The opinion of the court was delivered by: Carolyn K. Delaney United States Magistrate Judge
FINDINGS AND RECOMMENDATIONS
Presently pending before the court is plaintiff's motion for default judgment pursuant to Fed. R. Civ. P. 55(b)(2).*fn1 (Dkt. No. 8.) Upon review of the papers in support of the motion, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS:
The background facts are taken from the operative complaint unless otherwise noted. Defendant Innovative Steel Systems, Inc. ("Innovative Steel") was a California corporation originally incorporated on April 8, 1994 and engaged in the manufacture and installation of metal framing components for the building industry, with its principal place of business in Lathrop, California. (See Complaint, Dkt. No. 1 ["Compl."] ¶¶ 4-5.) Innovative Steel ceased operating sometime in 2003, and its powers, rights, and privileges were suspended by the California Secretary of State on December 3, 2003, and by the California Franchise Tax Board on May 1, 2007. (Compl. ¶¶ 9, 11.)
Defendant Innovative Steel Systems, Inc. 401(k) plan ("Plan") is an employee pension benefit plan as defined under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1002(3) sponsored by defendant Innovative Steel. (Compl. ¶¶ 3-4.) The Plan was funded solely through employee contributions and discretionary employer contributions. (Compl. ¶ 13.) Pursuant to the Plan's governing documents, Innovative Steel was the Plan Administrator and Named Fiduciary of the Plan. (Compl. ¶ 7.) Invesco, Ltd. ("Invesco") is the Plan's custodial trustee and can act only at the direction of the Plan Administrator or a properly appointed discretionary Trustee. (Compl. ¶ 8.) As of February 24, 2011, the Plan had 15 participants and $38,934.13 in assets. (Compl. ¶ 13.)
Plaintiff in this action is Hilda Solis, Secretary of Labor for the United States Department of Labor. Plaintiff alleges that prior to and at the time of Innovative Steel's cessation of operations, Innovative Steel failed to take sufficient steps to provide for the prudent and complete termination of the Plan, thereby essentially abandoning the Plan. (Compl. ¶ 10.) Currently, Invesco, as the custodial trustee, refuses to authorize distribution of the remaining Plan assets to the Plan's participants and beneficiaries without direction from a properly-appointed fiduciary or a court-appointed independent fiduciary. (Compl. ¶ 12.) As such, the participants are unable to access their account balances to reinvest them before retirement or draw from them upon retirement. (Compl. ¶ 15.) Plaintiff alleges several violations of ERISA, discussed further below. (Compl. ¶¶ 14-15.)
Based on the above-mentioned facts, on February 2, 2012, plaintiff filed the instant action against Innovative Steel and the Plan*fn2 to enjoin acts or practices that violate the provisions of Title I of ERISA, and to obtain other appropriate equitable relief to redress violations and enforce the provisions of Title I of ERISA pursuant to 29 U.S.C. § 1132(a)(5). (Dkt. No. 1.)*fn3 Plaintiff seeks removal of Innovative Steel from its position as Plan Administrator and named fiduciary of the Plan; appointment of an independent fiduciary with discretionary authority to administer the Plan to effectuate its termination and distribution of the Plan assets to the participants and beneficiaries; as well as any other just and equitable relief. (Id.)
Proofs of service filed with the court demonstrate that defendants were properly served with process on March 2, 2012 pursuant to Fed. R. Civ. P. 4(h)(1)(A), Fed. R. Civ. P. 4(e)(1) and Cal. Civ. Proc. Code §§ 416.20 and 416.90.*fn4 (Dkt. Nos. 4, 5.) On March 2, 2012, plaintiff served the process papers on Suen Fang, Assistant to Dong Won Sohn, who was duly authorized to accept service of process on behalf of Mr. Sohn. In turn, because Mr. Sohn was the President, CEO, and COO of Innovative Steel, he is for practical purposes a trustee of the now-defunct Innovative Steel and authorized to accept service on its behalf. Mr. Sohn is also listed as the Trustee of the Plan in the Plan Adoption Agreement, and section 8.14 of the Plan's Trust Agreement provides that the Trust and any Plan adopting it may be served with legal process by service upon any Trustee. Therefore, Mr. Sohn was also authorized to accept service on behalf of the Plan.*fn5
When defendants failed to respond to the complaint within the required time, plaintiff filed a request for entry of default on March 27, 2012. (Dkt. No. 6.) The next day, on March 28, 2012, the clerk entered defendants' default. (Dkt. No. 7.) Subsequently, on April 4, 2012, plaintiff filed the instant motion for default judgment against defendants. (Dkt. No. 8.) The motion seeks a default judgment awarding primarily injunctive relief. No response to the motion has been filed.
Pursuant to Fed. R. Civ. P. 55, default may be entered against a party against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend against the action. See Fed. R. Civ. P. 55(a). However, "[a] defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." PepsiCo, Inc. v. Cal. Sec. Cans., 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, the decision to grant or deny an application for default judgment lies within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court may consider the following 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.
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily disfavored. Id. at 1472.
As a general rule, once default is entered, well-pleaded factual allegations in the operative complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); see also Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Although well-pleaded allegations in the complaint are admitted by a defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) ("[A] defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law") (citation and quotation marks omitted); Abney v. Alameida, 334 F. Supp. 2d 1221, 1235 (S.D. Cal. 2004) ("[A] default judgment may not be entered on a legally insufficient claim."). A party's default conclusively establishes that party's liability, although it does not establish the amount of damages. Geddes, 559 F.2d at 560.
A. Appropriateness of the Entry of Default Judgment Under the Eitel Factors
1. Factor One: Possibility of Prejudice to Plaintiff
The first factor set forth by the Ninth Circuit in Eitel considers whether the plaintiff would suffer prejudice if default judgment is not entered, and whether such potential prejudice to the plaintiff militates in favor of granting a default judgment. See PepsiCo, Inc., 238 F. Supp. 2d at 1177. Here, plaintiff would face prejudice if the court did not enter a default judgment because plaintiff would be without another recourse to enjoin the challenged conduct and enforce compliance with ERISA. Moreover, the Plan participants and beneficiaries would ...