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Pennsylvania National Mutual Casualty Insurance Co. v. Y&J Construction, Inc.

United States District Court, E.D. Virginia, Alexandria Division

September 1, 2017



          John F. Anderson, United States Magistrate Judge

         This matter is before the court on plaintiffs Motion for Default Judgment against Y&J Construction. Inc, (Docket no. 31) ("motion for default judgment"). In this action. Pennsylvania National Mutual Casualty Insurance Company ("plaintiff or "Penn National") seeks a default judgment against defendant Y&J Construction, Inc. ("defendant" or "Y&J Construction") in the amount of $3, 749, 315.63. Pursuant to 28 U.S.C. § 636(b)(1)(C), the undersigned magistrate judge is filing with the court his proposed findings of fact and recommendations, a copy of which will be provided to all interested parties.

         Procedural Background

         On October 2. 2015. plaintiff filed the complaint in this action alleging negligence, breach of contract, and seeking indemnification for a payment made under an insurance policy. (Docket no. 1) ("CompL"). Upon the filing of the complaint, a summons was issued for service on Y&J Construction at 7769 Water Street, Fulton. Maryland 20759. (Docket no. 2). Y&J Construction was served with a copy of the summons and the complaint and its exhibits on December 9, 2015 through personal service on its registered agent, Youngjae Jeon. (Docket no. 10). In accordance with Fed.R.Civ.P. 12(a), defendant's responsive pleading was due on December 30, 2015, twenty-one days after service of process. Defendant timely filed an answer to the complaint on December 22, 2015. (Docket no. 7).

         The District Judge entered an Order on February 2, 2016, directing discovery to close in this matter by May 13, 2016. (Docket no. 11). On March 2, 2016, defendant filed a motion to stay the proceedings pending resolution of a related declaratory judgment action. (Docket no. 13). That action was brought by Essex Insurance Company, which sought a declaratory judgment that no coverage was available to Y&J Construction under its insurance policy. See Essex Ins. Co. v. Y&J Construction, Inc., e/a/., No. 1:15-cv-1597-TSE-TCB. The District Judge granted defendant's motion and entered a stay of these proceedings pending the conclusion of the related declaratory judgment action on March 11, 2016. (Docket no. 17).

         On February 7, 2017, plaintiff filed a motion to vacate the stay due to the resolution of the related action. (Docket no. 18). In that matter, the court entered an order finding that Essex Insurance Company had no obligation (1) to defend Y&J Construction in this matter, (2) to indemnify Y&J Construction for any judgment, settlement, or recovery in this action, and (3) to indemnify Penn National with respect to any subrogation rights it possesses as a result of Perm National's payment on behalf of its insured resulting from the fire caused by Y&J Construction. (Docket no. 20 ¶ 7). On February 22, 2017, defendant's counsel filed a motion to withdraw as counsel for Y&J Construction, explaining that they had been retained by Essex Insurance Company under the policy at issue in the declaratory judgment action. (Docket no. 20). On April 6, 2017, the District Judge entered an order granting the motion to vacate the stay and defendant's counsel's motion to withdraw. (Docket no. 22). The District Judge advised defendant that as a corporate entity, it must be represented by counsel in federal court proceedings and directed defendant to secure replacement counsel or face default judgment. (Id). The District Judge specified that "[i]f new counsel for Defendant does not enter an appearance in this case within twenty-one (21) days of the entry of this order, Plaintiff shall immediately obtain the entry of default from the Clerk pursuant to Federal Rule of Civil Procedure 55(a)." (Id. at 2).

         Over twenty-one days have passed since the District Judge's order, and new counsel for defendant has not yet appeared in this action. Accordingly, plaintiff filed a motion for entry of default with an incorporated Roseboro notice on May 16, 2017. (Docket no. 24). On May 30, 2017, plaintiff noticed the motion for a hearing before the undersigned on June 16, 2017. (Docket no. 27). The motion for entry of default and notice of hearing were mailed to defendant at 7769 Water Street in Fulton, Maryland 20759 on the days they were filed with the court. (Docket nos. 24, 27). On June 16, 2017, counsel for the plaintiff appeared at the hearing before the undersigned and no one appeared on behalf of the defendant. On June 16, 2017, the Clerk of Court entered default in accordance with Fed.R.Civ.P. 55(a). (Docket no. 30). On August 3, 2017, plaintiff filed this motion for default judgment along with a supporting memorandum and a notice setting a hearing for September 1, 2017. (Docket nos. 31-33).

         Proposed Findings and Recommendations

         Rule 55 of the Federal Rules of Civil Procedure provides for the entry of a default judgment when "a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend." Fed.R.Civ.P. 55(a). Based on defendant's failure to obtain new counsel to represent it in this action as ordered by the District Judge, the Clerk of Court has entered a default as to defendant. (Docket no. 30).

         A defendant in default admits the factual allegations in the complaint. See Fed. R. Civ. P. 8(b)(6) ("An allegation-other than one relating to the amount of damages-is admitted if a responsive pleading is required and the allegation is not denied."); see also GlobalSantaFe Corp. v., 250 F.Supp.2d 610, 612 n.3 (E.D. Va. 2003) ("Upon default, facts alleged in the complaint are deemed admitted and the appropriate inquiry is whether the facts as alleged state a claim."). Rule 55(b)(2) of the Federal Rules of Civil Procedure provides that a court may conduct a hearing to determine the amount of damages, establish the truth of any allegation by evidence, or investigate any other matter.

         Jurisdiction and Venue

         A court must have both subject matter and personal jurisdiction over a defaulting party before it can render a default judgment. Plaintiff alleges that this matter is properly brought in this court under 28 U.S.C. § 1332 based on complete diversity of citizenship and an appropriate amount in controversy. (Compl. ¶ 7).

         Plaintiff is a Pennsylvania corporation with its principal place of business in Harrisburg, Pennsylvania. (Compl. ¶ 1). Defendant is a Maryland corporation with its principal place of business in Fulton, Maryland. (Compl. ¶ 5). Plaintiffs complaint also seeks a judgment in excess of $75, 000. (Compl. ¶ 7). In its answer, defendant did not contest these allegations, but instead stated that it was without full and complete information to admit or deny these allegations. (Docket no. 7 ¶ 2). Given that these allegations are uncontested, it appears that this court has jurisdiction over the dispute pursuant to 28 U.S.C. § 1332.

         This court also has personal jurisdiction over defendant because Virginia's long-arm statute authorizes the exercise of jurisdiction and defendant satisfies the "minimum contacts" test under the Due Process Clause of the Fourteenth Amendment. See CFA Inst. v. Inst, of Chartered Fin. Analysts of India, 551 F.3d 285, 292 (4th Cir. 2009). Specifically, defendant has transacted business within Virginia and was transacting business in Virginia at the time of the incident giving rise to the complaint. (Compl. ¶ 6). Moreover, defendant did not object to personal jurisdiction in its answer, so has waived any objection. Fed.R.Civ.P. 12(h)(B)(ii). Venue is proper in this court pursuant to 28 U.S.C. § 1391(b)(2) because a substantial part of the events or omissions giving rise to the claims occurred in the Eastern District of Virginia. (Compl. ¶ 8).


         Pursuant to Fed.R.Civ.P. 4(h), a corporation may be served in a judicial district of the United States in the manner prescribed in Rule 4(e)(1) for serving an individual or by delivering a copy of the summons and complaint to an officer, managing, or general agent, or any other agent authorized by law to receive service of process.

         The summons issued on October 2, 2015 (Docket no. 2) was returned executed on December 29, 2015 (Docket no. 10) with an affidavit of service that indicates that on December 9, 2015, a process server personally served Youngjae Jeon, Registered Agent of Y&J Construction, Inc., at 7769 Water Street, Fulton, Maryland 20759, with a copy of the summons, complaint, and attached exhibits (Docket no. 10 at 1). In response to this service, initial counsel made an ...

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