Solis v. Cardiografix, Inc. et al
Filing
21
ORDER granting 19 Motion for Default Judgment. The hearing scheduled for 8/24/2012 is VACATED. The Clerk shall close this file. Signed by Judge Edward J. Davila on 8/22/2012. (ejdlc1, COURT STAFF) (Filed on 8/22/2012)
1
2
3
4
5
6
7
IN THE UNITED STATES DISTRICT COURT
8
FOR THE NORTHERN DISTRICT OF CALIFORNIA
9
SAN JOSE DIVISION
CASE NO. 5:12-cv-01485 EJD
HILDA L. SOLIS, Secretary of Labor,
United States Department of Labor,
11
For the Northern District of California
United States District Court
10
ORDER GRANTING PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT
12
Plaintiff(s),
v.
13
[Docket Item No(s). 19]
CARDIOGRAFIX, INC., et. al.,
14
15
Defendant(s).
/
16
17
Presently before the Court is a Motion for Default Judgment (the “Motion”) filed by Plaintiff
18
Hilda L. Solis as Secretary of the United States Department of Labor (“Plaintiff”). See Docket Item
19
No. 19. Plaintiff requests the court enter judgment against Defendants Cardiografix, Inc. (the
20
“Company”), David Hyun, M.D. (“Hyun”), and Cardiografix, Inc. 401(k) Profit Sharing Plan
21
(collectively, “Defendants”) for various violations of the Employee Retirement Income Security Act
22
of 1974 (“ERISA”), 29 U.S.C. § 1001 et. seq. To date, Defendants have not filed an opposition or
23
otherwise appeared in this proceeding.
24
Having thoroughly reviewed Plaintiff’s pleadings, the court finds this matter suitable for
25
decision without oral argument pursuant to Civil Local Rule 7-1(b). Accordingly, the hearing
26
scheduled for August 24, 2012, will be vacated. The Motion will be granted based on the discussion
27
which follows.
28
1
CASE NO. 5:12-cv-01485 EJD
ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
1
2
I.
FACTUAL AND PROCEDURAL BACKGROUND
Cardiografix, Inc. is a California corporation operating as an independent outpatient
3
diagnostic cardiac imaging center in Santa Clara County. See Compl., Docket Item No. 1, at ¶ 9.
4
David Hyun, M.D. (“Hyun”) is the President and owner of the Company. See id., at ¶ 10. He is also
5
a Trustee of the Cardiografix, Inc. 401(k) Profit Sharing Plan, an employee pension benefit plan. See
6
id., at ¶¶ 9, 20.
7
As the plan trustee, Hyun has the authority, discretion, and responsibility to manage and
8
control the assets of the fund according to the Plan’s provisions. See id., at ¶ 20. Further, the
9
Company, as Plan Administrator, is granted the powers to administer, interpret, and apply the Plan.
See id., at ¶ 18. The Company maintains a single general banking account, and Hyun was an
11
For the Northern District of California
United States District Court
10
account signatory. See id., at ¶ 22. This single general banking account is used to pay the
12
Company’s operating and other non-plan expenses. See id., at ¶ 23.
13
Plan participants may obtain loans up to $50,000.00. See id., at ¶ 15. The terms for
14
repayment consist of withholding amounts from the participant’s payroll until the loan amount, plus
15
interest, is repaid. See id., at ¶ 15. Following Company practice, these withheld amounts would
16
remain in the single general banking account prior to being remitted to the Plan. See id., at ¶ 24.
17
From May 31, 2007, to approximately May 31, 2010, the Company withheld at least
18
$49,510.06 from participants’ pay for loan repayments. See id., at ¶ 25. However, the Company did
19
not timely remit these withheld amounts to the Plan; such action caused lost-opportunity costs. See
20
id., at ¶ 25. Further, the Company and Hyun retained and commingled these amounts within the
21
single general banking account and used the amounts to pay non-Plan expenses for the Company
22
and for Hyun. See id., at ¶¶ 26-27.
23
According to the Department of Labor regulations, participant loan repayments must be
24
remitted to the Plan within a specific time frame. See id., at ¶ 28. Plaintiff alleges the repayments
25
could have been segregated from the Company assets within seven business days from the date of
26
withholding. See id., at ¶ 29.
27
28
In mid-February, 2008, Hyun obtained a participant loan of $50,000.00 from the Plan. See
id., at ¶ 31. However, the unpaid balance on his loan remains at least $46,841.59, despite the terms
2
CASE NO. 5:12-cv-01485 EJD
ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
1
of repayment consisting of twice monthly repayments beginning on April 15, 2008. See id., at ¶¶
2
32-33.
3
4
5
Further, Hyun, as plan trustee, failed to collect the Employer Safe Harbor Contributions for
Plan years 2008 and 2009, causing additional lost opportunity costs. See id., at ¶¶ 39-41.
On March 23, 2012, Plaintiff initiated this action by filing the complaint against Defendants.
6
On May 8, 2012, Defendants were served with a copy of the Summons, Complaint and relevant
7
court documents. Defendants thereafter failed to respond to the Complaint. Consequently, the Clerk
8
entered Defendants’ default on June 7, 2012. See Docket Item No. 16. This motion followed.
9
II.
DISCUSSION
A.
11
For the Northern District of California
United States District Court
10
Pursuant to Federal Rule of Civil Procedure 55(b), the court may enter default judgment
12
against a defendant who has failed to plead or otherwise defend an action. “The district court’s
13
decision whether to enter default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d
14
1089, 1092 (9th Cir. 1980).
15
Legal Standard
The Ninth Circuit has provided seven factors for consideration by the district court in
16
exercising its discretion to enter default judgment, known commonly as the “Eitel factors.” They
17
are: (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff’s substantive claim; (3)
18
the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of
19
dispute concerning material facts; (6) whether default was due to excusable neglect and; (7) the
20
strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel
21
v McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). When assessing these factors, all factual
22
allegations in the complaint are taken as true, except those with regard to damages. Televideo Sys.,
23
Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987).
24
B.
Jurisdiction and Service of Process
25
Courts have an affirmative duty to examine their own jurisdiction - both subject matter and
26
personal jurisdiction - when entry of judgment is sought against a party in default. In re Tuli, 172
27
F.3d 707, 712 (9th Cir. 1999). Here, this court has subject matter jurisdiction pursuant to 29 U.S.C. §
28
1132(e). Personal jurisdiction arises from service upon Defendants in California. See Docket Item
3
CASE NO. 5:12-cv-01485 EJD
ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
1
Nos. 10, 11, 12; Burnham v. Super. Ct., 495 U.S. 604. 610-11 (1990).
2
The court must also assess whether the Defendants were properly served with notice of this
3
action. Plaintiff served the Summons and Complaint on Hyun, as an individual, in his capacity as
4
plan trustee, and as president of the company. See Docket Item Nos. 11, 12, 13. This service
5
encompasses all three Defendants, and the court therefore finds that Plaintiff properly effected
6
service of process.
7
C.
8
Turning now to the Eitel factors, it is clear they favor entry to default judgment against
9
Defendants in this case.
10
To begin, failure to enter default judgment in favor of Plaintiff would result in prejudice to
11
For the Northern District of California
United States District Court
The Eitel Factors
the plan participants, who have been denied the proper operation of their employee benefit plan.
12
Second, the Complaint is sufficient to support entry of a default judgment. Judgment by
13
default cannot be entered if the complaint fails to state a claim. See Moore v. United Kingdom, 384
14
F.3d 1079, 1090 (9th Cir. 2004). In the instant action, the court finds that the factual allegations, as
15
previously detailed above, support the violations of ERISA identified in the Complaint under the
16
pleading standard provided by Federal Rule of Civil Procedure 8.
17
Third, the sum of money at stake is relatively small. In general, the fact that a large sum of
18
money is at stake is a factor disfavoring default judgment. See Eitel, 782 F.2d at 1472 (holding that
19
alleged damages of $2,900,000, when considered in light of the parties’ dispute as to material facts,
20
supported by the court’s decision against entry of default judgment). In the instant case, Plaintiff
21
has asked for a total judgment of $120,795.01 - an amount far less than that contemplated by the
22
court in Eitel. Because the sum of money at stake here is modest in comparison, this factor weighs
23
in favor of entering a default judgment.
Fourth, there is no dispute of material fact. Indications that there is a dispute of material fact
24
25
can weigh against entry of default judgment. Id. at 1471-72. Here, Defendant has not disputed any
26
of Plaintiff’s contentions by failing to respond to either the Complaint or this motion, and all
27
material facts pled in the Complaint are verifiable. See Decl. of Charlene Argate, Docket Item No.
28
19.
4
CASE NO. 5:12-cv-01485 EJD
ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
1
Fifth, it is unlikely that default was the result of excusable neglect. This action was filed
2
over five months ago and Defendants have been properly served - three times over. Moreover, as an
3
employer, Hyun is aware of the payment obligations for which he is responsible and has chosen to
4
not to respond as a result.
5
Sixth, although federal policy generally disfavors the entry of a default judgment, all of the
6
other Eitel factors favor of a default judgment here. Therefore, this general policy is outweighed by
7
the more specific considerations, and the motion to enter default judgment will be granted.
8
D.
Damages
9
As previously noted, Plaintiffs action is based on the statutory duties imposed by ERISA,
specifically those contained in 29 U.S.C. §§ 1103, 1104 and 1106. For violations of these sections,
11
For the Northern District of California
United States District Court
10
29 U.S.C. § 1109 provides:
12
13
14
15
Any person who is a fiduciary with respect to a plan who breaches any
of the responsibilities, obligations, or duties imposed upon fiduciaries
by this title shall be personally liable to make good to such plan any
losses to the plan resulting from each such breach, and to restore to
such plan any profits of such fiduciary which have been made through
use of assets of the plan by the fiduciary, and shall be subject to such
other equitable or remedial relief as the court may deem appropriate,
including removal of such fiduciary.
16
17
Section 1109 allows the court wide discretion to fashion a remedy for a trustee’s breach of
18
fiduciary duty so long as the remedy inures to the benefit of the plan as a whole. See Chuck v.
19
Hewlett Packard Co., 455 F.3d 1026, 1039 (9th Cir. 2006) (citing Massachusetts Mut. Life Ins. Co.
20
v. Russell, 473 U.S. 134, 140 (1985)); see also Chao v. Merino, 452 F.3d 174, 185 (2d Cir. 2006).
21
Plaintiff seeks the following amounts as identified losses to the Plan: (1) $49,510.06 as
22
unremitted payments withheld from plan participants from May 31, 2007, through May 31, 2010,
23
plus $6,611.83 in lost opportunity costs and prejudgment interest on that amount; (2) $46,841.59 as
24
the unpaid balance on the loan taken by Hyun, plus $7,383.00 in lost opportunity costs; (3)
25
$9,646.21 as uncollected employer safe harbor contributions for Plan years 2008 and 2009, plus
26
$802.32 in lost opportunity costs. The court finds these amounts appropriate and supported by the
27
evidence presented for this motion.
28
In addition, Plaintiff seeks equitable relief in the form of an injunction removing the
5
CASE NO. 5:12-cv-01485 EJD
ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
1
Company as the plan administrator, removing Hyun as the plan trustee, and removing both the
2
Company and Hyun as fiduciaries of the Plan in favor of an independent fiduciary, whose costs
3
should be paid by Defendants. Plaintiff also seeks an order allowing an offset to Hyun’s individual
4
plan account against the amount Defendants are ordered to pay as a result of this proceeding. In
5
light of the authority allowing these injunctive provisions under similar circumstances, the court
6
finds the injunction requested here appropriate as well. See, e.g., Reich v. Lancaster, 55 F.3d 1034,
7
1054 (5th Cir. 1995); Martin v. Feilen, 965 F.2d 660, 672-73 (8th Cir. 1992); Beck v. Levering, 947
8
F.2d 639, 641 (2d Cir. 1991); Davis v. Torvick, No. C-93-1343 CW, 1996 WL 266127, at * 7 (N.D.
9
Cal. May 2, 1996).
In sum, Plaintiff shall recover a total of $120,795.01 in actual losses to the Plan plus post
11
For the Northern District of California
United States District Court
10
judgment interest. The Company and Hyun are jointly and severally liable for this amount as co-
12
fiduciaries of the Plan. The court will also issue the injunction requested by Plaintiff, as detailed in
13
the judgment to follow this order.
14
III.
15
ORDER
Based on the foregoing, the hearing scheduled for August 24, 2012, is VACATED.
16
Plaintiffs’ motion for entry of default judgment is GRANTED in the amount of $120,795.01. A
17
permanent injunction shall also issue as detailed in the ensuing judgment. The Clerk shall close this
18
file.
19
IT IS SO ORDERED.
20
21
22
Dated: August 22, 2012
EDWARD J. DAVILA
United States District Judge
23
24
25
26
27
28
6
CASE NO. 5:12-cv-01485 EJD
ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?