Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_03-cv-06586/USCOURTS-caed-1_03-cv-06586-5/pdf.json

Parties Involved:
Himax Furniture Industry Corporation, Ltd
Defendant
Royal Specialty Underwriting, Inc.,
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ROYAL SPECIALTY UNDERWRITING, )

)

Plaintiff, )

v. )

)

HIMAX FURNITURE INDUSTRY )

CORPORATION, Ltd., )

)

Defendant. )

)

 )

CV F 03 6586 OWW SMS

FINDINGS AND RECOMMENDATIONS RE:

PLAINTIFF’S MOTION FOR DEFAULT

JUDGMENT (DOC. 27)

Plaintiff is proceeding with a civil action in this Court.

The matter has been referred to the Magistrate Judge pursuant to

28 U.S.C. § 636(b) and Local Rules 72-302(c)(1) and 72-303.

I. Background

Plaintiff Royal Speciality Underwriting, Inc., an insurer,

filed a complaint for indemnification on November 12, 2003,

against Defendant Himax Furniture Industry Corporation, Ltd. On

December 6, 2004, Plaintiff moved for entry of default,

submitting a memorandum of points and authorities and a

declaration in support thereof; on April 28, 2005, Plaintiff

filed a certificate of service, translated, with attachments. On

May 18, 2005, Plaintiff’s motion for entry of default was

granted, and on the same date the clerk entered the default of

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1

 On November 14, 2005, Mr. Gortinsky substituted out and Mr. Nielsen substituted in as Plaintiff’s

counsel.

2

 Some portion of the delay in the hearing of this motion has resulted from Plaintiff’s counsel’s failure to

file a substitution of attorneys and order in compliance with the Local Rules, and by extensions of time sought for the

submission of the supplemental brief. 

3

 Plaintiff’s counsel was notified by telephone on the morning of November 17, 2005 of the order vacating

the hearing.

2

Defendant Himax Furniture Industry Corporation, Ltd.

On June 29, 2005, Plaintiff filed a notice of motion and

motion for default judgment and declaration of Alex Gortinsky1

with exhibits in support thereof; on October 14, 2005, and again

on November 4, 2005, Plaintiff filed a supplemental brief.2

On November 17, 2005, the Court vacated the hearing on

Plaintiff’s motion for default judgment and deemed the matter

submitted on the basis of the papers submitted with respect to

the motion.3

II. Requirements for Entitlement to Default Judgment

A court has the discretion to enter a default judgment

against one who is not an infant, incompetent, or member of the

armed services where the claim is for an amount that is not

certain on the face of the claim and where 1) the defendant has

been served with the claim; 2) the defendant’s default has been

entered for failure to appear; 3) if the defendant has appeared

in the action, the defendant has been served with written notice

of the application for judgment at least three days before the

hearing on the application; and 4) the court has undertaken any

necessary and proper investigation or hearing in order to enter

judgment or carry it into effect. Fed. R. Civ. P. 55(b); Alan

Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th

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Cir. 1988). Factors that may be considered by courts in

exercising discretion as to the entry or setting aside of a

default judgment include the nature and extent of the delay,

Draper v. Coombs, 792 F.2d 915, 924-925 (9th Cir. 1986); the

possibility of prejudice to the plaintiff, Eitel v. McCool, 782

F.2d 1470, 1471-72 (9th Cir.1986); the merits of plaintiff's

substantive claim, id.; the sufficiency of the allegations in the

complaint to support judgment, Alan Neuman Productions, Inc., 862

F.2d at 1392; the amount in controversy, Eitel v. McCool, 782

F.2d at 1471-1472; the possibility of a dispute concerning

material facts, id.; whether the default was due to excusable

neglect, id.; and the strong policy underlying the Federal Rules

of Civil Procedure that favors decisions on the merits, id.

 A default judgment generally bars the defaulting party from

disputing the facts alleged in the complaint, but the defaulting

party may argue that the facts as alleged do not state a claim.

Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392.

Thus, well pleaded factual allegations, except as to damages, are

taken as true; however, necessary facts not contained in the

pleadings, and claims which are legally insufficient, are not

established by default. Cripps v. Life Ins. Co. of North America,

980 F.2d 1261, 1267 (9th Cir. 1992); TeleVideo Systems, Inc. v.

Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987).

A. Status of the Parties, Service, Notice,

 and Entry of Default

The Court takes judicial notice of its order granting

Plaintiff’s motion for entry of default, filed on May 18, 2005

(Doc. 25), in which the Court determined that Plaintiff had

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4 The Court may take judicial notice of court records. Fed. R. Evid.

201(b); United States v. Bernal-Obeso, 989 F.2d 331, 333 (9th Cir. 1993);

Valerio v. Boise Cascade Corp., 80 F.R.D. 626, 635 n. 1 (N.D. Cal. 1978),

aff’d, 645 F.2d 699 (9th Cir. 1981).

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proved that the service of the complaint and summons was in

conformity with the Hague Convention and was legally adequate

under Fed. R. Civ. P. 4(f) and (l).4 The Court has not been

informed of any fact that would change its conclusion regarding

the adequacy of service, and thus the Court confirms the adequacy

of Plaintiff’s proof of service on the Defendant entity. The

Court further notes that there is no indication that Defendant

answered within the pertinent time period permitted by the rules,

and thus the entry of Defendant’s default on the same date was

correct.

The Plaintiff’s motion for default judgment was not served

on Defendant. Although Fed. R. Civ. P. 55(b)(2) requires written

notice of an application for default judgment be served at least

three days prior to the hearing on the defaulting party, it

requires that such notice be given only to a party, or a

representative thereof, who has appeared in the action. An

appearance for the purpose of Rule 55 need not be a formal one

and may consist even of informal contacts made by the defaulting

party where the defaulting party demonstrates a clear purpose to

defend the suit. In re Roxford Foods v. Ford, 12 F.3d 875, 879-81 

(9th Cir. 1993) (holding in a declaratory relief action that

communications by a trustee in bankruptcy regarding an identical

claim in a related bankruptcy action to be sufficient to

demonstrate a clear intention to defend where time had been given

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to the trustee to retain counsel for representation on the

merits). Here, there was no formal appearance; further,

Plaintiff’s counsel declares that Defendant has not appeared in

this action. Thus, no notice was necessary.

Fed. R. Civ. P. 55(d) and 54(c) require that a judgment by

default shall not be different in kind from or exceed in amount

that prayed for in the demand for judgment. Plaintiff expressly

alleged in the complaint that Plaintiff sought damages that

included $125,000.00 paid by Plaintiff insurance company to the

injured party, Marilyn Beeler, in settlement of her action

against Plaintiff’s insured, plus attorney’s fees and costs

incurred in connection with the underlying tort action. (Complt.

at 3.) 

Because Plaintiff sought only $125,000.00 paid in the action

(Complt. at p. 3), the demand for $137,500.00 set forth in the

declaration of Gortinsky as the amount of the settlement exceeds

the demand of the complaint. Accordingly, with respect to the

amount paid in settlement (as distinct from other elements of

damage claimed), only $125,000.00 should be awarded. Fong v.

United States, 300 F.2d 400, 412-13 (9th Cir. 1962).

Plaintiff prayed for judgment that included costs incurred

and paid in defense of the claim brought by Beeler due to the

faulty manufacturing of the chair, as well as costs of the

present suit. (Complt. at 3.) It has been held that where a type

of damages is requested in the complaint in an amount to be

proved, but the amount was not specified, recovery in excess of

an amount stated is permitted. Henry v. Sneiders, 490 F.2d 315,

317 n. 2 (9th Cir. 1974), cert. denied Sneiders v. Henry, 419 U.S.

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1060 (1974). Thus, it appears that the prayer for costs provides

sufficient notice. 

In his declaration, Alex Gortinsky declares that Defendant

is not an infant, incompetent, or member of the armed forces.

(Decl. at 2.)

In summary, there is no defect with respect to notice,

status or interest of the parties, or presence of a member of the

armed forces, which would render entry of default judgment

inappropriate. Further, there is no indication that there would

be any material dispute as to facts, or that any other factor

warrants a trial on the merits in this action. Accordingly, the

entry of default judgment appears to be appropriate. 

B. Sufficiency of the Complaint

1) Jurisdiction

Plaintiff alleges that Plaintiff Royal Speciality

Underwriting, Inc., is a corporation incorporated in the state of

Georgia and has its headquarters and principal place of business

in North Carolina; Defendant Himax Furniture Industry

Corporation, Ltd., is a citizen of China with its principal place

of business in China; and the amount in controversy exceeds

$75,000.00. (Complt at 1.) Gortinsky declares that Defendant is a

foreign corporation doing business under the laws of China.

(Decl. at ¶ 5.)

These allegations are sufficient to establish subject matter

jurisdiction in this Court pursuant to 28 U.S.C. § 1332(a)(2),

which recognizes original jurisdiction in the district courts of

civil actions involving matters in controversy exceeding

$75,000.00 and between citizens of a state and citizens of

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subjects of a foreign state. A corporation created under the laws

of a foreign state is deemed to be a citizen or subject of the

foreign state. JPMorgan Chase Bank v. Traffic Stream (BVI)

Infrastructure Ltd., 536 U.S. 88, 91-92 (2002).

2. Indemnity

The complaint alleges that Plaintiff insured Numark

Industries, which operated and maintained a furniture

distribution business, under a general insurance liability

policy. Defendant Himax manufactured and supplied a defective

chair to the insured, which in turn distributed it to Office Max,

an office supply store located in Stanislaus County, which in

turn sold it to the County of Stanislaus Probation Department;

Marilyn Beeler, an employee of the Probation Department, was

injured by the chair when it collapsed, and she sued in the

California Superior Court, County of Stanislaus, where it was

determined that her injury was a direct result of Defendant

Himax’s defective manufacture of the chair. Beeler recovered

damages from Numark, the insured, based on Numark’s participation

in the marketing chain, and its strict liability for the injuries

sustained by Beeler, despite Numark’s not being negligent or

otherwise at fault; Plaintiff settled the action in good faith 

pursuant to an agreement with Beeler for the sum of $125,000.00,

which was reasonable in light of the injuries sustained.

Plaintiff also sustained expenses in connection with the

Stanislaus County action, including attorney’s fees and costs.

(Complt. at 1-3.)

The principle of subrogation applies in all cases in which

one person, not a volunteer, pays a debt for which another is

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primarily answerable and which, in equity and good conscience,

should have been discharged by the latter. Caito v. United

California Bank, 20 Cal.3d 694, 704 (1978); Fireman’s Fund Ins.

Co. v. Maryland Cas. Co. , 65 Cal.App.4th 1279, 1292 (1998).

Equitable subrogation is a right implied by law by virtue of the

nature of the contract of insurance, independent of a provision

in the contract itself, Offer v. Superio Court, 194 Cal. 114, 118

(1924); its purpose is to place the burden for a loss on the

party ultimately liable or responsible for it and by whom it

should have been discharged, and to relieve entirely the insurer

who indemnified the loss and who in equity was not primarily

liable therefor, Fireman’s Fund Ins. Co. v. Maryland Cas. Co. ,

65 Cal.App.4th at 1296. An insurer who has paid an insured loss

caused by a third party may pursue the insured’s rights and

remedies against that party. Employers Mutual Liability Insurance

Coa. v. Tutor-Saliba Corp., 17 Cal.4th 632, 639 (1998). A

supplier of a product who is without fault but who has become

strictly liable because of its mere presence in the chain of

distribution of a defective product has a right to indemnity from

the manufacturer, which is strictly liable. Ford Motor Co. v.

Robert J. Poeschl, 21 Cal.App.3d 694, 697-98 (1971). 

The essential elements of an insurer's cause of action for

equitable subrogation are as follows: 1) the insured suffered a

loss for which the defendant is liable, either as the wrongdoer

whose act or omission caused the loss or because the defendant is

legally responsible to the insured for the loss caused by the

wrongdoer; 2) the claimed loss was one for which the insurer was

not primarily liable; 3) the insurer has compensated the insured

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 Attachments to the declaration of Gortinsky demonstrate that the chair was defective due to a poor weld, a

manufacturing defect. (Ex. B.)

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in whole or in part for the same loss for which the defendant is

primarily liable; 4) the insurer has paid the claim of its

insured to protect its own interest and not as a volunteer; 5)

the insured has an existing, assignable cause of action against

the defendant which the insured could have asserted for its own

benefit had it not been compensated for its loss by the insurer;

6) the insurer has suffered damages caused by the act or omission

upon which the liability of the defendant depends; 7) justice

requires that the loss be entirely shifted from the insurer to

the defendant, whose equitable position is inferior to that of

the insurer; and 8) the insurer's damages are in a liquidated

sum, generally the amount paid to the insured. Fireman’s Fund

Ins. Co. v. Maryland Cas. Co. , 65 Cal.App.4th at 1292. 

Here, Plaintiff alleged the primary liability of Defendant

for the loss suffered by the party who successfully sued the

insured and the Plaintiff’s payment of the insured’s liability to

the injured party. It has further been alleged that the insured

was without fault, and that the liability towards the injured

party was based on the manufacturer’s strict liability. The facts

pleaded sufficiently stated a claim for equitable subrogation.5

C. Damages

Exhibit C to the declaration of Gortinsky reveals that the

insured settled the lawsuit against it by agreeing to pay to the

injured party, Marilyn Beeler, $137,500.00, but $12,000.00 was

paid to the County of Stanislaus, which had intervened in the

action. Thus, the insured was obligated to pay $125,000.00 to the

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injured party, the amount demanded in the complaint.

Plaintiff also claims $12,350.20 in costs in the underlying

products liability action as well as costs of $1,183.25 in the

present action. Costs were prayed for in the complaint.

As to the costs and fees paid in the underlying action in

which the insured was sued by the injured party, Plaintiff argues

that a person who through the tort of another has been required

to act in the protection of his interests by bringing or

defending an action against a third person is entitled to recover

compensation for the reasonably necessary loss of time,

attorney's fees, and other expenditures thereby suffered or

incurred. Prentice v. North American Title Guaranty Corp.,

Alameda Division, 59 Cal. 2d 618, 620 (1963) (holding that where

a vendor of land was required by the negligence of a third party

to bring a quiet title suit to protect its interests, the vendor

was entitled to recover from the third party the expenditures and

attorney’s fees paid in the quiet title suit). Gortinsky’s

declaration states that the costs and expenditures of the state

court action, consisting of court fees and costs; expenditures

for discovery, subpoenas, medication, experts, translation; and

miscellaneous expenses of photocopying, mailing, and telephone

were incurred, and he has submitted copies of the invoices

supporting the costs requests. (At 5, and Ex. E.)

The Court finds that costs in the products liability action

of $12,350.20 should be awarded.

As to costs in this action, costs recoverable under Fed. R.

Civ. P. 54(d) include those enumerated in 28 U.S.C. § 1920 and

other applicable statutes. Local Rule 54-292(a). Federal courts

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are limited to assessing only those costs enumerated under 28

U.S.C. § 1920, but courts are free to interpret the meaning of

costs within section 1920. Haagen-Daz v. Double Rainbow Gourmet

Ice Creams, 920 F.2d 587, 588 (9th Cir. 1990) (citing Crawford

Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437, 441-42 (1987)). 

Plaintiff’s costs of filing fees and fees for service of

process, which include the translation fees of the service

documents required for proof of service in this Court, are

allowable pursuant to 28 U.S.C. §§ 1920(a), 1921; Local Rule 54-

292(f) (fees of the clerk and marshal). Private process servers’

fees are recoverable. Afflex Corp. v. Underwriters Laboratories,

Inc., 914 F.2d 175, 178 (9th Cir. 1990).

However, with respect to claimed costs of photocopying,

Title 28 U.S.C. § 1920(4) and Local Rule 54-292(f) provide that

items taxable as costs include fees for exemplification and

copies of papers “necessarily obtained for use in the case.” It

is not required that the document be introduced at a hearing or

trial or otherwise into the record. Haagen-Daz v. Double Rainbow

Gourmet Ice Creams, 920 F.2d 587, 588 (9th Cir. 1990). Recovery is

allowed for costs for copies reasonably and necessarily procured

in connection with discovery and use in presenting arguments and

evidence to the Court, but not for in-house copying made for the

convenience of counsel. Frederick v. City of Portland, 162 F.R.D.

139, 144 (D. OR 1995). The costs of printing pleadings and other

papers required to be served on opposing parties and the Court

are recoverable under § 1920(3) (“fees and disbursements for

printing and witnesses”). McMillan v. United States, 891 F.Supp.

408, 415 (WD MI 1995).

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Plaintiff does not indicate the purpose or nature of the

copying costs of $2.13 claimed. Thus, that portion of the costs

claimed has not been shown to have been necessarily incurred and

should be excluded.

Accordingly, the Court finds that Plaintiff should be

awarded $1181.12 in costs in this action.

III. Recommendation

Accordingly, it IS RECOMMENDED that:

1. Plaintiff’s motion for entry of a default judgment BE

GRANTED in part; and

2. The Clerk BE DIRECTED to enter judgment in favor of

Plaintiff Royal Specialty Underwriting, Inc., and against

Defendant Himax Furniture Industry Corporation, Ltd., for

damages, consisting of $125,000.00 spent in settlement of the

state court action and $12,350.20 in expenses in the state

action; and for costs in this action in the amount of $1181.12. 

This report and recommendation is submitted to the United

States District Court Judge assigned to the case, pursuant to the

provisions of 28 U.S.C. § 636 (b)(1)(B) and Rule 72-304 of the

Local Rules of Practice for the United States District Court,

Eastern District of California. Within thirty (30) days after

being served with a copy, any party may file written objections

with the Court and serve a copy on all parties. Such a document

should be captioned “Objections to Magistrate Judge’s Findings

and Recommendations.” Replies to the objections shall be served

and filed within ten (10) court days (plus three days if served

by mail) after service of the objections. The Court will then

review the Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636

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(b)(1)(C). The parties are advised that 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).

IT IS SO ORDERED.

Dated: November 17, 2005 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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