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Construction Laborers Trust Funds for Southern California Administrative Co. v. Dominguez

United States District Court, C.D. California

November 21, 2017

CONSTRUCTION LABORERS TRUST FUNDS FOR SOUTHERN CALIFORNIA ADMINISTRATIVE COMPANY, Plaintiff,
v.
GEORGE ANDREW DOMINGUEZ, et al., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S APPLICATION FOR RIGHT TO ATTACH ORDER AND WRIT OF ATTACHMENT [DKT. NO. 13]

          SUZANNE H. SEGAL UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         On September 28, 2017, Plaintiff Construction Laborers Trust Funds for Southern California Administrative Company (“CLTF” or “Plaintiff”) filed a civil complaint against Defendants George Andrew Dominguez (“Dominguez”), Hudson Insurance Company (“Hudson”), and Suretec Insurance Company (“Suretec”).[1] (“Complaint, ” Dkt. No. 1). The Complaint asserts claims for contributions to employee benefit plans, specific performance, preliminary and permanent injunctive relief, breach of settlement agreement, recovery against license bond, and recovery against labor and material payment bonds. (Id. at 4-16).

         Two weeks later after Plaintiff filed the Complaint, on October 12, 2017, Plaintiff filed an Ex Parte Application for a Right to Attach Order and Writ of Attachment, and for a Temporary Protective Order.[2] (“Application” or “Appl., ” Dkt. No. 13). The Application was supported by a Memorandum of Points and Authorities (“Memo.”) and the declarations of Marsha M. Hamasaki (“Hamasaki Decl.”) and Yvonne Higa (“Higa Decl.”). (Id.). Defendant filed an Opposition on October 16, 2017, (“Opp.”), including the declaration of George Andrew Dominguez (“Dominguez Decl.”). (Dkt. No. 17). That same day, the Court held a telephonic hearing and issued an Order denying the Ex Parte Application without prejudice on the procedural ground that Plaintiff had not shown that it would suffer irreparable harm if the matter were heard as a regularly noticed motion. (Dkt. No. 19). On October 17, 2017, Plaintiff filed a Notice of Hearing setting the hearing on the merits of its Application for November 7, 2017, (Dkt. No. 20), which the Court continued to November 21, 2017. (Dkt. No. 33).

         On October 27, 2017, Defendant filed a Supplemental Opposition, (“Supp. Opp.”), including another declaration of George Andrew Dominguez (“Dominguez Supp. Decl.”). (Dkt. No. 26). Plaintiff filed a Reply on November 3, 2017, (“Reply, ” Dkt. No. 29), including additional declarations by Marsha M. Hamasaki, (“Hamasaki Supp. Decl., ” Dkt. No. 30), and Yvonne Higa. (“Higa Suppl. Decl., ” Dkt. No. 31). The Court held a hearing on November 21, 2017. For the reasons discussed below and at the hearing, Plaintiff's Application for a Right to Attach Order and Writ of Attachment is GRANTED.

         II.

         ALLEGATIONS OF THE COMPLAINT

         Plaintiff is an administrator and agent for collection of several employee benefit plans, and a fiduciary as to those plans. (Complaint ¶ 3). The plans were created by written agreements, and qualify as “employee benefit plans” and “multi-employer plans” within the meaning of the relevant provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). (Id.).

         Defendant is an individual doing business as G.A. Dominguez. (Id. at ¶ 4). Defendant is a party to written collective bargaining agreements with Plaintiff and its affiliated local unions. (Id. ¶ 11). Pursuant to these agreements, Defendant is required to pay fringe benefit contributions for each hour worked by his employees performing services covered by the agreements, and to deliver to Plaintiff monthly contribution reports that identify the employees, the hours worked by each employee, and the amount of the contributions due. (Id. ¶ 13). The contributions are to be paid monthly. (Id.). In the event that Defendant fails to pay the contributions timely, he is liable for interest on the unpaid amounts, plus liquidated damages in a sum equal to the greater of $25.00 or 20% of the unpaid contributions. (Id. ¶¶ 16-17). The agreements empower Plaintiff to audit Defendant's payroll and business records, with resulting costs charged to Defendant. (Id. ¶ 18).

         Plaintiff alleges that Defendant employed workers covered by the agreements but failed to pay benefits for certain periods from January 2014 through July 2017. (Id. ¶¶ 19 & 23). Defendant previously entered into a settlement agreement concerning amounts owed for the period from March 2016 to September 2016, (id. ¶¶ 41-42), but failed to make all the payments. (Id. ¶ 44). Defendant has also failed to permit Plaintiff to conduct a complete audit of his payroll and business records. (Id. ¶¶ 20-21).

         III.

         THE ATTACHMENT APPLICATION AND THE PARTIES' CONTENTIONS

         By the instant Application, Plaintiff “seeks to attach funds owed to [Defendant] by his prime contractor and by the public agencies pending final judgment[, ] which may partially secure recovery of the funds owed by [Defendant, ] and to record the writ of attachment against [Defendant's] business property prior to its sale.” (Memo. at 2). Plaintiff calculated in its opening brief that as of September 27, 2017, Defendant owed Plaintiff at least $158, 832.85. (Id. at 10). However, Plaintiff sought to attach only $130, 000.00 of Defendant's assets in light of the possibility that it might prevail on its Sixth Claim for Relief against Suretec for unpaid compensation guaranteed by a payment bond. (Id.; see also Complaint at 20-21). Plaintiff further revised its calculations in its Reply to reflect adjustments made after the Application was filed. Plaintiff determined that the revised total amount owed by Defendant, including unpaid fringe benefits, liquidated damages, audit fees, and interest as of October 27, 2017, was $139, 576.26. (Id.; see also Higa Supp. Decl. ¶ 9). Plaintiff further conceded that the amount it is now seeking from Suretec could reduce Defendant's liability to $102, 185.95. (Reply at 11). Plaintiff presently seeks to attach only $75, 000.00 of that amount in order to “free some $27, 000.00 to [Defendant] for the expenses and legal fees pending final judgment” of this matter. (Id.).

         The specific assets owned by Defendant which Plaintiff seeks to attach are:

A) Lien against real property commonly known as 535 537 W. Grand Avenue, Escondido, CA 92025;
B) Proceeds of the sale of real property commonly known as 535-537 W. Grand Avenue, Escondido, CA 92085 [sic];
C) All contract earnings, right to payments, retention, for work performed by Defendant for the San Diego Unified School District;
D) All contract earnings, right to payments, retention for work performed for the Whittier Union High School District;
E) All Defendant's accounts receivables, payments, right to payments, owed by JTS Modular Inc., and all funds payable thereto up to [$75, 000.00] in JTS Modular Inc.'s possession, custody and/or control, including subcontract earnings for work performed for JTS Modular Inc., for the Pomona Unified School District and/or any other subcontract work by Defendant for JTS Modular, Inc.
F) Funds held in bank accounts with City National Bank.

(Appl., Exh. A at 6).

         Plaintiff argues that it is entitled to attach Defendant's assets for at least three reasons. First, Plaintiff contends that Defendant evidently does not have the funds on hand to pay the amounts owed, as demonstrated by his failure to pay monies due under the settlement agreement and his alleged submission of “unpaid false reports as confirmed by the audit of payroll records, and certified payroll records on public works projects.” (Memo. at 10). Plaintiff believes that Defendant owes “substantial debt” not only to Plaintiff, but also to the IRS, as evidenced by tax liens levied by the IRS. (Reply at 3; Hamasaki Decl. ¶ 8 & Exh. 3). Second, Plaintiff is concerned that Defendant may be shutting down his business because his commercial property is for sale by owner. (Memo. at 10). Plaintiff argues that further evidence of Defendant's potential imminent departure from the business is suggested by Defendant's failure to submit monthly contribution reports since May 2017, even though other records confirm that he has had employees on his payroll since that time, and by his failure to pay the contributions due. (Id.). Third, Plaintiff maintains that Defendant's unwillingness to communicate indicates that Plaintiff will recover nothing unless it obtains contributions from Defendant's known projects for which Defendant will receive payment, or from the proceeds of the sale of his commercial property. (Id. at 11).

         Defendant does not challenge Plaintiff's allegations that he is delinquent in making required contributions, or even the amounts that Plaintiff alleges that he owes.[3] Instead, Defendant argues that the “scope” of the proposed attachment is “problematic” and that there is no danger that funds will not be available if Plaintiff prevails in this action. (Supp. Opp. at 1). Defendant asserts four challenges to the “scope” of the proposed attachment, which he contends impermissibly encompasses exempt property. Defendant notes first that “it could be argued” that Plaintiff is seeking to attach assets held “in trust” by Defendant in which he has no ownership interest. (Id.). According to Defendant, the rights of his bond issuers (and co-Defendants), Hudson and Suretec, create a “trust relationship” in which payments by third parties to Defendant for work covered by the bonds should be construed as monies held “in trust” by Defendant for the benefit of Hudson and Suretec. (Id.). Second, Defendant claims that his assets are community property, and that attachment would infringe the property rights of his non-debtor spouse. (Id.). Third, Defendant maintains that as an individual, he is “entitled to assert certain exemptions” under California Code of Civil Procedure §§ 703.010-704.995, although he does not identify the specific exemptions that he believes may apply.[4] (Id.). Fourth, Defendant asserts that Plaintiff is not permitted under California Code of Civil Procedure § 487.020(b) to attach property that is necessary to support Defendant and his family, including funds needed to pay for attorney's fees so that Defendant may meaningfully defend the instant action on the merits. (Id.) (citing Randone v. Appellate Dep't, 5 Cal.3d 536, 562 (1971)).

         As to the contention that there is no risk that funds will not be available to make Plaintiff whole should Plaintiff prevail in this action, Defendant argues that “[t]he issuance of payment and performance bonds on each of the projects upon which [Plaintiff] has filed its lawsuit, as well as all other public works projects, ensures that, should [Plaintiff] prevail, funds will be available to satisfy [Plaintiff's] claim.” (Supp. Opp. at 2). According to Defendant, “[p]ractically speaking, the presence of such bonds already secure[s] [Plaintiff's] claim, ” thereby satisfying the purpose of prejudgment attachments. (Id. at 6). Finally, Defendant states in his declaration that although he listed real property for sale by owner with an asking price of $585, 000.00, he has received no reasonable offer in the year that the property has been on the market, and he does not anticipate that a sale will be finalized “in the near future.” (Dominguez Supp. Decl. ¶ 10).

         Plaintiff refutes each of the defenses raised by Defendant. With respect to Defendant's challenges to the “scope” of the proposed attachment, Plaintiff argues that sums owed by third parties to Defendant are Defendant's “accounts receivable” and are not held “in trust” for the benefit of Defendant's bond issuers. (Reply at 5). Plaintiff further contends that community assets are subject to attachment. (Id.) (citing, inter alia, Century Surety Co. v. Polisso, 139 Cal.App.4th 922, 942 (2006), and California Family Code § 910(a)). To the extent that Defendant is entitled to any statutory exemptions from attachment, which he does not identify, Plaintiff notes that the California Code of Civil Procedure sets out procedures for claiming exemptions after levy. (Reply at 7) (citing Cal. Code Civ. Proc. §§ 703.510 et seq.). With respect to Defendant's claim that the assets Plaintiff seeks to attach are needed to support his family and his defense in this litigation, Plaintiff states that such a claim requires a full disclosure of Defendant's assets. (Reply at 7). As to Defendant's contention that funds will be available through bond issuers Hudson and Suretec, Plaintiff argues that it is not clear that the bond amounts will be sufficient as “[p]ayment bonds on projects only cover the contributions owed to the employees for their work on the bonded project, and do not cover [Plaintiff's] claim for liquidated damages[] and audit fees.” (Id. at 4). Finally, with respect to Defendant's claim that liquidated damages are “arguably impermissible” given their punitive nature, Plaintiff emphasizes that both the written agreements and ERISA, 29 U.S.C. § 1132(g)(2), provide for liquidated damages, which the Ninth Circuit has “repeatedly held . . . are mandatory elements of any court award.” (Reply at 2) (citing cases; emphasis in original).

         IV. DISCUSSION

         A. California Law Applies To Plaintiff's Application For Right To Attach Order And Writ Of Attachment

         Plaintiffs in federal court may invoke whatever remedies are provided under the law of the state in which the federal court is located for “seizing a person or property to secure satisfaction of the potential judgment.” Fed.R.Civ.P. 64; Reebok Int'l, Ltd. v. Marnatech Enters., Inc., 970 F.2d 552, 558 (9th Cir. 1992) (discussing Rule 64); NML Capital, Ltd. v. Spaceport Sys. Int'l, L.P., 788 F.Supp.2d 1111, 1116 (C.D. Cal. 2011). These remedies may include a writ of attachment. Fed.R.Civ.P. 64; see also VFS Fin., Inc. v. CHF Express, LLC, 620 F.Supp.2d 1092, 1094-95 (C.D. Cal. 2009) (Rule 64 “provides for prejudgment attachment[] and other prejudgment remedies . . .” authorized under state law). Because attachment is sought against Defendant in the state of California, California law determines whether and under what conditions a writ of attachment may issue. In California, the procedures and grounds for obtaining orders for prejudgment writs of attachment are codified at California Code of Civil Procedure §§ 481.010-493.060.

         B. Overview Of California Law Governing Attachment

         Attachment “is a remedy by which a Plaintiff with a contractual claim to money (not a claim to a specific item of property) may have various items of a defendant's property seized before judgment and held by a levying officer for execution after judgment.” Waffer Int'l Corp. v. Khorsandi, 69 Cal.App.4th 1261, 1271 (1999) (emphasis omitted). California allows prejudgment attachments under limited circumstances as “a provisional remedy to aid in the collection of a money demand.” Kemp Bros. Constr. Inc. v. Titan Elec. Corp., 146 Cal.App.4th 1474, 1476 (2007). It is “a harsh remedy because it causes the defendant to lose control of his property before the plaintiff's claim is adjudicated.” Martin v. Aboyan, 148 Cal.App.3d 826, 831 (1983). Therefore, the requirements for the issuance of a writ of attachment are strictly construed against the applicant. Pos-A-Traction, Inc. v. Kelly-Springfield Tire Co., 112 F.Supp.2d 1178, 1181 (C.D. Cal. 2000) (“Attachment is a purely statutory remedy, which is subject to strict construction.”). The burden is on the applicant to establish each element necessary for an attachment order by a preponderance of the evidence. Loeb & Loeb v. Beverly Glen Music, Inc., 166 Cal.App.3d 1110, 1116 (1985).

         A writ of attachment may be issued “only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars.” Cal. Code Civ. Proc. § 483.010(a) (emphasis added). For damages to be “readily ascertainable, ” the contract “must furnish a standard by which the amount due may be clearly ascertained and there must exist a basis upon which the damages can be determined by proof.” CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., 115 Cal.App.4th 537, 540 (2004) (internal quotation marks omitted); see also Pet Food Express, Ltd. v. Royal Canin USA Inc., 2009 WL 2252108, at *5 (N.D. Cal. July 28, 2009) (“lost profits” that plaintiff sought to attach were not “certain, fixed, or even readily ascertainable” and thereby failed to “meet the threshold requirement for this court to even consider issuing a writ of attachment”). Attachment is permitted on unsecured claims or claims secured by personal property, but not on claims secured by real property. Cal. Code Civ. Proc. § 483.010(b). Attachment lies on any claim against a partnership or corporation or on claims against individuals that arise out of the conduct by the individual of a trade, business, or profession. Id. § 483.010(c).

         A court must find all of the following before an attachment order may issue: (1) the claim upon which the attachment is based is one upon which an attachment may be issued; (2) the plaintiff has established the probable validity of the claim upon which the attachment is based; (3) the attachment is not sought for a purpose other than recovery of the claim upon which the attachment is based; and (4) the amount to be secured by the attachment is greater than zero. Id. § 484.090(a). To establish the “probable validity” component, the plaintiff must show that it is more likely than not that it will obtain a judgment against the defendant. Id. § 481.190; see also Pos-A-Traction, 112 F.Supp.2d at 1182. “In determining the probable validity of a claim where the defendant makes an appearance, the court must consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.” Loeb & Loeb, 166 Cal.App.3d at 1120.

         California law restricts the availability of pre-judgment attachments in part by providing the defendant with an opportunity, prior to a ruling on an attachment application, to establish that the property sought to be ...


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