Opinion
3:21-cv-00097-JR
08-04-2021
TIMOTHY J. GAUTHIER AND GARTH BACHMAN, TRUSTEES OF THE OREGON AND SOUTHWEST WASHINGTON NECA-IBEW ELECTRICAL WORKERS AUDIT COMMITTEE, Plaintiffs, v. VITRO ELECTRIC, LLC, a Limited Liability Company, and JOHN VITRO, an individual, Defendants.
FINDINGS & RECOMMENDATION
Jolie A. Russo United States Magistrate Judge
Plaintiffs bring this action under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.§ 1132 alleging defendant Vitro Electric failed to timely file employee benefit contributions under the terms of the collective bargaining agreement (CBA) in violation of 29 U.S.C. § 1145. Plaintiffs additionally assert breach of fiduciary duty against John Vitro in violation of ERISA for failing to fund fringe benefit contributions. Plaintiffs also assert a state law claim for breach of contract against defendant Vitro Electric for failure to pay union dues, political action committee contributions, vacation funds, and administrative funds in accordance with the CBA. Finally, plaintiffs assert a state law claim for conversion against both defendants for failure to pay vacation funds and union dues to the union. After the Court required an amended motion for default judgment to address certain deficiencies, plaintiffs now seek judgment only as to the ERISA benefits claim and breach of contract claim related to the failure to pay certain funds and dues under the CBA. The breach of contract claim, however, is preempted under the Labor Management Relations Act, 29 U.S.C. § 185. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55-56 (1987) (The LMRA has a pre-emptive force so powerful as to displace entirely any state cause of action for violation of contracts between an employer and a labor organization and any such suit is purely a creature of federal law). When the resolution of a state law claim substantially depends on the meaning of a collective bargaining agreement, courts must treat the claim as one made under section 301 or dismiss it as preempted by federal labor law. Jones v. Honeywell Int. Inc., 295 F.Supp.2d 652, 671 (M.D. La. 2003). Because 29 U.S.C. § 185(a) authorizes this Court to remedy alleged failures to remit required contributions, the breach of contract claim should be treated as brought under the LMRA.
Certain types of dues, funds, and contributions alleged in the breach of contract claim, despite being required by the CBA, do not appear to be related to the ERISA benefit plan. See Mason Tenders Dist. Council Welfare Fund v. Logic Const. Corp., 7 F.Supp.2d 351, 359 (S.D.N.Y. 1998) (unpaid dues checkoffs and NYLPAC contributions, while arising out of the CBA, do not relate to employee benefit plans). Nonetheless, despite the lack or apparent ERISA preemption for those breaches, the LRMA still preempts such claims.
Plaintiffs initiated this action on January 21, 2021 and served defendants on February 1, 2021. Defendants failed to respond to the complaint and on February 25, 2021, the Court granted plaintiffs' motion for entry of default. In their amended motion for default judgment, plaintiffs seek:
1) Under Plaintiffs' First Claim for Relief, from Defendant Vitro Electric LLC, unpaid contributions in the amount of $49,085.30, liquidated damages of $9,817.06, and interest through June 21, 2021, in the amount of $2,767.57.
2) Under Plaintiffs' Second Claim for Relief, from Defendant Vitro Electric LLC, wage withheld funds in the sum of $6,971.93, and interest on outstanding wage withholdings of $353.87 calculated through June 21, 2021.
3) Under all claims Plaintiffs, Oregon and Southwest Washington NECA-IBEW Electrical Workers Audit Committee, Comprised of Timothy G. Gauthier and Garth Bachman, acting on Behalf of Harrison Electrical Workers Trust Fund; Edison Pension Trust; National Electrical Benefit Fund; International Brotherhood of Electrical Workers District No. 9 Pension Plan; Barnes Labor-management Cooperation Committee and on Behalf of the Trustees of Said Trust Fund, and on Behalf of the International Brotherhood of Electrical Workers, Local 48, request a reasonable attorney's fee against Defendants, in the sum of $8,509.50 and Plaintiffs court costs in the sum of $467.00.Amended Motion for Judgment (ECF 22) at p. 2.
Entry of default is appropriate “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend.” Fed.R.Civ.P. 55(a). A party has no duty to defend, however, unless the plaintiff properly served the defendant with the summons and complaint, or waives such service, pursuant to Federal Rule of Civil Procedure 4. See Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999) (“one becomes a party officially, and is required to take action in that capacity, only upon service of a summons”).
Before the Court decides whether to grant default judgment, Federal Rule of Civil Procedure 55(b)(2) requires the Clerk's entry of default. However, entry of a defendant's default does not automatically entitle plaintiff to a court-ordered judgment. See Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986). Indeed, a district court has discretion in deciding whether to enter a default judgment. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising this discretion, the court may consider a number of factors: (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 (the Eitel factors). See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Additionally, when a party seeks entry of default judgment, courts have a duty to examine their own jurisdiction-both subject matter and personal. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999).
This Court has subject matter jurisdiction pursuant to sections 502 and 515 of ERISA, 29 U.S.C. §§ 1132 and 1145, and pursuant to 29 U.S.C. § 185. Defendant Vitro Electric is an Oregon LLC authorized to do business in Oregon and defendant John Vitro is the managing member of Vitro Electric and a resident of Clackamas County, Oregon. Compl. (ECF 1) at ¶¶ 11-12. In addition, defendants executed the CBA which provides that legal proceedings may be initiated in Multnomah County, Oregon. Id.at ¶ 18. Moreover, as noted above, service of process was accomplished in Portland, Oregon. See Affidavits of Service (ECF 4 and 5).
A. ERISA Claim
Under 29 U.S.C. § 1154:
[e]very 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 shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.
Plaintiffs are entitled to bring a civil action for an employer's failure to pay. 28 U.S.C. § 1132. If judgment is entered in favor of the plaintiffs, the “court shall award”:
(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.”29 U.S.C. § 1132(g)(2). An award is mandatory if (1) the employer is delinquent at the time the action is filed; (2) the plan provides for such an award; and (3) the district court enters judgment against the employer. Masonry Indus. Tr. Admin., Inc. v. Chris Lee Masonry, Inc., 2016 WL 3396939, at *2 (D. Or. June 14, 2016).
Upon an entry of default the facts in the complaint are taken as true, however, “neither the default nor the allegation in the complaint can establish the amount of damages.” Lasheen v. Embassy of the Arab Republic of Egypt, 625 F. App'x. 338, 341 (9th Cir. 2015) (cited pursuant to Ninth Circuit Rule 36-3). Accordingly, before the court can enter a default judgment for a sum that is uncertain, a plaintiff must prove damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 916-17 (9th Cir. 1987).
Plaintiffs allege Vitro Electric failed to timely file employee benefit contribution reporting or properly fund reports as required under the terms of the CBA for the hours worked in October and November 2020 for a total of $49,085.30. Plaintiffs further allege entitlement to liquidated damages in the amount of $9,817.06. Plaintiffs also assert interest at the rate of 10% per annum from the date the contributions were due until paid which is currently $2,767.57.
Under the terms of the Amendment to the Inside Commercial Agreement, Article XIII, Section 13.01, (ECF 22-2 at p. 9) and the Material handler Agreement, Article XI, Section 11.01, (ECF 22-2 at p.73) Vitro Electric agreed to pay contributions for employee benefits on behalf of its employees performing work under the CBA on the 15th day of the month after which they become delinquent if they are not paid by the 15th of the following month.
The Agreements also provide for an interest rate of 10 percent per annum compounded monthly until fully paid. In addition, ERISA provides for liquidated damages in the amount of 20 percent of outstanding contributions. 29 U.S.C. § 1132(g). The Commercial Agreement noted above also authorize these liquidated damages. (ECF 22-2 at p. 10).
Here, the evidence presented by plaintiffs establishes that defendant Vitro Electric is delinquent in the amount of $29,118.35 for contributions that were reported due for hours worked in October 2020, and in the amount of $19,966.95 for hours worked November 2020. Accordingly, interest accrued through June 21, 2021 is $1,739.13 and $1.028.44 respectively for the months of October and November 2020. In addition, liquidated damages are $5,823.67, and $3,993.39 respectively for a total liquidated damages amount of $9,817.06.
Pursuant to 29 U.S.C. § 1132(g), plaintiffs are also entitled to an award of reasonable attorney fees.
B. LMRA Claim
Under the terms of the Amendment to the Inside Commercial Agreement, Article XIII, Section 13.01, (ECF 22-2 at p. 9), defendant Vitro Electric is also required to submit wages withheld for union dues and vacation pay, as well as funds for payment of the costs of administering the benefit funds. The evidence submitted with the amended motion for entry of default judgment establishes that Vitro Electric failed to pay wages withheld for hours worked in October and November 2020 in the sum of $6,971.93. Plaintiffs also assert entitlement to a statutory rate of nine percent per annum, or $353.87, from the date due through June 21, 2021. The Agreement provides for interest at the statutory rate for delinquent fringe benefit payments. Amendment to the Inside Commercial Agreement, Article XIII, Section 13.05, (ECF 22-2 at p. 10). ERISA uses the rate prescribed by section 6621 of the Internal Revenue Code. 29 U.S.C. § 1132(g)(2)(E). Pursuant to 26 U.S.C. § 6621(a)(2), the rate is federal short-term rate plus 3 percent. The applicable short-term rates for October and November 2020 were .14 and .13 percent respectively and rose to .15 for December 2020. https://resources.evans-legal.com/?p=8361. For 2021, it has varied from a low of .11 to the June rate of .14 percent. https://resources.evans-legal.com/?p=2591. However, for failure to pay amounts recoverable under the LMRA, as opposed to ERISA, the award of prejudgment interest is within the Court's discretion including using the Oregon state statutory rate. Cf. Trustees of Loc. 7 Tile Indus. Welfare Fund v. All Flooring Sols., LLC, 2020 WL 9814088, at *10 (E.D.N.Y. Feb. 12, 2020). Nonetheless, the CBA does not distinguish between ERISA and non-ERISA funds and accordingly, the Court, in its discretion, should award interest at the rate established by 26 U.S.C. § 6621(b). Accordingly, the Court should require plaintiff to submit a proposed judgment that calculates interest using the formula prescribed by the IRS if they wish to receive a judgment inclusive of interest for this claim.
C. Eitel Analysis
As noted above, in exercising its discretion to award a default judgment, the Court considers the following factors under Eitel, 782 F.2d at 1471-72: (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.
1. Factor One: Possibility of Prejudice to Plaintiffs In assessing this factor, courts have considered whether the plaintiffs would be without recourse for recovery if the motion for default judgment is not granted. See, e.g., J & J Sports Prods., Inc. v. Cardoze, 2010 WL 2757106, at *5 (N.D. Cal. July 9, 2010); PepsiCo, Inc. v. California Sec. Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002). Currently, plaintiffs have no recourse to obtain relief other than through this action.
2. Factors Two and Three: Merits of Claims and Sufficiency of Complaint Upon entry of default, this Court must take the well-pleaded factual allegations of the complaint as true. See Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (“The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.”); Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (“In reviewing a default judgment, this court must take the well-pleaded factual allegations of [the complaint] as true.”).
The complaint and supporting documents establish that Vitro Electric signed a Letter of Assent in which the company agreed to abide by the terms of the Commercial/Industrial Labor Agreement, which require contributions and wage withholding. The contribution and wage withholding figures are not in dispute here because defendant completed and submitted the reports showing the contributions and withholdings due. According to ERISA statutes and the terms of the agreement, Vitro Electric owes those damages and liquidated damages, interest, attorney's fees, and costs.
3. Fourth Factor: Sum of Money at Stake
Under the fourth Eitel factor, “the court must consider the amount of money at stake in relation to the seriousness of [defendant's conduct.” PepsiCo, 238 F.Supp.2d at 1176-77; see also J&J Sports Productions, 2010 WL 2757106, at *5 (“a large sum of money at stake would disfavor default damages, ” such as a request for $114,200 in damages); Board of Trustees of the Sheet Metal Workers v. Vigil, 2007 WL 3239281, at *2 (N.D. Cal. Nov. 1, 2007) (“[D]efault judgment is disfavored if there were a large sum of money involved”). The amounts at issue in this case are not relatively large.
4. Fifth Factor: Possibility of Dispute Over Material Facts
In addressing the fifth factor, the Court considers whether a dispute concerning material facts exists. As mentioned above, “[u]pon entry of default, all well-pleaded facts in the complaint are taken as true, except those relating to damages.” PepsiCo, 238 F.Supp.2d at 1177. Thus, “[t]he fifth factor . . . weighs in favor of default judgment when the claims in the complaint are well-pleaded.” Joe Hand Prods. v. Holmes, 2015 WL 5144297, at *7 (D. Or. Aug. 31, 2015). Otherwise stated, “[b]ecause all allegations in a well-pleaded complaint are taken as true after the court clerk enters default judgment, there is no likelihood that any genuine issue of material fact exists.” Elektra Entm't Grp., Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005).
Again, Vitro Electric provided the amounts that were due, so those figures are not at issue and the possibility of a dispute over material facts is low, if such a dispute exists at all.
5. Sixth Factor: Excusable Neglect
The sixth factor pertains to the possibility that the default resulted from excusable neglect. There is no evidence here of excusable neglect and, as noted above, plaintiffs properly served Vitro Electric with a copy of the summons and complaint.
F. Seventh Factor: Policy Favoring Decisions on the Merits
Factor seven is “the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits, ” specifically the policy that “[c]ases should be decided upon their merits whenever reasonably possible.” Eitel, 782 F.2d at 1472. However, “this policy, standing alone, is not dispositive, especially where a defendant fails to appear or defend itself in an action.” Joe Hand Promotions, Inc. v. Machuca, 2014 WL 1330749, at *6 (E.D. Cal. Mar. 31, 2014). Where a defendant has failed to answer a complaint, it “makes a decision on the merits impractical, if not impossible.” PepsiCo, 238 F.Supp.2d at 1177. Fed.R.Civ.P. 55 allows the court to terminate a case before a hearing on the merits when a defendant fails to defend an action. Id. Thus, the preference to decide cases on the merits does not preclude a court from granting default judgment. PepsiCo, 238 F.Supp.2d at 1177.
Here, a decision on the merits is impossible because defendants have failed to appear, plead, or defend this action. Additionally, all other factors weigh in favor of a default judgment. Therefore, the seventh factor is not dispositive, and the Court is not precluded from entering a default judgment against defendants.
E. Attorney Fees
Plaintiffs seek attorney's fees of $8509.50 including 17.1 hours for attorney Linda J. Larkin at a rate of $235 per hour, 20.4 hours for attorney Dylan P. Jenson at a rate of $185 per hour and 8.2 hours for legal assistant Amy Mathis at rate of $110 per hour. Attorney's fees are authorized by 29 U.S.C. § 1132(g)(2) and the terms of the Commercial/Industrial Labor Agreement in this case. Work performed by non-attorneys, such as paralegals, are awarded at market rates, if this is “the prevailing practice in a given community.” Trustees of Const. Indus. & Laborers Health & Welfare Tr. v. Redland Ins. Co., 460 F.3d 1253, 1257 (9th Cir. 2006).
Generally, attorney's fees are calculated using the lodestar method, i.e., by multiplying the number of hours worked by the reasonable hourly rate. See Perdue v. Kenny A., 559 U.S. 542, 551 (2010) (holding “the lodestar approach” is “the guiding light” when determining reasonable fees). In determining the “reasonable hourly rate to use for attorneys and paralegals[, ]” the court looks to the “prevailing market rates in the relevant community.” Gonzalez v. City of Maywood, 729 F.3d 1196, 1205 (9th Cir. 2013) (citations and internal quotation marks omitted). The court also excludes hours “that are excessive, redundant, or otherwise unnecessary.” McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009) (quoting Hensley v. Eckerhart, 461 U.S. 424, 434 (1983)). The party seeking fees bears “the burden of documenting the appropriate hours expended in the litigation, and [is] required to submit evidence in support of those hours worked.” United Steelworkers of Am. v. Ret. Income Plan for Hourly-rated Emps. Of Asarco, Inc., 512 F.3d 555, 565 (9th Cir. 2008) (quotations omitted).
For purposes of determining the prevailing market rate, the relevant community is the “one in which the district court sits.” Davis v. Mason County, 927 F.2d 1473, 1488 (9th Cir. 1991), superseded by statute on other grounds as recognized by Davis v. City & County. of San Francisco, 976 F.2d 1536, 1556 (9th Cir.1992). This Court uses the most recent Oregon State Bar Economic Survey as a benchmark for comparing an attorney's billable rate with the fee customarily charged in the locality. Precision Seed Cleaners v. Country Mut. Ins. Co., 976 F.Supp.2d 1228, 1244 (D. Or. 2013); see also Copeland-Turner v. Wells Fargo Bank, 2012 WL 92957, at *2 (D. Or. Jan. 11, 2012) (“Judges in the District of Oregon use the Oregon State Bar Economic Survey . . . as a benchmark for assessing the reasonableness of hourly billing rates.”). The Economic Survey sets forth rates charged by Oregon attorneys in the relevant year, including rates specific to communities such as Portland.
Plaintiffs' counsel has submitted an itemized list of the work performed on this case and the time spent on each task. Declaration of Dylan P. Jensen (ECF 22-1 at pp. 1-8). The work does not appear excessive or duplicative.
The median rate for a Portland attorney with over 30 years of experience, such as Larkin, is $425. See OREGON STATE BAR 2017 ECONOMIC SURVEY 40 (2017). Considering Larkin's experience, the requested hourly rate of $235 is reasonable. The median rate for Portland Tr. Fund v. Baseline Indus. Constr., Inc., 2019 WL 6329336, at *4 (D. Or. Nov. 26, 2019) (approving rate of $90 and citing other cases); Wilson v. Decibels of Oregon, Inc., No. 1:17-CV-01558-MC, 2019 WL 6245423, at *4 (D. Or. Nov. 22, 2019) (approving rate of $90 for legal assistant).
Plaintiffs seek costs of $467, specifically, $400 for the filing fee, $65 in service fees for the complaint, and $2.00 for copies. “Unless a federal statute, these rules or a court order provides otherwise, costs-other than attorney's fees-should be allowed to the prevailing party.” Fed.R.Civ.P. 54(d)(1). “Rule 54(d)(1) creates a presumption in favor of awarding costs to the prevailing party, and a district court has limited discretion to deny fees under the rule.” Goldberg v. Pac. Indem. Co., 627 F.3d 752, 758 (9th Cir. 2010). Additionally, the Commercial/Industrial Labor Agreement allows plaintiffs to recover the costs of this litigation. Thus, plaintiffs are entitled to $467 in costs.
CONCLUSION
Plaintiffs' amended motion for judgment of default (ECF 22) should be granted in part: Absent objections to this F&R, plaintiffs should submit a proposed judgment against defendant Vitro Electric for the Court's signature which includes for plaintiffs' first claim for relief: $49,085.30, liquidated damages of $9,817.06, and interest through June 21, 2021, in the amount of $2,767.57 (plus any additional accrued interest); for plaintiffs' second claim for relief: $6,971.93 plus interest on outstanding wage withholdings calculated pursuant to the formula prescribed by section 6621 of the Internal Revenue Code; attorney fees in the amount of $8,509.50; and costs in the sum of $467.00.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.