Re alleges that it provided Defendant Jeff Carter Construction, Inc. (“JCC”) with four sets of payment and performance bonds in connection with various construction contracts. Pl.'s Compl. ¶¶ 10-11. These included:
a. Performance Bond No. 2312186 in the sum of $241,800.00 and Payment Bond No. 2312186 in the sum of $241,800.00 posted with Wildish Building Co. (“Wildish”), as obligee, by Swiss Re as surety, and on behalf of JCC, as principal regarding Subcontract No. 5397-001 for certain work to be performed relating to the EWEB Trail Bridge Recreation Area Construction - CTO-23 (the “EWEB Project”).
b. Performance Bond No. 2326623 in the sum of $176,178.00 and Payment Bond No. 2326623 in the sum of $176,178.00 posted with the City of Fairview, State of Oregon, as obligee, by Swiss Re as surety, and on behalf of JCC, as principal regarding a contract for certain work to be performed relating to the Citywide Sidewalk Repair Project, 2022.
c. Performance Bond No. 2326621 in the sum of $186,346.00 and Payment Bond No. 2326621 in the sum of $186,346.00 posted with the State of Oregon, as obligee, by Swiss Re as surety, and on behalf of JCC, as principal regarding Contract Number: PO-73000-00005798 for certain work to be performed relating to the Willamette River Br Bearing Pedestal Repair (Newberg) (the “Willamette River Bridge Project”).
d. Performance Bond No. 2326625 in the sum of $1,159,260.00 and Payment Bond No. 2326625 in the sum of $1,159,260.00 posted with Polk County, as obligee, by Swiss Re as surety, and on behalf of JCC, as principal regarding a contract for certain work to be performed relating to the Boating Facility Improvements at Buena Vista County Park (the “Buena Vista Project”).Id.
In partial consideration for these bonds, Defendants entered into an indemnity agreement (“Agreement”) with Swiss Re under which Defendants agreed to “exonerate, hold harmless and indemnify [Swiss Re] from and against any and all Loss.” Id. at ¶ 13; see also Sanford Decl. Ex. 1 at ¶ 2, ECF No. 16-1. In addition, the Agreement obligated Defendants, on Swiss Re's demand, to deposit money as collateral security upon the occurrence of, among other things, receipt of a notice of default or Swiss Re setting up a reserve “to cover any investigation, demand, liability, claim asserted, suit or judgment under any of the bonds.” Sanford Decl. Ex. 1 at ¶ 2, ECF No. 16-2. The Agreement provides that collateral security “shall be equal to the liquidated amount stated in any claim or demand plus the amount that [Swiss Re] deems sufficient to cover [its] estimate of the costs and expenses to defend, investigate and adjust the claim or demand.” Id.
JCC has been held in default or the obligees have asserted claims against each of the above bonds. See Sanford Decl. ¶¶ 5-8. Exs. 2-9. As a result, on July 14, 2022, September 30, 2022, and October 4, 2022, Swiss Re demanded deposit of $275,000 in collateral security pursuant to the Agreement, but Defendants did not deposit the security and have ceased communication with Swiss Re. Id. at ¶ 10, Ex. 10, ECF No. 16-10. On November 11, 2022, Swiss Re filed this action for specific performance of its hold harmless and collateral security clauses and for breach of contract. See Compl., ECF No. 1. Defendants were served on November 30, 2022. See ECF Nos. 8-10. Pursuant to Rule 55(a), after Defendants failed to answer the Complaint or otherwise defend the action, the Clerk of the Court entered default as to Defendants on December 27, 2022. See ECF No. 12.
Before the Court now is Swiss Re's Motion for Entry of Default. Swiss Re claims that, as to each of the four payment and performance bonds at issue:
a. Wildish held JCC in default and terminated its contract. Swiss Re set a reserve of $88,079.00 as collateral security against the claims by Wildish. Sandford Decl. ¶ 5, Exs. 2-3.
b. Polk County found JCC in breach of contract and asserted a claim against the performance bond. Swiss Re and Polk County have entered into an agreement in principle to pay $421,922.64 to resolve the claim. Id. ¶ 6, Exs. 4-5.
c. The City of Newberg found JCC in breach of contract and asserted a claim against the performance bond. Id. ¶ 7, Exs. 6-7. Swiss Re has yet to set a reserve for this claim. Id. ¶ 11.
d. The State of Oregon terminated its contract with JCC for cause and default and asserted a claim against the performance bond. Swiss Re set a reserve of $186,346.00 as collateral security against the claims by the State of Oregon. Id. ¶ 8, Exs. 8-9.
Swiss Re has also set a reserve to pay a construction consultant $54,000.00. Id. ¶ 12.
In total, Swiss Re seeks judgment in the amount of $750,347.64 based on the above, as well as attorneys' fees totaling $12,222.50 and costs and expenses totaling $670.36.
STANDARD OF REVIEW
A district court may order a default judgment to be entered against a party following the entry of default by the clerk of the court. Fed.R.Civ.P. 55(b)(2). Whether to grant a default judgment is within the district court's discretion. SeeTeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987) (per curiam) (“Rule 55 . . . gives the court considerable leeway as to what it may require as a prerequisite to the entry of a default judgment.”). In exercising its discretion, the district court may consider factors including:
(1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff's substantive claim; (3) the sufficiency of the complaint;
(4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.Garcia v. Pacwest Contracting LLC, No. 3:12-cv-01930-SI, 2016 WL 526236, at *1 (D. Or. Feb. 9, 2016) (citing Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986)). Upon entry of default, “the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.” TeleVideo, 826 F.2d at 917-18 (quotation marks omitted). “A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c).
DISCUSSION
I. Eitel Factors
The Court first assesses the potential prejudice to Swiss Re should it deny the motion. See Eitel, 782 F.2d at 1471. As Swiss Re would otherwise lack an alternative method by which to resolve its present claims, the Court finds this factor weighs in favor of granting the motion. See Garcia, 2016 WL 526236, at *3 (D. Or. Feb. 9, 2016) (finding the “possibility of prejudice . . . factor weigh[ed] in favor of granting” motion for default judgment because the plaintiff had “no alternative means by which to resolve their” claims).
With respect to the second, third, and fifth factors-the merits of the claims, the sufficiency of the complaint, and the possibility of a dispute concerning material facts-because default has previously been entered, the Court accepts as true all well-pleaded allegations in the complaint. SeeUnited States v. Panter, No. 1:11-cv-03052-CL, 2012 WL 2367369, at *4 (D. Or. May 24, 2012) (explaining that after the entry of default a district court must “accept as true all well-pleaded allegations regarding liability”). The Ninth Circuit has indicated that these factors require that a plaintiff's allegations “state a claim on which the [plaintiff] may recover.” Danningv. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978). The complaint in this case more than adequately states claims for specific performance and breach of contract. SeeGarcia, 2016 WL 526236, at *3 (finding merits and sufficiency of complaint factors weighed in favor of granting motion for default judgment where the complaint “properly stated a claim”). The Court further finds the record in this case does not call into question any material facts.
The fourth Eitel factor-the sum of money at stake in the action-also weighs in favor of granting the motion. SeeEitel, 782 F.2d at 1471. Although the amount at stake here is substantial, which typically weighs against entry of default judgment, Swiss Re has supported its motion with evidence in the form of declarations. Defendants “should not be allowed to evade judgment as a result of failing to appear.” SeeUnited States v. Kelton, No. 1:15-cv-197-AA, 2015 WL 9809799, at *2 (D. Or. Dec. 19, 2015) (“The amount of damages at issue is substantial, so this Eitel factor slightly favors the [defendants]. But the [plaintiff] has submitted a declaration and supporting exhibits verifying the assessments due from the [defendants]”). The Court also notes that the judgment sought is well under the amounts contemplated by the parties under the terms of the bonds at issue. See Compl. ¶¶ 10-11, ECF No. 1 (listing the amounts of the bonds); see also Allied World Specialty Ins. Co. v. JND Thomas Co., Inc., No. 115CV01498DADSKO, 2015 WL 9480626 (E.D. Cal. Dec. 29, 2015) (finding this Eitel factor weights in favor of plaintiffs where the amount sought as collateral was well within the total amounts of the bonds).
The sixth Eitel factor-whether the default may be due to a defendant's excusable neglect-weighs in favor of granting the motions. SeeEitel, 782 F.2d at 1471. Here, Defendants failed to deposit collateral security following Swiss Re's demands in July, September, and October of 2022. Sanford Decl. Ex. 10, ECF No. 16-10. After filing suit on November 11, 2022,
Swiss Re filed affidavits attesting that Defendants were properly served on November 30, 2022. See ECF Nos. 8-10. Over nine months have passed since Swiss Re first demanded collateral security, nearly five months have elapsed since the Complaint was served on Defendants, and nearly four months have passed since the Clerk's entry of default. See Sanford Decl. Ex. 10, ECF No. 16-10; ECF Nos. 1, 12. “Given these efforts and the subsequent passage of time, it is unlikely that [the defendant's] failure to appear is the result of excusable neglect.” United Statesv. Stuck, No. 3:19-cv-01161-SB, 2020 WL 4516917, at *3 (D. Or. July 9, 2020), adopted, 2020 WL 4506781 (D. Or. Aug. 5, 2020); see alsoKelton, 2015 WL 9809799, at *2 (“The nonappearing Defendants were properly served, and have had ample time to respond but failed to do so. There is no evidence of excusable neglect”).
The final Eitel factor considers the strong policy of the Federal Rules of Civil Procedure favoring decisions on the merits. SeeEitel, 782 F.2d at 1471. However, “the mere existence of [Rule] 55(b) indicates that ‘this preference, standing alone, is not dispositive.” Stuck, 2020 WL 4516917, at *3 (citations and internal quotations omitted). “Thus, the preference to decide cases on the merits does not preclude a court from granting default judgment.” Id. Defendants' failure to defend this lawsuit “makes a decision on the merits impossible[,]” and therefore “the policy favoring decision on the merits does not preclude the Court from entering a default judgment[.]” Garcia, 2016 WL 526236, at *4 (citing PepsiCo, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002)).
In sum, the Court finds that the Eitel factors weigh in favor of entry of default judgment.
II. Damages
Following an entry of default, the facts in the complaint are taken as true; however, “neither the default nor the allegations in the complaint can establish the amount of damages.” Lasheen v. Embassy of the Arab Republic of Egypt, 625 Fed.Appx. 338, 341 (9th Cir. 2015). Thus, before a court can enter a default judgment on a sum uncertain, a plaintiff must prove its damages. Swift Fin., LLC v. Alabar Constr., Inc., No. 2:18-cv-02009-SU, 2019 WL 654343, at *3-4 (D. Or. Jan. 30, 2019), adopted, 2019 WL 653801 (D. Or. Feb. 15, 2019).
Here, the Court finds that Swiss Re has provided sufficient evidence to prove the damages sought. The Sanford Declaration contains unrebutted evidence of the $750,347.64 sought under the indemnity and collateral security portions of the Agreement. See ECF No. 16.
In addition, the Agreement provides for attorneys' fees. Sandford Decl. Ex. 1 at 1, ECF No. 16-1. Swiss Re seeks attorneys' fees totaling $12,222.50 and costs and expenses totaling $670.36. Pl.'s Mot. at 5, ECF No. 14]. Swiss Re has provided a declaration in support of its request for attorneys' fees. The Court has reviewed Swiss Re's declaration in support of its motion for attorneys' fees, ECF No. 15, considered the relevant factors under Or. Rev. Stat. § 20.075, and finds that the amount of attorneys' fees sought is a reasonable sum calculated by the number of hours spent on the case by Swiss Re's attorneys and paralegal, multiplied by a reasonable hourly rate.
RECOMMENDATION
For the reasons above, Swiss Re's Motion for Default Judgment, Attorneys' Fees, Costs, Expenses, and Showing Cause Why the Action Should not be Dismissed (ECF No. 14) should be GRANTED.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure 4(a)(1) should not be filed until entry of the district court's judgment or appealable order.
The Findings and Recommendation will be referred to a district judge. Objections to this Findings and Recommendation, if any, are due fourteen (14) days from today's date. See Fed.R.Civ.P. 72. Failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).