United States District Court, S.D. West Virginia, Charleston
MEMORANDUM OPINION AND ORDER
T. COPENHAVER, JR. UNITED STATES DISTRICT JUDGE
are plaintiff's Motion for Default Judgment Against
Defendant Myrtle D. Corporation, filed July 19, 2016 (ECF No.
12), defendants Rock “N” Roll Coal Company, Inc.,
and David Cline's Motion to Defer Entry of Judgment
Against Myrtle D. Corporation, filed August 10, 2016 (ECF No.
18), and plaintiff's Motion for Oral Argument, filed
February 20, 2017 (ECF No. 30).
case is a declaratory judgment action brought by plaintiff
American Mining Insurance Company, Inc. The complaint asks
the court to find that none of the six policies issued by
plaintiff to defendant Rock “N” Roll Coal
Company, Inc., (“Rock ‘N' Roll”) cover
the claims or counterclaims alleged in a state suit initiated
by defendant Myrtle D. Corporation (“Myrtle D.”)
against Rock “N” Roll and David Cline.
D. filed its state court complaint against Rock
“N” Roll and David Cline, President of Rock
“N” Roll, on October 13, 2015, alleging that Rock
“N” Roll failed to make certain royalty payments.
Shortly thereafter, Rock “N” Roll and Cline filed
a counterclaim against Myrtle D. alleging conspiracy, slander
of title, public disclosure of private facts, negligence, and
breach of a lease agreement. Myrtle D. responded with its own
counterclaim alleging that Cline and Rock “N”
Roll were contractually obligated to name Myrtle D. as an
additional insured in their policies and to indemnify and
defend Myrtle D. for claims arising out of Rock
“N” Roll's coal mining operations. The state
court dismissed Myrtle D.'s complaint on June 6, 2016, on
Myrtle D.'s motion, leaving only the Rock “N”
Roll and David Cline counterclaim and the Myrtle D.
counterclaim in that case. Myrtle D. is named as an
additional insured on five of plaintiff's six insurance
policies with Rock “N” Roll, generating
plaintiff's coverage obligations to Myrtle D., Rock
“N” Roll, and David Cline.
motion contends that entry of judgment against defendant
Myrtle D. is appropriate under Rule 55(b)(2) of the Federal
Rules of Civil Procedure because Myrtle D. has failed to
otherwise plead or defend in this action. Myrtle D. was
served in this action with the summons and the complaint on
May 17, 2016, as shown by the proof of service filed by the
West Virginia Secretary of State on May 23, 2016, but it
never answered the complaint or filed a notice of appearance
in this case. Plaintiff also argues that the declaratory
relief it seeks is proper on the merits. The motion by Rock
“N” Roll and Cline does not directly respond to
plaintiff's motion but instead moves to defer entry of
default judgment against Myrtle D. under Rule 54(b), which
allows the court to enter final judgment against one party in
a multiparty suit “only if the court expressly
determines that there is no just reason for delay.”
54(b) applies in the Fourth Circuit to situations in which a
plaintiff alleges either joint or several liability of
co-defendants, especially when there are overlapping issues.
See United States for Use of Hudson v. Peerless Ins.
Co., 374 F.2d 942, 944 (4th Cir. 1967). Our Court of
Appeals has suggested that delay is particularly justified
when, inter alia, a co-defendant may be prejudiced by
dismissal, a co-defendant objects to dismissal, there are
overlapping claims or issues to be resolved, or there are
outstanding motions. Equip. Fin. Grp., Inc. v. Traverse
Computer Brokers, 973 F.2d 345, 348 (4th Cir. 1992). In
a situation closely analogous to this one, one district court
in this circuit expressly found that “[t]he avoidance
of logically inconsistent judgments in the same action and
factually meritless default judgments provide ‘just
reason.'” Phoenix Renovation Corp. v. Gulf
Coast Software, Inc., 197 F.R.D. 580, 582 (E.D. Va.
2000) (default judgment against one co-defendant
inappropriate when other co-defendant objected and theories
against each co-defendant were similar). A district court is
allowed to “exercise its discretion in certifying
partial judgments in consideration of ‘judicial
administrative interest' - including ‘the historic
federal policy against piecemeal appeals' - and
‘the equities involved.'” Lloyd Noland
Found., Inc. v. Tenet Health Care Corp., 483 F.3d 773,
777-78 (11th Cir. 2007) (some quotation marks omitted)
(quoting Curtiss-Wright Corp. v. Gen. Elec. Co., 446
U.S. 1, 8 (1980)).
case, plaintiff lays out what it contends is the correct
interpretation of its insurance policies - policies that are
dispositive of the case against each co-defendant, including
the two non-defaulting co-defendants. Because plaintiff's
claims against different co-defendants each involve the same
insurance policies, litigation against the non-defaulting
co-defendants will inevitably require interpreting those
policies and the issues to which they give rise. As such,
entry of final judgment now against Myrtle D. would preempt
full discovery on issues relevant to coverage and may lead to
inconsistent judgments among the defendants. Furthermore, the
conditions noted by the Fourth Circuit in Equipment Finance
Group, including prejudice to a co-defendant, objections by a
co-defendant, overlapping issues, and pending motions,
recommend against entering default judgment against Myrtle D.
at this juncture. 973 F.2d at 348.
emphasizes that “out of an abundance of caution,
[plaintiff] agreed to provide Myrtle D. with a defense [in
the state court action], under a reservation of rights,
” beginning on April 12, 2016. Pl.'s Resp. to
Defs.' Mot. to Defer J. Against Myrtle D. Corp. 2.
Indeed, in an ordinary case involving only two parties, the
costs of a related defense would counsel in favor of a
default judgment against a non-responsive party declaring
there is no duty to defend that party. Here, however, this
factor must be balanced against the risk of inconsistent or
factually underdeveloped default judgments as well as the
pecuniary interests of co-defendants David Cline and Rock
“N” Roll in establishing coverage.
courts have found that withholding entry of default judgment
is proper even when an insurer-plaintiff is involved in
ongoing representation of a co-defendant in another action.
For example, in Security Insurance Co. of Hartford v.
Schipporeit, Inc., the plaintiff insurer, Security,
represented Schipporeit, Inc., under a reservation of rights
in a state court action brought by LaSalle Street
Church. 69 F.3d 1377, 1380 (7th Cir. 1995). Plaintiff
moved for entry of a default judgment declaring non-coverage
against Schipporeit, Inc., for failure to appear in federal
court. Id. The district court denied the motion for
default judgment despite the costs incurred by
plaintiff's ongoing representation of Schipporeit because
a similarly situated non-party, LaSalle, moved to intervene.
Id. The Seventh Circuit upheld the denial, noting
Security opposed LaSalle's petition to intervene because
it wanted a quick, unopposed adjudication that it had no
obligation to defend or indemnify Schipporeit. And Security,
it seems, was on the verge of obtaining that result. It
wanted to play the Washington Generals and get out of town
with a quick win. The district court wisely allowed a more
worthy opponent to get into and onto the court.
Id. at 1381. Although Schipporeit involved an
intervenor rather than a co-defendant, the principles and
policy rationales enunciated by the Seventh Circuit are
another case, Global Aerospace, Inc. v. Platinum Jet
Management, LLC, et al., an insurance company plaintiff
moved for default judgment against a non-responsive corporate
defendant in a suit arising out of a plane crash. No.
09-60756-CIV, 2009 WL 3400519, at *5 (S.D. Fla. Oct. 20,
2009). Plaintiff was defending the other individual
co-defendants in various criminal proceedings arising out of
the crash. The court noted that plaintiff had not shown that
entering declaratory relief would “no longer run the
risk of being inconsistent with rulings in favor of some of
the Individual Defendants, ” although it did observe
that it would consider “at any point” information
showing that the co-defendants' claims were sufficiently
distinct for default judgment to be entered. Id. at
*6. Similarly, plaintiff here has not shown that there is no
risk of inconsistent rulings among the co-defendants, and the
fact that it has agreed to provide a defense for Myrtle D.
does not negate that risk.
cases together suggest that the incurrence of defense costs
by an insurer in a related case does not by itself justify
the entry of default judgment against a non-responsive co
-defendant where there is a risk of inconsistent judgments
and underdeveloped factual premises. Consequently, and in
light of the pending motion for summary judgment in this
case, there is just reason to delay entry of default judgment
against Myrtle D. under Rule 54(b). Accordingly, the court
will not enter default judgment under Rule 55(b) at this
time. The court will, however, consider information
demonstrating that no on overlapping claims or issues”
remain at any point it becomes available.
therefore ORDERED that plaintiff's Motion for Default
Judgment Against Myrtle D. Corporation be, and it hereby is,
denied. In addition, it is ORDERED that defendants Rock
“N” Roll Coal Company, Inc., and David Cline's Motion to Defer Entry of
Judgment Against Myrtle D. Corporation be, ...