Opinion
23-cv-05140-JCS
07-15-2024
OPERATING ENGINEERS HEALTH AND WELFARE TRUST FUND, et al., Plaintiffs, v. PACIFIC COAST IRON, INC., et al., Defendants.
REPORT & RECOMMENDATION RE MOTION FOR DEFAULT JUDGMENT RE: DKT. NO. 19
JOSEPH C. SPERO United States Magistrate Judge.
I. INTRODUCTION
Plaintiffs-several union benefit trust funds and their trustees- assert claims against Defendants Pacific Coast Iron, Inc. (“Pacific Coast Iron”) and Adam Murray, under the Employee Retirement Income Security Act (“ERISA”) related to Defendants' late and unpaid fringe benefit contributions. Defendants failed to appear or respond to the Complaint and the Clerk entered their default on December 19, 2023. Dkt. no. 13. Presently before the Court is Plaintiffs' Motion for Default Judgment (“Motion”). The undersigned magistrate judge held a hearing on the Motion on June 28, 2024 and Plaintiffs filed supplemental materials in response to the Court's request on July 12, 2024. For the reasons discussed below, the undersigned recommends that the Motion be GRANTED in part and DENIED in part.
The trust fund plaintiffs (collectively, “the Trust Funds”) are: Operating Engineers' Health and Welfare Trust Fund for Northern California (“Health Fund”); Pension Trust Fund for Operating Engineers (“Pension Fund”); Pensioned Operating Engineers' Health And Welfare Trust Fund (“Pensioned Health Fund”); Operating Engineers and Participating Employers Pre-Apprentice, Apprentice and Journeymen Affirmative Action Training Fund (“Affirmative Action Training Fund”); Operating Engineers Local Union No. 3 Vacation, Holiday and Sick Pay Trust Fund (“Vacation Fund”); and Operating Engineers Local 3 Heavy And Highway Trust Fund. See Compl. (dkt. 1) at 2.
Because Defendants have not appeared in the case or consented to the jurisdiction of a magistrate judge under 28 U.S.C. § 636(c), this case will be reassigned to a United States district judge for all further proceedings, including action on the recommendations of this report. Any party may file objections to these recommendations no later than fourteen days after being served with a copy of this report. As stated in the conclusion of this report, Plaintiffs are instructed to serve a copy of this report on Defendants and file proof of service to that effect.
II. BACKGROUND
A. Factual Background
On December 1, 2022, Defendant Adam Murray on behalf of Pacific Coast Iron entered into a Collective Bargaining Agreement entitled “Independent Northern California Construction Agreement” (the “Independent Agreement”) with the Operating Engineers Local No. 3 of the International Union of Operating Engineers, AFL-CIO (the “Union”). Compl. ¶ 10; Brown Decl. ¶ 3 & Ex. A (Independent Agreement). The Independent Agreement incorporates the current Master Agreement between the Union and the United Contractors, Associated General Contractors of California, Inc., Industrial Contractors UMIC, Inc., and Northern Alliance of Engineering Contractors. Compl. ¶ 10; Brown Decl. ¶¶ 4-5 & Ex. B (2020-2023 Master Agreement); id., Ex. C (2023-2026 Master Agreement) (collectively, “Master Agreements”). The Master Agreements, in turn, incorporate the terms of the Trust Agreements establishing the Trust Funds (“Trust Agreements”). Compl. ¶ 10; Brown Decl. ¶ 7 & Ex. B, Section 12.01.03; id., Ex. C, Section 12.01.03.
The Master Agreements and the Trust Agreements require Pacific Coast Iron to make fringe benefit contributions to the Trust Funds based on the hours worked by Defendants' employees and enumerate the procedures if they fail to do so. Compl. ¶ 11; Brown Decl., Ex. B (2020-2023 Master Agreement), Section 12.00.00 - 12.14.00; id., Ex. C (2023 - 2026 Master Agreement), Section 12.00.00 - 12.14.00; id., Ex. D (Pension Trust Fund for Operating Engineers Trust Agreement), Seventeenth Amendment to the Trust Agreement; Do Supp. Decl. ¶ 3 & Exs. A-E (remaining Trust Agreement excerpts with similar provisions). Under these agreements, fringe benefit contributions are due on the fifteenth day of the month following the month in which hours were worked and are considered delinquent if not received by the twenty-fifth (25th) day of that month. Compl. ¶ 12; Brown Decl., Ex. B (2020-2023 Master Agreement), Section 12.01.02; id., Ex. C (2023 - 2026 Master Agreement), Section 12.01.02. Liquidated damages in the amount of ten percent (10%) are imposed for each delinquent contribution, but in the amount of twenty percent (20%) for each delinquent contribution that is the subject of litigation. Compl. ¶ 12; Brown Decl., Ex. B (2020-2023 Master Agreement), Section 12.13.00-12.13.01; id., Ex. C (2023 - 2026 Master Agreement), Section 12.13.00-12.13.01. In addition, the agreements provide that interest shall accrue on delinquent contributions at the rate of ten percent from the date they become delinquent, which is the twenty-sixth (26th) day of the month in which payment was due, until paid in full. Compl. ¶ 12; Brown Decl., Ex. B (2020-2023 Master Agreement), Section 12.13.02; id., Ex. C (2023 - 2026 Master Agreement), Section 12.13.02.
Paragraph 12 of the Independent Agreement states that if the employer is a corporation, its principal shareholder(s) will “personally guarantee all payments of wages and fringe benefits, including fringe benefit contributions, liquidated damages, interest and collection costs, including, but not limited to, attorney's fees and auditor/accountant fees.” Brown Decl., Ex. A (Independent Agreement), Section One, Paragraph 12. The Independent Agreement names “Pacific Coast Iron” in the space for “Individual Employer/Company Name” at the top of the agreement; the signature line at the bottom of the agreement, for “Individual Employer's Name and Title” carries the signature “Adam Murray/President.” In the Complaint, Plaintiffs allege that “[u]nder the terms of the Independent Agreement, Defendant Adam Murray personally guaranteed all amounts claimed herein.” Compl. ¶ 10. The Complaint alleges that Pacific Coast Iron is a corporation, Compl. ¶ 3, but does not allege any specific facts as to whether Adam Murray is a principal shareholder of Pacific Coast Iron.
In the Complaint, Plaintiffs assert a single claim, for delinquent contributions, interest, liquidated damages, attorneys' fees and costs under ERISA, 29 U.S.C. § 1145, against both defendants.
B. The Motion
In the Motion, Plaintiffs ask the Court to enter default judgment against all Defendants and award the following relief: 1) an award of unpaid contributions ($11,821.10), liquidated damages on unpaid and late paid contributions ($16,935.65) and interest through March 1, 2024 at a rate of ten percent ($727.02) for the months of May 2023, July 2023, August 2023, October 2023, November 2023, December 2023, January 2024 and March 2024; 2) liquidated damages on late-paid June 2023 contributions ($1,321.99) that were paid prior to litigation, at a rate of ten percent; 3) attorneys' fees incurred between August 8, 2023 and March 31, 2024 ($9,408.50); and 4) costs incurred during the same period ($748.97). Plaintiffs further request that the Court order that interest shall continue to accrue at a rate of ten percent per annum on unpaid contributions ($11,821.10) from May 7, 2024, until paid, and at post judgment interest rates on the balance of the judgment.
III. ANALYSIS
A. Legal Standards
After default has been entered against a party, a district court may grant an application for default judgment in its discretion. See Fed.R.Civ.P. 55(b)(2). If the court is satisfied that jurisdiction is proper and that service of process upon the defendant was adequate, it then considers several factors in determining whether to grant default judgment:
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In making its decision, the court takes all factual allegations in the complaint, except those relating to damages, as true. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (citing Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)).
B. Jurisdiction and Service of Process
As a preliminary matter, a court considering a motion for default judgment must determine whether it has both subject matter jurisdiction and personal jurisdiction, and dismiss sua sponte if it does not. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). The Court has “federal question” subject matter jurisdiction because Plaintiffs' claims “aris[e] under the . . . laws . . . of the United States,” specifically, ERISA. See 28 U.S.C. § 1331. The Court further finds that service on all defendants was adequate.
Pursuant to Rule 4 of the Federal Rules of Civil Procedure, an individual or a corporation may be served pursuant to the law of the state in which the district court is located. Fed. R.Civ. P. 4(e)(1) & (h)(1)(A). Sections 415.10 and 415.20(a) of the California Code of Civil Procedure provide for service on a corporation through personal service on its registered agent or on a person apparently in charge at the agent's address. In the latter scenario, a copy of the complaint and summons must also be sent by first class mail, with service effected ten days after mailing. Id. Here, Plaintiffs have supplied a proof of service reflecting that on October 16, 2023, Adam Murray, Agent for Service of Process for party Pacific Coast Iron, was served by delivering a copy of the complaint to an individual who appeared to be in charge at the address listed for the corporation with the California Secretary of State (520 Truck Street, Placerville, CA 95667) and mailing the complaint and summons to the same address. Dkt. no. 8 (proof of service for Pacific Coast Iron); Do Decl., ¶ 5 & Ex. A (Business Search listing address for Pacific Coast Iron). Therefore, the Court finds that Pacific Coast Iron was properly served.
The proof of service for service on Murray as an individual indicates that Murray was served on October 16, 2023 by leaving a copy of the complaint at a different address, 7046 Ryan Ranch Road, El Dorado Hills, CA 95630, with a “Jane Doe” who appeared to be approximately 35 years old, and then mailing the complaint to the same address. Dkt. no. 8. The process server checked the box indicating that a “Company” was being served and that the complaint was left with “a Person in charge at least 18 years of age apparently in charge of the office or usual place of business of the person served.” Id. The supplemental declaration of counsel, however, states that Plaintiffs believe this address is Murray's dwelling. Do Supp. Decl. ¶¶ 9-10. According to Plaintiffs' counsel, his office obtained this address “in a matter involving a separate company purportedly owned by Mr. Murray.” Id. ¶ 10. Plaintiffs' counsel further state that “[d]uring the lifetime of this lawsuit, [his] office has communicated with two separate attorneys who asserted that they represented Mr. Murray, as well as Mr. Murray himself, to attempt to resolve this dispute” and that “[his] office has never been informed that either the 520 Truck Street or 7046 Ryan Ranch Road address were invalid, or that service on either Defendant could be disputed.” Id. ¶ 9.
California law permits substitute service on an individual by “leaving a copy of the summons and complaint at the person's dwelling house . . . in the presence of a competent member of the household . . ., at least 18 years of age . . . and by thereafter mailing a copy of the summons and of the complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint were left.” Cal. Civ. Proc. Code § 415.20(b). Although the process server checked the wrong box on the proof of service, the evidence in the record shows that the complaint was properly served on Murray at his dwelling under section 415.20(b).
C. Eitel Factors
Several of the Eitel factors weigh in favor of granting default judgment simply because Defendants have not appeared in this action. As Defendants have failed to respond to the complaint or otherwise appear in this action, Plaintiffs will be left without a remedy, and therefore prejudiced, if default judgment is not granted. The sum of money is not so high as to weigh against granting judgment to the extent that damages are supported by evidence, an issue discussed separately below. Defendants were properly served and there is no indication that their default is due to excusable neglect. To the contrary, Plaintiffs have supplied a declaration by Plaintiffs' counsel that two demand letters were sent to Pacific Coast Iron prior to the initiation of litigation against them. See Do Decl. ¶¶ 6-7 & Exs. B, C. In addition, Plaintiffs' counsel states in his supplemental declaration that Defendants contacted his office to try to resolve the dispute. Do Supp. Decl. ¶ 9. Furthermore, because Defendants have failed to respond to this action, no material facts in the record justify denying Plaintiffs' request for default judgment. Finally, while there is a strong public policy favoring the resolution of disputes on the merits, that is not possible in this case because Defendants have failed to appear to defend the case, and there is no indication that they intend to do so.
The remaining factors, “the merits of plaintiff's substantive claim” and “the sufficiency of the complaint,” are intertwined where, as here, the case has not advanced beyond the pleading stage. Those factors also favor Plaintiffs' request for entry of default judgment as to Pacific Coast Iron. They do not, however, support entry of default judgment as to Adam Murray as an individual.
There is no doubt that ERISA authorizes the type of recovery Plaintiffs seek against an “employer” as that term is defined under ERISA. See 29 U.S.C. § 1002(5) (“The term ‘employer' means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity”); see also 29 U.S.C. § 1132. Furthermore, Plaintiffs alleged in the Complaint that both defendants are “employers” under this provision. Complaint ¶ 3. However, ERISA applies only to an “employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement [.]” 29 U.S.C. § 1145 (emphasis added). Plaintiffs have adequately alleged that Pacific Coast Iron is bound by the Master Agreements, and produced evidence of the same; therefore Plaintiffs state viable claims under Section 1145 as to that defendant. On the other hand, neither the allegations in the Complaint nor the evidence supplied by Plaintiffs establishes that Murray can be held individually liable under the Independent Agreement and the Master Agreements.
In the Complaint, Plaintiffs make the conclusory allegation that “[u]nder the terms of the Independent Agreement, Defendant Adam Murray personally guaranteed all amounts claimed herein.” Compl. ¶ 10. On default, however, only facts are deemed to be true, not legal conclusions. Thus, this allegation is insufficient to establish that Murray is individually liable merely by virtue of the fact that he signed the Independent Agreement. Furthermore, the language cited by Plaintiffs in the Motion, giving rise to individual liability on the part of a corporate employer's “principal shareholder,” see Motion at 2, does not apply because Plaintiffs have not specifically alleged that Murray is a principal shareholder of Pacific Coast Iron or offered any evidence establishing that fact. Therefore, the Court concludes that Plaintiffs' request for default judgment should be granted as to Pacific Coast Iron and denied as to Murray.
D. Relief Sought
1. Damages
a. Unpaid Contributions
Plaintiffs seek an award of unpaid contributions in the amount of $11,821.10 for the months of May 2023, July 2023, August 2023, October 2023, November 2023, December 2023, January 2024 and March 2024. Brown Decl. ¶¶ 13-16. Plaintiffs have adequately documented these amounts. Do Supp. Decl., Ex. F (contribution reports). Therefore, it is recommended that this amount be awarded in full.
b. Liquidated Damages
Plaintiffs seek $16,935.65 in liquidated damages for the months listed above, as well as an additional $l,321.99 in liquidated damages for the late-paid June 2023 contribution, paid before Plaintiffs initiated this action. Brown Decl. ¶¶ 13-16. As to the former, Plaintiffs have provided evidence that the Master Agreements set liquidated damages at twenty percent of the late contribution, as discussed above. They have also supplied a declaration establishing the underlying amounts of the late contributions. Based on this evidence, the Court recommends that the $16,935.65 requested by Plaintiffs for liquidated damages on delinquent contributions that were unpaid at the time litigation was initiated should be awarded in full.
The Court also finds that Plaintiffs are entitled to the $l,321.99 they seek in liquidated damages for the late-paid June 2023 contribution. It is unclear whether these are authorized under ERISA because these amounts became due and were paid before the lawsuit was filed, on October 6, 2023. See Idaho Plumbers & Pipefitters Health & Welfare Fund v. United Mech. Contractors, Inc., 875 F.2d 212, 216 (9th Cir. 1989). The undersigned has concluded, however, that liquidated damages may be available as a matter of contract on such late payments. See Bd. of Trs. of Laborers Health & Welfare Trust Fund for N. Cal. v. Perez, 2011 WL 6151506, at * 11 (N.D. Cal. Nov.7, 2011). For the reasons stated in Perez, the Court concludes that liquidated damages on the June 2023 late-paid contributions are available as a matter of contract even if they are not available under ERISA.
Therefore, these amounts should be awarded in full.
c. Interest
Plaintiffs seek $727.02 in interest on late and unpaid contributions. Brown Decl. ¶ 16. As discussed above, the Master Agreement provides for interest at a rate of ten percent on unpaid contributions from the date they become delinquent to the date paid. This provision may be enforced both as a matter of contract, for the reasons discussed above, and ERISA. See Sheet Metal Workers Pension Tr. of N. California v. Evolution Sheet Metal & Metal Fabrication, Inc., No. 20-CV-02110-PJH (LB), 2021 WL 3864585, at *9 (N.D. Cal. Mar. 25, 2021), report and recommendation adopted, No. 20-CV-02110-PJH, 2021 WL 3861545 (N.D. Cal. Aug. 30, 2021) (awarding ten percent interest on unpaid contributions on default judgment pursuant to terms of collective bargaining and trust agreements). Further, Plaintiffs have presented evidence establishing the amount of interest they seek. Brown Decl., ¶ 16. Therefore, it is recommended that the full amount of interest requested by Plaintiffs be awarded.
At oral argument, Plaintiffs stipulated that their interest calculation is based only upon the underlying unpaid contributions and does not include interest on liquidated damages.
2. Attorneys' Fees
Under ERISA and the terms of the collective bargaining agreements and Trust Agreements, Plaintiffs are entitled to an award of reasonable attorneys' fees and costs. Federal courts have adopted the “lodestar” method for calculating the amount of reasonable attorneys' fees. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The lodestar figure is the product of the hours counsel reasonably spent on the case and a reasonable hourly rate. Id. To determine whether Plaintiffs' claimed hours are reasonable, the Court must review attorneys' time records to determine whether the hours are adequately documented in a manner that can be properly billed directly to clients. Id. at 434. Reasonableness is determined based on the prevailing market rate for similar work by similarly qualified counsel, not the amount that the attorneys would have actually charged the prevailing party. Welch v. Metro. Life Ins. Co., 480 F.3d 942, 946 (9th Cir. 2007).
Plaintiffs request $9,408.50 for a total of 39.3 hours of work on this matter by attorney Tino Do (16.6 hours) and two paralegals, Nargis Shaghasi (21.8 hours) and Jamila Colbert (0.9 hours). Do Decl. ¶¶ 18-20 & Ex. E (time records). Do's billing rate was $305/hour from August 2023 through December 2023, and $325/hour from January 2024 through March 2024. Id. ¶17(a). The work performed by Shaghasi was billed at the rate of $175/hour from August 2023 through December 2023, and $185/hour from January 2024 through March 2024. Id. ¶17(b). The work performed by Colbert was billed at the rate of $185/hour in March 2024. Id. ¶ 17(c).
Based on the submissions and the Court's knowledge about prevailing rates, the rates are reasonable. See Dist. Council 16 N. California Health v. Advantage Com. Servs., Inc., No. 21-CV-04716-TSH, 2022 WL 4137577, at *9 (N.D. Cal. Aug. 11, 2022), report and recommendation adopted in part sub nom. Dist. Council 16 N. California Health & Welfare Tr. Fund v. Advantage Com. Servs., Inc., No. 21-CV-04716-MMC, 2022 WL 17371091 (N.D. Cal. Aug. 30, 2022) (approving rates of $250-285 per hour for a shareholder attorney, $245-265 for an associate attorney, and $145-$165 for a paralegal at the same firm and noting that “[a]n hourly rate of $650 for lead counsel and $190 for senior paralegals has been found to be reasonable for Bay Area ERISA specialists”) (citations omitted). The Court also finds the time billed to be reasonable based on review of the billing records supplied by Plaintiffs. Therefore, it is recommended that the attorneys' fees requested by Plaintiffs be awarded in full.
3. Costs
Plaintiffs seek and award of $748.97 in costs for service of process fees for service of the Summons and Complaint on Defendants ($346.97) and the filing fee ($402). Brown Decl. ¶ 22 & Ex. F. Plaintiffs have presented evidence that they incurred all of these costs and the undersigned finds them to be reasonable. Therefore, Plaintiffs are entitled to all of their requested costs. Civ. L. R. 54-3(a)(1)(“The Clerk's filing fee is allowable if paid by the claimant.”), (2) (“Fees for service of process by someone other than the marshal acting pursuant to Fed.R.Civ.P. 4(c) are allowable to the extent reasonably required and actually incurred.”).
IV. CONCLUSION
For the reasons stated above, it is recommended that the Court GRANT the Motion as to Defendant Pacific Coast Iron and DENY the Motion as to Defendant Adam Murray. It is further recommended that as to Defendant Pacific Coast Iron, the Court award $40,963.23 in damages, attorneys' fees and costs. Plaintiffs are ordered to serve a copy of this Report on all defendants and file proof of service to that effect. Any objection to this Report must be filed within fourteen days of the date on which the Report is served.