Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06016/USCOURTS-caed-1_04-cv-06016-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:2201 Declaratory Judgement (Insurance)

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

THE HARTFORD CASUALTY INSURANCE

COMPANY,

Plaintiff,

v.

KENNETH M. MALAVOS, et al,

Defendants.

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1:04-cv-6016 OWW LJO

MEMORANDUM DECISION AND

ORDER RE: MOTION FOR

RECONSIDERATION 

OF MAGISTRATE JUDGE’S

FINDINGS AND

RECOMMENDATIONS

AND

ORDER TO SHOW CAUSE

I. INTRODUCTION

This is the first of four cases filed by Plaintiff, The

Hartford Casualty Insurance Company, seeking injunctive relief

from ongoing or pending arbitrations. The district court

rejected Hartford’s claims on the merits in the three

subsequently-filed cases. See Hartford v. Valley Pearl

Marketing, LLC, et al, Case No. 1:05-cv-00232, Doc. 25; Hartford

v. S&W Farms et al, Case No. 1:05-cv-00233, Doc. 22; Hartford v.

Hendricks, et al, Case No. 1:05-cv-00234, Doc. 23. In this case,

however, default was entered against all Defendants before the

merits of the case could be reached. Plaintiff applied for

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default judgment on October 21, 2004, Doc. 25, while Defendants

Alan Cheney, John Schmidt, and Manuel Tavares (collectively “the

Growers,” unless referred to individually) moved to set aside the

entry of default against them on November 10, 2004, Doc. 34. 

On December 9, 2004, Magistrate Judge Lawrence J. O’Neill

issued Findings and Recommendations, recommending that entry of

default be set aside and that Hartford’s motion for default

judgment be denied. Hartford timely objected. Doc. 51, filed

Dec. 23, 2004. After reviewing the entire record, the district

court concludes that the Growers’ motion to set aside default

should be granted and Hartford’s application for default judgment

should be denied. Also, as discussed in more detail below,

Hartford is ordered to show cause why this entire case should not

be dismissed.

II. BACKGROUND

A. The Underlying Substantive Dispute.

Plaintiff Hartford, a private insurance company, offers

federally reinsured crop insurance policies pursuant to the

Federal Crop Insurance Act, 7 U.S.C. §§ 1501-08. Doc. 1 ¶ 17,

filed July 26, 2004. These insurance policies are written by the

Federal Crop Insurance Corporation (“FCIC”), published as

administrative regulations, and often referred to as the “Basic

Provisions.” See 7 C.F.R. § 457.8.

The Growers farm apples in California. Doc. 1 ¶ 6. They

either purchased or are the transferees of FCIC crop insurance

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1 Whether they are the immediate purchasers or the

transferees is in dispute and addressed at Part IV.D.2.

2 The Basic Provisions stipulate that crop losses caused by

“[f]ailure to follow recognized good farming practices” are not

compensable. See Doc. 38, Ex. B § 12(b).

3

policies issued by Plaintiff for the Growers’ 2003 apple crops.1

Doc. 1 ¶ 17. The Growers suffered losses to their apples and

submitted claims for these losses to Plaintiff. Doc. 1 ¶ 18-19;

Doc. 34 at 2:1-2, filed Nov. 10, 2004. Plaintiff denied their

claims because it determined that the Growers had not farmed in a

“good and farmer-like manner.”2 Doc. 1 ¶¶ 19-20. The Growers

dispute Plaintiff’s determination.

The Basic Provisions contain a dispute resolution provision

which calls for arbitration under some circumstances and

administrative appeal in others:

If [the insured] and [the insurer] fail to agree on any

factual determination, the disagreement will be resolved in

accordance with the rules of the American Arbitration

Association. Failure to agree with any factual

determination made by FCIC must be resolved through the FCIC

appeal provisions published at 7 CFR part 11.

Doc. 38, Ex. B § 20(a). The Growers, believing that the adequacy

of their farming practices was a factual dispute subject to

arbitration, submitted a demand for arbitration to the American

Arbitration Association (“AAA”) on February 18, 2004. Doc. 34 at

2:2-4. The AAA appointed Kenneth Malavos to arbitrate the

dispute between Plaintiff and the Growers. Doc. 6 at 5:6-7,

filed Aug. 18, 2004.

Plaintiff objected to the arbitration, claiming that the

arbitrator lacked jurisdiction to resolve the good farming

practices dispute, and that he lacked authority to decide his own

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3 Plaintiff contends that determinations of good farming

practices, whether made by FCIC or a private insurer, can only be

reconsidered through an administrative process set forth by FCIC.

Doc. 1 ¶ 20.

4 Malovos was subsequently dismissed as a defendant. Doc.

24, filed Oct. 18, 2004.

4

jurisdiction regarding the good farming practices dispute.3 Doc.

1 ¶ 23. Despite Plaintiff’s objections, Arbitrator Malavos

issued an “interim award” on July 12, 2004, concluding that he

possessed authority to decide his own jurisdiction. See Doc. 38,

Ex. A.

Plaintiff commenced this action on July 26, 2004, filing

suit to enjoin the Growers and Malovos from proceeding with the

arbitration.4 Doc. 1 at 8, ¶ 1. Plaintiff also requests that

the court declare the dispute over good farming practices nonarbitrable. Id.

In addition to the Growers and Malovos, Plaintiff names as

defendants two partnerships: Little John Creek Partners and

Versalis Ranch (“the Partnerships”). The Partnerships are

alleged to be the named insureds under the insurance policies at

issue. Doc. 53 Exs. I and O, filed Dec. 23, 2004. As discussed

at Part IV.D.2, it is not clear that any partnership named

“Versalis Ranch” actually exists. Nevertheless, Plaintiff

alleges that the Partnerships were established and are operated

by the Growers. Doc. 1 ¶¶ 6-7. The Growers deny that they are

members of the Partnerships, asserting that the disputed

insurance policies were transferred from the Partnerships to them

as individuals. Doc. 57 at 5:5-8, filed Jan. 5, 2005.

///

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5 Service of process in this manner is proper under Cal.

Civ. Proc. Code § 415.20(b). See discussion at Part IV.A.

6 California law permits service of process on a partnership

by personally serving a “general partner” of the partnership. 

See Cal. Civ. Proc. Code § 416.40.

5

B. The Current Dispute Over Entry of Default.

Plaintiff filed suit on July 26, 2004. Doc. 1. After five

unsuccessful attempts to personally serve the summons and

complaint on the individual Grower defendants (Cheney, Schmidt,

and Tavares), Plaintiff attempted to effect substitute service of

process on August 31, 2004, by leaving a copy of the summons and

complaint with the Growers’ secretary at their business office,

and then mailing a copy of the summons and complaint to the same

location on September 1, 2004.5 See Doc. 13 ¶ 3 and Ex. A, filed

Sep. 23, 2004.

Assuming the Growers to be partners in the Partnerships,

Plaintiff attempted to effect service of process on the

Partnerships by personally serving one of the Growers, Alan

Cheney, on September 15, 2004.6 Doc. 41, Ex. C, filed Nov. 24,

2004.

A properly served defendant must answer the complaint within

twenty days of service. Fed. R. Civ. P. 12(a)(1)(A). For the

Growers, that clock began to run on September 2, 2004, and

expired on September 21, 2004. The Growers filed no responsive

pleading by that date. On September 23, 2004, Plaintiff

requested the Clerk of court to enter default against the

Growers. Doc. 12, filed Sept. 23, 2004. The Clerk entered

default the following day. Doc. 15, filed Sept. 24, 2004. 

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Similarly, the Partnerships did not respond by the expiration

date of their twenty-day window (October 5, 2004), and the Clerk

entered default as to them two days later. Doc. 21, filed Oct.

7, 2004. On October 21, 2004, Plaintiff filed an application for

default judgment against all Defendants. Doc. 25.

The Growers claim that they first learned of the entry of

default against them on October 20, 2004. Doc. 34 at 2:21-22,

filed Nov. 10, 2004. That same day, the Growers, through their

attorney, directed a letter to counsel for Plaintiff, requesting

that Plaintiff discontinue pursuit of default judgment. Doc. 34

at 2:21-23. Plaintiff apparently did not respond to this letter. 

Doc. 34 at 2:23-24.

Counsel for the Growers appeared before the court for a

scheduling conference on November 4, 2004, and stated that he

would file a motion to set aside default by November 5, 2004. 

Doc. 39 at 3:16-18, filed Nov. 12, 2004. The Growers actually

filed that motion on November 10, 2004. Docs. 33-34, filed Nov.

10, 2004. Plaintiff filed an opposition and moved to strike the

motion to set aside default as untimely. Doc. 40, filed Nov. 24,

2004.

The motions were submitted on the briefs without oral

argument, and the Magistrate Judge issued his findings and

recommendations on December 9, 2004. Doc. 50.

C. The Magistrate Judge’s Findings and Recommendations.

The Magistrate Judge recommended that the court:

1. Grant the Growers’ motion to set aside entry of

default against them;

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2. Deny Plaintiff’s application for default judgment

against the Growers;

3. Deny without prejudice Plaintiff’s application for

default judgment against the Partnerships; and

4. Deny Hartford’s motion to strike the Growers’

motion to set aside entry of default.

Doc. 50 at 2:3-8.

Plaintiff filed an objection to these findings and

recommendations. Doc. 51, filed Dec. 23, 2004. However, should

the district court adopt them, Plaintiff asks in the alternative

that it order Defendants to reimburse Plaintiff for the

attorney’s fees incurred in litigating the issue of default. Id.

at 13:12-14:2. The Growers filed a response to Plaintiff’s

objections. Doc. 57, filed Jan. 5, 2005. The Partnerships have

filed no pleadings on this matter, and have never appeared before

the court in any matter relating to this suit.

III. STANDARD OF REVIEW

When a party objects to the findings and recommendations of

a magistrate judge, the district court shall review de novo the

findings of fact and conclusions of law to which objection is

made. 28 U.S.C. § 636(b)(1)(C); Unites States v. Reyna-Tapia,

328 F.3d 1114, 1121 (9th Cir. 2003) (en banc). The court need

not review de novo any finding or recommendation that the parties

accept as correct. Reyna-Tapia, 328 F.3d at 1121. The district

court may accept, reject, or modify, in whole or in part, the

magistrate judge’s findings or recommendations. See 28 U.S.C. 

§ 636(b)(1)(C).

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IV. LEGAL ANALYSIS

A. Service of Process.

1. Effectiveness of Service.

The Growers argue that substitute service of process

effected upon them on August 31, 2004, was in fact ineffective. 

Doc. 57 at 3:2-6; Doc. 57 at 4:13. California law, they contend,

does not contemplate substitute service upon individuals (as

opposed to corporations or public entities). Doc. 44 at 4:5-6.

Service of process may be effected “pursuant to the law of

the state in which the district court is located....” Fed. R.

Civ. P. 4(e)(1). California law provides for service of a

summons upon an individual person “by delivering a copy of the

summons and of the complaint to such person or to a person

authorized by him to receive service of process.” Cal. Civ.

Proc. Code § 416.90. However, if, after reasonable diligence,

the summons and complaint cannot be personally delivered in

accordance with Section 416.90, several methods of substitute

service are permitted. Cal. Civ. Proc. Code § 415.20(b). One

such method is effected by leaving a copy of the summons and

complaint at the usual place of business of the person to be

served, in the presence of a person apparently in charge, and

afterwards mailing a copy of the summons and complaint to the

same location. Id.

Plaintiff’s proofs of service indicate that their process

server met all the requirements of Section 415.20(b). On August

31, 2004, the process server left the summons and complaint at

the Growers’ business office in the presence of the Growers’

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secretary. Doc. 13, Ex. A, filed Sep. 23, 2004. The next day,

Plaintiff mailed a copy of the summons and complaint to the same

address. Doc. 13 ¶ 3. Plaintiff therefore effected substitute

service of process upon the individual Grower defendants on

September 1, 2004.

2. Propriety of Entry of Default.

Section 415.20(b) states that service of process becomes

“complete” under its requirements on the tenth day after the

required mailing of a copy of the summons and complaint to the

address at which the summons and complaint were left. Plaintiff

mailed the summons and complaint on September 1, 2004, the day

after the server personally delivered copies to the Growers’

business address. Doc. 13 ¶ 3. The Growers argue that Section

415.20(b)’s ten-day delay between the required mailing and

“completion” of service pushes back the beginning of their

twenty-day response window to September 11, 2004. They further

argue that the twenty-day window really expired on October 1,

2004, and, therefore, that the clerk’s entry of default against

them on September 24, 2004, was premature. Doc. 44 at 4:12-19.

The Magistrate Judge correctly rejected the Growers’

argument. Despite Section 415.20(b) and its ten-day delay, any

party served under a state law method still has only twenty days

to reply:

[U]nder the plain terms of Federal Rule of Civil

Procedure 12(a), a defendant has twenty days from

receipt of the summons to file an answer unless a

federal statute provides otherwise. This is so even

if, as permitted by Federal Rule of Civil Procedure

4(e), the defendant is served pursuant to a state law

method of service and the state law provides a longer

time to answer.

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Beller & Keller v. Tyler, 120 F.3d 21, 25-26 (2d Cir. 1997).

Plaintiff completed all of the requirements of Section

415.20(b) on September 1, 2004, the day it mailed a copy of the

summons and complaint to the Growers’ business address. The

twenty-day clock began to run the following day and expired on

September 21, 2004. Entry of default on September 24, 2004, was

not premature.

B. Timeliness of the Growers’ Motion to Set Aside Default.

Plaintiff claims that the Growers’ motion to set aside

default was untimely: at a scheduling conference on November 4,

2004, counsel for the Growers stated that he would file the

motion by the next day, but he did not do so until November 10,

2004. See Doc. 39 at 3:16-18. However, the district court did

not order counsel for the Growers to submit a motion by November

5; it merely acknowledged his intention to do so. Id. Plaintiff

received full time to reply and suffered no prejudice.

Plaintiff’s motion to strike the motion to set aside default is

DENIED.

C. The Growers’ Motion to Set Aside Entry of Default.

1. Legal Standard.

Default judgments are disfavored, and cases should be

decided on their merits whenever reasonably possible. Pena v.

Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985). 

The district court may set aside entry of default “[f]or good

cause shown.” Fed. R. Civ. P. 55(c). The court’s discretion for

finding “good cause” is especially broad where (as in this case)

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7 All three cases cited in this paragraph involve the

setting aside of default judgment, rather than entry of default. 

However, the three-part “good cause” standard that controls

relief from entries of default also governs the vacating of

default judgments. TCI, 244 F.3d at 696. The difference between

the application of the standard at the two stages of default

appears to be the extra measure of judicial discretion applicable

to setting aside entries of default. Brady, 211 F.3d at 504.

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it considers a motion to set aside entry of default, rather than

default judgment. Brady v. United States, 211 F.3d 499, 504 (9th

Cir. 2000).

In practice, the “good cause” analysis considers whether:

(1) the party in default engaged in culpable conduct leading to

entry of default, (2) the party in default has a meritorious

defense, or (3) setting aside entry of default would prejudice

the non-defaulting party. Franchise Holdings II, LLC v.

Huntington Restaurants Group, Inc., 375 F.3d 922, 925-26 (9th

Cir. 2004). These three factors are considered “disjunctive,”

meaning that the motion to set aside default may be denied based

on any one of them. American Ass’n of Naturopathic Physicians v.

Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000). The party in

default bears the burden of showing that these factors counsel in

favor of setting aside default. TCI Group Life Ins. Plan v.

Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). Nevertheless, the

interest in finality of judgment “should give way fairly

readily...[to] the competing interest in reaching the merits of a

dispute.” Id.7

2. Analysis.

The standard set forth above provides three factors for

consideration, but the district court may deny a motion to set

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8 TCI addressed whether this Circuit’s long-standing

standard for culpability should to be revised in light of the

related holding in Pioneer Investment Services, Co. v. Brunswick

Associates, Ltd., 507 U.S. 380, 395 (1993). See TCI, 244 F.3d at

697-699. In Pioneer, the Supreme Court made it clear that

excusable neglect could encompass some intentional failures to

act, and explained that a court should determine whether such

intentional failures are excusable by examining a number of

equitable factors. Pioneer, 507 U.S. at 388. Examining the

holding from Pioneer, the TCI court held that the Ninth Circuit’s

pre-Pioneer standard (receipt of actual or constructive notice

and an intentional failure to answer) is still valid, so long as

courts interpret “intentional failure to answer” narrowly.

12

aside default based on any one of them. Because the court finds

the Growers’ conduct “culpable,” the court does not reach the

remaining two factors.

A party’s conduct is culpable “if he has received actual or

constructive notice of the filing of the action and intentionally

failed to answer.” Id. at 697.8 Therefore, the court’s analysis

focuses on (1) whether the Growers received actual or

constructive notice of the complaint, and (2) whether they

intentionally failed to respond.

a. Notice.

Actual notice is achieved when the party to be served knows

that a summons and complaint has been served upon that party,

regardless of whether that party was personally served. See

Pena, 770 F.2d at 815.

Here, Plaintiff filed suit on July 26, 2004. Doc. 1. On

July 29, 2004, Plaintiff mailed a courtesy copy of the summons

and complaint to the Growers’ attorney. Doc. 5, filed July 30,

2004. The Growers admit receiving notice of Plaintiff’s suit by

way of this courtesy copy. Doc. 57 at 4:13-14. However, absent

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express or implied authorization for one’s attorney to receive

process on one’s behalf, a courtesy copy served upon an attorney

satisfies no statutory requirements for service of process and

creates neither actual nor constructive notice of the suit. See

Olympus Corp. v. Dealer Sales & Service, Inc., 107 F.R.D. 300,

305 (E.D.N.Y. 1985). The Growers state, and Plaintiff does not

dispute, that they never authorized their attorney to receive

process for them. Doc. 57 at 4:14-15. Therefore, the courtesy

copy of the complaint mailed to the Growers’ attorney did not put

them on notice in a legally cognizable sense.

However, on September 1, 2004, Plaintiff effected substitute

service of process upon the growers. The summons and complaint

were properly served in accordance with Section 415.20(b) of the

California Civil Procedure Code. The Growers admit receiving

this copy of the summons and complaint. Doc. 57 at 3:2-4. 

Therefore, the Growers’ had actual notice of the complaint as of

the date of receipt.

b. Intentional Failure to Respond.

In the context of a culpability analysis, an “intentional”

act is not simply one taken by an actor who knows what the likely

consequence will be. TCI, 244 F.3d at 697. Rather, the act must

evince an intent to “take advantage of the opposing party,

interfere with judicial decisionmaking, or otherwise manipulate

the legal process....” Id. But, the burden rests on the party

seeking to set aside entry of default. He or she must present a

“credible, good faith explanation negating any intention to take

advantage of the opposing party, interfere with judicial

decisionmaking, or otherwise manipulate the legal process.” Id.

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Under TCI, the question then becomes whether the Growers

have offered a “credible, good faith explanation” for failing to

timely repond to the complaint. They have not. The Growers’

argument regarding ineffectiveness of service is not an

explanation. Their attorney has never stated that he honestly

believed substitute service was ineffective upon individuals and

advised his clients accordingly. Even had the attorney believed

this, the appropriate response is not to ignore the complaint,

but to move to dismiss it for insufficiency of service of

process. See Fed. R. Civ. P. 12(b)(5).

The Growers do explain that they instructed their counsel to

conserve resources and focus on the pending arbitration, but this

cannot be considered a “credible, good faith explanation.” Where

it is clear that attorney and client have conferred regarding a

complaint, failure to explain adequately a decision not to answer

weighs heavily against the defaulting party in a culpability

analysis:

[T]he defaulting party’s general familiarity with legal

processes or consultation with lawyers at the time of

the default [is often] pertinent to the determination

whether the party's conduct in failing to respond to

legal process was deliberate, willful or in bad faith.

... Absent some explanation...it is fair to expect that

individuals who have previously been involved in

litigation or have consulted with a lawyer appreciate

the consequences of failing to answer and do so only if

they see some advantage to themselves.

TCI, 244 F.3d at 699 n.6 (9th Cir. 2001) (emphasis added). 

However, “legal sophistication or lack thereof is [not

necessarily] determinative of whether the culpability standard is

met.” Id.

Based on the information before the court, it appears that

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the Growers have submitted no reasonable explanation justifying

their behavior. Rather, in consultation with their attorney,

they intentionally ignored Plaintiff’s suit, perhaps in an

attempt to avoid the cost of litigation. This conduct is

“culpable” and would normally not be excused. However, denial of

the Growers’ motion in this case would create an anomaly. 

Because Plaintiff’s application for default judgment will be

denied, as described at Part IV.D.1, denying the Growers’ motion

to set aside entry of default would leave the Growers in

procedural limbo and have prejudicial effect on the pending

arbitration proceedings.

Entry of default may be set aside “[f]or good cause shown.” 

Fed. R. Civ. P. 55(c). Given that default judgment may be set

aside for “any...reason justifying relief from the operation of

judgment,” id. 60(b)(6), and that the court’s discretion for

finding “good cause” is especially broad where it considers a

motion to set aside entry of default, rather than default

judgment, Brady, 211 F.3d at 504, “good cause” exists in this

case to set aside entry of default. The Growers’ motion to set

aside entry of default is GRANTED.

D. Hartford’s Applications for Default Judgment.

1. Default Judgment Against the Growers.

Default judgment is not a matter of right. A court, in its

sound discretion, may refuse default judgment where it determines

that no justifiable claim has been alleged. See Lewis v. Lynn,

236 F.3d 766, 767 (5th Cir. 2001); Doe v. Qi, 349 F. Supp. 2d

1258, 1271 (N.D. Cal. 2004); William W. Schwarzer et al,

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California Practice Guide: Federal Civil Procedure Before Trial

6:100 (2005).

The district court has already reached the merits of

Plaintiff’s underlying arbitrability claims in three recent suits

which are essentially identical to this case, all initiated by

Plaintiff Hartford and litigated by the same attorneys present

here. See Hartford v. Valley Pearl Marketing, LLC, et al, Case

No. 1:05-cv-00232, Doc. 25; Hartford v. S&W Farms et al, Case No.

1:05-cv-00233, Doc. 22; Hartford v. Hendricks, et al, Case No.

1:05-cv-00234, Doc. 23. In these suits, Plaintiff filed

complaints (substantially identical to the complaint in this

case) seeking declarations that good farming practices disputes

can only be resolved through an administrative process. The

district court found: (a) that the insurance policy granted the

arbitrator authority to determine her own jurisdiction, including

whether good farming practices disputes are arbitrable; and (b)

even if the arbitrator did not have authority to determine her

own jurisdiction, good farming practices disputes are

nevertheless arbitrable under the language of the insurance

policy at issue. Default judgment in Plaintiff’s favor is

therefore inappropriate. Plaintiff’s application for default

judgment against the Growers is DENIED.

2. Default Judgment Against the Partnerships.

Plaintiff alleges that the Growers are also members of the

Partnerships (Versalis Ranch and Little John Creek Partners). 

Because one of the Growers (Cheney) was personally served with

process as to the partnerships on September 15, 2004, see Doc.

41, Ex. C, and because the Partnerships have made no appearance

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in this case, Plaintiff contends that default judgment is

warranted at least as to them.

The Growers deny that they have ever been members of the

Partnerships and have filed declarations to that effect. Docs.

45-47, filed Dec. 3, 2004. Plaintiff has countered with a number

of exhibits (e.g., insurance receipts and adjuster’s reports)

supposedly establishing that the Growers are in fact members of

the Partnerships.

With regard to Little John Creek Partners, Plaintiff’s

exhibits suggest that the Growers may be members of a partnership

under that name, although no exhibit unequivocally establishes

such memberships. See Doc. 53, Exs. I-N, filed Dec. 23, 2004. 

With regard to Versalis Ranch, Plaintiff’s exhibits establish

nothing. All exhibits in support of the Versalis Ranch claim are

directed to the “Mt. Oso Fruit Company.” See Doc. 53, Exs. O-R. 

The name “Versalis Ranch” never appears on any of these

documents.

For their part, the Growers explain that they are the

legitimate transferees of crop insurance policies originally

purchased by Little John Creek Partners and Mt. Oso Fruit

Company. They submit no documentation of their own to support

this claim, but rather point to two of Plaintiff’s exhibits. See

Doc. 57 at 5:1-10. Both exhibits are handwritten “adjuster’s

special reports.” In one, concerning Little John Creek Partners,

the adjuster writes: “Apparently this ranch has been transferred

to new ownership of Cheney, Tavarrez [sic] & Schmidt, with

transfer of ins[urance] policy. Do not have date of transfer at

this time.” Doc. 53, Ex. M. In the other, regarding Mt. Oso

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Fruit Company, the adjuster states: “This ranch has been

transferred to Cheney, Tavarrez [sic] & Schmidt.” Doc. 53, 

Ex. P.

On the whole, the evidence is inconclusive. Doubt remains

as to whether the Growers were partners in Little John Creek

Partners, and whether the “Versalis Ranch” partnership actually

exists. In such a situation, further briefing or evidentiary

submissions from the parties could be requested. However, the

merits of Plaintiff’s claims against the Partnerships have

already been decided in the related cases discussed at Part

IV.D.1 By virtue of the arbitration agreements, even if the

Growers are members of the Partnerships (and therefore have

completely failed to respond to the summons and complaint), the

record does not support default judgment in this case. 

Plaintiff’s application for default judgment against the

Partnerships is DENIED.

V. ORDER TO SHOW CAUSE

Plaintiff’s underlying claims in regard to arbitrability of

its dispute with the Growers have already been rejected on their

merits in three similar cases. Plaintiff is therefore ORDERED TO

SHOW CAUSE on or before August 15, 2004 why this case should not

be dismissed.

VI. CONCLUSION

For the reasons set forth above:

1. Plaintiff’s motion to strike the Growers’ motion to set

aside default is GRANTED;

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2. The Growers’ motion to set aside default is GRANTED;

3. Plaintiff’s application for default judgment against the

Growers is DENIED;

4. Plaintiff’s application for default judgment against the

Partnerships is DENIED; and

5. Plaintiff is ORDERED TO SHOW CAUSE on or before August 15,

2004 why this case should not be dismissed.

SO ORDERED.

Dated: August 3, 2005 /s/ OLIVER W. WANGER

______________________________

 Oliver W. Wanger

UNITED STATES DISTRICT JUDGE

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