Board of Trustees of the Sheet Metal Workers Local 104 Health Care Trust et al v. Moak

Filing 42

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS MOTION FOR DEFAULT JUDGMENT. Amended Pleadings or Motions due by 11/7/2012. Signed by Judge Claudia Wilken on 10/31/2012. (ndr, COURT STAFF) (Filed on 10/31/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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BOARD OF TRUSTEES OF THE SHEET
METAL WORKERS, et al.,
Plaintiffs,

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United States District Court
For the Northern District of California

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v.
TIMOTHY MOAK and JENNIFER MOAK,

No. C 11-4620 CW
ORDER GRANTING IN
PART AND DENYING
IN PART
PLAINTIFFS’ MOTION
FOR DEFAULT
JUDGMENT

Defendants.
________________________________/

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Plaintiffs Board of Trustees of the Sheet Metal Workers

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Local 104 Health Care Trust, Sheet Metal Workers Pension Trust of

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Northern California, and Sheet Metal Workers Local 104 Vacation

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Holiday Savings Plan (collectively referred to as the Trust Funds)

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and Trustee Bruce Word move for entry of default judgment against

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Defendants Timothy and Jennifer Moak.

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The Court deems the matter suitable for decision without oral

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argument, and grants the motion in part and denies it in part.

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The motion is unopposed.

BACKGROUND
The following summary of factual allegations in this action

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is taken from the complaint and from section II of the magistrate

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judge’s report and recommendation re: Plaintiffs’ motion for

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default judgment.

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(Docket No. 34.)

Plaintiffs are trustees of employee benefit plans within the

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meaning of the Employee Retirement Income Security Act of 1974

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(ERISA) § 3(1) and (3), 29 U.S.C. § 1002(1) and (3) and

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§ 1132(d)(1), and a multiemployer plan within the meaning of ERISA

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§§ 3(37) and 515, 29 U.S.C. §§ 1002(37) and 1145.

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The Trust Funds are authorized to bring suit under ERISA, and

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Plaintiff Board of Trustees of the Sheet Metal Workers Local 104

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Health Care Trust is authorized to bring suit and collect monies

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for the Sheet Metal Workers’ National Pension Fund.

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Compl. ¶ 2.

Id.

Pacific Heating & Sheet Metal, Inc. (Pacific), a California
corporation, was bound by a written collective bargaining

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agreement with Sheet Metal Workers Local Union No. 104, which

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provides that Pacific shall make contributions to the Trust Funds

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United States District Court
For the Northern District of California

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on behalf of Pacific’s employees on a regular basis on all hours

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worked, and that Pacific shall be bound to and abide by all the

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provisions of the respective Trust Agreements and Declarations of

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Trust of the Trust Funds.

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Defendants executed a personal guaranty in the sum of $136,600.57

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for the fringe benefits due for the period March 2010 through June

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2010, plus “any additional new fringe benefit obligations which

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become due prior to [Pacific] paying its fringe benefit

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obligations for the above period . . . .”

Id., ¶ 5.

On August 3, 2010,

Compl., Ex. A.

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Plaintiffs allege that Defendants violated ERISA and the

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National Labor Relations Act of 1947 by failing to pay monies due

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to the Trust Funds under the collective bargaining agreement,

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trust agreements, and the personal guaranty on behalf of Pacific’s

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employees.

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liquidated damages, interest and attorneys’ fees pursuant to the

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terms of the collective bargaining agreement.

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Id. ¶ 6; Ex. A.

Plaintiffs seek unpaid contributions,

Id. ¶¶ 8-9.

Pacific ceased operations on or about October 31, 2010.

Id.

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¶ 11.

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Pacific’s withdrawal liability in the amount of $735,675.00, which
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Plaintiffs further allege that Defendants are liable for

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allegedly represents additional new fringe benefit obligations due

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and payable under the personal guaranty.

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Id. ¶ 20; Ex. A.

Plaintiffs filed this action on September 16, 2011, seeking

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an award of all contributions due and owing to the date of

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judgment, withdrawal liability payments due, liquidated damages,

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interest, and attorneys’ fees and costs.

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Defendants were served by personal delivery to Timothy Moak at 236

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Spring Valley Drive, Vacaville, California 95687.

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5.)

On September 27, 2011,

(Docket Nos. 4,

Defendants failed to respond to the complaint and Plaintiffs

United States District Court
For the Northern District of California

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requested entry of default, which the clerk of court entered on

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November 8, 2011.

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(Docket No. 9.)

On March 21, 2012, Plaintiffs filed the present motion for

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default judgment.

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to a magistrate judge for a report and recommendation.

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failed to appear and did not otherwise respond to Plaintiffs’

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motion.

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report and recommendation that the motion for default judgment be

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denied because Plaintiffs failed to establish that Defendants were

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“employers” subject to suit under ERISA.

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recommended that the complaint be dismissed with leave to amend to

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plead additional allegations that would support imposing

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individual liability on Defendants.

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(Docket No. 14.)

The Court referred the matter
Defendants

On May 1, 2012, the assigned magistrate judge issued a

The magistrate judge

(Docket No. 34.)

Plaintiffs timely filed a request for de novo determination

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of the motion for default judgment and their objections to the

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magistrate judge’s report and recommendation that the motion for

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default judgment be denied.

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Plaintiffs’ request for de novo determination on their motion for

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default judgment, granted leave to file additional proposed
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(Docket No. 36.)

The Court granted

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findings, and ordered Plaintiffs to submit a summary of the

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damages calculation.

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Plaintiffs and the magistrate judge’s report and recommendation,

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and grants the motion for default judgment in part and denies it

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in part.

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The Court has reviewed the papers filed by

LEGAL STANDARD

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Pursuant to Rule 55(b)(2) of the Federal Rules of Civil

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Procedure, the court may enter a default judgment where the clerk,

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under Rule 55(a), has previously entered the party’s default based

United States District Court
For the Northern District of California

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upon failure to plead or otherwise defend the action.

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Civ. P. 55(b).

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automatically entitle the plaintiff to a court-ordered default

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judgment.

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The district court has discretion in its decision to grant or deny

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relief upon an application for default judgment.

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Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).

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consider the following factors in deciding whether to enter a

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default judgment:

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A defendant’s default, however, does not

Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986).

Aldabe v.

The court may

(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.

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Fed. R.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

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In considering the sufficiency of the complaint and the

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merits of the plaintiff’s substantive claims, facts alleged in the

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complaint not relating to damages are deemed to be true upon

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default.

Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir.
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1977); Fed. R. Civ. P. 8(d).

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to make detailed findings of fact.”

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Combs, 285 F.3d 899, 906 (9th Cir. 2002).

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defendant is not held to admit facts that are not well-plead or to

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admit conclusions of law.

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Bank, 515 F.2d 1200, 1206 (5th Cir. 1975).

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allegations in a complaint are not well-plead, liability is not

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established by virtue of the defendant’s default and default

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judgment should not be entered.

“The district court is not required
Fair Housing of Marin v.
On the other hand, a

Nishimatsu Constr. Co. v. Houston Nat’l
As a result, where the

Id.

United States District Court
For the Northern District of California

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Damages or other forms of relief awarded are constrained by

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the rule that judgment by default “must not be different in kind

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from, or exceed in amount, what is demanded in the [complaint].”

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Fed. R. Civ. P. 54(c).

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DISCUSSION
I.

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Jurisdiction and Service
Based on the findings of the magistrate judge on jurisdiction

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and service of process, which were not the subject of Plaintiffs’

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request for de novo determination, the Court is satisfied that it

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has subject matter and personal jurisdiction in this matter.

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Rept. Rec. at 3-4.

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II.

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Claim for Unpaid Contributions, Liquidated Damages, Interest
and Attorneys’ Fees
With respect to Plaintiffs’ first cause of action for unpaid

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contributions, the Court finds that the Eitel factors are
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satisfied, based on the personal guaranty executed by Defendants.
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In support of the motion for default judgment, Plaintiffs
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acknowledge that Pacific, not Defendants, “was the original
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signatory employer.”

Mot. De Novo Determination at 4.

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However,

default judgment is sought against Defendants, not as employers

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under ERISA, but as fiduciaries acting “indirectly in the interest

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of the employer” based on the separately executed guaranty:

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“Sometime later, Timothy Moak and Jennifer Moak, principals in the

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business, signed a separate document, a personal guaranty of the

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fringe benefit contribution obligation.”

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U.S.C. § 1002(5)).

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merits of Plaintiffs’ claim, the sufficiency of the complaint, and

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the possibility of a dispute concerning material facts weigh in

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United States District Court
For the Northern District of California

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favor of default judgment because Plaintiffs have sufficiently

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shown that Defendants are obliged to guarantee “all fringe benefit

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contributions of the Company which may become due in the future

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until such time as the Company pays in full the $136,600.57

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obligation.”

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Id. at 4 (citing 29

Thus, the key Eitel factors addressing the

Compl., Ex. A.

Plaintiffs have demonstrated that, pursuant to the terms of

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the collective bargaining agreement, $163,796.65 in unpaid

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contributions is now due for hours worked from March 2010 through

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October 2010, as confirmed in an audit result and offset by

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credits.

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delinquency of $136,600.57; second delinquency, for August through

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October 2010, of $97,746.08; and $70,550.00 in credits).

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Liquidated damages of twenty percent on the delinquent

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contributions (without the deduction for credits) amount to

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$46,869.33, for a net balance of unpaid contributions and

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liquidated damages of $210,665.98 (not the $215,415.27 calculated

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by Plaintiffs).

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Suppl. Finegan Dec. ¶¶ 4-7 (identifying original

Id. ¶ 7; Finegan Dec. ¶ 7 and Ex. 9.

Interest is also due and owing on all principal amounts at
the legal rate from the dates on which the principal amounts
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accrued.

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interest rate of ten percent to the unpaid contributions in the

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amount of $163,796.65, due as of February 2, 2011.

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16 and Exs. 7 and 11; Suppl. Finegan Dec. ¶ 10.

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rate, the daily amount of interest is $44.88.

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¶ 10.

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2012, Plaintiffs have shown that the interest due is $28,588.56.

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Finegan Dec. ¶ 10 and Ex. 10.

Plaintiffs apply an

Finegan Dec. ¶

At this interest

Suppl. Finegan Dec.

For the 637 days between February 2, 2011 and October 31,

Looking to the other Eitel factors, the Court determines that
Plaintiffs will be left without a remedy if default judgment is

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United States District Court
For the Northern District of California

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not entered, and there is no evidence in the record to suggest

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that Defendants’ failure to appear and otherwise defend was the

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result of excusable neglect.

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money at stake in the claim for unpaid contributions, and a strong

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policy underlying the Federal Rules of Civil Procedure favors a

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decision on the merits, on balance, the Eitel factors weigh in

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favor of granting default judgment on the claim for unpaid

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contributions, liquidated damages and interest in the amount of

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$239,254.54.

Although there is a large sum of

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Plaintiffs also seek an award of attorneys’ fees and costs,

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which may be awarded to a trust fund that receives a judgment in

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its favor.

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submitted declarations by their attorney to support their claim

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for attorneys’ fees and costs.

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that he spent in excess of six hours prosecuting this action at a

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rate of $185.00 per hour, for a total fee request of $1,110.00 for

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six hours.

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and the hourly billing rate are reasonable given the work

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performed.

See 29 U.S.C. § 1132(g)(2)(D).

Plaintiffs have

Plaintiffs’ counsel calculates

Carroll Suppl. Dec. ¶ 4.

The amount of time expended

Plaintiffs calculate their costs for prosecuting this
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action to be $472.00, consisting of filing fees and costs for

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service of summons.

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shown that they are entitled to an award of attorneys’ fees and

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costs totaling $1,582.00.

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III. Claim for Withdrawal Liability

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Carroll Dec. ¶ 2.

Thus, Plaintiffs have

With respect to Plaintiffs’ second cause of action, seeking

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an award of $735,675.00 against Defendants for Pacific’s

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withdrawal liability, Plaintiffs fail to demonstrate the merit of

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that claim or the sufficiency of the complaint, based on the

United States District Court
For the Northern District of California

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personal guaranty.

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3, 2010, expressly states,

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The guaranty executed by Defendants on August

Guarantors want to provide the Trust Funds with
assurances that all contributions due to the Trust
Funds arising under any collective bargaining
agreement, any trust or other agreement, or
otherwise for the above periods through the date of
execution hereof will be paid; that Guarantors want
to guarantee that any payment plan entered into by
the Company will be carried out; and the Guarantors
want to guarantee that any additional new fringe
benefit obligations which become due prior to the
Company paying its fringe benefit obligations for
the above period are also paid.
Compl., Ex. A at 1-2.

Nowhere in the guaranty do Defendants agree

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to be personally obligated for Pacific’s withdrawal liability,
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which was not triggered until October 31, 2010, when Pacific
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ceased operations and ceased to have an obligation to contribute
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to the employee benefit plans, nearly three months after
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Defendants executed the personal guaranty.

Compl. ¶ 11.

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Plaintiffs contend that Defendants’ agreement to guarantee
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personally the fringe benefit contributions owed by Pacific
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encompasses the withdrawal liability.

However, the guaranty

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cannot be so broadly construed.

Under California law, guaranty

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contracts are subject to the same rules of interpretation as those

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used for other contracts, with a view to ascertaining the intent

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of the parties.

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1415 (1995) (citing Bloom v. Bender, 48 Cal. 2d 793, 803 (1957)).

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“Guaranty contracts ‘may be explained by reference to the

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circumstances under which they were made and the matter to which

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they relate, the main object being to ascertain and effectuate the

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intention of the parties.’”

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Trust and Savings Assn. v. Waters, 209 Cal. App. 2d 635, 638

River Bank Am. v. Diller, 38 Cal. App. 4th 1400,

Id. (quoting Bank of America Nat.

United States District Court
For the Northern District of California

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(1962)).

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only to obligations for fringe benefit contributions, not to other

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statutory obligations such as withdrawal liability.

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the circumstances under which the guaranty was executed,

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Defendants acknowledged that as of the date of the guaranty

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agreement, Pacific “presently owes a balance in contributions to

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the Trust Funds, in the sum of $136,600.57 for March 2010 through

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June 2010.”

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agreed “to personally guarantee payment of the $136,600.57 in

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fringe benefit obligations due to the Trust Funds from the Company

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for the above periods,” and also agreed to guarantee “all fringe

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benefit contributions of the Company which may become due in the

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future until such time as the Company pays in full the $136,600.57

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obligation.”

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benefit obligations of the Company . . . are paid, and the Company

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is no longer a delinquent employer under the rules of the

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collective bargaining agreement, this personal guarantee shall be

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rendered ineffective and unenforceable and shall be deemed

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canceled.”

Here, the provisions of the guaranty agreement refer

Compl., Ex. A at 1.

Id.

Referring to

In that context, Defendants

The guaranty also provided that “if all fringe

Id. at 2-3.

Under these circumstances, where Pacific
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was still operating as a business at the time the guaranty was

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executed, there is no indication that the parties contemplated

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that Defendants would be personally obligated for the business’s

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withdrawal liability in the future.

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An employer’s withdrawal liability pursuant to 29 U.S.C.

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§ 1381 is determined separately from the calculation of fringe

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benefit contributions under a collective bargaining agreement.

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the Ninth Circuit recognized in Woodward Sand Co., Inc. v. W.

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Conference of Teamsters Pension Trust Fund, 789 F.2d 691, 694 (9th

As

United States District Court
For the Northern District of California

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Cir. 1986), the system for assessing withdrawal liability was

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established to prevent employers from withdrawing from pension

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plans without paying their share of the plans’ unfunded vested

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benefit liability.

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their share of the real cost of pensions, by paying a share of the

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difference between the assets already contributed and the vested

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benefit liability.”

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R.A. Gray & Co., 467 U.S. 717, 723 (1984)).

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liability’ is assessed against the employer to ‘ensure that

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employees and their beneficiaries [are not] deprived of

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anticipated retirement benefits by the termination of pension

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plans before sufficient funds have been accumulated in the

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plans.’”

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Plaintiffs acknowledge, the imposition of withdrawal liability

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lies within “the full discretionary authority” of the trustees and

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requires an assessment of the employer’s share of the unfunded

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vested liability for all participating employers.

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¶ 5, Ex. 2 at 2, ¶ I.E and Ex. 5; Kaufmann Dec. ¶ 3.

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guaranty does not mention or contemplate an assessment of
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“This system is designed to make employers pay

Id. (citing Pension Benefit Guaranty Corp. v.
“This ‘withdrawal

Id. (quoting R.A. Gray & Co., 467 U.S. at 723).

As

Finegan Dec.
The personal

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Pacific’s share of the unfunded vested benefit liability for all

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employers.

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agreement to guarantee Pacific’s fringe benefit contributions does

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not create future withdrawal liability.

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Under the circumstances presented here, Defendants’

Because the personal guaranty does not oblige Defendants to

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pay Pacific’s withdrawal liability, the complaint fails to allege

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a sufficient claim for withdrawal liability against Defendants and

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the motion for default judgment is denied.

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to amend the complaint to support individual liability against

Plaintiffs seek leave

United States District Court
For the Northern District of California

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Defendants.

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appear futile for Plaintiffs to allege that the employer, Pacific,

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was subject to withdrawal liability, and allege a basis for joint

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and several liability against Defendants, leave to amend the

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complaint is granted.

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of Teamsters Pension Trust Fund v. Lafrenz, 837 F.2d 892, 893 n.1

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(9th Cir. 1988) (affirming judgment imputing ERISA withdrawal

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liability to owners under common control doctrine and noting that

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the employer’s withdrawal liability was determined an earlier

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action).

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that Pacific has filed a Chapter 7 voluntary petition for

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bankruptcy and that a trustee has been appointed.

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Heating & Sheet Metal, Inc., Case. No. 11-40315 (Bankr. N.D. Cal.,

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petition filed January 11, 2011).

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withdrawal liability against Pacific is likely to be subject to

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the automatic stay, Plaintiffs would have to seek appropriate

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relief against Pacific in the bankruptcy proceedings.

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Mot. De Novo Determination at 9.

Because it does not

See Board of Trustees of the Western Conf.

However, the Court takes judicial notice of the fact

In re Pacific

Because any action for

Plaintiffs may either voluntarily dismiss the second cause of
action for withdrawal liability from the complaint, or amend the
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claim for withdrawal liability if they can do so without violating

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the automatic bankruptcy stay.

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the claim for withdrawal liability, the Court will enter judgment

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against Defendants on the first cause of action for unpaid

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contributions, liquidated damages, interest and attorneys’ fees in

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the amount of $240,836.54.

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their election within seven days of the date of this order.

Should Plaintiffs elect to dismiss

Plaintiffs must advise the Court of

CONCLUSION

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For the foregoing reasons, Plaintiffs’ motion for default

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United States District Court
For the Northern District of California

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judgment is GRANTED as to the first cause of action for unpaid

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contributions, liquidated damages, interest and attorneys’ fees in

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the amount of $240,836.54.

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judgment is DENIED WITHOUT PREJUDICE as to the second cause of

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action for withdrawal liability in the amount of $735,675.00.

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Plaintiffs’ motion for default

If Plaintiffs elect to dismiss the claim for withdrawal

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liability from the complaint, they shall advise the Court and

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submit a proposed judgment within seven days from the date of this

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order.

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for relief from the bankruptcy stay, or both, they must do so in

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seven days.

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dismissed for failure to prosecute and judgment will enter on the

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first claim.

If they intend to file an amended complaint or a motion

If they do neither, the second claim will be

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IT IS SO ORDERED.

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Dated: 10/31/2012
CLAUDIA WILKEN
United States District Judge

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