Crosthwaite et al v. AAA Construction Group, Inc., No. 3:2010cv01376 - Document 29 (N.D. Cal. 2010)
Court Description: ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT by Judge Alsup granting 22 Motion for Default Judgment (whalc2, COURT STAFF) (Filed on 12/10/2010)
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Crosthwaite et al v. AAA Construction Group, Inc. Doc. 29 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 12 13 14 15 F. G. CROSTHWAITE and RUSSELL E. BURNS, in their capacities as Trustees of the Operating Engineers Health and Welfare Trust Fund, PENSION TRUST FUND FOR OPERATING ENGINEERS, PENSIONED OPERATING ENGINEERS’ HEALTH AND WELFARE FUND, and OPERATING ENGINEERS LOCAL UNION NO. 3 OF THE INTERNATIONAL UNION OF OPERATING ENGINEERS, AFL-CIO, 18 ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT Plaintiffs, 16 17 No. C 10-01376 WHA v. AAA CONSTRUCTION GROUP, INC., a California corporation, 19 Defendant. 20 / 21 INTRODUCTION 22 In this ERISA action, plaintiffs move for default judgment against defendant AAA 23 Construction Group, Inc. following its failure to appear in this action and respond to the 24 complaint. Plaintiffs allege that defendant failed to make the required contributions, liquidated 25 damages, and interest payments to plaintiffs as required by a bargaining agreement. Plaintiffs 26 seek to recover these payments and attorney’s fees and costs. Plaintiffs’ counsel failed to appear 27 at the hearing and later submitted a request to decide this motion on the papers. For the following 28 reasons, plaintiffs’ motion for default judgment is GRANTED IN PART. Dockets.Justia.com 1 2 STATEMENT Plaintiffs filed this action on April 1, 2010. According to the complaint, plaintiffs Pension 3 Trust Fund for Operating Engineers and Pensioned Operating Engineers’ Health and Welfare 4 Fund are employee benefit plans. Plaintiffs F. G. Crosthwaite and Russell E. Burns are 5 fiduciaries of the Operating Engineers Health and Welfare Trust Fund, which is also an employee 6 benefit plan. Plaintiff Operating Engineers Local Union No. 3 of the International Union of 7 Operating Engineers, AFL-CIO, is a union and a party to a collective bargaining agreement with 8 defendant. Defendant AAA Construction Group, Inc. is an employer under ERISA. 9 The complaint alleges that the union plaintiff and defendant “entered into a collective bargaining agreement requiring employer contributions to the Plaintiff Funds, and to the Union 11 For the Northern District of California United States District Court 10 for union dues and to the Bargained Plans.” The complaint lists funds that defendant is required 12 to contribute to under the collective bargaining agreement. Plaintiffs Crosthwaite and Burns are 13 co-chairmen of the board of trustees of the funds, which receive and administer contributions 14 made pursuant to the bargaining agreement to the plans. Under the bargaining agreement 15 defendant is also required to submit monthly reports on the number of hours worked by its 16 employees. For each delinquent payment under the bargaining agreement, defendant must pay 17 liquidated damages and interest as set forth in the agreement. 18 According to the complaint, defendant has failed to make the required contributions for 19 June 2009, submit monthly reports from July 2009 through February 2010, or pay previously 20 assessed liquidated damages and interest. As relief, plaintiffs request damages in the amount of 21 the unpaid contributions, liquidated damages, and interest, attorney’s fees and costs, and for an 22 injunction to prevent defendant from continuing to breach its obligations under the bargaining 23 agreement and ERISA. The complaint does not assert claims for relief set out from other 24 allegations, but rather reads as one narrative setting forth plaintiffs’ claims. 25 Plaintiffs attempted initial service on defendant on April 27, 2010 (Dkt. No. 7). Plaintiffs 26 moved for entry of default, but the Clerk declined to enter default (Dkt. No. 10). Plaintiffs 27 investigated addresses at which they could effectuate service on defendant or certain known 28 officers and directors of defendant. Through this investigation plaintiffs determined the address 2 1 of one of defendant’s officers and directors. Accordingly, service was effectuated on defendant 2 on August 21 (Dkt. No. 16). Defendant has failed to file any responsive pleading in this action. 3 Defendant also failed to appear at the case management conference. Default was entered on 4 September 28 (Dkt. No. 19). 5 Plaintiffs now move for default judgment against the defendant. A hearing on the motion 6 was noticed for December 9. Defendant was properly served with notice of the motion, which 7 included the hearing date and time (Dkt. No. 26). Defendant did not appear at the hearing, either 8 through a representative or through counsel. 9 FRCP 55(b)(2) permits a court, following an entry of default, to enter default judgment 11 For the Northern District of California United States District Court 10 ANALYSIS against a defendant. “The district court’s decision whether to enter a default judgment is a 12 discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The scope of relief 13 allowed through default judgment is limited by FRCP 54(c), which states that “[a] default 14 judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” 15 1. 16 Plaintiffs had some initial challenges serving defendant. Eventually, however, they SERVICE OF PROCESS 17 successfully served Michael Arikat, who — according to documentation submitted by plaintiffs 18 — is an officer and director of defendant, as registered with the State of California. Serving Mr. 19 Arikat constitutes service to the defendant corporation. See Cal. Code Civ. Proc. 416.10. Mr. 20 Arikat was served at his residence on August 21. Pursuant to FRCP 4(e), this constitutes proper 21 service. MERITS OF THE CLAIMS AND SUFFICIENCY OF THE COMPLAINT 22 2. 23 In the Ninth Circuit, a court is to consider several factors in exercising its discretion to 24 25 26 27 award 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. 28 3 1 Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). After entry of default, well-pled 2 allegations in the complaint regarding liability are taken as true, except as to amount of damages. 3 Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Consequently, Eitel factors 4 two, three, and five weigh in favor of the entry of default judgment against defendant AAA 5 Construction Group. There is no dispute concerning material facts. The well-pled allegations in 6 plaintiffs’ complaint regarding liability are treated as true. 7 8 9 provides that: 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. 11 29 U.S.C. 1145. Section 1145 created a federal cause of action against employers who have For the Northern District of California United States District Court 10 The well-pled facts establish the merits of plaintiffs’ case against defendant. ERISA 12 failed to make timely contributions as required under collective bargaining agreements such as 13 the one in this action. In the present case, the complaint alleges that contributions from June 2009 14 and other damages owed under Section 1145 remain unpaid. 15 Given this delinquency, recoverable damages are set forth in 29 U.S.C. 1132(g)(2): 16 17 In any action under this subchapter by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan — 18 (A) the unpaid contributions, 19 (B) interest on the unpaid contributions, 20 (C) an amount equal to the greater of — 21 (i) interest on the unpaid contributions, or 22 23 (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), 24 25 (D) reasonable attorney’s fees and costs of the action, to be paid by the defendant, and 26 (E) such other legal or equitable relief as the court deems appropriate. 27 The well-pled allegations, taken as true for the limited purpose of determining liability, establish 28 that unpaid contributions and other damages existed at the time this lawsuit was filed. The relief 4 1 sought is generally within the scope of ERISA. In short, plaintiffs’ complaint sufficiently states a 2 meritorious claim under ERISA. 3 The remaining Eitel factors favor entry of default judgment. First, absent entry, plaintiffs Second, it is unlikely that default was the result of excusable neglect. When defendant failed to 6 report or pay the contributions and damages at issue, demand was made on defendant to conform 7 with its contractual and statutory duties. Third, although federal policy favors decisions on the 8 merits, Rule 55(b) permits entry of default judgment in situations such as this where the defendant 9 refuses to litigate. Fourth, the sum of money at stake in this action is not unreasonable in light of 10 the allegations in the complaint. In sum, after careful consideration of all of the Eitel factors, this 11 For the Northern District of California might be unable to recover and provide the contributions owed to beneficiaries and members. 5 United States District Court 4 order finds that the entry of default judgment against defendant AAA Construction Group is 12 warranted. 13 3. 14 Sections 1145 and 1132 are the statutory basis of defendant’s duty to make timely 15 contributions to trust funds regulated by ERISA. Section 1132(g)(2) provides that plaintiffs are 16 entitled to unpaid contributions, liquidated damages, interest, and attorney’s fees. These awards 17 are mandatory under ERISA when unpaid contributions are established. Nw. Adm’rs, Inc. v. 18 Albertson’s, Inc., 104 F.3d 253, 257–58 (9th Cir. 1996). 19 SCOPE OF RELIEF Plaintiffs seek a judgment granting the following relief: (1) $2,095.56 in unpaid 20 contributions; (2) $4,380.54 in liquidated damages; (3) $754.39 in interest; (4) $6,809.50 in 21 attorney’s fees; (5) $1,583.55 in costs; and (6) an order requiring “Defendant to submit all 22 contribution reports and make payment on all additional amounts found due.” Though allegations 23 in the complaint regarding liability are taken as true, allegations as to the amount of damages are 24 not. 25 The requested relief for unpaid contributions in June 2009 is properly compensable under 26 29 U.S.C. 1132(g)(2)(A). Accordingly, plaintiffs are entitled to relief in the amount of $2,095.56 27 in unpaid contributions. 28 5 1 As stated, plaintiffs also request $4,380.54 in liquidated damages and $754.39 in interest, 2 incurred due to late contribution payments from January 2009 through June 2009. When 3 plaintiffs seek to collect liquidated damages for delinquent contributions that have already been 4 paid, mandatory liquidated damages under Section 1132(g)(2) do not apply. Idaho Plumbers & 5 Pipefitters Health & Welfare Fund v. United Mech. Contractors, Inc., 875 F.2d 212, 215 (9th Cir. 6 1989). However, liquidated damages and interest for late-paid contributions are allowable if they 7 are available under an enforceable contract, such as the collective bargaining agreement that is 8 present here. Section 12.13.00 of the agreement provides for the liquidated damages and interest 9 that were assessed here. Plaintiffs’ request suffers, however, from problems of proof. Based on a review of 11 For the Northern District of California United States District Court 10 plaintiffs’ submissions, the contributions that underlie the assessment of liquidated damages and 12 interest themselves seem to have been paid before the filing of this lawsuit. Plaintiffs provide a 13 summary list of liquidated damages and interest owing from January 2009 through June 2009, 14 “[a]ccording to [their] records.” There is no supporting documentation. There is no way to 15 compare records to determine what was owed versus what was paid, and when. In lieu of 16 evidence, plaintiffs merely provide their summary, which does not inspire confidence in this 17 context. Evaluation of plaintiffs’ request for liquidated damages and interest relative to the 18 formula for their assessment under the bargaining agreement requires knowledge of the amount 19 owed, payments made, and dates of payment, which we do not have. Consequently, plaintiffs are 20 not entitled to their requested relief in the amount of $4,380.54 in liquidated damages and 21 $754.39 in interest. 22 Even when attorney’s fees are mandatory under Section 1132(g)(2), a district court should 23 consider various relevant factors to determine the reasonableness of those fees. Kemmis v. 24 McGoldrick, 706 F.2d 993, 997–98 (9th Cir. 1983). These factors include: 25 26 27 28 (1) the time and labor required; (2) the novelty and difficulty of the questions presented; (3) the skill requisite to perform the legal services properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. 6 1 Seymour v. Hull & Moreland Eng’g, 605 F.2d 1105, 1117 (9th Cir. 1979). Plaintiffs submitted a 2 declaration of counsel in support of their request for $6,809.50 in attorney’s fees and $1,583.55 in 3 costs. The declaration states generally what tasks were involved in pursuing this lawsuit, the 4 number of hours worked by three attorneys and one paralegal, their billing rates, the general 5 categories of costs incurred, and total figures for fees and costs incurred. 6 Plaintiffs’ counsel’s submissions are inadequate to evaluate the requested amount of fees 7 based on the Seymour factors. The submissions do not even address several of the factors and did 8 not include a breakdown of the fees incurred. Without more, this order cannot approve an award 9 of the requested amount of attorney’s fees. As to costs, plaintiffs must make a request for taxable 11 For the Northern District of California United States District Court 10 costs in strict compliance with the civil local rules. Plaintiffs lastly request an order requiring “Defendant to submit all contribution reports 12 and make payment on all additional amounts found due.” This is not outside of the scope of relief 13 requested in the complaint, which stated a prayer for relief for an order “requiring that Defendant 14 comply with its obligations . . . [and] enjoining Defendant from violating” the bargaining 15 agreement and ERISA. Among the facts alleged in the complaint is that defendant has not 16 submitted a monthly report (or paid a contribution) from July 2009 through February 2010. 17 As stated above, Section 1132(g)(2)(E) provides for equitable relief. Defendant’s 18 payment history presents a picture of a business that was content with delinquency for the first 19 half of 2009 and content with nonpayment and evasion since then. Defendant shall not be 20 allowed to continue in this manner. This order requires defendant AAA Construction Group, Inc. 21 to provide monthly Employer’s Reports as set forth in the bargaining agreement to plaintiffs’ 22 counsel, Saltzman & Johnson Law Corporation, for the months of July 2009 through November 23 2010. Plaintiffs must effect service through a valid process server within 30 days of the date of 24 this order. (This is necessary to subject defendant to the contempt power of the district court.) 25 Defendant AAA Construction Group is ordered to provide the reports specified above within 60 26 days of the date of this order. 27 28 7 1 CONCLUSION 2 For the reasons set forth above, plaintiffs’ motion for default judgment is GRANTED IN 3 PART. Judgment in favor of plaintiffs and against defendant AAA Construction Group, Inc. in the 4 amount of $2,095.56 in unpaid contributions will be entered accordingly. Plaintiffs’ request for 5 liquidated damages, interest, and attorney’s fees is denied for lack of proof. Defendant is ordered 6 to provide monthly Employer’s Reports to plaintiffs’ counsel as stated above. Following the 7 entry of judgment, plaintiffs may serve and file a bill of costs pursuant to the civil local rules. 8 9 IT IS SO ORDERED. 10 For the Northern District of California United States District Court Dated: December 10, 2010. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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