M. CHRISTINA ARMIJO, District Judge.
Having considered Nevada General's Motion and Notice and the relevant law, and otherwise being fully advised in the premises, the Court GRANTS the Motion and orders default judgment against Defendants Arthur Anaya, Kevin Baca, Denise Hinkle, Nancy Hissa, Theodore Hissa, Ashley Ramirez, Daniel Romero, and Abelino Romero.
Plaintiff Nevada General Insurance Company ("Nevada General") is a foreign insurance company with citizenship in the State of Nevada licensed to do business in the State of New Mexico. [Doc. 7; Doc. 57] Defendants Arthur Anaya, Kevin Baca, Denise Hinkle, Nancy Hissa, Theodore Hissa, Ashley Ramirez, Daniel Romero (the Group Defendants) and Abelino Romero (Romero)
Nevada General brought a declaratory judgment action pursuant to 28 U.S.C. Section 2201 for the purpose of determining whether it has a duty to defend or indemnify Romero for damages arising out of the "Incident," a five-car collision involving Romero's 2000 Chevrolet Malibu. At issue is Nevada General policy number 0295010, which Nevada General issued to Romero for and in consideration of the payment of an insurance premium, which provided coverage on the 2000 Chevrolet Malibu that Abelino Romero's brother, Daniel Romero, was driving at the time of the Incident.
Specifically, Nevada General requests the following declarations:
[Doc. 7, ¶¶ 75-84]
The First Amended Complaint was filed on March 10, 2015. [Doc. 7] Defendants Kevin Baca, Denise Hinkle, Nancy Hissa, and Theodore Hissa, were served on March 17, 2015. [Doc. 13-16] Defendant Daniel Romero was served on March 25, 2015, and Ashley Ramirez and Arthur Anaya were served on June 15, 2015. [Doc. 18, 22-23] When they failed to answer the First Amended Complaint, the Clerk entered default against the Group Defendants. [Doc. 46] See Fed. R. Civ. P. 55(a) (pertaining to entry of default by the Clerk).
The return of service indicates that Nevada General served Romero certified mail, return receipt on March 16, 2015. [Doc. 11] Romero, acting pro se, responded to the First Amended Complaint on March 31, 2015. [Doc. 17] In a handwritten document titled "Answer," Romero stated that he "woke up from taking a nap, later on learning that my younger brother Daniel Romero and his girlfriend Michelle Baca took [his] car without permission." [Doc. 17] Romero went on,
[Doc. 17] The document was filed in the docket as an answer. [Doc. 17]
On October 27, 2015, Nevada General filed a Joint Status Report and Provisional Discovery Plan [Doc. 27] in which it stated that "Abelino Romero is appearing in this action pro se; Plaintiff's counsel attempted to reach him at the last known telephone number and was informed by the person answering that it is not a number for Abelino Romero." [Doc. 27] On February 17, 2016, Nevada General filed another status report in which it again reported that Abelino Romero could not be contacted at the last known number. [Doc. 31] In August, 2016, the Clerk's office entered defaults as the Group Defendants. [Doc. 46] A copy of the entry of default was mailed to Abelino Romero and returned as undeliverable. [Doc. 53] On September 20, 2016, this Court ordered Nevada General to demonstrate facts supporting its contention that the parties are completely diverse as necessary for this Court to exercise its jurisdiction under 28 U.S.C. § 1332. [Doc. 47] A copy of this Order was mailed to Abelino Romero by the Court and returned as undeliverable. [Doc. 48] An order entered by this Court on January 24, 2017 was also mailed to Romero and returned as undeliverable. [Doc. 57; Doc. 58] Subsequent orders entered in August and November, 2017, were mailed to Romero by the Court and returned as undeliverable. [Doc. 61; Doc. 65; Doc. 69] Notices of hearings in April, 2018 were also sent to Romero and returned. [Doc. 72; Doc. 73] Finally, Romero did not attend a status conference held on April 18, 2018. [Doc. 68]
In sum, Romero has not responded to any filings or hearings in this matter since filing an Answer in March, 2015. Neither has he updated his address pursuant to Local Rule D.N.M. Civ. 83.6, which states that "[a]ll attorneys of record and parties appearing pro se have a continuing duty to notify the Clerk, in writing, of any change in their firm name, mailing addresses, telephone numbers, facsimile numbers, or electronic addresses."
Before the Court are two filings by Nevada General that raise procedural questions and demonstrate some confusion as to the interplay between Rule 55(a) and 55(b). Rule 55(a) and 55(b) clearly set "out a two-step process for a default judgment" in which the first step is the entry of default based on a failure to appear or "otherwise defend." Branch v. Attorney for You, No. 1:15-CV-01087-RAJ, 2016 WL 7438410, at *2 (D.N.M. June 7, 2016) (citing Watkins v. Donnelly, 551 Fed.Appx. 953, 958 (10th Cir. 2014) (unpublished) for the proposition that "[e]ntry of default by the clerk is a necessary prerequisite that must be performed before a district court is permitted to issue a default judgment.")). Federal Rule of Civil Procedure 55(a) provides that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Fed. R. Civ. P. 55(a). Rule 55(b)(1) provides that the Court Clerk may enter a default judgment on request by a plaintiff "[i]f the plaintiff's claim is for a sum certain or a sum that can be made certain by computation." Because the Court Clerk may enter a default judgment only in these circumstances, the Court Clerk is not authorized under Rule 55(b) to enter a default judgment in a declaratory judgment action. See W. World Ins. Co. v. Czech, 275 F.R.D. 59, 62 (D. Mass. 2011) ("Because Western World seeks a declaratory judgment that it owes no duty to defend or indemnify Williams, plaintiff's claim is not for a `sum certain' within the meaning of Fed.R.Civ.P. 55(b)(1) and thus the Clerk was not authorized to enter the Default Judgment."). Hence, in a declaratory judgment action, "the party must apply to the court for a default judgment." Rule 55(b)(2).
The first of the two filings at issue is Nevada General's Motion for Default Judgment against Defendant Abelino Romero under Rule 55 and Fed. R. Civ. P. 41.
In response to a query from the Court [Doc. 74], Nevada General filed a Notice in which it stated that "[o]n or about April 29, 2016, [Nevada General] filed a Motion for Default Judgment against [the Group Defendants]." [Doc. 77] Nevada General went on, "In accordance with Rule 55(a), the U.S. District Court Clerk . . . entered said default judgment against these [d]efendants." [Doc. 77] Nevada General concluded by stating that "a Motion for Default against the last remaining Defendant, Abelino Romero[,] and a Motion to Dismiss is pending before this Court [Doc. 70]. If the Court finds those motions well taken and grants the relief requested therein, this matter should then be effectively dismissed and the matter closed." [Doc. 77]
Nevada General's statements in its Notice are incorrect on several fronts. First, Nevada General confuses an entry of default under Rule 55(a) with default judgment under Rule 55(b). As discussed above, Rule 55(a) and (b) define two separate steps. Indeed, when Nevada General moved for default, it titled its motion "Request for Default Pursuant to F.R.C.P. 55(a)" and made no reference to default judgment pursuant to Rule 55(b). [Doc. 40]
Nevertheless, the Court will construe Plaintiff's Notice as a motion for default judgment as to the Group Defendants. Plaintiff's reference to Defendant Romero as the "last remaining defendant" and its belief that default judgment has already been entered against the Group Defendants indicate that it seeks that outcome. Similarly, in other motions and notices to the Court, Nevada General has indicated that it would seek default judgment against the Group Defendants. [See, e.g., Doc. 76, pg. 2 (stating that Nevada General would file a motion for default judgment against the Group Defendants)] In addition, the legal analysis as to the propriety of declaratory judgment is identical to that for Plaintiff's Motion for Default Judgment Against Defendant Abelino Romero. Finally, the Group Defendants are not entitled to notice of the motion for default judgment because they failed to appear or answer. Fed. R. Civ. P. 55(b)(2).
Consistent with the two-step process defined by Rule 55, the first issue is whether default should be entered against Romero under the circumstances here. The typical default case is one in which the defendant has failed to answer. City of New York, 645 F.3d at 131. However, Rule 55(a) states that default also may be entered when a party fails to "otherwise defend" against the complaint. The meaning of the phrase "otherwise defend" is not defined in the Rule, and the Circuit courts differ on the scope of the phrase. See Liberty Mut. Ins. Co. v. Fleet Force, Inc., No. CV-09-S-773-NW, 2013 WL 3357167, at *5 (N.D. Ala. July 1, 2013) (stating that "[t]he Courts of Appeals disagree over what, precisely, it means to fail to `otherwise defend'"). "Most hold that an entry of default is proper whenever the defendant fails to engage in litigation, regardless of the stage at which such failure occurs." Id. at *6; see City of New York, 645 F.3d at 128 (discussing the majority and minority positions).
Examination of the relevant authorities reveals, however, that the relevant question is whether a defendant has indicated an intent to defend against the complaint. In Bass v. Hoagland, a Fifth Circuit case cited by some authorities for the proposition that a default should not enter when a defendant has filed an answer, see, e.g., City of New York, 645 F.3d at 131, the Court stated that "[t]he words `otherwise defend' refer to attacks on the service, or motions to dismiss, or for better particulars, and the like, which may prevent default without presently pleading to the merits" and that "[w]hen Bass by his attorney filed a denial of the plaintiff's case neither the clerk nor the judge could enter a default against him." Bass v. Hoagland, 172 F.2d 205, 210 (5th Cir. 1949); see Wright & Miller, supra, at § 2682 (discussing Bass). Key to the Court's ruling, however, was the fact that the defendant had denied the plaintiff's allegations and filed a demand for a jury trial, indicating an intent to force the plaintiff to prove his case.
The Court concludes that, although Romero filed an Answer in response to the First Amended Complaint, the Answer did not evince an intent to defend against the allegations in the First Amended Complaint. The Answer did not deny any of the allegations, or assert any defenses. Indeed, Romero admitted one of the key facts asserted by Nevada General—that the driver of the insured car took the car without his permission. [Doc. 17] "Although pro se litigants' filings are held to less stringent standards than formal pleadings drafted by lawyers, they are still subject to the federal rules of civil and appellate procedure." Abdelsamed v. Colorado, 6 F. App'x 771, 772 (10th Cir. 2001) (internal quotation marks and citation omitted). Rule 8 requires that "[i]n responding to a pleading, a party must (A) state in short and plain terms its defenses to each claim asserted against it; and (B) admit or deny the allegations asserted against it by an opposing party." Moreover, "[a]n allegation—other than one relating to the amount of damages—is admitted if a responsive pleading is required and the allegation is not denied." Under this Rule, the allegations in Nevada General's First Amended Complaint are deemed admitted by Romero. Such an effect is inconsistent with an intent to defend against the complaint. Cf. In re Baker, No. 84-05146, 1984 WL 558303, at *1 (Bankr. D.N.D. Dec. 3, 1984) (denying a motion for default judgment where "[t]he [d]efendant, although not filing an answer, did file with the Court a copy of a letter addressed to the [p]laintiff setting out in detail his response to the [p]laintiff's allegations" and that the pro se defendant's letter "[wa]s rather complete in its denial of the [p]laintiff's cause of action and evidences to the Court his intent to defend the Complaint"); Smith v. Gadd, 280 S.W.2d 495, 498 (Ky. 1955) (discussing the requirements for an "appearance" under Kentucky's default judgment rule—substantively equivalent to Rule 55(b)(2)—and stating that the "question is . . . whether or not he has so participated in the action as to indicate an intention to defend" and that "[t]here must be some act which would signify that the defendant is contesting liability rather than admitting it, and therefore would be likely to contest the motion for judgment if given notice").
Moreover, since filing the Answer, Romero had failed to maintain a current address with the Court, as required by Local Rule 83.6. As a consequence, all mail to Romero from the Court has been returned as undeliverable, and Romero has failed to respond to orders by the Court or to attend hearings. Failure to maintain communication with Nevada General and the Court is further indication that Romero has no intent to defend against the First Amended Complaint. See Home Port Rentals, Inc. v. Ruben, 957 F.2d 126, 133 (4th Cir. 1992) (affirming default judgment under Rule 55 where, although they filed a responsive pleading, the defendants subsequently failed to notify the Court or their attorney of changes in address, failed to appear for hearings, and did not respond to notices from the Court). The Court therefore finds that Romero has failed to "otherwise defend" against the First Amended Complaint and will order the Clerk to enter default against him.
The Court now turns to the question of whether Nevada General is entitled to a default judgment as to Romero and the Group Defendants. Upon a motion for default judgment, a district court accepts as true all well-pled allegations in a complaint, except those related to proving damages. See U.S. v. Craighead, No. 05-6227, 2006 WL 936684, *2 (10th Cir. Apr. 12, 2006) (unpublished). Our Tenth Circuit has held that, "when entry of a default judgment is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties," and that the court must "`exercise[] its responsibility to determine that it has the power to enter the default judgment." Metro. Life Ins. Co. v. Johnson, No. 14-CV-00811-KLM, 2015 WL 1945398 at *2, 3 (D. Colo. Apr. 29, 2015) (citing Williams v. Life Savings & Loan, 802 F.2d 1200, 1202-03 (10th Cir. 1986)); see Venable v. Haislip, 721 F.2d 297, 300 (10th Cir. 1983) (holding that a default judgment is not appropriate if the court does not have jurisdiction over the subject matter and the defendant).
Once a district court concludes that it has the power to enter a default judgment against a defendant, the court next must determine whether the well-pled allegations of the complaint, if true, state a claim for relief. See Wright & Miller, supra, § 2688.1 at 63 (explaining that upon a motion for default judgment a court must determine whether the facts alleged in the complaint, if true, "constitute a legitimate cause of action" entitling the plaintiff to relief); Greenwich Ins. Co. v. Daniel Law Firm, No. 07-CV-02445-LTB-MJW, 2008 WL 793606, *1 (D. Colo. Mar. 22, 2008) (after determining it has jurisdiction over the subject matter and the defendant, a court must decide "whether the unchallenged facts create a legitimate basis for the entry of a judgment"). A trial court is vested with broad discretion in deciding whether to enter a default judgment. See Grandbouche v. Clancy, 825 F.2d 1463, 1468 (10th Cir. 1987).
The Court finds that it has the subject matter and personal jurisdiction required to enter a default judgment against Romero and the Group Defendants. The facts alleged in the First Amended Complaint, together with the Court's findings as to the defendants' New Mexico residency [Doc. 57], confer subject matter jurisdiction on the Court pursuant to 28 U.S.C. Section 1332. In its Order entered on January 24, 2017, this Court found that Nevada General is a resident of Nevada and that Romero and the Group Defendants are residents of New Mexico. [Doc. 57] Hence, the parties are diverse. Moreover, the policy limits for Policy 0295010 exceed $75,000. Thus, Nevada General's First Amended Complaint falls within this Court's diversity jurisdiction. See § 1332.
A federal court sitting in diversity may only assert personal jurisdiction over a defendant . . . "who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located," and if the exercise of personal jurisdiction under state law comport[s] with the Fourteenth Amendment's due process clause. U.S. v. Botefuhr, 309 F.3d 1263, 1271 (10th Cir. 2002 (quoting Fed. R. Civ. P. 4(k)(1)(A)). New Mexico's long-arm statute confers the maximum jurisdiction permissible consistent with the Fourteenth Amendment's due process clause. See Tercero v. Roman Catholic Diocese, 48 P.3d 50, 54 (N.M. 2002) (citation omitted). Thus, the Court's first statutory inquiry effectively collapses into the second constitutional analysis. See Melea, Ltd. v. Jawer SA, 511 F.3d 1060, 1065 (10th Cir. 2007). The Fourteenth Amendment's due process clause requires, for a court to assert personal jurisdiction over a defendant, that a defendant have (1) sufficient "minimum contacts" with the forum state (2) such that subjecting the defendant to the court's jurisdiction will not offend traditional conceptions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation omitted). Because the Court has found that Romero and the Group Defendants are residents of New Mexico, exercise of personal jurisdiction over them clearly comports with the due process clause.
Our Tenth Circuit has indicated that a district court does not have personal jurisdiction over a defendant if the defendant was not served. See Venable, 721 F.2d at 300. Federal Rule of Civil Procedure 4(m) requires a plaintiff to serve a defendant within 120 days after the complaint is filed or be subject to dismissal without prejudice of the complaint. See Fed. R. Civ. P. 4(m). A review of the docket confirms that Nevada General's service upon Romero and the Group Defendants was timely. [See Doc. 11-16; Doc. 18, 22-23]
The Court further concludes that Nevada General served Romero and the Group Defendants properly under Federal Rule of Civil Procedure 4(e). Federal Rule 4(e) provides that "an individual. . . may be served in a judicial district of the United States by," among other methods, "following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made." Fed. R. Civ. P. 4(e)(1). Under New Mexico law,
NMRA, Rule 1-004. Rule 1-004(F) permits personal service of process as well. Here, the returns of service indicate that Nevada General served Romero and the Group Defendants either by certified mail, return receipt, or personally. [See Doc. 11-16; Doc. 18, 22-23] The Court finds that it has both subject matter and personal jurisdiction to enter default judgment against Romero and the Group Defendants.
Having concluded that it has the power to enter a default judgment, the Court next must determine whether the well-pled allegations of the First Amended Complaint, if true, state a claim for relief. See Wright & Miller, supra, § 2688.1, at 63; Greenwich Ins. Co., 2008 WL 793606, *1. Federal Rule of Civil Procedure 55(b) provides that the Court may conduct a hearing to obtain an accounting, determine the amount of damages, or establish the truth of any allegations in the complaint by evidence. It also authorizes the Court to enter a default judgment without a hearing if the Court determines, in its discretion, that no hearing is necessary. The Court concludes that a hearing is not necessary here because the First Amended Complaint does not seek damages. Moreover, as discussed, under both Rule 8(b)(6) and Craighead, the Court accepts as true all well-pled allegations in the First Amendment Complaint. See Craighead, 2006 WL 936684, *2.
The allegations in the First Amended Complaint, if true, establish that
[Doc. 7] Nevada General also alleges that Daniel Romero was charged with a number of crimes stemming from the Incident, including kidnapping, trafficking, intimidation of a witness, and aggravated battery of a household member.
Nevada General further alleges that the Policy: 1) includes a clause permitting cancellation if the insured misrepresented the users of the vehicle and the members of his household; 2) requires the insured to assist with investigation and settlement of an accident; 3) covers only users of the vehicle who were using it with Romero's permission; 4) does not cover damage resulting from intentional acts; 5) does not cover accidents occurring during commission of illegal acts; and 6) does not cover punitive or exemplary damages. [Doc. 7, ¶¶ 34-70] Taking these allegations as true, and considering the facts alleged together with the limitations in the Policy, the Court finds that the First Amended Complaint states a claim for the declaratory relief Nevada General requests.
The Court concludes that it has the authority to enter default judgment against Romero and the Group Defendants, and that the well-pled allegations in the First Amended Complaint establish that Nevada General is entitled to relief. Thus, the Court will grant Nevada General's Motion for Default Judgment Against the Defendant Abelino Romero and Motion to Dismiss [Doc. 70], and also grant default judgment against Arthur Anaya, Kevin Baca, Denise Hinkle, Nancy Hissa, Theodore Hissa, Ashley Ramirez, Daniel Romero. [Doc. 77]
