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Board of Trustees of Pipe Trades District Council No. 36 Health And Welfare Trust Fund v. Clifton Enterprises Inc.

United States District Court, Ninth Circuit

May 31, 2013




In this enforcement action brought under the Employee Retirement Income Security Act ("ERISA"), Plaintiffs bring a Motion for Default Judgment ("Motion") seeking entry of default judgment, an award of outstanding employee benefit contributions, liquidated damages and interest, and an injunction requiring an audit of books and records. (Dkt. No. 83-1.) After carefully reviewing the record, and having had the benefit of oral argument on May 23, 2013, the Court Orders as follows.


Each of the Plaintiffs, [1] except for the Board of Trustees of the Central California Pipe Trades Industry Labor-Management Cooperation Committee Trust Fund ("Labor-Management Fund") was, and is: the Plan Administrator of employee benefit plans within the meaning of Section 3(3) of ERISA; a fiduciary within the meaning of Section 3(2)(A)(iii) of ERISA; and the named fiduciary within the meaning of Section 402 (a)(l) of ERISA. (Dkt. No. 1 ¶ 4.) The Labor-Management Fund oversees a joint labor-management trust fund organized pursuant to Section 302(c)(9) of the Labor Management Relations Act ("LMRA") and Section 6(b) of the Labor Management Cooperation Act of 1978 ("LMCA"). ( Id. at ¶ 5.) It is likewise a fiduciary of its trust fund. ( Id. )

Defendant Clifton Enterprises, Inc., dba Nichols Plumbing & Heating ("Nichols"), an employer within the meaning of ERISA Section 3(5) and 29 U.S.C. § 1002(5), is a signatory to a Master Labor Agreement ("MLA") between the Pipe Trades Council No. 36 of the Association of Journeymen and Apprentices of the Plumbing & Pipefitting Industry of the United States and Canada, AFL-CIO and Mechanical Contractors Council of Central California, and various trust agreements establishing each of the Plaintiffs (collectively, the "Agreements"). ( Id. at ¶ 14.) Pursuant to the Agreements, Nichols agreed to remit fringe benefit contributions for all work performed by its covered employees, with said payments to be received by Plaintiffs at their place of business on or before the fifteenth calendar day of each successive month. ( Id. at ¶ 15.) "Nichols further agreed that all delinquent contributions, except for contributions owed to [the Labor-Management Fund], shall be subject to liquidated damages in the amount of twenty percent (20%) of the delinquent contributions" if Plaintiffs are forced to initiate legal action upon said contributions. ( Id. at ¶ 18; see also Dkt. No. 83-3 at Art. XIX, Sec. 2.) In addition, Nichols further agreed that all delinquent contributions and liquidated damages shall be subject to interest at a rate of 12% per annum from the fifteenth calendar day of each successive month. (Dkt. No. 1 ¶ 19; see also Dkt. No. 83-3 at Art. XIX, Sec. 2, Art. XXXIII, Sec. 4.)

The Complaint, filed November 9, 2011, alleges that Nichols has failed to pay contributions due for work performed by its employees totaling $25, 266.05. ( Id. at ¶ 26.) These delinquent contributions arise from work performed in December 2010, January 2011, and February 2011. (Dkt. No. 83-2 ¶ 6.) After filing the Complaint, Plaintiffs conducted an audit of Nichols' financial and payroll records, which determined that Nichols had underreported and underpaid certain fringe benefit contributions for March, April, and May 2011, totaling an additional $23, 385.60. ( See Dkt. No. 83-1 at 7; see also Dkt. No. 83-5 ¶ 4.)

The Complaint further alleges that Defendants Barbara Anna Clifton ("Ms. Clifton"), Charles Lee Clifton Sr. ("Mr. Clifton Sr."), Charles Lee Clifton Jr. ("Mr. Clifton Jr."), and Robert Lawrence Clifton ("Mr. R. Clifton")-as individuals who were Nichols' corporate officers or who otherwise exercised authority or control over the management or disposition of said assets-owed a fiduciary duty to Plaintiffs, and may be personally held liable for losses suffered by the plan with respect to 1) amounts that were withheld from employees' wages by an employer for contribution to the plan (employee contributions), and 2) contributions owed for the use of non-union labor. (Dkt. No. 1 ¶¶ 8-11, 41, 44.)[2] In addition, Defendant C R B Enterprises Monterey Inc., dba Nichols Plumbing & Heating ("CRB"), identified in the Complaint as DOE 1, is "likewise liable for all monies owed, either as the directors or shareholders of Nichols, persons certifying the monthly contribution reports, alter egos, double-breasted shops or some other theory of liability." ( Id. at ¶ 29; see also Dkt. No. 83-1 at 6-7.)

Defendants failed to answer or otherwise appear and Defendants' default was entered by the Clerk pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. ( See Dkt. Nos. 17 (Clifton Enterprises, Inc., dba Nichols, Ms. Clifton, Mr. Clifton Jr., and Mr. R. Clifton), 32 (Mr. Clifton Sr.), and 69 (CRB).) Plaintiffs filed the present Motion on March 29, 2013. In the Motion, Plaintiffs request: 1) an order directing Defendants to pay $65, 830.16 in unpaid contributions, liquidated damages, and interest; and 2) an order requiring that CRB submit to an audit. (Dkt. No. 83-1 at 18.) Plaintiffs served Defendants with the Motion by mail. (Dkt. No. 83-7.) With the exception of Mr. R. Clifton, Defendants have not appeared or responded to the Motion, and the deadline for opposing the motion has passed. See Civil L.R. 7-3(a).


I. Jurisdiction and Service of Process

When a court is considering whether to enter a default judgment it has "an affirmative duty to look into its jurisdiction over both the subject matter and the parties." In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Here, the Court has subject matter jurisdiction pursuant to 29 U.S.C. § 1132 (empowering ERISA plan fiduciaries to bring civil actions to enforce plan terms). The Court has personal jurisdiction because Nichols and CRB are California corporations that engage in business activities in the Northern District of California. Personal jurisdiction over the individual Defendants arises from service upon those individuals in California. ( See Dkt. Nos. 10, 12, 13, 18); Burnham v. Super. Ct., 495 U.S. 604, 610-11 (1990).

A court is also required to "assess the adequacy of the service of process on the party against whom default is requested." Bd. of Trs. of the N. Cal. Sheet Metal Workers v. Peters, No. 00-0395, 2000 U.S. Dist. LEXIS 19065, at *2 (N.D. Cal. Jan. 2, 2001). Federal Rule of Civil Procedure 4(e) provides that service in accordance with California law is proper. Under California law, a corporation may be served by delivering a copy of the summons and of the complaint to the person designated as agent for service of process. See Cal. Civ. P. Code § 416.10(a). Here, Nichols' and CRB's agents for service of process were personally served with the Summons and Complaint. (Dkt. Nos. 11 (Nichols), 63 (CRB).) In addition, each of the four individually named Defendants were personally served with the Summons and Complaint pursuant to California law. See Cal. Civ. P. Code § 415.10.

II. Default Judgment

After entry of default, a court may grant default judgment on the merits of the case. See Fed.R.Civ.P. 55. The factual allegations of the complaint, except those concerning damages, are deemed to have been admitted by the non-responding party. Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977). "The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). A court should consider the following factors in determining whether to enter 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 decisions on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

The majority of the Eitel factors support default judgment. First, if the Motion were to be denied, then Plaintiffs would likely be left without a remedy given Defendants' failure to appear or otherwise defend this action. See Pepsico, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002). Second, because Defendants have not answered the Complaint or otherwise appeared in this action, the possibility of a dispute concerning material facts is unknown. Third, Plaintiffs properly served Defendants and there is no evidence in the record that Defendants' failure to appear and otherwise defend this action was the result of excusable neglect. Fourth, the sum of money being sought by Plaintiffs is reasonable in that it is tailored to the specific misconduct of Defendants; namely, Defendants' failure to pay the contributions, which they allegedly assumed responsibility for under the MLA. See Pepsico, 238 F.Supp.2d at 1176 (stating that "the court must consider the amount of money at stake in relation to the seriousness of Defendant's conduct"). Finally, although the seventh Eitel factor, which favors decisions on their merits, weighs against default judgment, the Court finds that this factor is not dispositive.

Having determined that on balance the Eitel factors discussed above support Plaintiffs' Motion, the Court turns to the merits of Plaintiffs' substantive claims and the sufficiency of the evidence (the second and third Eitel factors). These factors essentially require Plaintiffs to state a claim on which it may recover. Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978). Plaintiffs' Complaint seeks a finding of liability as to Nichols, the individual Defendants, and CRB.

A. Nichols

Plaintiffs claim that Nichols violated ERISA by failing to provide timely payments and reports pursuant to the MLA. These allegations are sufficient to state a claim under Federal Rule of Civil Procedure 8(a). See 29 U.S.C. § 1145 ("Every 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."). The claims are further substantiated by the factual record. As discussed above, Plaintiffs have offered evidence that Nichols entered into the MLA. The MLA, through the Agreements, imposes liability on delinquent employers for liquidated damages, unpaid interest and attorney's fees in addition to any unpaid contributions. Plaintiffs' Complaint alleges that Nichols has failed to pay contributions due for work performed by its employees during the months of December 2010 through February 2011. (Dkt. No. 1 at ¶ 24.) In addition, Nichols has failed to report or pay contributions for the months of March 2011 through May 2011. ( See Dkt. No. 83-5.) Plaintiffs have provided adequate documentation supporting these allegations. ( See Dkt. No. 83-4, Ex. C (Nichols' Report of Contributions for Dec. 2010 through Feb. 2011); see also Dkt. No. 83-5 (audit report of Nichols' unreported and unpaid hours for Mar. 2011 through May 2011).) In addition, Plaintiffs provide an accounting of liquidated damages incurred by Plaintiffs in support of the Motion. ( See Dkt. No. 83-2 ¶ 8.) Accepting all factual allegations as true, Plaintiffs have stated a claim for relief.

Nichols breached its agreement with Plaintiffs when it failed to report or pay contributions for the periods listed above. Nichols' default triggered the filing of the instant suit for recovery, in response to which Nichols has taken no action. Based on the foregoing, ...

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