Opinion
CASE NO. C10-0282-MAT.
October 25, 2010
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
INTRODUCTION
Plaintiffs — Locals 302 and 612 of the International Union of Operating Engineers-Construction Industry Health Security Fund, Locals 302 and 612 of the International Union of Operating Engineers-Employers Construction Industry Retirement Fund, Western Washington Operating Engineers-Employers Training Trust Fund (hereinafter collectively "Trust Funds"), and Local 302 of the International Union of Operating Engineers — move the Court for summary judgment against defendant Don Morin, Inc. (Dkt. 9.) This matter was brought pursuant to the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (ERISA), to recover delinquent trust fund contributions, liquidated damages, interest, attorney's fees, and costs.
Plaintiffs filed this lawsuit in relation to delinquent contributions for the months of December 2009 and January 2010. Defendant paid the December 2009 contributions just prior to the filing of this lawsuit and the January 2010 contributions after the lawsuit was filed. Plaintiffs, therefore, now pursue the payment of liquidated damages, interest, attorney's fees, and costs. Plaintiffs seek liquidated damages in the amount of $10,708.93, interest in the amount of $655.80, attorney's fees in the amount of $3,565.50, and costs in the amount of $485.74. ( See Dkts. 11 15.)
Defendant contends the pleadings on file do not support granting summary judgment and that, even if adequate evidence was offered, the liquidated damages clause at issue in this case is unenforceable as a penalty under Washington law. (Dkt. 13.) For the reasons described below, the Court finds plaintiffs entitled to liquidated damages for the delinquent January 2010 contributions, but not for the delinquent December 2009 contributions. The Court further finds plaintiffs entitled to the interest, attorney's fees, and costs requested.
BACKGROUND
On April 4, 1996, defendant entered into a compliance agreement wherein it agreed to be bound by the terms and conditions of the Trust Agreements of the three Trust Funds included in this lawsuit. (Dkt. 12, Exs. A, C-E.) The compliance agreement also bound defendant to the collective bargaining agreement between Associated General Contractors of Washington and Locals 302 and 612 of the International Union of Operating Engineers, and any successor agreements. ( Id., Ex. B.)
The collective bargaining agreement currently in effect requires defendant to report and pay monthly contributions to the Trust Funds for all employees covered by the agreement on or before the fifteenth day of the month following the month in which the relevant hours were worked. ( Id., Ex. B at 20 (Schedule "B" Fringe Benefits, Section 1).) The Trust Agreements require the payment of liquidated damages in an amount equal to twelve percent of the delinquent contributions owed and twelve percent interest accruing upon each monthly contribution delinquency. ( See id., Exs. C-E (Art. II, Section 9).) They also require the payment of attorney's fees, court costs, and reasonable expenses in relation to the collection of delinquent contributions. ( Id.)
Records submitted by plaintiffs reveal that defendant delinquently submitted its contributions for the months of December 2009 and January 2010. ( Id., Ex. F.) The records show a payment on February 17, 2010 for December 2009 contributions due on January 15, 2010, and a payment on February 26, 2010 for January 2010 contributions due on February 15, 2010. ( Id.) Plaintiffs note that payments are typically received on the day prior to the deposit and concede that it most likely received the December 2009 contributions on February 16, 2010. (Dkt. 14 at 3, n. 1 and 7.) Plaintiffs filed the lawsuit under consideration on February 17, 2010. (Dkt. 1.)
DISCUSSION
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party is entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient showing on an essential element of his case with respect to which he has the burden of proof. See Celotex, 477 U.S. at 322-23.
Genuine issues of material fact that preclude summary judgment are "disputes over facts that might affect the outcome of the suit under the governing law[.]" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding a summary judgment motion, the Court must view all facts and inferences therefrom in the light most favorable to the nonmoving party. See Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). "[A] party opposing a properly supported motion for summary judgment may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256 (citing Fed.R.Civ.P. 56(e)).
A. Support for Summary Judgment
Defendant first contends that the pleadings on file do not support granting summary judgment. Defendant states that it denied in its Answer the claims alleging breach of contract and asserting damages. It avers that no evidence has been offered, either in the Complaint or in Plaintiffs' Motion for Summary Judgment, supporting an action on contract for liquidated damages or other remedies. Defendant maintains, therefore, that plaintiffs have failed to demonstrate their entitlement to a judgment as a matter of law under any circumstances. However, the Court, in large part, rejects these contentions.
Plaintiffs aver and provide documentation showing that defendant is bound by a collective bargaining agreement, as well as to the terms and conditions of Trust Agreements which require the payment of liquidated damages, interest, attorney's fees, and costs in the event of delinquent contributions. Plaintiffs establish that defendant submitted delinquent contributions for the months of December 2009 and January 2010, the amount of liquidated damages and interest owing as a result of those delinquent contributions under the operative documents, and the attorney's fees and costs incurred as a result of their efforts to recover delinquent contributions and associated damages.
Defendant does not dispute that it is bound by the enforceable terms of the operative documents ( see Dkt. 13 at 5, n. 2), that it failed to timely submit its contributions for the months in question, or that the operative documents require the payment of interest, attorney's fees, and costs. Nor does defendant dispute the amounts of liquidated damages, interest, attorney's fees, and costs allegedly incurred under the operative documents. Defendant, instead, argues only that the liquidated damages clause contained within each Trust Agreement is unenforceable as a penalty.
For the reasons discussed below, the Court finds plaintiffs entitled to an award of liquidated damages owing for the delinquent January 2010 contributions, interest for both of the months in question, and an award of attorney's fees and costs. The evidence submitted demonstrates that there are no genuine issues as to any material facts and that plaintiffs are entitled to a judgment as a matter of law with respect to these damages. Defendant's contention as to insufficient pleading and a lack of evidence supporting summary judgment on these issues is no more than conclusory and, therefore, insufficient to defeat summary judgment.
As also discussed below, however, the Court does not find plaintiffs entitled to summary judgment in relation to all of the damages associated with the delinquent December 2009 contributions. That is, plaintiffs fail to submit in their summary judgment motion sufficient argument and evidentiary support for their contention that they are entitled to liquidated damages in relation to those contributions.
B. Damages for Delinquent Contributions
Defendant contends that the liquidated damages clause at issue in this case is unenforceable as a penalty under Washington law. It points specifically to RCW 62A.2-718, which states:
Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
Defendant asserts that that the liquidated damages provision at issue, which applies regardless of the length or impact of the delinquency, is clearly a penalty. See Lind Bldg. Corp. v. Pac. Bellevue Dev., 55 Wn. App. 70, 79, 776 P.2d 977 (1989) ("[T]he purpose of awarding damages for breach of contract is to place the damaged party, as nearly as possible, in the position he would be in had the contract been performed. He is not entitled to more than he would have received had the contract been performed.") (citing Platts v. Arney, 50 Wn.2d 42, 46, 309 P.2d 372 (1957)). It asserts that "`[i]nterest is adequate compensation for any loss occasioned by the debtor's delay[,]'" Aubrey v. Angel Enters., 43 Wn. App. 429, 434, 717 P.2d 313 (1986) (quoting Shepherd v. Continental Bank, 28 Wn. App. 346, 349, 622 P.2d 1310 (1981)), and that the imposition of liquidated damages on top of interest accrued constitutes a windfall for plaintiffs. Defendant stresses that plaintiffs have failed to identify any damages sustained in this case as a result of the delinquent contributions. It notes, as an additional consideration, that it had no opportunity to bargain for the terms contained in the Trust Agreements.
Plaintiffs counter defendant's contentions by asserting that damages associated with the January 2010 contributions are preempted under ERISA and that they are entitled to the damages associated with the December 2009 contributions under federal common law. As discussed below, the Court agrees with plaintiffs' contention as to liquidated damages for the January 2010 contributions and as to the total amount of interest, attorney's fees, and costs sought, but finds a lack of support as to liquidated damages for the December 2009 contributions.
1. January 2010 Contributions:
ERISA obligates participating employers to make contributions to a multi-employer trust fund in accordance with the contract and trust agreement. See ERISA Section 515, 29 U.S.C. § 1145. It provides, at § 1132(g)(2), specific remedies for delinquent contributions, including, in addition to the unpaid contributions, liquidated damages, interest, attorney's fees, and costs. As noted, defendant is also bound by Trust Agreements containing terms as to damages owed as a result of delinquent contributions. (Dkt. 9, Exs. C-E.)
"Section 1132(g)(2) is `mandatory and not discretionary.'" Northwest Adm'rs Inc. v. Albertson's, Inc., 104 F.3d 253, 257 (9th Cir. 1996) (quoting Operating Eng'rs Pension Trust v. Beck Eng'g Surveying, Co., 746 F.2d 557, 569 (9th Cir. 1984)). Entitlement to a mandatory § 1132(g)(2) award requires that: "(1) the employer must be delinquent at the time the action is filed; (2) the district court must enter a judgment against the employer; and (3) the plan must provide for such an award." Id. (citing Idaho Plumbers Pipefitters Health Welfare Fund, 875 F.2d 212, 215 (9th Cir. 1989)). "[M]andatory fees are available under § 1132(g)(2) `notwithstanding the defendant's post-suit, pre-judgment payment of the delinquent contributions themselves.'" Id. at 258 (quoting Carpenters Amended Restated Health Benefit Fund v. John W. Ryan Constr. Co., 767 F.2d 1170, 1175 (5th Cir. 1985)).
Here, it is undisputed that defendant was delinquent in making its January 2010 contributions at the time plaintiffs filed this suit and that the Trust Agreements provide for liquidated damages, interest, attorney's fees, and costs. Plaintiffs are, accordingly, entitled to liquidated damages, interest, attorney's fees, and costs under § 1132(g)(2) in relation to the January 2010 delinquent contributions.
Defendant's reliance on state law is unavailing. ERISA contains an expansive preemption provision. See generally 29 U.S.C. § 1144(a) (ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA) and (c)(1) ("`State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law[.]"); Egelhoff v. Egelhoff, 532 U.S. 141, 146 (2001) (observing that ERISA's preemption provision is "`clearly expansive.'") (sources omitted); General Am. Life Ins. Co. v. Castonguay, 984 F.2d 1518, 1521 (9th Cir. 1993) ("ERISA's preemption clause is one of the broadest ever enacted by Congress, and it preempts even generally applicable laws, not just laws aimed exclusively at employee benefit plans[.]") (internal citations omitted).
Section 1132(g)(2)(C)(ii) specifically allows for a grant of "liquidated damages provided for under the plan in an amount not in excess of 20 percent[.]" Defendant fails to support the contention that the liquidated damages provision at issue here, allowing for only twelve percent of delinquent contributions owing, may escape preemption. Indeed, defendant entirely ignores the issue of preemption, focusing instead on distinguishable and inapplicable state law. Because this argument fails and because plaintiffs are entitled to the damages sought in relation to the January 2010 contributions, the Court finds plaintiffs entitled to summary judgment on this issue.
2. December 2009 Contributions:
Plaintiffs concede receipt of defendant's December 2009 contributions prior to the filing of this lawsuit and, therefore, the inapplicability of § 1132(g)(2) to damages associated with these delinquent contributions. Section 1132(g)(2) does not preempt alternative contractual remedies when its provisions fail to reach the particular situation in question. Idaho Plumbers, 875 F.2d at 217. Plaintiffs, accordingly, seek damages for the December 2009 contributions based on the terms of the collective bargaining agreement and the Trust Agreements.
Under federal common law, in order to be deemed enforceable, and not void as a penalty, a liquidated damages provision must meet two conditions: "First, the harm caused by a breach must be very difficult or impossible to estimate. Second, the amount fixed must be a reasonable forecast of just compensation for the harm caused." Id. (citations omitted). "The parties' intentions determine whether this second requirement is satisfied. They must make a good faith attempt to set an amount equivalent to the damages they anticipate." Id. (citations omitted). Where unreasonable, a court will refuse to enforce stipulated damages on public policy grounds. Id. (cited sources omitted).
While the parties dispute whether federal or state law controls this issue, neither identifies a relevant distinction between federal and state law. Compare Idaho Plumbers, 875 F.2d at 217 (looking to whether the harm caused by a breach is "very difficult or impossible to estimate[]" and whether the amount fixed is "a reasonable forecast of just compensation for the harm caused."), with RCW 62A.2-718(1) (looking to whether liquidated damages are "reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy.") Given the similarity in the criteria applied, see id., and the fact that courts in the Ninth Circuit appear to apply federal law, see, e.g., Idaho Plumbers, 875 F.2d at 217, the Court herein applies federal common law in addressing the enforceability of the liquidated damages provision at issue.
Here, plaintiffs state that the December 2009 liquidated damages are enforceable "based on the language of the liquidated damages provision of the Trust Agreements, and the reasons they give for awarding liquidated damages — in part because it's too difficult to determine the exact amount of damages." (Dkt. 14 at 7.) The Trust Agreements state in relevant part:
The parties recognize and acknowledge that the regular and prompt payment of employer contributions to the Fund is essential to the efficient and fair administration of the Fund and the Plan and that the Fund will incur extra administrative expenses in addition to and apart from actual legal fees and costs as a result of any failure of any Individual Employer to pay required monthly contributions in full within the time provided; that the amount of such extra expense has a direct relationship to the number of Employees involved, which in turn has a direct relationship to the total contributions due; and that the actual amount of such extra administrative expense is extremely difficult, if not impractical, to establish. The parties wish to establish in advance of any default, the measure for such extra administrative expense as liquidated damages. Accordingly, the parties agree that if any Individual Employer is delinquent in remitting any required contributions, then unless the Trustees, by affirmative action, waive the same for good cause shown, such delinquent Individual Employer shall be liable for a liquidated damage charge in the sum of twelve percent (12%) of the amount of his delinquency; provided that such liquidated damages shall in no event be less than twenty-five dollars ($25.00) for each month of contributions which is delinquent.
(Dkt. 12, Exs. C-E (Art. II, Section 9).) Plaintiffs also note that the agreements require damages of only twelve percent of the delinquency, rather than the twenty percent rejected by the Ninth Circuit in Idaho Plumbers.
The Court encounters no difficulty in concluding that plaintiffs satisfy the first prong of the above-described two-part test. See Idaho Plumbers, 875 F.2d at 217. Courts have recognized the difficulty in estimating damages caused by delinquent trust fund contributions. See, e.g., Bd. of Trustees v. Udovch, 771 F. Supp. 1044, 1049 (N.D. Cal. 1991) ("When an employer is delinquent in paying contributions into a fringe benefit trust fund, the fund suffers some kinds of harms that are very difficult to gauge. In order to pursue payment, the trust must engage in a number of activities, such as sending additional collection letters, billing statements, and correspondence, and placing follow-up telephone calls, that are made necessary only by the breach but that are so intertwined with on-going operations that their separate value is most difficult to measure. A trust fund pursuing delinquent contributions suffers additional harm through the diversion of employee and executive time and attention from other business matters. Moreover, the plans are subjected to uncertainty about whether the delinquent contributions will ever be collected and the effect the delinquencies will have on the fund's ability to pay out benefits.") In this case, the difficulty in accurately forecasting damages, as averred by plaintiffs and stated explicitly in the Trust Agreements, is apparent.
Plaintiffs do not, however, succeed in relation to the second part of the applicable test. See Idaho Plumbers, 875 F.2d at 217. In fact, plaintiffs do not make any showing with respect to efforts made to forecast just compensation for the harm caused by delinquent contributions. They proffer no argument or evidence as to the parties' intentions or the process entailed in the formulation of the liquidated damages provision. Instead, they simply assert that defendant is bound by the plain language of the Trust Agreements and rely on the fact that they seek a lesser amount than that deemed a penalty in a different case. The relevant language within the Trust Agreements does not provide any further explanation, stating only that the Trust Funds "will incur extra administrative expenses" and "that the amount of such extra expense has a direct relationship to the number of Employees involved, which in turn has a direct relationship to the total contributions due[.]" (Dkt. 12, Exs. C-E.)
"Without some indication that the liquidated damages provision is a good faith attempt to set an amount reflective of anticipated damages, [the court] will find the provision void as a penalty." Parkhurst v. Armstrong Steel Erectors, Inc., 901 F.2d 796, 798 (9th Cir. 1990). See also Idaho Plumbers, 875 F.2d at 218 (rejecting twenty percent liquidated damages provision, leading to damages totaling $9,245.23 for contributions paid four days late, explaining: "Even taking account of lost investment interest and increased administrative costs, these damages are not a reasonable forecast of just compensation. The trust funds provide no explanation for the increase from 10% to 20%. They do not suggest that it corresponded to an increase in administrative or other costs. The trustees had the opportunity and authority to establish a schedule of damages, but failed to do so. The provision was not a good faith attempt to estimate the amount of damages flowing from the breach.") This remains true whether the provision calls for twenty percent of the delinquent contributions or some lesser amount. See, e.g., Parkhurst, 875 F.2d at 798 (noting appellees' concession "that the Idaho Plumbers penalty analysis would recognize no difference between a 10% or 20% rate[]" and finding nothing in the record to indicate that liquidated damages provisions at either ten or twenty percent were the result of good faith attempts to forecast damages); Udovch, 771 F. Supp. at 1050 (finding ten percent liquidated damages provision unenforceable as a penalty where it was clear it could not "be considered a reasonable forecast of only the otherwise uncompensated harm that breaches were likely to cause."; also rejecting enforceability of twenty percent figure applied in the event of multiple delinquencies).
Because plaintiffs fail to make any showing that the twelve percent liquidated damages provision resulted from a good faith attempt to estimate damages flowing from a breach, the Court has no basis for concluding that the provision is enforceable. See Parkhurst, 901 F.2d at 798. Plaintiffs, therefore, fail to establish their entitlement to liquidated damages for the delinquent December 2009 contributions.
The Court notes, however, that defendant raises no argument as to interest accrued in relation to the December 2009 contributions. Indeed, defendant appears to suggest that the interest constitutes adequate compensation for the harm caused by its failure to timely render its contributions. ( See Dkt. 13 at 4 and 6.) Defendant likewise appears to recognize its contractual obligation to pay "costs and fees associated with recovery." ( Id. at 6.) The Court, therefore, finds defendant liable for the interest accrued in relation to the delinquent December 2009 contributions, and attorney's fees and costs associated with recovering those damages.
CONCLUSION
In sum, the Court finds plaintiffs entitled to some of the liquidated damages sought, as well as to interest, attorney's fees, and costs. Accordingly, Plaintiffs' Motion for Summary Judgment is hereby GRANTED in part and DENIED in part. Plaintiffs are awarded liquidated damages in the amount of $5,183.12 for the delinquent January 2010 contributions. ( See Dkt. 12, Ex. F.) Plaintiffs are also entitled to the interest, attorneys' fees, and costs requested, as outlined above. However, because plaintiffs calculated the amount of interest as of March 4, 2010 ( id.) and the amount of attorney's fees and costs as of September 2010 ( see Dkt. 15), a revised accounting may now be in order. Accordingly, plaintiffs shall submit such information within ten (10) days of the date of this Order.
DATED this 25th day of October, 2010.