Opinion
01-CV-0515E(Sc)
June 24, 2002
MEMORANDUM and ORDER
Plaintiffs commenced this action July 19, 2001 alleging, inter alia, that defendant Robert Green, d/b/a Green Metering, violated a collective bargaining agreement (the "cba"), trust agreements and section 515 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1145, by failing to make monetary contributions to the Union and its employee benefit plan. After defendant failed to appear in this action, plaintiffs obtained an Entry of Default from the Clerk of the Court on October 26, 2001. On January 10, 2002 plaintiffs made the present motion for default judgment under Rule 55(b)(2) of the Federal Rules of Civil Procedure ("FRCvP"), seeking unpaid union and employee benefit contributions, interest, attorneys' fees, and costs in the sum of $4,029.36. For the reasons discussed hereinafter, plaintiffs' motion will be denied.
Plaintiffs seek attorneys fees of $140 per hour for both an attorney and a law clerk. This is patently improper. If plaintiffs renew this motion, they must carefully review their request for attorneys' fees.
Under FRCvP 55, district courts may grant default judgment against a party that has failed to plead or otherwise defend. See Enron Oil Corp. v. Masonori Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). First, a party moving for default judgment must obtain an Entry Of Default from the Clerk of the Court pursuant to FRCvP 55(a) and, second, the moving party must seek a default judgment from the Clerk of the Court or the Court, depending on the circumstances as set forth in FRCvP 55(b).
Where the moving party seeks default judgment from the district court, FRCvP 55(b)(2) governs and provides that "[i]f, in order to enable the court to enter judgment or to carry it into effect, it is necessary to *** establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper ***." This language indicates that judgment against a defaulting party should be granted only after careful examination of the moving party's claim by the district court. Id. at 96. Indeed, "a defendant's default does not in itself warrant a court in entering a default judgment [because] [t]here must be a sufficient basis in the pleadings for the judgment entered." Am. Centennial Ins. Co. v. Seguros La Republica, S.A., No. 91 CIV.1235 (MJL), 1996 WL 304436, at *18 (S.D.N.Y. June 5, 1996) (quoting Nishimatsu Const. Co., Ltd. v. Houston Nat'l. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)).
See also Ghartey v. Chrysler Credit Corp., No. CV-92-1782 (CPS), 1992 WL 373479, at *4 (E.D.N.Y. Nov. 23 1992) (citing Nishimatsu).
Consequently, the district court has the sound discretion to ascertain whether sufficient grounds exist for granting default judgment. Enron, at 95. In exercising this discretion, the district court may evaluate the underlying merits of the substantive claim. Wagstaff-el v. Carlton Press Co., 913 F.2d 56, 57 (2d Cir. 1990), cert. denied, 499 U.S. 929 (1991). A district court may also consider, inter alia, the possibility of prejudice to the plaintiffs if default judgment is not granted, the sufficiency of the complaint, the possibility of disputed material facts, whether the defendant's default was due to neglect and the strong federal policy favoring decisions on the merits. Ironworkers Local 6 Health Care Fund v. Stumm-Western Const., Corp., No. 95-CV-0002E(H), 1996 WL 528613 *1 (W.D.N.Y. Sept. 6, 1996) (denying motion for default judgment to the extent that the record was insufficient to ascertain the amount of damages owed in ERISA action involving collective bargaining agreements). Nonetheless, the Second Circuit Court of Appeals has cautioned that "defaults are generally disfavored and are reserved for rare occasions" and that, when there is doubt as to the propriety of default relief, "the doubt should be resolved in favor of the defaulting party." Enron Oil Corp., at 96.
Turning to the particular facts of this case, plaintiffs allege that defendant failed to make payments to the Union as third-party beneficiary as is allegedly required by the cba. The parties thereto were the Union and the Western New York Association of Plumbing and Mechanical Contractors, Inc. (the "Association"). From a review of the cba, however, it is not apparent that defendant was a party to, or is bound by, the cba. The cba states that the Association was the bargaining representative for its "Employer members and for those non-members and for those non-member contractors that have furnished the Association with collective bargaining authorizations." cba, at 1. The cba, however, does not identify defendant as either an "Employer member" or a non-member or non-member contractor that furnished the Association with a "collective bargaining authorization." Accordingly, the cba does not facially bind defendant. Moreover, plaintiffs have presented no other supporting documentation that would establish defendant's liability under the cba.
Attached to plaintiffs' Motion For Default Judgment as Exhibit A.
This Court has held that, "[o]nce a default judgment has been entered, the allegations of a complaint which establish a defendant's liability are to be accepted as true, except for those relating to the amount of damages." Joe Hand Promotions, Inc. v. West, No. 99-CV-0983E(M), 2000 WL 1610666, at *2 (W.D.N.Y. Oct. 26, 2000) (emphasis added) (citing Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997). Plaintiffs here, however, have not established that defendant is liable under the cba. A "default is not treated as an absolute confession by the defendant of his liability and of the plaintiff's right to recover.'" Van Limburg Stirum v. Whalen, 90-CV-1279, 1993 WL 241464, at *4 (N.D.N.Y. June 29, 1993) (quoting Nishimatsu, at 1206). Consequently, a district court, in its sound discretion, may require the moving party to present proof of facts necessary to establish liability, ibid. (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)), because district courts may only grant a default judgment where a sufficient basis is pled in the complaint. 10 James Wm. Moore et al., Moore's Fed. Prac. § 55.12[1] (3d Ed. 2001) (citing Thomson v. Wooster, 114 U.S. 104 (1855)).
Without evidentiary proof linking defendant to the cba, this Court declines to grant plaintiffs' motion for default judgment. This insufficiency prevents plaintiffs from setting forth "a sufficient basis in the pleadings for [default] judgment." Am. Centennial Ins. Co., at *18. Plaintiffs' motion will be denied without prejudice to a renewal of their motion if and when they produce supplemental documentation establishing defendant's binding connection to the cba. Absent such a showing, default judgment is of doubtful propriety and the interests of justice compel this Court, in its sound discretion, to resolve such doubt in favor of defendant. Enron Oil Corp., at 96.
The Fifth Circuit Court of Appeals's decision in Nishimatsu is instructive. Nishimatsu, at 1206. Therein, plaintiff brought suit against defendant Houston Nat'l Bank for breach of contract. Ibid. The Fifth Circuit Court of Appeals vacated the district court's grant of default judgment against defendant because the contract only identified such defendant as an agent of one of the contracting parties. Ibid. The court held that such defendant could challenge entry of default judgment on appeal because he was not a party to the contract upon which default judgment was granted. Ibid. Accordingly, plaintiff's motion for default judgment was inadequate where — as here — its pleading failed to demonstrate that the defendant was liable under the contract. Ibid. Although plaintiffs submitted a copy of the cba with their pleadings, defendant is not identified in the cba as a party and no other document establishes his liability. Accordingly, it is hereby ORDERED that plaintiffs' motion for default judgment is denied without prejudice.