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Carpenters Southwest Admin. Corp. v. Team Framing & Drywall, LLC

United States District Court, C.D. California

January 12, 2015

CARPENTERS SOUTHWEST ADMINISTRATIVE CORP., et al., Plaintiffs,
v.
TEAM FRAMING & DRYWALL, LLC, et al., Defendants

For Carpenters Southwest Administrative Corporation, a California non-profit corporation, Board of Trustees for the Carpenters Southwest Trusts, Plaintiffs: Jodi Siegner, Varand Vartanian, LEAD ATTORNEYS, DeCarlo and Shanley APC, Los Angeles, CA.

ORDER RE: PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT

Fernando M. Olguin, United States District Judge.

Having reviewed and considered plaintiffs' Motion for Entry of Default Judgment (" Motion") and the oral argument presented on January 8, 2015, [1] the court concludes as follows.

INTRODUCTION

On March 27, 2014, plaintiffs Carpenters Southwest Administrative Corporation (" Carpenters Southwest") and Board of Trustees for the Carpenters Southwest Trusts (" Board of Trustees") (collectively, " plaintiffs") filed a Complaint against Team Framing & Drywall, LLC (" defendant"), and Does 1-10, for failure to pay fringe benefit contributions. (See Complaint).

Defendant was served on August 14, 2014. (See Proof of Service, filed on August 14, 2014). On plaintiffs' request and pursuant to Rule 55(a) of the Federal Rules of Civil Procedure, the Clerk entered default against defendant on September 11, 2014. (See Default by Clerk, filed on September 11, 2014).

On September 24, 2014, plaintiffs filed their first Motion for Default Judgment, which the court denied without prejudice on November 4, 2014. (See Court's Order of November 4, 2014). Plaintiffs filed the instant Motion on November 13, 2014. To date, defendant has not filed a responsive pleading or otherwise appeared.

SUMMARY OF FACTS

Carpenters Southwest is the corporate administrator of the Southwest Carpenters Health and Welfare Trust, the Southwest Carpenters Pension Trust, and various other plans that exist pursuant to the Labor Management Relations Act, 29 U.S.C. § § 141, et seq. and are governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § § 1001, et seq. (" ERISA"). (See Motion at 1-2; Complaint at ¶ 6). The Board of Trustees is the authorized fiduciary of these plans. (See Motion at 2; Complaint at ¶ 3). Defendant is a contractor in the construction industry, (see Complaint at ¶ 13), and allegedly has " not reported and paid the fringe benefit contributions on all hours worked by its carpenters." (Motion at 2). Plaintiffs now seek to recover $126, 578.13 in unpaid contributions, pre-judgment interest, audit fees, attorney's fees and costs. ( See id. at 10).

LEGAL STANDARD

Rule 55(a) of the Federal Rules of Civil Procedure provides that " [w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." After the clerk enters default pursuant to Rule 55(a), the court may enter a default judgment against the party. See Fed.R.Civ.P. 55(b)(2). Upon entry of default, the well-pleaded factual allegations of the complaint are taken as true, with the exception of allegations concerning the amount of damages. See Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). The scope of relief is limited to the specific demand in the complaint. See Fed.R.Civ.P. 54(c).

Even where well-pleaded allegations exist, " [t]he 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). In exercising its discretion as to whether default judgment should be entered, the court considers 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. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (the " Eitel factors").

DISCUSSION

I. LOCAL RULE 55-1o.

In this district, applications for default judgment must include: " (a) [w]hen and against what party the default was entered; (b) [t]he identification of the pleading to which default was entered; (c) [w]hether the defaulting party is an infant or incompetent party[; ] (d) [t]hat the Servicemembers Civil Relief Act (50 U.S.C. App. § 521) does not apply; and (e) [t]hat notice has been served on the defaulting party, if required by F.R.Civ.P. 55(b)(2)." Local Rule 55-1.

Here, plaintiffs have satisfied the procedural requirements for entry of default judgment. Specifically, plaintiffs have established that: (a) the Clerk entered default against defendant, (see Default by Clerk, filed on September 11, 2014; Motion at 2); (b) the default is based on defendant's failure to respond to the Complaint, (see Default by Clerk, filed on September 11, 2014; Motion at 2); (c) defendant is neither an infant nor an incompetent person, (see Complaint at ¶ 13; Motion, Declaration of [Auditor] Kristin Tingley (" Tingley Decl.") at ¶ 11); (d) defendant is not in active military service (see Tingley Decl. at ¶ 11); and (e) plaintiffs served defendant with notice of the Motion. (See Notice of Motion, filed on November 13, 2014, at 3).

II. THE EITEL FACTORS.

Having concluded that default was properly entered, the court will now determine whether to enter default judgment against defendant.

A. The Possibility of Prejudice to Plaintiff.

This factor considers whether plaintiffs will suffer prejudice if default judgment is not entered. Here, plaintiffs would suffer prejudice if default judgment is not entered because plaintiffs " would be denied the right to judicial resolution of the claims presented, and would be without other recourse for recovery." Elektra Entm't Grp. Inc. v. Crawford, 226 F.R.D. 388, 392 (C.D. Cal. 2005).

B. The Merits of Plaintiffs' Substantive Claims and the Sufficiency of the Complaint.

" Under an [Eitel] analysis, the merits of plaintiff's substantive claims and the sufficiency of the complaint are often analyzed together." Dr. JKL Ltd. v. HPC IT Educ. Ctr., 749 F.Supp.2d 1038, 1048 (N.D. Cal. 2010). These two factors require a plaintiff to " state a claim on which [the plaintiff] may recover[.]" Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978).

Plaintiffs have brought their claims under ERISA, which provides that a trustee or administrator is authorized to bring a civil enforcement action to recover unpaid contributions from an employer who is bound to make such contributions under a particular plan or a collective bargaining agreement. See 29 U.S.C. § 1132(a)(3) (authorizing fiduciary of employee benefit plan to bring a civil action to enforce any provision of ERISA); id. at § 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 collective bargaining agreement shall . . . make such contributions"); id. at § 1002(14) (" fiduciary" to include trustees and administrators). " To prevail on a claim for unpaid ERISA contributions, a plaintiff must prove that: (1) the trust funds are a qualified multi-employer plan as defined by 29 U.S.C. § 100[2](37); (2) the defendant is an employer obligated to contribute under the plan's terms, and (3) the defendant failed to contribute in accordance to the plan." Trustees of S. Cal. IBEW-NECA Pension Plan v. Alarm Tech Sec. Sys., Inc., 2008 WL 4196627, *3 (C.D. Cal. 2008). Here, plaintiffs allege that: (1) the trusts are " multiemployer plans within the meaning of 29 U.S.C. [§ ] 1002(37)(A)[, ]" (see Complaint at ¶ 6; Motion at 4; Tingley Decl. at ¶ 8); (2) defendant is an employer that is obligated to pay contributions for each hour worked by the employees, (see Complaint at ¶ ¶ 17-20; Motion at 4-5; Tingley Decl. at ¶ ¶ 11-12); and (3) defendant failed to timely pay fringe benefit contributions. (See Complaint at ¶ 21; Motion at 6, Declaration of [Auditor/Collector] Yolanda Duke (" Duke Decl.") at ¶ 7). Under the circumstances, the court is persuaded that plaintiffs' Complaint sufficiently alleges that defendant failed to pay fringe benefit contributions, in violation of ERISA.

C. The Amount of Money at Stake.

Under this Eitel factor, " the court must consider the amount of money at stake in relation to the seriousness of Defendant's conduct." PepsiCo, Inc. v. California Sec. Cans, 238 F.Supp.2d 1172, 1176 (C.D. Cal. 2002). " The Court considers Plaintiff's declarations, calculations, and other documentation of damages in determining if the amount at stake is reasonable." Truong Giang Corp. v. Twinstar Tea Corp., 2007 WL 1545173, *12 (N.D. Cal. 2007).

A plaintiff seeking default judgment is " required to prove all damages sought in the complaint." Philip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003). However, " any award in an ERISA action to collect delinquent contributions is governed by 29 U.S.C. § 1132, which circumscribes the latitude given to courts in structuring an appropriate remedy." Northern Cal. Glaziers Pension Trust Fund v. Hollis Glas, Inc., 2011 WL 5974618, *6 (N.D. Cal. 2011) (footnote omitted). Under § 1132(g)(2), a court must award a plaintiff who obtains a judgment in favor of a plan the following:

(A) the unpaid contributions,
(B) interest on the unpaid contributions,
(C) an amount equal to the greater of:
(i) interest on unpaid contributions, or
(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent [] 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)(A) - (E); see also Nw. Adm'rs, Inc. v. Albertson's, Inc., 104 F.3d 253, 257 (9th Cir. 1996) (Where default judgment has been granted in favor of a plan, an award under 29 U.S.C. § 1132(g)(2) is " mandatory."). To be entitled to a mandatory award under § 1132(g), the following three requirements must be satisfied: (1) the employer should be delinquent at the time the action is filed; (2) the district court must enter judgment against the employer; and (3) the plan itself must provide for such an award. See Northern Cal. Glaziers Pension Trust Fund, 2011 WL 5974618, *6.

Here, plaintiffs have submitted evidence that defendant " underreported the actual hours worked by its carpentry employees" resulting in more than $70, 000 in unpaid contributions, with no response from defendant as of the issuance of this Order. (See Duke Decl. at ¶ 7). Second, for the reasons contained in this Order, the court will enter judgment against defendant. Finally, the relevant plans provide for the award sought by plaintiffs. (See Tingley Decl. at ¶ ¶ 6-13).

Having determined that statutory damages are appropriate, the court must determine the propriety of the monetary amount that plaintiffs are requesting. See Northern Cal. Glaziers Pension Trust Fund, 2011 WL 5974618 at *7. Here, plaintiffs request $71, 941.11 in unpaid contributions, $42, 748.48 in pre-judgment interest, $6, 541.20 in audit fees, and $5, 347.34 in attorney's fees for a total of $126, 578.13, plus costs. (See Motion at 10).

Plaintiffs have submitted evidence that defendant " underreported the actual hours worked by its carpentry employees." (Duke Decl. at ¶ 7; Motion, Declaration of [Manager for Audit & Collections] Richard Watanabe (" Watanabe Decl.") at ¶ 8). When multiplied by the applicable contribution rates, this results in $71, 941.11 in unpaid contributions. (See Watanabe Decl. at ¶ 13). In addition, under the plan agreements, " interest is accrued at the rate of 7% of the unpaid contributions." (Id. at ¶ 12). Calculating until January 8, 2015 -- the date of the hearing on this Motion - this results in $21, 374.24 of accrued interest. This can be doubled pursuant to 29 U.S.C. § 1132(g)(2)(C), since it is greater than the liquidated damages amount. (See id., Exhibits 9-10; Motion at 3); see also Carpenters Sw. Admin. Corp. v. ACL Builders, Inc., 2012 WL 5186010, *3 (C.D. Cal. 2012) (finding that under ERISA, plaintiffs may double interest when it is greater than liquidated damages amount). Finally, under the relevant plan agreements, " defendant is to pay audit costs if delinquencies are found, " which amounts to $6, 541.20. (Watanabe Decl. at ¶ ¶ 10 & 13, Exhibit 9) (capitalization omitted).

In short, plaintiffs seek a total of $126, 578.13 plus costs, (see Motion at 6), and the court finds this to be reasonable, as the damages consist of unpaid contributions, audit fees, and attorney's fees -- all of which directly relate to defendant's alleged violation of ERISA. (See id. at 10); see also Trustees of the Operating Engineers Pension Trust v. Munson Plumbing, Inc., 2011 WL 245732, *3 (C.D. Cal. 2011) (finding that in an ERISA action, plaintiff's request consisting of attorney's fees, litigation costs, and interest is reasonable).

D. The Possibility of a Dispute Concerning Material Facts.

As noted above, upon entry of default, the well-pleaded allegations in the Complaint are taken as true, except those relating to damages. See TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). In addition, " [t]he district court is not required to make detailed findings of fact." Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir.), cert. denied 537 U.S. 1018, 123 S.Ct. 536, 154 L.Ed.2d 425 (2002). Since defendant never answered or otherwise appeared in this action, it is unclear whether there would be any genuine dispute over material facts.

E. Whether the Default Was Due to Excusable Neglect.

Excusable neglect is an equitable concept that takes account of factors such as " prejudice . .., the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith." Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 395, 113 S.Ct. 1489, 1498, 123 L.Ed.2d 74 (1993). Here, there is no evidence that defendant failed to defend this action due to excusable neglect. Defendant was served with the Complaint, (see Proof of Service, filed on August 14, 2014), and instant Motion, (see Notice of Motion, filed on November 13, 2014, at 3), and has failed to respond or otherwise defend itself in this action. In short, this factor weighs in favor of default judgment.

F. The Strong Policy Favoring Decisions on the Merits.

" Cases should be decided upon their merits whenever reasonably possible." Eitel, 782 F.2d at 1472. However, " this preference, standing alone, is not dispositive." Kloepping v. Fireman's Fund, 1996 WL 75314, *3 (N.D. Cal. 1996). Defendant's failure to answer plaintiffs' Complaint " makes a decision on the merits impractical, if not impossible." PepsiCo, Inc., 238 F.Supp.2d at 1177. Under Fed.R.Civ.P. 55(b), termination of a case before hearing the merits is allowed when a defendant failed to defend an action. The court, therefore, finds that granting default judgment is appropriate in this action as set forth above.

G. Summary of the Eitel Factors.

On balance, the Eitel factors weigh in favor of granting default judgment. The court addresses plaintiffs' requested remedies below.

III. REMEDIES.

As discussed above, the court grants plaintiffs statutory damages in the amount of $71, 941.11 in unpaid contributions, $42, 748.48 in interest, and $6, 541.20 in audit fees.

Plaintiffs also seek attorney's fees in the amount of $5, 347.34. (See Motion, Declaration of [Plaintiffs' Attorney] Jodi Siegner at ¶ 10). In default judgment actions, attorney's fees are generally awarded pursuant to the fee schedule set forth in Local Rule 55-3. Under Local Rule 55-3, attorney's fees for a delinquency of $93, 683.48[2], (see id.), are $3, 600 plus four percent of the amount over $50, 000. This comes out to $5, 347.34, which the court finds to be reasonable.

This Order is not intended for publication. Nor is it intended to be included in or submitted to any online service such as Westlaw or Lexis.

CONCLUSION

Based on the foregoing, IT IS ORDERED THAT:

1. Plaintiffs' Motion for Entry of Default Judgment (Document No. 21) is granted. Judgment shall be entered in favor of plaintiffs Carpenters Southwest Administrative Corporation and the Board of Trustees for the Carpenters Southwest Trusts, and against defendant Team Framing & Drywall, LLC. in the total amount of $126, 578.13.

2. Plaintiffs shall serve defendant with a copy of this Order and the Judgment filed contemporaneously with the filing of this Order in such a manner as to make them operative in any further proceedings.

JUDGMENT

Pursuant to the Court's Order Re: Plaintiffs' Motion for Entry of Default Judgment, IT IS ADJUDGED that:

1. Default judgment shall be entered in favor of plaintiffs defendant Team Framing & Dryway, LLC in the amount of $126, 578.13. The total amount is allocated as follows:

A. Statutory damages in the amount of $121, 230.79.
B. Attorney's fees in the amount of $5, 347.34.

2. Plaintiffs shall serve defendant with a copy of this Judgment in such a manner as to make it operative in any future proceedings.


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