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Board of Directors of Motion Picture Industry Pension Plan v. AnEFX, Inc.

United States District Court, C.D. California

April 2, 2018


          Attorneys Present for Plaintiffs: Kathryn Halford

          Present: The Honorable CHRISTINA A. SNYDER


         Proceedings: PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT (Dkt. 34, filed February 28, 2018)


         On April 5, 2017, plaintiffs Board of Directors of the Motion Picture Industry Pension Plan, Board of Directors of the Motion Picture Industry Individual Account Plan, and Board of Directors of the Motion Picture Industry Health Plan (collectively, the “Plans”) brought this action against defendant AnEFX, Inc. (“AnEFX”) pursuant to § 301 of the Labor Management Relations Act of 1947 (“LMRA”), as amended, 29 U.S.C. § 185, and § 502 of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132, for breach of collective bargaining agreements and violations of ERISA. Dkt. 1 (“Compl.”).

         On October 4, 2017, counsel for defendant filed a motion to withdraw from the representation. Dkt. 19. On November 6, 2017, the Court found good cause to permit withdrawal and directed AnEFX to retain new counsel within 30 days, admonishing that failure to do so may result in the imposition of sanctions or the entry of default. Dkt. 23. No substitution of counsel was made. Pursuant to plaintiffs' request, the Clerk entered default on January 25, 2018. Dkt. 31. On February 28, 2018, plaintiffs filed the instant motion for default judgment. Dkt. 34 (“Mot.”). The Court held a hearing on April 2, 2018. No appearance was made on behalf of AnEFX.

         Having carefully reviewed the motion and plaintiffs' supporting declarations and exhibits, the Court finds and concludes as follows.


         The Plans are employee welfare benefit and pension plans under ERISA, 29 U.S.C. § 1002(1) & 2, and multiemployer plans within the meaning of ERISA, 29 U.S.C. § 1002(37)(A). Compl. ¶ 4. The Plans were established pursuant to a series of collective bargaining agreements (the “Trust Agreements”) between various employers and employer associations performing work in the motion picture and television industry and the International Alliance of Theatrical Stage Employees and Moving Picture Machine Operators of the United States and Canada, AFL-CIO (“IATSE”). Id. ¶¶ 4, 9.

         A. Trust Agreements

         On October 18, 2010, AnEFX executed a Memorandum Agreement with IATSE Local 700, in which it agreed to become signatory to the 2009-2012 Producer IATSE and M.P.T.T.A.A.C. Basic Agreement and the 2009-2012 Local 700 Post Production Independent Agreement. Id. ¶ 8, Ex. 1. On November 5, 2010, AnEFX executed an Agreement of Consent in which it agreed to become a party to and be bound by the Producer-IATSE Basic Agreement of 2009 between the Alliance of Motion Picture and Television Producers, Inc. and IATSE together with its West Coast Studio Locals, including Local 700. Id., Ex. 2. In conjunction with these Agreements, AnEFX executed an IATSE Trust Acceptance, acknowledging that it agreed to be bound by all terms and conditions of the Trust Agreements establishing the Plans and to contribute to the Plans on behalf of employees covered by the Agreements. Id. ¶ 9, Ex. 3. AnEFX also entered into an Employee-Shareholder Company Agreement, wherein the company agreed to contribute to the Plans on behalf of its shareholder, John Levy, on a continuous 56 hour-per-week basis within five working days following the end of each weekly payroll period. Id., Ex. 4.

         The Trust Agreements obligate employers to submit weekly remittance reports, together with contributions owed to the Plans for the total hours worked by or guaranteed to all employees covered by the Agreements by the last day of each work week. Contributions are delinquent if they are not received within the timeframes established by the Trust Agreements. Id. ¶ 11; dkt. 34-2, Declaration of Chris Tashchyan (“Tashchyan Decl.”) ¶ 8A, Exs. 1-3. Pursuant to the Trust Agreements, the Plans have the right to audit employer records. Should any audit disclose a delinquency, underpayment, or other erroneous reporting, the cost of the audit shall be borne by the employer. Id. ¶¶ 8B-C. The Plans may sue to enforce the provisions of the Trust Agreements, in which event the employer shall be liable for all expenses of enforcement and collection, including costs and fees for accountants, auditors and attorneys, as well as liquidated damages and interest. Id. ¶ 8D. In the event of a default in the payment of contributions, interest is charged from the date when payment was due through the date payment is made at a rate of one percent per month. Id. ¶ 8E. Liquidated damages are assessed in an amount greater than either (1) twenty percent of all unpaid contributions, or (2) interest calculated at a rate of one percent per month from date payment was due to the date payment is made. Id. ¶ 8F.

         B. Audits of Defendant

         The Plans conducted two audits of AnEFX's records through May 7, 2016, which revealed that AnEFX owed delinquent contributions in the amount of $237, 176.47. Id. ¶ 9, see Exs. 9 & 10. The first audit was published on March 19, 2015 and disclosed $1, 087.39 in unpaid contributions for hours worked by AnEFX's employees during the period of November 7, 2010 through April 15, 2013. Id. The second audit, completed on December 16, 2016, disclosed that AnEFX had underpaid contributions in the amount of $236, 089.08 during the period between April 21, 2013 through May 7, 2016. Id. Although given an opportunity both prior to and after the finalization of the audits, AnEFX failed to dispute the findings or pay the delinquent contributions. Id.

         AnEFX did not produce records for a final audit for the period between May 2016 through August 2017, nor has the company reported or paid contributions for any weekly period after December 3, 2016 through August 31, 2017, the date AnEFX's participation in the Plans was terminated. Id. ¶ 10. As a result of this breach of the Trust Agreements, the full amount of additional delinquent contributions and other damages for the period after May 2016 has not been fully ascertained. Id. However, the Plans received multiple complaints regarding unreported hours for this period from participants in the Plans. Id. Based on payroll information provided by these participants, the Plans have determined that AnEFX owes additional contributions in the amount of $131, 033.33 as of February 2, 2018. Id., Exs. 11, 15. In addition, AnEFX has failed to make contributions for John Levy at the rate of 56 hours per week for 48 weeks per year as required by the Employee-Shareholder Company Agreement. AnEFX owes a total of $42, 175.14 for unpaid employee shareholder contributions pursuant to this agreement. Id. ¶ 11, Ex. 8.


         Pursuant to Federal Rule of Civil Procedure 55, when a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and the plaintiff does not seek a sum certain, the plaintiff must apply to the court for a default judgment. Fed.R.Civ.P. 55.

         As a general rule, cases should be decided on the merits as opposed to by default, and, therefore, “any doubts as to the propriety of a default are usually resolved against the party seeking a default judgment.” Judge William W. Schwarzer et al., California Practice Guide: Federal Civil Procedure Before Trial ¶ 6:11 (The Rutter Group 2015) (citing Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985)). Granting or denying a motion for default judgment is a matter within the court's discretion. Elektra Entm't Grp. Inc. v. Crawford, 226 F.R.D. 388, 392 (C.D. Cal. 2005); see also Sony Music Entertainment, Inc. v. Elias, 2004 WL 141959, *3 (C.D. Cal. Jan. 20, 2004).

         The Ninth Circuit has directed that courts consider the following factors in deciding whether to enter default judgment: (1) the possibility of prejudice to plaintiff; (2) the merits of plaintiff's substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning the material facts; (6) whether defendant's default was the product of excusable neglect; and ...

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