San Mateo Electrical Workers Health Care Trust et al v. ACS Controls Corporation

Filing 22

ORDER by Judge Lucy H. Koh granting 19 Motion for Default Judgment. (lhklc2, COURT STAFF) (Filed on 11/22/2010)

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San Mateo Electrical Workers Health Care Trust et al v. ACS Controls Corporation Doc. 22 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v. ACS CONTROLS CORPORATION, Defendant. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION SAN MATEO ELECTRICAL WORKERS HEALTH CARE TRUST, et al. Plaintiffs, ) ) ) ) ) ) ) ) ) ) ) Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT I. INTRODUCTION Three employee benefit trusts (San Mateo Electrical Workers Health Care Trust, San Mateo County Electrical Construction Industry Retirement Trust, and San Mateo Electrical Workers Education and Training Plan) were created by a collective bargaining agreement between an electricians' union (International Brotherhood of Electrical Workers, Local Union 617) and an employers' association (National Electrical Contractors Association, San Mateo Chapter). The trusts, their trustee (Dominic Nolan), the union, and the employer association (collectively, "Plaintiffs") bring this action against ACS Controls Corporation ("Defendant"), alleging violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1001-1191c, and the Labor Management Relations Act ("LMRA"), 29 USCS 141-188. Plaintiffs allege that Defendant is delinquent in its payments into Plaintiffs' trusts as required by the collective bargaining agreement. 1 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT Dockets.Justia.com 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Presently before the Court is Plaintiffs' Motion for Default Judgment (hereafter, "Motion," Dkt. No. 19). The Court conducted a hearing on October 7, 2010. Defendant did not oppose the motion or appear at the hearing. Based on some inconsistencies in the damages calculations originally submitted by Plaintiffs, the Court requested that Plaintiffs submit a revised damages calculation. Plaintiffs filed an Amended Declaration supporting their motion for default on October 26, 2010. See Dkt. No. 21. Based on the arguments presented and the papers submitted by Plaintiffs, Plaintiffs' Motion for Default Judgment is hereby GRANTED. Because the Plaintiffs filed two declarations containing confidential employee information (Dkt. Nos. 19, Ex. 1, and 21), Plaintiffs are hereby ORDERED to submit a Motion to Remove Incorrectly Filed Document with a Proposed Order seeking replacement of these filings with properly redacted versions. The redacted versions shall be prepared by Plaintiffs and shall redact employee confidential information. II. BACKGROUND a. Factual Background In a Complaint filed on January 16, 2009, Plaintiffs allege as follows: The San Mateo Electrical Workers Health Care Trust, San Mateo County Electrical Construction Industry Retirement Trust, and San Mateo Electrical Workers Education and Training Plan (collectively, "Funds") are multi-employer employee benefit plans pursuant to ERISA 29 U.S.C. 1002(3), (37) and 29 U.S.C. 1132(d)(1) and jointly trusteed employee benefit trusts pursuant to the LMRA, 29 U.S.C. 186(c)(5). Compl. 3. Dominic Nolan is a trustee and fiduciary of the Funds under ERISA and LMRA. Compl. 4. Defendant ACS Controls Corporation is an "employer" "engaged in an industry or activity affecting commerce" (electrical wiring installation) within the meaning of 29 U.S.C. 152 and 29 U.S.C. 1002-03. Compl. 5. At all relevant times, Defendant was a signatory to a Letter of Assent binding it to the Inside Wireman's Agreement, a written collective bargaining agreement between Plaintiffs International Brotherhood of Electrical Workers Local Union 617 (a union) and National Electrical Contractors Association (an employers association). The Inside Wireman's Agreement also requires Defendant to be bound by applicable Fund agreements, which established the Funds. The 2 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Inside Wireman's Agreement requires a monthly payment to each Fund. See Gordon Decl., Ex. A at 22-29 (Inside Wireman's Agreement, Art.'s VI, VII). These requirements are consistent with the calculations on the payroll slips approved by Defendant's bookkeeper. See, e.g. Gordon Decl., Ex. A at 25 (Inside Wireman's Agreement, Section 7.3, providing that the San Mateo County Electrical Construction Industry Retirement Trust receives $6.00 per employee hour worked, plus an additional $3.00 or $6.00 per hour if a vested participant so desires); Am. Gordon Decl., Ex. A at 1-2 (payment obligations calculated and acknowledged by Defendant's bookkeeper Judy Still, specifically "Local Pension - Total Column 5" at 2 and Cols. 4-5 at 3). The Inside Wireman's Agreement provides for the possibility of payment levels changing at the recommendation of the Funds' trustees. See Gordon Decl., Ex. A at 26, 27 (Inside Wireman's Agreement, Sections 7.4, 7.6(c)). Payments to the San Mateo Electrical Workers Health Care Trust and the San Mateo Electrical Workers Education and Training Plan have increased from the levels provided in the Inside Wireman's Agreement. Although Plaintiffs have provided no contract documentation other than the Inside Wireman's Agreement, Defendant's own payroll slips, signed by Defendant's bookkeeper document the increases. See, e.g. Am. Gordon Decl., Ex. A at 1 ("Health & Welfare - $7.70 per hour" from April 2009); Gordon Decl., Ex. A at 26 (Section 7.4, providing payment of $6.70 per hour to San Mateo Electrical Workers Healthcare Trust, effective June 2006). Both the Fund Agreements and the Inside Wireman's Agreement provide for prompt payment of all employer contributions to the Funds and provide for the payment of liquidated damages and attorney's fees in case of late or missed payments. Plaintiffs allege that the agreements also provide for interest at a simple annual rate of 8%, although the cited sections of the Agreement contain no such provision. Compl. 7, 8 (quoting Inside Wireman's Agreement, Sections 7.7-7.8.) Plaintiffs allege that Defendant breached the agreements in the following ways. First, Defendant untimely paid for the months of June 2008, October 2008 through March 2009, and May 2009 through July 2009. Second, Defendant failed to pay altogether for the months of August 2009 through July 2010. Compl. 9; Stephenson Decl., Ex. A at 1. 3 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 On the basis of the allegations outlined above, Plaintiffs allege two causes of action. First, Plaintiffs allege failure to make obligatory payments to a multiemployer plan under the terms of a collective bargaining agreement in violation of ERISA. Compl. 12. Second, Plaintiffs allege breach of Articles VI and VII of the Inside Wireman's Agreement in violation of LMRA. Compl. 16; see Gordon Decl., Ex. A at 22-29. b. Procedural History On November 20, 2009, Plaintiffs filed this suit. See Dkt. No. 1. On March 8, 2010, Plaintiffs served Defendant with the summons and complaint. See Dkt. Nos. 1, 2, 5. On March 10, 2010 and again on April 15, 2010, the initial case management conference was continued at Plaintiffs' request, pending informal settlement talks with Defendant. See Dkt. Nos. 6, 8. Pursuant to Fed. R. Civ. P. 12(a)(1), Defendant's Answer was due on March 28, 2010. See Dkt. No. 5. On April 27, 2010, as a result of Defendant's failure to answer the complaint, Plaintiffs filed a motion for entry of default. See Dkt. No. 9. On April 29, 2010, the Clerk of Court entered default. See Dkt. No. 10. Presently before the Court is Plaintiffs' Motion for Default Judgment. III. LEGAL STANDARDS Pursuant to Fed. R. Civ. P. 55(b)(2), when the defendant fails to timely answer a complaint, the plaintiff may move the court for an entry of default judgment. The grant of a default judgment is within the discretion of the court. Draper v. Coombs, 792 F.2d 915, 924 (9th Cir. 1986). In the Ninth Circuit, the district court must consider seven factors: (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. Eitel v. McCool, 782 F.2d 1470, 147172 (9th Cir. 1986). IV. ANALYSIS Plaintiffs move the Court to enter default judgment against Defendant for unpaid contributions, liquidated damages for unpaid contributions, interest for unpaid contributions, liquidated damages 4 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 for contributions that were late, but paid before the complaint was brought, and attorney's fees and costs. Mot. at 3-4. a. Default Judgment Plaintiffs have presented proof of adequate service of process, and Defendant has failed to timely answer, leading the Clerk of Court to enter default against Defendant. See Dkt. Nos. 5, 10. The Court thus has discretion to grant or deny a default judgment under Fed. R. Civ. P. 55(b). See Eitel, 782 F.2d at 1471- 72. Although strong public policy favors decisions on the merits, in light of Defendant's refusal to litigate, the Court must examine whether default judgment is appropriate in this case under Eitel. Here, Defendant has not presented a defense or otherwise communicated with the Court at all. Thus, Defendant has not shown excusable neglect. If Plaintiffs are not granted default judgment, the Unions and Funds cannot recover the contributions owed to them. See Bay Area Painters and Tapers Pension Trust Fund v. Lombari, No. 10-0709 SC, 2010 WL 3749401, at *3 (N.D. Cal. Sept. 23, 2010). The Court finds that Defendant's failure to demonstrate excusable neglect, measured against the possibility of prejudice to Plaintiffs, favors default judgment. Once the Clerk of Court enters default, all well-pleaded allegations regarding liability are taken as true except as to the amount of damages. Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002); Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). Here, the Clerk of Court entered default on April 29, 2010. Upon review of Plaintiffs' Complaint, and pursuant to ERISA 502, Plaintiffs have standing to enforce provisions of ERISA or obtain appropriate equitable relief to redress certain violations. 29 U.S.C. 1132. Further, the Court finds that Plaintiffs have adequately alleged a violation of 515 of ERISA by showing that Defendants did not contribute to the Funds as required by the Fund Agreements. 29 U.S.C. 1145. Thus, the merits of Plaintiffs' claims are deemed valid. Because the allegations are taken as true, there is no possibility of a dispute concerning material facts. These factors favor granting default judgment for Plaintiffs. A large sum of money in dispute weighs against granting default judgment. See Eitel, 782 F.2d at 1472 (affirming denial of default judgment for claim to $3M). Here, Plaintiffs seek 5 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 $43,573.31 (plus less than $10 daily interest after October 7, 2010), inclusive of attorneys' fees and costs. Mot. at 6. This is a small amount when compared to "the potential loss of benefits by Defendant's employees as a result of Defendant's conduct." See Bd. of Tr. of the N. Cal. Sheet Metal Workers, et al. v. Peters, No. C-00-0395, 2000 U.S. Dist. Lexis 19065, at *5 (N.D. Cal. Dec. 29, 2000). Thus, the Court finds this factor in favor of default judgment. In sum, the Court finds that the Eitel factors favor granting default judgment. Accordingly, the Court GRANTS Plaintiffs' Motion for Default Judgment. b. Remedy Plaintiffs contend that Defendant should pay delinquent contributions, liquidated damages, and interest to the Funds. Mot. at 3-4. Plaintiffs also contend that Defendant should pay Plaintiffs' attorneys fees and costs. Mot. at 4. This action was brought by Plaintiff Nolan, the fiduciary of the Trusts, to enforce Defendant's duties to make regular contributions to the Trusts under 29 U.S.C. 1145. Accordingly, the Court is obligated to award the unpaid contributions, interest on the contributions, the greater of interest on the unpaid contributions or liquidated damages as provided by the plan, and reasonable attorney's fees and costs. 29 U.S.C. 1132(g)(2). The Ninth Circuit has held that this provision is mandatory, and not discretionary, when (1) defendant was delinquent when the action was filed, (2) the court is entering a judgment against defendant and (3) the Trust Agreements provide for these awards. Nw. Admin., Inc. v. Albertson's, Inc., 104 F.3d 253, 257 (9th Cir. 1996). Under the Inside Wireman's Agreement, delinquent contributors are liable for liquidated damages of 10% on late contributions and for attorney's costs and fees incurred enforcing collection by the Funds. Plaintiffs also allege that the Trust Agreements provide for 8% per annum simple interest on all unpaid contributions, but without documentary support for this figure. The terms of these agreements are in accordance with 29 U.S.C. 1132(g)(2). However, the Court will not award the 8% interest without documentary support that this is the contractual interest rate. Plaintiffs claim that $44,816.24 in contributions was either delinquent at commencement of this action or became delinquent between commencement of this action and the October 7, 2010 6 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 hearing on the Motion for Default Judgment. However, Plaintiffs credit Defendant with payments made since the suit was brought, of $1,500.00 on December 15, 2009, $1,500.00 on January 20, 2010, $4,000.00 on July 2, 2010, and $7,830 on July 8, 2010. Thus, the delinquent principal requested is $29,986.24. Mot. at 3-4; Stephenson Decl. 25, Ex. A at 1; Am. Gordon Decl., Ex. B at 1. As liquidated damages, Plaintiffs seek 10% of the entire $44,816.24 ($4,481.62), per the Inside Wireman's Agreement. See id. This is an appropriate application of 29 U.S.C. 1132(g)(2). See Roofers Local Union No. 81 v. Wedge Roofing, Inc., 811 F. Supp. 1398, 1401-02 (N.D. Cal. 1991). Plaintiffs seek 8% simple interest per annum on each contribution within the $44,816.24. Interest is calculated from the due date of each payment until either the principal was paid (July 8, 2010) or until the hearing on Plaintiffs' Motion for Default Judgment (October 7, 2010). The calculated total is $2,526.86. Plaintiffs overstate Defendant's liability by $32.50 when they mistakenly apply the July 2 payment on July 8 in their interest calculations and fail to apply $1370.55 from the July 8 payment. See Motion at 3-4; Stephenson Decl. at 6, Ex. A at 1. However, Plaintiffs also understate Defendant's liability by $71.67 when they fail to request interest for the $1,500.00 paid late on December 15, 2009 and the $1,500.00 paid late on January 20, 2010. See Am. Stephenson Decl., Ex. B at 1. Thus, the corrected total interest is $2566.03. However, the Court will not award the 8% interest without documentary support that this is the contractual interest rate. Plaintiffs also request 10% liquidated damages on payments that were late, but were paid before the complaint was filed. These liquidated damages total $3,045.85. See Stephenson Decl. 2-10. ERISA may not be used as a vehicle to obtain late fees. See Idaho Plumbers & Pipefitters Health & Welfare Fund v. United Mech. Contractors, 875 F.2d 212, 215 (9th Cir. 1989); Parkhurst v. Armstrong Steel Erectors, Inc., 901 F.2d 796, 797 (9th Cir. 1990). However, although recovery of liquidated damages for contributions that were late, but paid before the complaint was brought is inappropriate under Plaintiffs' ERISA claim, contract remedies are not precluded by ERISA. Idaho Plumbers at 216; Parkhurst at 798. Thus, liquidated damages for Defendant's late payments 7 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 may be awarded under LMRA, 29 U.S.C. 185(a). The Court finds that the liquidated damages in the uncontested Fund Agreements are a reasonable estimate of difficult-to-quantify harm, and therefore appropriate contractual remedy for breach of the collective bargaining agreement. Plaintiffs also request $5030.32 in attorney's fees and $447.42 in attorney's costs, up to but not including the default judgment motion. Gordan Decl. at 3. Plaintiffs' counsel further estimates unbilled fees to be $555.00 based on their hourly rate of $185 and unbilled work researching, writing, and arguing this Motion. Id. These fees and costs total $6032.47. Under 29 U.S.C. 1132(g)(2)(D), the Court finds these fees and costs to be reasonable. The unpaid principal, corrected interest, liquidated damages, and attorney's fees described above total $46,112.48. Plaintiffs filed their Motion for Default Judgment on September 2, 2010. Plaintiffs later received payment of $1,000.00 on September 8, 2010, and $1,500.00 on October 6, 2010. Am. Gordon Decl. 7, Ex. B at 1. These payments reduce Defendant's liability to $43,612.48. See Am. Gordon Decl. 8, Ex. B at 1. Plaintiffs also seek 8% simple interest on this total from October 7, 2010 until the judgment is entered. Am. Gordon Decl. 8. 29 U.S.C. 1132(g)(2)(B) does not provide for interest on liquidated damages and attorney's fees. Bd. of Tr. of the Boilermaker Vacation Tr. v. Skelly, Inc., 389 F.Supp.2d 1222, 1227 (N.D. Cal. 2005). Thus, only interest on the unpaid principal is appropriate, or $6.02 per day. However, the Court will not award the 8% interest without documentary support that this is the contractual interest rate. In their Motion for Default Judgment, Plaintiffs cite to the liquidated damages provision in support of the alleged provision for 8% interest. See Mot. at 5 (citing Gordan Decl., 3, Ex. A at 27). The Court has been unable to find reference to this 8% figure in the Inside Wireman's Agreement entered into evidence. See Gordan Decl., Ex. A. Thus, notwithstanding the use of the 8% interest figure in the damages calculations by Sandy Stephenson. Stephenson Decl. 11-23, the Court currently finds insufficient evidentiary basis for the award of 8% interest on the principal; however, 29 U.S.C. 1132(g)(2) entitles Plaintiffs to interest on the unpaid principal. The Court therefore instructs Plaintiffs to submit evidence of their entitlement to interest at the 8 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 specific rate of 8% by December 1, 2010. If this evidence is not submitted, Defendant will not be liable for $6.02 daily simple interest. V. CONCLUSION The Court GRANTS Plaintiffs' Motion for Default Judgment and AWARDS Plaintiffs $43,612.48 in unpaid principal, interest, liquidated damages, and attorney's fees and costs, along with $6.02 per day interest on unpaid principal from October 7, 2010 until entry of judgment, for a total of $43,883.38, conditional upon Plaintiffs submission to the Court of 8% interest provisions in the Fund Agreements by November 29, 2010. Absent submission by this deadline, Plaintiffs are awarded $41,046.45. Because the Plaintiffs filed two declarations containing confidential employee information (Dkt. Nos. 19, Ex. 1, and 21), Plaintiffs are hereby ORDERED to submit a Motion to Remove Incorrectly Filed Document with a Proposed Order seeking replacement of these filings with properly redacted versions. The redacted versions shall be prepared by Plaintiffs and shall redact employee confidential information. Counsel for Plaintiffs are further ordered to notify the affected employees that their confidential information was made publicly available by Counsels' public filing of this information by December 1, 2010. IT IS SO ORDERED. Dated: November 22, 2010 _________________________________ LUCY H. KOH United States District Judge 9 Case No.: 09-CV-05519-LHK ORDER GRANTING DEFAULT JUDGMENT

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