Opinion
REQUEST FOR REASSIGNMENT; REPORT AND RECOMMENDATION RE PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT [DOCKET NO. 16]
DONNA M. RYU, Magistrate Judge.
Plaintiffs Boards of Trustees for Laborers Trust Funds move the court pursuant to Federal Rule of Civil Procedure 55(b)(2) for entry of a default judgment against Defendant A&B Building Maintenance Co., Inc. ("A&B Building"). [Docket No. 16.] Plaintiffs ask the court to order A&B Building to pay due and unpaid fringe benefit contributions, interest and liquidated damages due and owing, and attorneys' fees and costs. A&B Building has not filed a declination or consent to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. § 636(c). Therefore, the court requests that this case be reassigned to a District Judge, and issues this Report and Recommendation, with a recommendation that the motion be granted.
I. Background and Procedural History
Plaintiffs are the Boards of Trustees for the Laborers Health and Welfare Trust Fund for Northern California, Laborers Vacation-Holiday Trust Fund for Northern California, Laborers Pension Trust Fund for Northern California, and Laborers Training and Retraining Trust Fund for Northern California ("the Trust Funds"). The Trust Funds, created by written Trust Agreements, consist of, inter alia, all employee fringe benefit contributions that are to be made by employers pursuant to collective bargaining agreements. Compl. ¶¶ 3-6 [Docket No. 1]; Lauziere Decl. [Docket No. 17] ¶ 10, Exs. A, B (Trust Agreement for Laborers Pension Trust Fund). The Trust Funds are multi-employer benefit plans within the meaning of Sections 3 and 4 of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1002, 1003. Compl. ¶ 5. A&B Building is an employer within the meaning of Sections 3(5) and 515 of ERISA, 29 U.S.C. §§ 1002(5) and 1145, and an employer in an industry affecting commerce within the meaning of Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185. Compl. at ¶ 7.
Plaintiffs represent that the Trust Agreements for all four of the Trust Funds contain the same terms and conditions as the Trust Agreement for the Pension Trust Fund for Northern California and therefore, the references to the Pension Trust Fund apply to all the Trust Funds. Lauziere Decl. ¶ 11.
A&B Building executed a memorandum agreement with the Northern California District Council of Laborers ("Laborers Union") on March 14, 2008. Compl. ¶ 9; Lauziere Decl. ¶ 6, Ex. F (Memorandum Agreement dated March 14, 2008). By signing the memorandum agreement, A&B Building became bound to a written collective bargaining agreement with the Laborers Union entitled the Laborers' Master Agreement for Northern California ("Master Agreement"). Compl. ¶ 9. The Master Agreement requires that employers pay contributions to the Trust Funds for each hour their employees work as laborers. Compl. ¶ 10; Lauziere Decl. ¶ 16, Ex. G (Sections 28A and 28B of the Master Agreement). Furthermore, an employer who fails to make the required contributions on or before the 25th day of the month is subject to interest on the delinquent contribution at a rate of 1.5% per month, as well as liquidated damages, which are set at $150 for each delinquent contribution. Compl. ¶ 10; Lauziere Decl. ¶ 16, Ex. H (Liquidated Damage Program - Board Policy). The Master Agreement permits the Boards of Trustees to file a lawsuit to recover payment of delinquent contributions and all attorneys' fees and costs incurred. Compl. ¶ 10; Lauziere Decl. ¶ 13, Ex. D (Article IV, Section 3 of the Master Agreement).
Plaintiffs allege that they have performed all conditions required of them by the terms of the Master Agreement. Compl. ¶ 12. Plaintiffs further allege that A&B Building failed to report and pay all employee fringe benefit contributions for the "period years" ending December 2008 and December 2009. Compl. ¶ 13; Lauziere Decl. ¶ 17.
Plaintiffs use the term "period year" to describe the periods of time that A&B Building failed to make contributions to the Trust Funds. Compl. ¶ 13; Lauziere Decl. ¶ 17. At the hearing on the motion on September 26, 2013, Plaintiffs' counsel explained that Plaintiffs had used the term "period years" because it was not clear from their audit which months in 2008 and 2009 A&B Building's employees worked hours for which A&B Building failed to make contributions. For that reason, Plaintiffs' calculations presume that those hours were worked in the last month of those years, i.e. December 2008 and December 2009.
Plaintiffs filed the current action in this court on February 19, 2013 pursuant to Section 301 of the LMRA, 29 U.S.C. § 185, and Sections 502(a)(3) and 502(e)(1) of ERISA, 29 U.S.C. §§ 1132(a)(3) and 1132(e)(1) to recover due and unpaid benefit contributions, interest, liquidated damages, attorneys' fees, and filing costs. On March 7, 2013, Plaintiffs voluntarily dismissed Robert L. Hernandez, the Responsible Managing Officer, CEO, and President of A&B Building, after they received notice of Hernandez's Chapter 7 bankruptcy proceeding. See Pls.' Req. to Dismiss Def. Robert L. Hernandez Without Prejudice [Docket No. 6] at 2. On April 9, 2013, A&B Building executed a waiver of service. [Docket No. 7.] The waiver of service specifies that A&B Building must file and serve an answer or motion within 60 days from February 27, 2013. Id. A&B Building filed no responsive pleading by the April 29, 2013 deadline. See Pls.' Case Management Statement [Docket No. 9] at 2. Plaintiffs' counsel informed A&B Building that they would proceed with filing a request for clerk's entry of default if no responsive pleading was provided by May 10, 2013. Id. On May 9, 2013, A&B Building's counsel represented to Plaintiffs' counsel that no response would be filed. Id. Plaintiffs' counsel filed a motion for entry of default on May 22, 2013, which the clerk entered the following day. [Docket Nos. 8, 10.] Plaintiffs filed this motion for default judgment on July 30, 2013. [Docket No. 8.] The court held a hearing on September 26, 2013; A&B Building did not appear.
Although Plaintiffs did not specify the Defendant against whom they alleged their third claim for relief for breach of fiduciary duty, it appears to be against Defendant Robert Hernandez. Compl. ¶¶ 21-24. Plaintiffs appear to have abandoned this claim, as they do not seek default judgment on it.
II. Default Judgment
A. Legal Standard
Federal Rule of Civil Procedure 55(b)(2) permits a court to enter a final judgment in a case following a defendant's default. Whether to enter a judgment lies within the court's discretion. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986); Shanghai Automation Instrument Co., Ltd. v. Kuei, 194 F.Supp.2d 995, 999 (N.D. Cal. 2001).
Before assessing the merits of a default judgment, a court must confirm that it has subject matter jurisdiction over the case and personal jurisdiction over the parties, as well as ensure the adequacy of service on the defendant. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). If the court finds these elements satisfied, it turns to the following factors ("the Eitel factors") to determine whether it should grant a 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 decision on the merits.
Eitel, 782 F.2d at 1471-72 (citation omitted). In this analysis, "the well-pleaded allegations of the complaint relating to a defendant's liability are taken as true." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). Nevertheless, default does not compensate for essential facts not within the pleadings and those legally insufficient to prove a claim. Id. The fourth factor focuses on the amount at issue in the action, as courts should be hesitant to enter default judgments in matters involving large sums of money. "When the money at stake in the litigation is substantial or unreasonable, default judgment is discouraged." Bd. of Trs. v. Core Concrete Constr., Inc., No. C 11-2532 LB, 2012 WL 380304, at *4 (N.D. Cal. Jan. 17, 2012) (citing Eitel, 782 F.2d at 1472). However, when "the sum of money at stake is tailored to the specific misconduct of the defendant, default judgment may be appropriate." Id. (citations omitted).
B. Analysis
This court has subject matter jurisdiction over this case pursuant to 29 U.S.C. §§ 185 (granting labor union organizations power to sue employers in federal court) and 1132 (empowering ERISA plan fiduciaries to bring civil actions to enforce plan terms). A&B Building qualifies as an "employer" under 29 U.S.C. §§ 152(2) and 1002(5), and as an employer in an industry affecting commerce within the meaning of 29 U.S.C. § 185. Compl. ¶ 7. The court exercises personal jurisdiction over A&B Building because it is a California corporation with its principal place of business located in San Jose, California. Compl. ¶ 7. Regarding the adequacy of service of process, Federal Rule of Civil Procedure 4(d)(1) allows a plaintiff to notify and request from a defendant a waiver of the service of summons. Fed.R.Civ.P. 4(d)(1). Once the waiver is filed, proof of service is no longer required and the Federal Rules of Civil Procedure regarding service apply as if the summons and complaint had been properly served upon the defendant. Fed.R.Civ.P. 4(d)(4). Here, A&B Building executed and returned a waiver of the service of summons on April 9, 2013. [Docket No. 9 at 2.]
Turning to the first Eitel factor, Plaintiffs will suffer great prejudice if the court does not enter a default judgment against A&B Building because Plaintiffs are otherwise likely to be without further recourse for recovery. See U.A. Local No. 467 Trust Fund v. Hydra Ventures, Inc., No. C-12-3746 EMC, 2013 WL 1007311, at *6 (N.D. Cal. Mar. 13, 2013) (first Eitel factor weighed in favor of default judgment for plaintiffs trust funds against defendant employer who had failed to make employee benefits contributions because plaintiffs would otherwise likely be without a remedy); 29 U.S.C. § 1132(e)(1) (except for actions under § 1132(a)(1)(B), the United States district courts have exclusive jurisdiction of civil actions brought by a participant, beneficiary, fiduciary, or any person referred to in Section 1201(f)(1) of this title).
Section 1132(a)(1)(B) provides that a participant or beneficiary may bring a civil action to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of his plan, or to clarify his rights to future benefits under the terms of his plan. 29 U.S.C. § 1132(a)(1)(B). This exception does not apply in this case because Plaintiffs allege that the court has jurisdiction pursuant to Section 1132(a)(3). Compl. ¶ 1.
Furthermore, the Complaint sufficiently pleads the elements of a violation of 29 U.S.C. § 1145. Specifically, the Complaint claims that A&B Building is an employer obligated under the collective bargaining agreement to make contributions to the Trust Funds and that A&B Building failed to do so. Compl. ¶¶ 7-13. In support of their claim, Plaintiffs provided a copy of the Master Agreement, signed by A&B Building on March 14, 2008. Lauziere Decl. ¶ 6, Ex. F (March 14, 2008, Memorandum Agreement). Furthermore, Michelle Lauziere, Plaintiffs' Accounts Receivable Manager, submitted a declaration stating that Plaintiffs audited A&B Building on June 20, 2012 and discovered that A&B Building failed to report and thus failed to pay contributions due for the period years ending in December 2008 and December 2009. Lauziere Decl. ¶¶ 17-18. Plaintiffs have produced a summary of the results of the audit showing the number of hours of covered work for which contributions were due but not paid. Lauziere Decl. ¶¶ 17-18, Ex. I (Statement of Contributions Due The Laborers Trust Funds [Not Reported/Not Paid]). Thus Plaintiffs have submitted a legally sufficient complaint that is likely to prevail on the merits and fulfill the second and third Eitel factors.
Section 1145 provides, in relevant part, that "[e]very employer who is obligated to make contributions to a multi-employer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement." 29 U.S.C. § 1145.
The fourth Eitel factor, the sum of money at stake in the action, also weighs in favor of the Plaintiffs. "When the money at stake in the litigation is substantial or unreasonable, default judgment is discouraged." Core Concrete Const., Inc., 2012 WL 380304, at *4 (citing Eitel, 782 F.2d at 1472). However, "when the sum of money at stake is tailored to the specific misconduct of the defendant, default judgment may be appropriate." Id. In Core, for example, the court found this factor weighed in favor of default judgment for the plaintiffs boards of trustees of trust funds because the amount of money they sought against an employer who had failed to make contributions to the trust funds was supported by the evidence and required by the collective bargaining agreement and 29 U.S.C. § 1132. Id. Here, the total sum of actual and statutory damages, interest, attorneys' fees, and costs that Plaintiff seeks to recover is $119,246.05. [Docket No. 16 at 7.] This sum is reasonable, tailored to A&B Building's alleged misconduct, and properly calculated, as discussed further below.
This sum represents: $43,949.10 (unpaid contributions), $30,114.56 (interest), $30,114.56 (additional award pursuant to § 1132(g)(2)(C)), $13,834.00 (attorneys' fees), and $1,233.84 (costs). [Docket No. 16 at 7.]
With respect to the fifth prong, A&B Building has not appeared in this action, let alone contested any of Plaintiffs' material facts. Finally, nothing in the record suggests that A&B Building defaulted due to excusable neglect. A&B Building signed a waiver of the service of summons on April 9, 2013, and was therefore on notice of its obligation to file and serve an answer or motion by the deadline (60 days from the date the request was sent, or April 29, 2013) and failed to do so.
Examining these facts in the aggregate, the court finds that the first six Eitel factors outweigh the Federal Rules of Civil Procedure's strong preference for a decision on the merits. The court therefore recommends that Plaintiffs' motion for default judgment be granted.
III. Damages
To recover damages after securing a default judgment, a plaintiff must prove the relief it seeks through testimony or written affidavit. Bd. of Trs. of the Boilermaker Vacation Trust v. Skelly, Inc., 389 F.Supp.2d 1222, 1226 (N.D. Cal. 2005); see Pepsico, Inc. v. California Security Cans, 238 F.Supp. 2d, 1172, 1175 (C.D. Cal. 2002) (citing Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987)). With respect to cases arising out of ERISA, the statute declares the following:
in any action... by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan -
(A) the unpaid contributions,
(B) interest on the unpaid contributions,
(C) an amount equal to the greater of -
(i) interest on the unpaid contributions, or
(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A),
(D) reasonable attorney's fees and costs of the action, to be paid by the defendant, and
(E) such other legal or equitable relief as the court deems appropriate.
A. Unreported, Unpaid Contributions and Interest and Liquidated Damages Thereon
Plaintiffs learned that A&B Building failed to report and failed to pay employee fringe benefit contributions for the period years ending December 2008 and 2009 totaling $43,949.10. Lauziere Decl. ¶ 17, Ex. I (Statement of Contributions Due to The Laborers Trust Funds [Not Reported/Not Paid]). The total interest due on this principal totals $30,114.56. Lauziere Decl. ¶ 19 (the 1.5% per month interest due was compounded monthly from the month in which each delinquent contribution for each Trust Fund was recorded and accumulated, through December 25, 2012), Ex. H (Liquidated Damages Program - Board Policy)).
For A&B Building's unreported, unpaid contributions, the contractual liquidated damages is $300. Lauziere Decl. ¶ 20, Ex. K (Statement of Interest and Liquidated Damages Due [Not Reported/Not Paid]) ($150 in liquidated damages for each delinquent contribution); Idaho Plumbers & Pipe Fitters Health & Welfare Fund v. United Mech. Contractors, Inc., 875 F.2d 212, 215 (9th Cir. 1989) (ERISA requires assessment of liquidated damages if "(1) the fiduciar[ies] obtain a judgment in favor of the plan, (2) unpaid contributions exist at the time of suit, and (3) the plan provides for liquidated damages"). However, pursuant to Section 1132(g)(2)(C), Plaintiffs are entitled to the greater of the interest on the unpaid contributions or liquidated damages, and therefore the court awards Plaintiffs an additional sum of $30,114.56.
The court recommends that Plaintiffs be awarded the total due for A&B Building's unreported, unpaid contributions, with interest and additional statutory damages, or $104,178.22. Lauziere Decl. ¶ 23.
B. Attorneys' Fees and Costs
To date, Plaintiffs have incurred $13,834 in attorneys' fees based upon the following rates and hours: (1) 19 hours by Ronald Richman, a senior law firm shareholder, at a rate of $345 per hour; and (2) 25 hours by Arlena Carrozzi, an associate, at a rate of $290 per hour. Richman Decl. [Docket No. 18] ¶ 4, Ex. A; Richman Supplemental Decl. [Docket No. 22] ¶ 5, Ex. A. These are reasonable San Francisco Bay Area rates for ERISA claims. See, e.g., Oster v. Std. Ins. Co., 768 F.Supp.2d 1026, 1035 (N.D. Cal. 2011) (approving hourly rate of $400 for associates and $150 for paralegals); Langston v. N. Am. Asset Dev. Corp. Group Disability, No. 08-2560 SI, 2010 WL 1460201, at *2 (N.D. Cal. Apr. 12, 2010) (approving hourly rate of $550 for partner and $150 for paralegals); Caplan v. CNA Fin. Corp., 573 F.Supp.2d 1244, 1249 (N.D. Cal. 2008) (approving hourly rates of $350 and $330 for associates). Having reviewed Plaintiffs' billing records, the court finds that the 44.1 hours expended on this case are reasonable. The court therefore recommends that Plaintiffs recover $13,834 in attorneys' fees.
Federal Rule of Civil Procedure 54(d)(1) grants district courts the discretion to award costs to prevailing parties. Fed.R.Civ.P. 54(d)(1); Marx v. General Revenue Corp., 133 S.Ct. 1166, 1172 (2013). Plaintiffs have incurred $1,233.83 in reasonable costs in the action to date. Richman Decl. ¶ 6, Ex. A; Richman Supplemental Decl. ¶ 6, Ex. A. The court therefore recommends that Plaintiffs be granted $1,233.83 in costs.
IV. Conclusion
For the foregoing reasons, the court recommends that the District Court grant Plaintiffs' motion for default judgment against A&B Building. The court further recommends that the District Court award Plaintiffs unpaid contributions, interest, and statutory damages in the amount of $104,178.22, and attorneys' fees and costs amounting to $13,834.00 and $1,233.83, respectively, for a total of $119,246.05.
Immediately upon receipt of this order, Plaintiffs shall serve a copy of this order on A&B Building and file proof of service with the court. Any party may file objections to this report and recommendation with the District Judge within 14 days of being served with a copy. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(a); N.D. Civ. L.R. 72-2.
IT IS SO ORDERED.