F.G. Crosthwaite et al v. LML Enterprises, Inc et al

Filing 22

ORDER TO SHOW CAUSE. Show Cause Response due by 9/13/2013. Signed by Magistrate Judge Jacqueline Scott Corley on 9/3/2013. (ahm, COURT STAFF) (Filed on 9/3/2013)

1
2
3
4
5
6
7

IN THE UNITED STATES DISTRICT COURT

8

FOR THE NORTHERN DISTRICT OF CALIFORNIA

9
10

Northern District of California

United States District Court

11

F.G. CROSTHWAITE, et al.,

12
13

Plaintiffs,

Case No.: 13-cv-0740 JSC
ORDER TO SHOW CAUSE

v.

14
15

LML ENTERPRISES, INC., et al.,

16
17

Defendants.

18
19

In this enforcement action brought under the Employee Retirement Income Security

20

Act (“ERISA”), Plaintiffs bring a Motion for Default Judgment (“Motion”) seeking entry of

21

default judgment, an award of outstanding employee benefit contributions, liquidated

22

damages and interest, and attorneys fees and costs. Plaintiffs seek default judgment against

23

Defendant LML Enterprises, Inc. (“LML”), a corporation, and Sean Christopher Lyons

24

(“Lyons”), as an individual. Plaintiffs assert that Defendant Lyons is individually liable for

25

the $83,123.59 in unpaid contributions, liquidated damages, and interest incurred as a result

26

of Defendant LML’s failure to pay and report its required contributions. (See Dkt. No. 13-1

27

at 7.) For the reasons stated below, the Court orders Plaintiffs to show cause with respect to

28

1

their Motion against individual Defendant Lyons and their calculation of unpaid

2

contributions.
DISCUSSION

3
4
5

I.

Individual Defendant Liability
Courts have found defendants individually liable for, among other things, unpaid

6

contributions “[w]here a collective bargaining agreement specifically provides for personal

7

liability of a corporate officer.” Emp. Painters’ Trust Health & Welfare Fund v. Bessey, 2009

8

WL 3347588, at *3 (W.D. Wash. Oct. 15, 2009). It is generally required that the corporate

9

officer to be held personally liable must have executed the document binding him or her to the

Northern District of California

terms of the collective bargaining agreement. See Emp. Painters’ Trust Health & Welfare

11
United States District Court

10

Fund v. Landon Const. Grp., 2011 WL 5864648, at *3 (W.D. Wash. Nov. 22, 2011)

12

(collecting cases and finding that “where courts have considered whether to uphold personal

13

liability provisions in collective bargaining agreements, the question of whether the officer at

14

issue signed the contract has been a key consideration”).

15

Plaintiffs contend that “Defendant Sean Christopher Lyons has personally guaranteed

16

all amounts claimed herein, pursuant to the terms of the Independent Northern California

17

Construction Agreement.” (Dkt. No. 1 ¶ 12.) Although the Independent Northern California

18

Construction Agreement includes provisions which would impose individual liability under

19

certain circumstances, Plaintiff has not cited to a particular provision or otherwise established

20

that Lyons agreed to be bound by the agreement. (Dkt. No. 14-2, at 1.) Indeed, Plaintiff does

21

not specifically allege that Lyons signed the agreement and the signature on the agreement is

22

illegible. That Lyons is identified as the “Responsible Officer, Partner, etc.” on the reverse

23

side of the agreement is suggestive, but the Court cannot conclude on that basis alone that

24

Lyons agreed to be bound by the agreement. (Dkt. No. 14-2 at 2.)

25

Plaintiffs are hereby ORDERED to SHOW CAUSE as to whether Lyons personally

26

signed the Independent Northern California Construction Agreement, and if not, what basis

27

exists for the Court to hold him individually liable.

28

2

1
2

II.

Calculation of Unpaid Contributions
There appear to be discrepancies between the amounts Plaintiffs allege Defendants

3

reported in contributions due and those reflected on the “Employer’s Report of

4

Contributions” for several of the months at issue.

5
6
7
8
9
10

Northern District of California

United States District Court

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

• For September 2012, Plaintiffs allege the total reported amount was $5,348.96,
but the “Employer’s Report of Contribution” for that month lists the amount as
$7,387.92. (Compare Dkt No. 13 at 7 with Dkt. No. 14-3 at 7.)
• For October 2012, Plaintiffs allege the total reported amount was $10,750.88,
but the “Employer’s Report of Contribution” for that month lists the amount as
$8,711.92. (Compare Dkt No. 13 at 7 with Dkt. No. 14-3 at 9.)
• For November 2012, Plaintiffs allege the total reported amount was $8,380.94,
but the “Employer’s Report of Contribution” for that month lists the amount as
$7,851.32. (Compare Dkt No. 13 at 7 with Dkt. No. 14-3 at 11.)
• For February 2013, two “Employer’s Report of Contribution” reports are
included with the second stating that it was “revised 5/15/13.” (Dkt. No. 14-3
at 19.) The revised report lists the reported amount as $3,707.20, not the
$3,919.04 alleged by Plaintiffs. (Compare Dkt No. 13 at 8 with Dkt. No. 14-3
at 19.)
Further, although Plaintiffs repeatedly state that “[p]ursuant to Trust Fund policy,
contributions for unreported months are estimated by calculating the average of the amounts
due on the last three months,” Plaintiffs have not cited any authority for this statement and
the Court could not find a clause in the Master Agreement or the Independent Northern
California Construction Agreement to this effect. (See, e.g., Dkt. No. 13 at 8.)
In light of the foregoing, Plaintiffs are hereby ORDERED to SHOW CAUSE as to
how they arrived at the figures cited in their motion and supporting declaration, or amend
these documents to reflect the accurate amounts. Further, Plaintiffs shall provide authority
for their representation as to the Trust Fund policy regarding calculation of contributions for
unreported months.
CONCLUSION
Plaintiffs shall file their response to this Order no later than September 13, 2013. The
Court further VACATES the hearing on Plaintiffs’ Motion currently scheduled for
September 5, 2013, and reschedules the hearing to September 26, 2013 at 9:00.

3

1

IT IS SO ORDERED.

2
3

Dated: September 3, 2013
_________________________________
JACQUELINE SCOTT CORLEY
UNITED STATES MAGISTRATE JUDGE

4
5
6
7
8
9
10

Northern District of California

United States District Court

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

4