Board of Trustees of the Laborers Health and Welfare Trust Fund for Northern California et al v. Vector General Engineering Contractors, Inc. et al

Filing 74


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1 2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4 5 6 7 8 9 11 For the Northern District of California United States District Court 10 BOARD OF TRUSTEES OF THE LABORERS HEALTH AND WELFARE TRUST FUND FOR NORTHERN CALIFORNIA; BOARD OF TRUSTEES OF THE LABORERS VACATION-HOLIDAY TRUST FUND FOR NORTHERN CALIFORNIA; BOARD OF TRUSTEES OF THE LABORERS PENSION TRUST FUND FOR NORTHERN CALIFORNIA; and BOARD OF TRUSTEES OF THE LABORERS TRAINING AND RETRAINING TRUST FUND FOR NORTHERN CALIFORNIA, No. C-12-02633 DMR REQUEST FOR REASSIGNMENT; REPORT AND RECOMMENDATION RE PLAINTIFFS’ MOTION FOR DEFAULT JUDGMENT [DOCKET NO. 64] 12 Plaintiff(s), 13 v. 14 15 RENE AMILCAR TORRES, an individual dba VECTOR GENERAL ENGINEERING CONTRACTORS INC, 16 17 Defendant(s). ___________________________________/ 18 19 Plaintiffs Boards of Trustees for Laborers Trust Funds move the court pursuant to Federal 20 Rule of Civil Procedure 55(b)(2) for default judgment against Defendant Rene Amilcar Torres, an 21 individual dba Vector Engineering Contractors Inc. Mot. [Docket No. 64] at 1. Plaintiffs ask the 22 court to order Defendant to pay unpaid employee fringe benefit contributions and related interest 23 and liquidated damages, and attorneys’ fees and costs. The court held a hearing on the motion on 24 October 30, 2014; Defendant did not appear. 25 Defendant has not filed a consent to the jurisdiction of a magistrate judge pursuant to 28 26 U.S.C. § 636(c). Therefore, the court requests that this case be reassigned to a District Judge and 27 issues this recommendation that the motion be granted. 28 I. BACKGROUND 1 2 A. Factual Allegations Plaintiffs are the Boards of Trustees for the Laborers Health and Welfare Trust Fund for 3 Northern California, the Laborers Vacation-Holiday Trust Fund for Northern California, the 4 Laborers Pension Trust Fund for Northern California, and the Laborers Training and Retraining 5 Trust Fund for Northern California (“the Trust Funds”). The Trust Funds, established under Trust 6 Agreements,1 consist of all employee fringe benefit contributions that are to be made by employers 7 pursuant to collective bargaining agreements. Second Am. Compl. [“SAC,” Docket No. 39] at ¶¶ 3- 8 6; Lauziere Decl. [Docket No. 65] ¶¶ 10-11, Exs. A-B. The Trust Funds are multi-employer benefit 9 plans within the meaning of sections 3 and 4 of the Employment Retirement Income Security Act of 11 For the Northern District of California United States District Court 10 1974 (“ERISA”), 29 U.S.C. §§ 1002, 1003. SAC at ¶ 5. Vector Engineering Contractors is an employer within the meaning of sections 3(5) and 515 12 of ERISA, 29 U.S.C. §§ 1002(5) and 1145, and an employer in an industry affecting commerce 13 within the meaning of section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 14 185. SAC at ¶ 7. At all relevant times, Torres was and is the sole owner of Vector Engineering 15 Contractors and operated and controlled Vector Engineering Contractors, such that Vector 16 Engineering Contractors and Torres constituted a single employer. Id. 17 By virtue of his membership in the Engineering and Underground Contractors Association 18 (“EUCA”), Torres became bound to a written collective bargaining agreement with the Northern 19 California District Council of Laborers (“Laborers Union”) entitled the Laborers’ Master Agreement 20 for Northern California (“Master Agreement”). SAC at ¶ 9; Lauziere Decl. at ¶ 16, Ex. G. In 21 agreeing to be bound by the Master Agreement, Torres further agreed to be subject to and bound by 22 all provisions and conditions of the written Trust Agreements which established the Trust Funds. 23 SAC at ¶ 9. 24 25 The Master Agreement requires that employers pay contributions to the Trust Funds for each hour their employees work as laborers. Lauziere Decl. at ¶ 16, Ex. G. Employers are required to 26 1 27 28 Plaintiffs represent that the Trust Agreements for all four of the Trust Funds contain the same terms and conditions as the Trust Agreement for the Pension Trust Fund for Northern California. Lauziere Decl. ¶ 11. Therefore, any references to the “Trust Agreement” apply to the Trust Agreements for all of the Trust Funds. Lauziere Decl., Exs. A-E. 2 1 pay the employee fringe benefit contributions on or before the 25th day of the month immediately 2 succeeding the month in which the employee’s work was performed. An employer who fails to 3 make the required contributions on or before the 25th day of the month is subject to interest on the 4 delinquent contribution at a rate of 1.5% per month, as well as liquidated damages, which are set at 5 $150 for each delinquent contribution. SAC at ¶ 10; Lauziere Decl. at ¶ 16, Ex. H (Liquidated 6 Damage Program - Board Policy); Ex. G. The Trust Agreement permits Plaintiffs to file a lawsuit to 7 recover payment of delinquent contributions and all attorneys’ fees and costs incurred. SAC at ¶ 10; 8 Lauziere Decl. at ¶ 13, Ex. D. Agreement. SAC at ¶ 12. Plaintiffs allege that Defendant has failed to meet all of his obligations by 11 For the Northern District of California Plaintiffs assert that they have performed all conditions required of them by the Master 10 United States District Court 9 failing to report and by failing to pay all employee fringe benefit contributions for the periods 12 December 2009, December 2010, and December 2011 in the principal amount of $35,354.23, and by 13 failing to pay interest and liquidated damages on the unpaid and delinquent employee fringe benefit 14 contributions for those periods. SAC at ¶ 13. 15 Plaintiffs filed the current action on May 22, 2012 pursuant to section 301 of the LMRA (29 16 U.S.C. § 185), and sections 502(a)(3) and 502(e)(1) of ERISA (29 U.S.C. §§ 1132(a)(3) and 17 1132(e)(1)), to recover due and unpaid benefit contributions, interest, liquidated damages, attorneys’ 18 fees, and filing costs, and amended their complaint twice. SAC at ¶ 1; see also Docket Nos. 1, 11. 19 B. Procedural History 20 Plaintiffs initially filed suit against Vector General Engineering and Rene Torres in his 21 capacity as an officer of Vector General Engineering. Docket No. 1. After Plaintiffs served the 22 summons and complaint on these defendants, Plaintiffs requested that the clerk enter default against 23 them; the clerk did so. Docket Nos. 5-8. Subsequently, Plaintiffs lifted the entry of default against 24 these defendants and filed a First Amended Complaint, because Plaintiffs discovered that the above 25 defendants had been erroneously sued, as Torres had signed the Master Agreement on behalf of a 26 different entity, Vector Engineering Contractors Inc. Docket Nos. 11, 17. The First Amended 27 Complaint named Torres dba Vector Engineering Contractors Inc. as Defendant. Docket No. 11. 28 3 1 For several months after Plaintiffs filed the First Amended Complaint, the parties attempted 2 to resolve their dispute informally. Docket No. 25. Torres agreed to submit to an audit, and 3 Plaintiffs moved for and received the court’s permission to file the SAC to include the amounts 4 owed to Plaintiffs based on the audit. Docket Nos. 27, 31, 38, 39. 5 Apparently this first attempt to resolve the dispute informally was unsuccessful, as Plaintiffs motion for default judgment because the clerk had not yet entered default against the newly named 8 Defendant. Docket Nos. 45, 48, 52. After the court denied this motion, Defendant contacted 9 Plaintiffs and expressed a willingness to resolve the matter outside of court, and the parties expected 10 to reach a settlement agreement. Docket No. 54. The parties apparently negotiated for several more 11 For the Northern District of California filed a motion for default judgment on August 15, 2013. Docket No. 43. The court denied this 7 United States District Court 6 months but were unable to reach a settlement, and on July 31, 2014, Plaintiffs’ counsel filed a 12 motion for entry of default against Defendant Torres dba Vector Engineering Contractors Inc., and 13 the clerk entered default the following day. Docket Nos. 59, 61. This motion for default judgment 14 followed. 15 16 II. DEFAULT JUDGMENT A. Legal Standard 17 Federal Rule of Civil Procedure 55(b)(2) permits a court to enter a final judgment following 18 a defendant’s default. Fed. R. Civ. P. 55(b)(2). Whether to enter a judgment lies within the court’s 19 discretion. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986); Shanghai Automation Instrument 20 Co., Ltd. v. Kuei, 194 F. Supp. 2d 995, 999 (N.D. Cal. 2001) (citations omitted). 21 Before assessing the merits of a default judgment, a court must confirm it has subject matter 22 and personal jurisdiction, as well as ensure adequacy of service on the defendant. See In re Tuli, 172 23 F.3d 707, 712 (9th Cir. 1999). If the court finds these requirements satisfied, it turns to the 24 following factors (“the Eitel factors”) to determine whether it should grant a default judgment: 25 26 27 (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 decision on the merits. 28 4 1 Eitel, 782 F.2d at 1471-72 (citation omitted). In this analysis, a “court takes ‘the well-pleaded 2 factual allegations’ in the complaint ‘as true’” (DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 3 (9th Cir. 2007)), “except those relating to the amount of damages.” Garamendi v. Henin, 683 F.3d 4 1069, 1080 (9th Cir. 2012) (citations omitted). 5 B. Analysis (granting labor union organizations power to sue employers in federal court) and 1132 (empowering 8 ERISA plan fiduciaries to bring civil actions to enforce plan terms). Defendant qualifies as an 9 “employer” under section 3(5) and section 515 of ERISA, 29 U.S.C. §§ 1002(5), 1145, and as an 10 employer in an industry affecting commerce within the meaning of section 301 of the LMRA, 29 11 For the Northern District of California This court has subject matter jurisdiction over this case pursuant to 29 U.S.C. §§ 185 7 United States District Court 6 U.S.C. § 185. SAC at ¶ 7. The court exercises personal jurisdiction over Defendant because Torres 12 does business as Vector Engineering Contractors, which is a California corporation with its principal 13 place of business located in South San Francisco, California. SAC at ¶ 7. 14 The Federal Rules of Civil Procedure allow for service on an individual by delivering a copy 15 of the summons and complaint to the individual personally. Fed. R. Civ. P. 4(e)(2)(A). The court 16 has reviewed the proof of service and the record and finds that the summons and complaint were 17 properly served on Defendant via personal service. See Docket No. 51. 18 Turning to the Eitel factors, under the first factor Plaintiffs will suffer great prejudice if the 19 court does not enter a default judgment because Plaintiffs are otherwise likely to be “without other 20 recourse for recovery.” Pepsico, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 21 2002); see also U.A. Local No. 467 Trust Fund v. Hydra Ventures, Inc., Case No. 12-CV-03746 22 EMC, 2013 WL 1007311 at *6 (N.D. Cal. Mar. 13, 2013) (first Eitel factor weighed in favor of 23 default judgment for plaintiffs trust funds against defendant employer who had failed to make 24 employee benefits contributions because plaintiffs would otherwise likely be without a remedy). 25 26 27 28 5 1 Considering the second and third Eitel factors, the SAC sufficiently pleads the elements of a collective bargaining agreement to make contributions to the Trust Funds but failed to do so in 4 accordance with the terms of that agreement. SAC at ¶¶ 16-20. Plaintiffs’ Accounts Receivable 5 Manager submitted a declaration stating that Plaintiffs audited Defendant and discovered that he 6 failed to report and thus failed to pay contributions due for several months. Lauziere Decl. at ¶ 17. 7 Plaintiffs produced a summary of the audit results showing the number of hours of covered work for 8 which contributions were due, but not paid. Lauziere Decl. at ¶¶ 17-19, Exs. I (Statement of 9 Contributions Due The Laborers Trust Funds [Not Reported/Not Paid]), J (Audit Report), and K 10 (Statement of Interest and Liquidated Damages Due [Not Reported/ Not Paid]). Thus, Plaintiffs 11 For the Northern District of California violation of 29 U.S.C. § 11452 by alleging that Defendant is an employer obligated under the 3 United States District Court 2 submitted a legally sufficient complaint that is likely to prevail on the merits of the Section 1145 12 claim, fulfilling the second and third Eitel factors.3 13 The fourth Eitel factor is the sum of money at stake in the action. “When the money at stake 14 in the litigation is substantial or unreasonable, default judgment is discouraged.” Bd. of Trs. v. Core 15 Concrete Constr., Inc., Case No. 11-CV-02532 LB, 2012 WL 380304 at *4 (N.D. Cal. Jan. 17, 16 2012) (citing Eitel, 782 F.2d at 1472). However, “when the sum of money at stake is tailored to the 17 specific misconduct of the defendant, default judgment may be appropriate.” Core Concrete, 2012 18 WL 380304 at *4 (recommending default judgment where the amount of money sought against the 19 employer was supported by the evidence and required by both the collective bargaining agreement 20 and 29 U.S.C. § 1132). Here, the total sum of actual and statutory damages, interest, attorneys’ fees, 21 and costs that Plaintiffs seek to recover is $104,084.55.4 Mot. 14. This sum is appropriate as it is 22 23 24 25 2 Section 1145 provides, in relevant part, that “[e]very employer who is obligated to make contributions to a multi-employer 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.” 29 U.S.C. § 1145. 3 26 27 28 The SAC also includes claims for breach of the collective bargaining agreement and breach of fiduciary duty. See SAC at ¶¶ 8-15, 21-26. Plaintiffs do not seek default judgment on these claims. 4 This sum represents: $35,354.23 (unpaid contributions), $23,555.25 (interest), $23,555.25 (additional award pursuant to section 1132(g)(2)(C)), $19,289 (attorneys’ fees), and $2,330.82 (costs). Mot. at 7. 6 1 supported by the evidence, tailored to Defendant’s alleged misconduct, and properly calculated, as 2 discussed below. 3 With respect to the fifth Eitel prong, Defendant has not appeared in this action, nor contested 4 any of Plaintiffs’ material facts. Finally, reviewing the record, there is nothing that suggests 5 Defendant defaulted due to excusable neglect. Examining these facts in the aggregate, the court 6 finds that the first six Eitel factors outweigh the Federal Rules of Civil Procedure’s strong preference 7 for a decision on the merits. The court therefore recommends that Plaintiffs’ motion for default 8 judgment be granted. 9 11 For the Northern District of California United States District Court 10 III. DAMAGES A. Legal Standard To recover damages after securing a default judgment, a plaintiff must prove the relief it 12 seeks through testimony or written affidavit. Bd. of Trs. of the Boilermaker Vacation Trust v. Skelly, 13 Inc., 389 F. Supp. 2d 1222, 1226 (N.D. Cal. 2005); see Pepsico, 238 F. Supp. 2d at 1175 (citing 14 Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987)). With respect to cases 15 arising out of ERISA, the statute declares the following: 16 17 18 19 20 21 22 in any action . . . 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-(A) the unpaid contributions, (B) interest on the unpaid contributions, (C) an amount equal to the greater of-(i) interest on the unpaid contributions, or (ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A), (D) reasonable attorney’s fees and costs of the action, to be paid by the defendant, and (E) such other legal or equitable relief as the court deems appropriate. 23 29 U.S.C. § 1132(g)(2). Interest on unpaid contributions is determined by using the rate provided 24 under the plan. Id. 25 B. Unreported, Unpaid Contributions 26 Plaintiffs performed an audit of Torres’s books and records. Lauziere Decl. at ¶ 17. In the 27 audit, Plaintiffs discovered that Torres failed to report and thus failed to pay contributions due and 28 7 1 owning for the periods December 2009, December 2010, and December 2011. Lauziere Decl. at ¶¶ 2 17-18, Exs. I, J. The total principal balance due on those unreported, unpaid contributions totals 3 $35,354.23. Lauziere Decl. at ¶ 18, Ex. J. 4 As described above, under the Master Agreement, an employer who fails to make the 5 required contributions on or before the 25th day of the month is subject to interest on the delinquent 6 contribution at a rate of 1.5% per month, as well as liquidated damages, which are set at $150 for 7 each delinquent contribution. SAC at ¶ 10; Lauziere Decl. ¶ 16, Ex. H. Plaintiffs calculate interest 8 for the unreported, unpaid contributions to be $23,555.25, and liquidated damages for the three 9 unreported, unpaid contributions to be $450. Lauziere Decl. at ¶ 19, Ex. K. “It is settled Ninth Circuit law that [an award under Section 1132(g)(2)] is mandatory and not 11 For the Northern District of California United States District Court 10 discretionary.” Operating Engineers Pension Trust v. Beck Engineering & Surveying Co., 746 F.2d 12 557, 569 (9th Cir. 1984) (noting that the statutory language in Section 1132(g)(2) that “the court 13 shall award the plan” unpaid contributions, interest, the greater of interest or liquidated damages, 14 and reasonable attorneys’ fees). For a mandatory award under section 1132(g)(2), three 15 requirements must be satisfied: (1) the employer must be delinquent at the time the action is filed; 16 (2) the district court must enter a judgment against the employer; and (3) the plan must provide for 17 such an award. Nw. Adm’rs, Inc. v. Albertson’s, Inc., 104 F.3d 253, 257 (9th Cir. 1996) (citations 18 omitted). The first requirement is met as the SAC alleges that Defendant was delinquent with 19 contributions and related payments for interest and liquidated damages. SAC at ¶¶ 13, 16-20; 20 Lauziere Decl. at ¶¶ 17-23. The second requirement is met with the entry of judgment against 21 Defendant as the court recommends for the reasons contained herein. Finally, the third prong is met 22 through the parties’ Master Agreement, which provides for liquidated damages and interest on 23 delinquent contributions. Lauziere Decl. at ¶¶ 13, 16; Ex. G; Ex. H. See also Idaho Plumbers & 24 Pipefitters Health & Welfare Fund v. United Mechanical Contractors, Inc., 875 F.2d 212, 215 (9th 25 Cir. 1989) (section 1132(g)(2)(C)(ii) applies when “the plan provides for liquidated damages”). 26 Pursuant to 29 U.S.C. § 1132(g)(2)(C), Plaintiffs are entitled to an additional award in the amount 27 equal to the greater of the interest on the unpaid contributions or liquidated damages at the contract 28 rate. Accord Operating Engineers, 746 F.2d at 569 (where the prejudgment interest exceeded the 8 1 amount of liquidated damages available under the parties’ agreement, “the district court was . . . 2 statutorily required to award the [plaintiffs] an amount equal to the prejudgment interest as 3 liquidated damages”). Since liquidated damages are less than interest, the court recommends that 4 Plaintiffs receive additional statutory damages of $23,555.25. 5 The court thus recommends that Plaintiffs be awarded $82,464.73 the total due for 6 Defendant’s unreported, unpaid contributions, with interest and additional statutory damages. 7 C. 8 Attorneys’ Fees and Costs Plaintiffs have incurred $19,289 in attorneys’ fees representing 65.3 hours billed by three of $290 per hour; (2) Ronald L. Richman, a managing partner and shareholder at the same firm, 5.6 11 For the Northern District of California attorneys at Bullivant Houser Bailey PC: (1) Edward Winchester, an associate, 58.9 hours at the rate 10 United States District Court 9 hours at a rate of $345 per hour; and (3) Susan Olson, senior counsel, 0.8 hours at a rate of $345 per 12 hour. Winchester Decl. [Docket No. 66] at ¶¶ 5-7; Ex. B; Supp. Br. [Docket No. 72] at 4. 13 Winchester has practiced law since 2010. Richman has practiced law since 1984 and handled 14 ERISA Trust Fund litigation since 1995, representing Plaintiffs at Bullivant Houser Bailey PC since 15 2006 and previously, at Stanton, Kay, and Watson from 1995-2002. Winchester Decl. at ¶ 4. Olson 16 was admitted to the California bar in 1991 and has more than 23 years of experience handling 17 ERISA litigation. Supp. Br. at 4. 18 Counsels’ fees of $345 per hour for partners and $290 for associates are reasonable San 19 Francisco Bay Area rates for ERISA claims. See, e.g., Oster v. Std. Ins. Co., 768 F. Supp. 2d 1026, 20 1035 (N.D. Cal. 2011) (approving hourly rate of $400 for associates); Langston v. N. Am. Asset Dev. 21 Corp. Grp. Disability, Case No. 08-CV-02560 SI, 2010 WL 1460201, at *2 (N.D. Cal. Apr. 12, 22 2010) (approving hourly rate of $550 for partner); Bd. of Trustees of Cement Masons Health & 23 Welfare Trust Fund for N. California v. C & C Concrete Inc., No. C 10-03343 LB, 2013 WL 24 2456560 at *9 (N.D. Cal. June 6, 2013) (approving Richman’s discounted rate of $325 per hour). 25 Having reviewed Plaintiffs’ billing records, the court finds that the 65.3 hours expended are 26 reasonable, given the procedural history of the case, Plaintiffs’ difficulty in determining Defendant’s 27 identity, and the parties repeated but unsuccessful attempts to settle without intervention from the 28 court. See C&C Concrete, 2013 WL 2456560 at *10 (approving expenditure of 77.8 hours, which 9 1 included drafting multiple complaints, documents related to multiple defaults, case management 2 statements and a motion for default judgment). The court therefore recommends that Plaintiffs 3 recover $19,289 in attorneys’ fees. 4 Federal Rule of Civil Procedure 54(d)(1) grants district courts the discretion to award costs 5 to prevailing parties. Fed. R. Civ. P. 54(d)(1); Marx v. General Revenue Corp., 133 S. Ct. 1166, 6 1172 (2013). Plaintiffs have incurred $2,330 in reasonable costs in the action to date. Winchester 7 Decl. ¶ 8, Ex. B (describing filing fees and service and document production costs). The court 8 therefore recommends that Plaintiffs be granted $2,330 in costs. 9 For the foregoing reasons, the court recommends that the District Court grant Plaintiffs’ 11 motion for default judgment. The court further recommends that the District Court award Plaintiffs 12 unpaid contributions in the amount of $35,354.23, interest in the amount of $23,555.25, statutory 13 damages in the amount of $23,555.25, attorneys’ fees in the amount of $19,289.00, and costs 14 amounting to $2,330.82, for a total of $104,084.55. 15 Immediately upon receipt of this order, Plaintiffs shall serve a copy of this order on 16 Defendant and file proof of service with the court. Any party may file objections to this report and 17 recommendation with the District Judge within 14 days of being served with a copy. See 28 U.S.C. 18 § 636(b)(1); Fed. R. Civ. P. 72(a); N.D. Civ. L.R. 72-2. RT 24 . Ryu onna M Ju M. D DONNAdge RYU NO 23 Dated: November 4, 2014 R NIA 22 DERED O OR IT IS S FO 21 LI IT IS SO ORDERED. S DISTRICT TE C TA RT U O 20 S 19 UNIT ED United States Magistrate Judge ER H 25 26 27 28 10 A For the Northern District of California United States District Court 10 IV. Conclusion N F D IS T IC T O R C

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