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Stenzel v. Metropolitan Life Insurance Co.

United States District Court, D. Montana, Great Falls Division

July 17, 2017

JAY STENZEL, Plaintiff,
v.
METROPOLITAN LIFE INSURANCE COMPANY and DOES 1 through 5, Defendants.

          ORDER

          John Johnston, United States Magistrate Judge

         I. Background

         Mr. Stenzel originally filed this action in Montana's Eight Judicial District, Cascade County, and, as Montana law requires, served Montana's Commissioner of Securities and Insurance (Commissioner) with a copy of the summons and complaint on January 23, 2017. (Doc. 20-1) The Commissioner sent a copy of the summons and complaint to Metropolitan Life Insurance Company's (Met Life) designated agent for service of process, CT Corporations Systems (CT Corp.), on January 25, 2017, via certified mail to the address Met Life provided to the Commissioner. (Id.) The summons and complaint were returned as undeliverable. (Id.) On or about February 24, 2017, the Commissioner sent the summons and complaint to CT Corp. at an address in Missoula, Montana. (Id.) CT Corp. received the summons and complaint on February 27, 2017. (Doc. 22 at 2)

         Met Life did not file an appearance in the state court action within 30 days of Mr. Stenzel serving the Commissioner. Therefore, on March 1, 2017, Mr. Stenzel requested the Cascade County Clerk of Court to enter default against Met Life. (Doc. 4-3 at 1) In response to this request, the Clerk of Court entered Met Life's default on March 1, 2017. (Id.)

         Met Life removed the case to the Great Falls Division of the District of Montana on March 22, 2017. (Doc. 1) Met Life then filed a Motion to Set Aside Default arguing the Court should set aside default because Met Life has a meritorious defense and its delay in responding to Mr. Stenzel's complaint did not cause him any prejudice. (Doc. 13) Mr. Stenzel filed a Motion to Remand arguing Met Life's Notice of Removal was untimely. (Doc. 19.) The parties fully briefed the motions, and the Court conducted a hearing on the motions on June 6, 2017.

         II. Standards

         A. Service and Removal

         Under Montana law, the Commissioner receives service of legal process on behalf of insurers conducting business in Montana. Mont. Code Ann. § 33-1-601(1). The Commissioner then forwards a copy of the summons and complaint to a person or entity the insurer designates to act as its agent for service of process. Mont. Code Ann. § 33-1-603(1). When the Commissioner forwards the summons and complaint to the insurer's agent, service is complete. Mont. Code Ann. § 33-1-603(3). A defendant insurer then has thirty days to respond. Id.

         28 U.S.C § 1446 governs the time for removal and provides that a notice of removal “shall be filed within 30 days after receipt by the defendant, through service of process or otherwise, a copy of the initial pleading.” While the Ninth Circuit has not determined whether service on a statutory agent, like the Commissioner, starts the time running on the 30 day removal period, district courts have held that the removal period does not begin to run until the defendant or its designated agent actually receives the summons and complaint. Pilot Trading Co. v. Hartford Ins. Group, 946 F.Supp. 834, 836 (D. Nev. 1996).

         B. Default

         Rule 55 of the Federal Rules of Civil Procedure states that if “a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Service of process on an insurer is complete when the Commissioner forwards a copy of the summons and complaint to the insurer. Montana Code Ann. § 33-1-603(3). The insurer then has thirty days to appear in the action. Id.

         The law disfavors default, and whenever possible, a case should be decided on the merits. Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). Thus, a court may set aside an entry of default for good cause. Fed R. Civ. P. 55(c). When determining whether good cause exist to set aside default, a court must look to three factors: (1) whether the defendant engaged in culpable conduct that led to default; (2) whether the defendant has a meritorious defense to the claims; and (3) whether setting aside default would prejudice the plaintiff. Falk, 739 F.2d at 463. When a state clerk of court enters default and the case is then properly removed to federal court, the federal court has jurisdiction to set aside the default. Edna H. Pagel, Inc. v. Teamsters Loc. Union 595, 667 F.2d 1275, 1278 (9th Cir. 1982).

         III. Analysis

         Met Life argues that (1) its Notice of Removal was timely because it filed the notice within thirty days of its designated agent actually receiving the summons and complaint (Doc. 22 at 2) and (2) the Court should set aside default because its conduct was not culpable, it has a meritorious defense to the claims, and its delay in responding to service did not cause Mr. Stenzel any prejudice. (Doc. 20 at 7-14.) Mr. Stenzel argues that (1) Met Life's Notice of Removal was not timely because it was filed more than thirty days after the Commissioner first mailed a copy of the summons and complaint to Met Life's designated agent for service (Doc. 20 at 7), and (2) the Court should not set aside default because Met Life's conduct was culpable in not providing ...


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