United States District Court, D. Utah
DECISION AND ORDER:
DENYING  MOTION FOR DEFAULT JUDGMENT;
GRANTING  MOTION TO INTERVENE; AND
GRANTING  MOTION TO TRANSFER RELATED
Nuffer United States District Judge.
order denies an insurer's motion for default against a
defunct insured, and allows claimants against the insurance
policy to have a voice in this case.
Starr Indemnity & Liability Company (“Starr”)
initiated this action seeking a declaratory judgment
regarding its insurance coverage obligations. Starr alleges
that certain liability insurance policies it issued to
defendants MonaVie, Inc. and MonaVie, LLC (collectively,
“MonaVie”) do not afford coverage for three
lawsuits against MonaVie tendered to Starr. The claimants in
two of the suits for which coverage is at issue in this case,
Andrew Harbut and Lisa Pontrelli (collectively, the
“MonaVie Claimants”), have moved to intervene in
this coverage action. Mr. Harbut's case proceeded in the
United States District Court for the Central District of
California until the court transferred the case to the
District of Utah, where it is now pending before another
judge. Mr. Harbut has filed a Motion to Transfer
Related Casein an effort to consolidate his case with
this one. Ms. Pontrelli's case proceeded in the United
States District Court for the District of New Jersey until it
was likewise transferred to the District of
Utah. In transferring Ms. Pontrelli's case,
the District of New Jersey specifically reasoned that this
coverage action by Starr potentially implicates Ms.
MonaVie is no longer participating in the case. MonaVie's
counsel was granted a motion to withdraw, which reported that
“the assets of [MonaVie] were foreclosed upon and
[MonaVie is] no longer in business.” When MonaVie
failed to appoint new counsel as ordered, default was entered
against MonaVie. Based on MonaVie's default, Starr has
moved for a default judgment. A default judgment would result
in a declaration that no liability insurance coverage is
available to pay the MonaVie Claimants. Such a
declaration would make little difference to defunct MonaVie,
the defaulting defendant. Rather, the parties with the most
to lose from a default judgment are the MonaVie Claimants,
whose potential recovery under the Starr policies would be
parties need answers to two general questions. First, does
Starr have a coverage obligation to MonaVie for the suits by
the MonaVie Claimants? Even if MonaVie will not concern
itself with this question, the MonaVie Claimants have a
potential interest in the Starr policies, and they are
entitled to a decision on the merits as to coverage.
Starr's Motion for Default Judgment is therefore DENIED.
The MonaVie Claimants' Motion to Intervene in the
coverage action is GRANTED.
is MonaVie liable to the MonaVie Claimants? This court is
best situated to resolve that question. Accordingly, Mr.
Harbut's Motion to Transfer Related Case is GRANTED. Ms.
Pontrelli's action, which is pending transfer,
is consolidated with this case sua sponte.
Judgment Is Denied.
on MonaVie's default, Starr filed its Motion for Default
Judgment. The MonaVie Claimants filed a response
to the Motion for Default Judgment. As nonparties, the
MonaVie Claimants sought leave to submit a proposed
opposition,  which has been considered in light of
the finding herein that the MonaVie Claimants are permitted
MonaVie Claimants argue that MonaVie's default should be
set aside. Good cause to set aside the default
against MonaVie under Rule 55(c) is not
apparent. MonaVie's own action, or inaction in
the case, gives the court no basis for reinstating MonaVie as
a defendant. However, the default against MonaVie need not be
set aside to deny a default judgment.
separates (a) entering a default from (b) entering a default
judgment. Under Rule 55(a), a defendant is
mandatorily subject to default where the defendant fails to
“plead or otherwise defend” the
claims. Under Rule 55(b), where the
plaintiff's claim is not for “a sum certain or a
sum that can be made certain by computation, ” the
plaintiff must apply to the court for a default
judgment. Here, Starr does not seek a certain or
calculable sum; rather, Starr's proposed default judgment
would declare its lack of a coverage obligation to MonaVie.
the circumstances, where a default judgment would decide the
potential interests of the MonaVie Claimant based on the
inaction of MonaVie, a default judgment would be improper.
“Default judgments, to be certain, are
disfavored.” Other federal courts have resisted
default judgment in coverage actions where an intervening
party has an interest in the coverage issues. In
Security Insurance Company of Hartford v.
Schipporeit, an insurer sought a default judgment as to
coverage when the defendant, the primary insured, failed to
make an appearance in the case. The district court found
that a default judgment would jeopardize the pressing, clear,
and obvious interest of an underlying claimant who stood to
benefit from the insurance coverage. The Seventh Circuit
affirmed the district court's decision allowing the
underlying claimant to intervene and denying a motion for
default judgment. The court of appeals observed that the
insurance company “wanted a quick, unopposed
adjudication that it had no obligation to defend or indemnify
[the primary insured], ” but the “district court
wisely allowed a more worthy opponent to get into and onto
case also deserves a worthy opponent. Starr's proposed
default judgment would establish that Starr's policies
provide no coverage for Mr. Harbut's action or Ms.
Pontrelli's action. Such a declaration would jeopardize
the MonaVie Claimants' potential interests without any
resistance. Rather than permit MonaVie's inaction to
determine the coverage issues based on, the Motion for
Default Judgment will be denied.
MonaVie Claimants Are Permitted to Intervene in the Coverage
same time frame when MonaVie defaulted in the coverage action
by failing to appoint new counsel when its prior counsel
withdrew, the MonaVie Claimants filed a Motion to
Intervene. Rule 24 provides for intervention of
right and permissive intervention into an action. The Tenth
Circuit “has stated that intervention is appropriate
where: 1) the motion is timely; 2) the movant has an interest
in the property at issue in the suit; 3) that interest may be
impaired absent intervention; and 4) the movant is not
adequately represented by existing
parties.” Each of these elements supports
intervention by the MonaVie Claimants. The MonaVie Claimants
sought to intervene before default was entered against
MonaVie, and within a week of discovering their interests in
the Starr policies were at risk in this case. The MonaVie
claimants have an interest in their potential recovery
against MonaVie and Starr's obligations to defend and
indemnify MonaVie. Indeed, both the District of New Jersey
and the Central District of California cited that
interest-the potential availability of insurance coverage-as
a reason for transferring the MonaVie Claimants' cases to
the District of Utah. MonaVie has demonstrated by
defaulting in this action that it will not defend its own
interests, which means that the MonaVie Claimants'
interest may be impaired absent intervention and that the
MonaVie Claimants are not adequately represented by the
intervention also does not unduly delay or prejudice the
parties' rights under Rule 24(c). Defendant
MonaVie has defaulted by failing to appear. And as the
Seventh Circuit observed, an insurer pursing a declaratory
relief against coverage, “can hardly be said to be
prejudiced by having to prove a lawsuit it chose to
initiate.” For these reasons, the Motion to
Intervene is granted.
MonaVie Claimants' Cases Are Transferred ...