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Maxum Indemnity Company v. Jerry Westlund

May 11, 2012

MAXUM INDEMNITY COMPANY, PLAINTIFF,
v.
JERRY WESTLUND, SUED AS OTHER CHARLES G. WESTLUND, S.J.C. ILLINOIS, LLC, D/B/A THE PONY, ROBERT G. WADE, AND TIMOTHY B. STEMPEL, DEFENDANTS.



The opinion of the court was delivered by: Stiehl, District Judge:

MEMORANDUM & ORDER

Before the Court is plaintiff Maxum Indemnity Company's motion for default judgment under Federal Rule of Civil Procedure 55(b) (Doc. 21). Plaintiff commenced this action against defendants Jerry Westlund, Robert G. Wade, Timothy B. Stempel, and S.J.C. Illinois, LLC seeking a declaratory judgment that plaintiff is not be required to defend or indemnify its insureds, Westlund and S.J.C., in two underlying state-court actions. S.J.C. was properly served, but has failed to plead or otherwise defend in response to the complaint. Plaintiff has secured the clerk's entry of default under Federal Rule of Civil Procedure 55(a), and now seeks default judgment against S.J.C. S.J.C has not responded, and the time in which to do so has passed.

I.BACKGROUND

This action arises from two separate state lawsuits, Wade v. Westlund, et. al., No. 11 L 1, in the Circuit Court of the First Judicial Circuit, Alexander County, Illinois, and Stempel v. Al- drich, et. al., No. 10 L 660 in the Circuit Court of the Twentieth Judicial Circuit, St. Clair County, Illinois. Plaintiff's motion for default judgment here pertains only to the Stempel lawsuit.

One evening, Timothy Stempel and Zachary Aldrich were spending time in a bar called The Pony and in another called The Hush Puppy Bar & Grill. Aldrich got drunk and attacked Stempel with a beer bottle, causing injuries to Stempel's face and nerves (Doc. 2, Ex. 3, ¶¶ 6, 7). Stempel sued, among others, Aldrich; S.J.C. Illinois, LLC (doing business as The Pony); and S.J.C's owner, Charles Westlund. Count I of Stempel's complaint alleges that the defendants violated the Illinois Liquor Control Act, 235 ILCS 5/1-1 et seq., for serving Aldrich when he was an "obviously intoxicated patron of their establishment" (id. at ¶ 10). Count II is a battery claim alleging that Aldrich beat Stempel and struck him multiple times in the face (id. at ¶ 13).

Westlund and S.J.C. have sought coverage for the claims against them under a commercial general-liability insurance policy issued to them by the plaintiff here, Maxum Indemnity Company. The insurance policy contains a liquor exclusion and an assault-or-battery exclusion. Based on those exclusions, plaintiff seeks a declaratory judgment here, under 28 U.S.C. §§ 2201--02, that it need not defend or indemnify Westlund in the Wade lawsuit and need not de-fend or indemnify either Westlund or S.J.C. in the Stempel lawsuit.

After plaintiff filed its complaint here, S.J.C was served through its agent Doris Quick. But S.J.C failed to plead or otherwise defend in response to the complaint. Plaintiff then filed a motion for entry of default against S.J.C. (Doc. 14), which the Clerk of Court has entered (Doc. 15). Plaintiff now moves for default judgment, asking the Court to issue the declaratory judgment that plaintiff need not defend or indemnify S.J.C in the Stempel lawsuit.

II.ANALYSIS

A. Jurisdiction

The Court has an independent duty to ensure it has subject-matter jurisdiction and, of course, it must have jurisdiction to render a default judgment against S.J.C. See Swaime v. Mol- tan Co., 73 F.3d 711, 716 (7th Cir. 1996) (noting that entry of default judgment is a per se abuse of discretion if the district court lacked jurisdiction).

Plaintiff alleges that jurisdiction is proper under 28 U.S.C. § 1332. Plaintiff is a Delaware corporation with its principal place of business in Georgia. Westlund is a citizen of California.

S.J.C. is an Illinois limited liability company, and plaintiff states, upon information and belief, that Westlund is the sole member of S.J.C., making S.J.C. a citizen of California as well. Wade is a citizen of Missouri. Stempel is a citizen of Illinois. As to the amount in controversy, the limit of the insurance policy in the Wade lawsuit and in the Stempel lawsuit is $1,000,000. Plaintiff believes its defense costs are likely to exceed $75,000 in each state lawsuit (including discovery, settlement negotiations, trial preparation, trial, and appeal). Further, plaintiff believes the total damages sought in each lawsuit are likely to exceed $75,000. Wade suffered broken ribs, a punctured lung, pneumonia, pain, disfigurement, and mental anguish. He also seeks punitive damages. Stempel suffered severe and permanent injuries to his face and nerves. He underwent surgery and has permanent scars. He seeks to recover lost wages and future lost wages, as well as dam-ages for pain and suffering.

The Declaratory Judgment Act, 28 U.S.C. §§ 2201--02, does not itself provide the district courts with subject-matter jurisdiction. E.g., Nationwide Ins. v. Zavalis, 52 F.3d 689, 692 (7th Cir. 1995). Some other basis must exist. Here it is diversity, and the Court is satisfied that the facts outlined above establish the complete diversity of the parties and that the amount in controversy is likely to exceed $75,000. See 28 U.S.C. § 1332(a)(1).

Yet the Declaratory Judgment Act expressly gives courts discretion whether to grant relief: "In a case of actual controversy within its jurisdiction . any court of the United States . may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." § 2201(a) (emphasis added); accord Med. Assurance Co., Inc. v. Hellman, 610 F.3d 371, 378 (7th Cir. 2010); Zavalis, 52 F.3d at 692. District courts have substantial discretion whether to dismiss or stay claims seeking declaratory re- lief under what is known as the Wilton/Brillhart abstention doctrine. R.R. Street & Co., Inc. v. Vulcan Materials ...


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