Perez v. Hanco Inc et al
Filing
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OPINION AND ORDER GRANTING 20 MOTION for Default Judgment as to Defendant Hanco, Inc. d/b/a Classico Seating filed by Thomas E Perez. Hanco is ORDERED to restore $25,697.32 to the Hanco, Inc. Health Plan and $2,609.44 to the Hanc o, Inc. Dental Plan. Hanco is also permanently enjoined from violating the provisions of Title I of ERISA, from serving as a fiduciary for any Hanco employee benefit plan or Hanco employee welfare benefit plan, and from serving as a fiduciary or serv ice provider to any ERISA-covered employee benefit plan. Secretary to submit a recommendation within 30 days of an individual to serve as an independent fiduciary to terminate the 401(k) plan and to distribute the plans assets to its beneficiaries and participants. Hanco is ORDERED to pay the fees and expenses of the independentfiduciary. The Secretary is awarded the costs of this action. ***Civil Case Terminated. Signed by Chief Judge Philip P Simon on 10/15/15. (mlc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
THOMAS E. PEREZ, Secretary of Labor,
United States Department of Labor,
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Plaintiff,
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v.
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HANCO, INC. d/b/a CLASSICO SEATING, )
HARRY T. RICHARDSON JR., THE HANCO, )
INC. PLAN, and THE HANCO, INC.
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DENTAL PLAN,
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Defendants.
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No. 3:14-CV-1908PPS-CAN
OPINION AND ORDER
Before me is Plaintiff Thomas E. Perez, Secretary of Labor’s Motion for Default
Judgment against Defendant Hanco, Inc. Because Hanco has failed to plead or defend, the
Secretary’s Motion for Default Judgment is GRANTED.
BACKGROUND
The Secretary filed his complaint on September 19, 2014, [DE 1], bringing claims
under 29 U.S.C. § 1109 and 29 U.S.C. §§ 1132(a)(2) and (5). The complaint alleges Hanco
failed to contribute requisite funds to its employees’ 401(k) plans from October 2011 to
February 2012, failed to contribute requisite funds to its employees’ health plans from
August 2011 to September 2011, and failed to contribute requisite funds to its employees’
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dental plans from February 2011 to May 2011, all while Hanco served as a fiduciary of the
plans. [Id.] The complaint also alleges that after Hanco ceased operations on February 21,
2012, it failed to administer the 401(k) plans by failing to terminate the 401(k) plans and
failing to authorize distributions to the plans’ participants and beneficiaries. [Id.] On
August 25, 2014, a non-defendant fiduciary restored the losses to Hanco’s 401(k) plan, and
no amount is currently outstanding with regard to the 401(k) plan [DE 20, Ex. A]. Hanco
was served with the complaint by the United States Marshal’s Office on December 20, 2014
[DE 10]. After Hanco failed to answer by the February 6 due date, the Secretary moved for
default entry on March 18; the clerk entered Hanco into default on March 19 [DE 18]. The
Secretary moved for default judgment on July 22 [DE 20]. Hanco has failed to appear,
plead, or otherwise defend.
DISCUSSION
I may enter default judgment under Rule 55(b)(2) once the clerk has entered a
default against the defendant under Rule 55(a). E.g., Wolf Lake Terminals v, Mut. Marine Ins.
Co., 433 F. Supp. 2d 933, 941 (N.D. Ind. 2005). Under Rule 55(a), the clerk is to enter the
default of a party against whom a judgment is sought when that party has failed to plead
or otherwise defend. Fed. R. Civ. P. 55(a). This entry is recognition of the fact that a party
is in default for a failure to comply with the rules. Since the Clerk has already entered
default against Defendant here [DE 18], I may enter a default judgment under Rule
55(b)(2).
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While Federal Rule of Civil Procedure 55(b) gives district courts the power to enter
default judgment, they must exercise discretion when doing so. See O’Brien v. R.J. O’Brien
& Assocs., Inc., 998 F.2d 1394, 1398 (7th Cir. 1993); Davis v. Hutchins, 321 F.3d 641, 646 (7th
Cir. 2003). “As a general rule, a default judgment establishes, as a matter of law, that
defendant[] [is] liable to plaintiff as to each cause of action alleged in the complaint.”
O’Brien, 998 F.2d at 1404 (citation and internal quotation marks omitted). All well-pled
allegations in the complaint are presumed true when ruling on a request for default
judgment. Black v. Lane, 22 F.3d 1395, 1399 (7th Cir. 1994). Thus, if the complaint establishes
the requisite elements of liability on a claim, a plaintiff is entitled to relief for that claim. See
In re Catt, 368 F.3d 789, 793 (7th Cir. 2004) (“Once the default is established . . . the plaintiff
must still establish the entitlement to the relief he seeks.”).
Several factors may be considered including whether grounds for default are clearly
established: the amount of money requested, delays resulting in prejudice to the plaintiff,
material issues of fact or substantial public importance, and whether the default is strictly
technical. Cameron v. Myers, 569 F. Supp. 2d 762, 764 (N.D. Ind. 2008) (citing 10A Charles
A. Wright, Arthur R,. Miller & Mary Kay Kane, Fed. Prac. & Pro. Civ. § 2685 (3d ed. 2007)).
Here, all factors weigh in favor of the Secretary. The Secretary requests neither an
unprecedented nor an alarming amount of money. Further, absent the judgment, the
Secretary would be prejudiced because it will have greater difficulty getting Hanco to
restore the delinquent contributions without a judgment. This lawsuit also implicates no
issues of public importance. Finally, and perhaps most importantly, Hanco’s total failure
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to respond to this suit whatsoever in the nearly ten months since initial service of the
summons amounts to more than a mere technicality - in other words, the default judgment
is not based on some mere procedural oversight.
In support of his claim that Hanco is liable for the dollar amounts claimed, the
Secretary cites 29 U.S.C. § 1109, which imposes liability on a fiduciary for losses incurred
as a result of the fiduciary’s breach of any responsibility, obligation, or duty. A fiduciary,
as defined by 29 U.S.C. § 1002(21)(A), is one who “exercises any authority or control
respecting management or disposition of [a plan’s] assets, . . . or . . . has any discretionary
authority or discretionary responsibility in the administration of such plan.” The secretary
submits that Hanco had authority and control over the assets of the 401(k) plan, the health
plan, and the dental plan, and also served as Plan Administrators for all three plans [DE
21]. Additionally, the Secretary has submitted evidence of Hanco’s delinquent
contributions in the declaration of Crystal Coleman [DE 20, Ex. A], who supervised the
investigations into the Hanco plans for the Employee Benefits Security Administration.
Because the Secretary properly alleges liability under 29 U.S.C. § 1109 and Hanco fails to
contest the allegations, Hanco is liable for the delinquent contributions.
A hearing to determine damages incident to default judgment is unnecessary where
damages can be ascertained from documentary evidence or detailed affidavits in the
record. See Dundee Cement Co. v. Howard Pipe & Concrete Prods. Inc., 722 F.2d 1319, 1323 (7th
Cir. 1983). A court must ascertain damages to a “reasonable certainty,” In re Catt, 368 F.3d
at 793, and the relief must not exceed what is demanded in the pleadings. Fed. R. Civ. P.
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54(c).
The Secretary requests Hanco restore an initial $25,697.32 to the Hanco, Inc. Health
Plan and $2,609.44 to the Hanco, Inc. Dental Plan for all delinquent contributions owed
through July 16, 2015 [DE 20 at 7]. Crystal Coleman’s declaration submitted by the
Secretary supports this amount [Id. at Ex. A]. Accordingly, Hanco is ordered to restore a
total of $25,697.32 to the Hanco, Inc. Health Plan and a total of $2,609.44 to the Hanco, Inc.
Dental Plan.
The Secretary also requests that Hanco be permanently enjoined from violating the
provisions of Title I of ERISA, be permanently enjoined from serving as a fiduciary for the
employee plans, and be permanently enjoined from serving as a fiduciary or service
provider to any ERISA-covered employee benefit plan [DE 20]. Additionally, the Secretary
requests an independent fiduciary be appointed to distribute the 401(k) plan’s assets and
to terminate the 401(k) plan, and that Hanco be ordered to pay the fees and expenses of the
independent fiduciary.
Where the fiduciary participates in egregious self-dealing or other serious
misconduct, a permanent injunction may be deemed appropriate remedial relief. Solis v.
Cooper, No. 1:10-CV-152-TS, 2011 WL 497614, at *2 (N.D. Ind. Feb. 4, 2011). 29 U.S.C. § 1109
empowers the Court to apply appropriate equitable and remedial relief. When appropriate,
courts have appointed independent fiduciaries and ordered the independent fiduciaries’
fees be paid by breaching defendants. See Chao v. Wheeler, No. 3:05-CV-763 RM, 2007 WL
4233464, at *2,8 (N.D. Ind. Nov. 28, 2007); see also DE 35 of same (Case No. 3:05-CV-763
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RM). Here, the Secretary alleges that the defendant withheld thousands of dollars from its
employees’ pay which was intended to be placed into the employee benefit plans, but was
instead placed into Hanco’s general assets. Hanco has also failed to terminate the 401(k)
plan and failed to authorize distributions to the plan’s participants and beneficiaries. Such
conduct is properly characterized as serious misconduct. Solis, 2011 WL 497614 at *2.
Accordingly, Hanco is permanently enjoined from violating the provisions of Title
I of ERISA, from serving as a fiduciary for any Hanco employee benefit plan, and from
serving as a fiduciary or service provider to any ERISA-covered employee benefit plan.
Given Hanco’s failure to terminate the 401(k) plan and distribute its assets, the
appointment of an independent fiduciary is an appropriate remedy here. An independent
fiduciary will be appointed, and Hanco will pay the fees and expenses of the independent
fiduciary. The Secretary is ordered to provide me with a recommendation of someone to
serve as the independent fiduciary within thirty days of this order.
Finally, the Secretary seeks to collect the costs of this action [DE 21]. 29 U.S.C. §
1132(g)(2)(D) provides that in an action for delinquent contributions “in which a judgment
in favor of the plan is awarded” a court “shall” award costs. Trustees of the Michiana Area
Elec. Workers Health & Welfare Fund v. TGB Unlimited Inc., No. 2:13-CV-19-JEM, 2015 WL
1865561, at *3 (N.D. Ind. Apr. 22, 2015). Because the court has granted the motion for
default judgment against Hanco, the Secretary is awarded the costs of this action.
CONCLUSION
The Court GRANTS the Secretary’s motion for Default Judgment and Hanco is
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ORDERED to restore $25,697.32 to the Hanco, Inc. Health Plan and $2,609.44 to the
Hanco, Inc. Dental Plan. Hanco is also permanently enjoined from violating the
provisions of Title I of ERISA, from serving as a fiduciary for any Hanco employee
benefit plan or Hanco employee welfare benefit plan, and from serving as a fiduciary or
service provider to any ERISA-covered employee benefit plan.
The Secretary is ORDERED to submit a recommendation to the court of an
individual to serve as an independent fiduciary to terminate the 401(k) plan and to
distribute the plan’s assets to its beneficiaries and participants within thirty (30) days of
this order. Hanco is ORDERED to pay the fees and expenses of the independent
fiduciary. The Secretary is awarded the costs of this action.
SO ORDERED.
ENTERED: October 15, 2015
s/Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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