United States District Court, E.D. California
R. ALEXANDER ACOSTA, Plaintiff,
CMSH ELECTRICAL, et al., Defendants.
FINDINGS AND RECOMMENDATIONS
CAROLYN K. DELANEY, UNITED STATES MAGISTRATE JUDGE
the court is plaintiff's motion for default judgment.
(ECF No. 7.) Defendant has failed to file an opposition to
this motion in accordance with Local Rule 230(c).
Accordingly, the hearing on the motion set for January 24,
2018 was vacated.
record reflects that defendant was properly served with
process on November 16, 2017 and default was entered December
11, 2017. Plaintiff thereafter filed an application for
default judgment, seeking injunctive relief. The undersigned
has fully considered the briefs and record in this case and,
for the reasons stated below, will recommend that
plaintiff's motion for default judgment be granted.
action, plaintiff, the U.S. Secretary of Labor, avers that
defendant CMSH Electrical (“CMSH”) is the Plan
Administrator for an employee pension benefit plan
(“Plan”) as defined under the Employee Retirement
Income Security Act of 1974 (“ERISA”). (ECF No.
1, “Compl., ”
3-4.) Plaintiff avers that CMSH's powers were suspended
by the California Franchise Tax Board in 2015. (Compl.,
¶ 9.) The plan's sole officer, Etsel Jack Baker, was
convicted of felony theft and embezzlement after transferring
Plan assets into a personal account, and is currently
incarcerated. (Compl., ¶ 10.) The Plan's asset
custodian, Merrill Lynch, “will not authorize
distributions of the remaining Plan assets to the Plan's
participants and beneficiaries without direction from a
properly appointed fiduciary or a court-appointed
fiduciary.” (Compl., ¶ 13.)
March 31, 2015, plaintiff alleges, the Plan had five
participants other than Mr. Baker and $0.00 in Plan assets.
(Compl., ¶ 14.) At the time Mr. Baker embezzled the
funds, the Plan was bonded by Traveler's Insurance.
(Id.) Traveler's Insurance has indicated that it
will pay bond proceeds to the Plan, restoring $272, 003.00
for the five participants, but at this time there is no
fiduciary available to receive the funds on behalf of the
seeks relief pursuant to ERISA §§ 502(a)(2) and
502(a)(5), 29 U.S.C. §§ 1132(a)(2) and 1132(a)(5).
Plaintiff seeks only injunctive, not monetary, relief, and
requests the court to remove CMSH as Plan Administrator and
to appoint Metro Benefits, Inc. as an independent fiduciary
with authority to administer the Plan. (See ECF No.
to Federal Rule of Civil Procedure 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)). 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 considers the following
(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
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir.
1986). Default judgments are ordinarily disfavored.
Id. at 1472.
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)); accord Fair Housing of Marin v.
Combs, 285 F.3d 899, 906 (9th Cir. 2002). In addition,
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. Hoa Huynh, 503 F.3d 847, 854 (9th Cir.
2007) (stating that a defendant does not admit facts that are
not well-pled or conclusions of law); 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 does not
establish the amount of damages. Geddes, 559 F.2d at