Builders Supply Co., Inc. Employee Stock Ownership Plan et al v. Nelson

Filing 17

MEMORANDUM AND ORDER - The clerk is directed to enter Lindsay A. Nelson's default. Lindsay A. Nelson shall have twenty days from the date of the clerk's entry of default within which to establish good cause for setting aside the default. The clerk is directed to send a copy of its entry of default, together with a copy of this memorandum and order, to the following address: Lindsay A. Nelson, 401 4th St., Apt. #1, Box 23, Yutan, NE 68073. As explained in the memorandum accompanyin g this order, the plaintiffs' motion for default judgment will be resolved after Nelson has had an opportunity to contest the clerk's entry of default. Ordered by Senior Judge Warren K. Urbom. (Copy mailed to pro se party as directed)(GJG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
BUILDERS SUPPLY CO., INC.
EMPLOYEE STOCK OWNERSHIP
PLAN, and BUILDERS SUPPLY
CO., INC., Plan Administrator,
Plaintiffs,
v.
LINDSAY A. NELSON,
Defendant.

)
)
)
)
)
)
)
)
)
)
)
)
)

8:13CV161
MEMORANDUM AND ORDER ON
THE PLAINTIFFS’ MOTION FOR
ENTRY OF DEFAULT AND
DEFAULT JUDGMENT

On November 13, 2013, Builders Supply Co., Inc. Employee Stock Ownership
Plan (the Plan) and Plan Administrator Builders Supply Co., Inc. (the Administrator)
(collectively, the plaintiffs) filed a motion for entry of default and for a default
judgment against Lindsay A. Nelson (Nelson). (ECF No. 15.) For the following
reasons, I shall direct the clerk to enter Nelson’s default, and I shall resolve the
plaintiffs’ motion for a default judgment after Nelson’s default has been entered.

I.

BACKGROUND

The Plan is an employee pension plan under the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. (Compl. ¶ 4, ECF No. 1;
Goerke Aff. ¶ 2, ECF No. 16-1.) The Administrator administers the Plan, and it is a
fiduciary of the Plan under ERISA. (Compl. ¶ 4, ECF No. 1.) At all material times,
Nelson was a beneficiary under the Plan, and he is a resident of Nebraska. (Id. ¶ 5.)
1

On May 22, 2013, the plaintiffs filed a four-count complaint against Nelson.
(See generally Compl., ECF No. 1.) The plaintiffs allege that on or about September
11, 2011, they issued a distribution to Nelson in the net amount of $28,682.21, but
this distribution included an overpayment of $22,500.00. (Id. ¶ 6.) They allege
further that Nelson’s ex-spouse was awarded a share of Nelson’s benefit account in
a Qualified Domestic Relations Order (QDRO) entered by the District Court of
Douglas County, Nebraska, on July 20, 2009, and that the amount of the ex-spouse’s
share equaled the amount of the overpayment to Nelson. (Id. ¶ 7. See also Compl.
Ex. B, ECF No. 1-2.) On November 30, 2012, the plaintiffs’ attorney mailed a letter
to Nelson stating that Nelson’s ex-spouse was entitled to a net distribution in the
amount of $22,500.00; that the plaintiffs erroneously sent the ex-spouse’s distribution
to Nelson; that Nelson had not transferred the $22,500.00 distribution to his exspouse; that Nelson was ignoring requests for cooperation from the plaintiffs; and that
the plaintiffs would take legal action against Nelson if he failed to respond to the
letter within seven days. (Compl. ¶ 9, ECF No. 1; see also Compl. Ex. C, ECF No.
1-3.) Nelson did not respond to any of the plaintiffs’ requests for the return of the
overpayment. (Compl. ¶ 10, ECF No. 1.)
Count I of the complaint, which is titled “Equitable Relief for Return of the
Overpayment Amount,” alleges that “Plaintiffs are entitled to judgment ordering
Nelson to return the Overpayment Amount to Plaintiffs . . . as a matter of equity
pursuant to the provisions of 29 U.S.C. § 1132(a)(3).” (Compl. ¶ 12, ECF No. 1.)
Count II, titled “Constructive Trust,” alleges that “Plaintiffs are entitled to judgment
imposing a constructive trust over the Overpayment Amount, including any proceeds
and assets derived therefrom, for the benefit of Plaintiffs, as a matter of equity
pursuant to the provisions of 29 U.S.C. § 1132(a)(3).” (Compl. ¶ 14, ECF No. 1.)
2

Count III, titled “Accounting,” alleges that “Plaintiffs are entitled to an accounting
from Nelson as to the location and any disposition of the Overpayment Amount,
together with any proceeds or other assets derived therefrom, as a matter of equity
pursuant to the provisions of 29 U.S.C. § 1132(a)(3).” (Compl. ¶ 16, ECF No. 1.)
Count IV, titled “Temporary Restraining Order and Preliminary Injunction,” alleges
that “Plaintiffs are entitled to a temporary restraining order and preliminary injunction
prohibiting and enjoining Nelson from disposing of the Overpayment Amount and
any proceeds or assets derived therefrom until a final determination is made with
respect to Plaintiffs’ claims in this action, as a matter of equity pursuant to the
provisions of 29 U.S.C. § 1132(a)(3).” (Compl. ¶ 18, ECF No. 1.) In addition to the
relief requested in Counts I-IV, the plaintiffs seek an award of costs and attorney’s
fees. (Id. ¶ 19.E.)
A summons was issued to Nelson on May 23, 2013. (ECF No. 4.) The
summons was returned unexecuted on July 10, 2013, with a note indicating that
service by certified mail was attempted twice, but both mailings were returned as
“unclaimed.” (E.g., Proof of Service at 2, ECF No. 8.) On August 6, 2013, the
plaintiffs moved for leave to serve Nelson by publication. (ECF No. 9.) This motion
was granted on August 12, 2013. (ECF No. 10.)
On September 26, 2013, October 3, 2013, and October 10, 2013, legal notice
of the plaintiffs’ complaint was published in The Daily Record of Omaha. (Noren
Aff. ¶ 2, ECF No. 14; see also Noren Aff. Ex. A, ECF No. 14-1.)1 To date, Nelson
has failed to answer or otherwise respond to the complaint.

1

On September 22, 2013, the plaintiffs received an extension of time within
which to effect service of process upon Nelson. (ECF No. 13. See also ECF Nos.
11-12.)
3

II.

STANDARD OF REVIEW

“When a party against whom a judgment for affirmative relief is sought has
failed to plead or otherwise defend, and that failure is shown by affidavit or
otherwise, the clerk must enter the party's default.” Fed. R. Civ. P. 55(a). “If the
plaintiff's claim is for a sum certain or a sum that can be made certain by computation,
the clerk–on the plaintiff's request, with an affidavit showing the amount due–must
enter judgment for that amount and costs against a defendant who has been defaulted
for not appearing and who is neither a minor nor an incompetent person." Fed. R.
Civ. P. 55(b)(1). “In all other cases, the party must apply to the court for a default
judgment.” Fed. R. Civ. P. 55(b)(2). “The court may conduct hearings or make
referrals–preserving any federal statutory right to a jury trial–when, to enter or
effectuate judgment, it needs to: (A) conduct an accounting; (B) determine the
amount of damages; (C) establish the truth of any allegation by evidence; or (D)
investigate any other matter.” Id.

III.

ANALYSIS

“When a party ‘has failed to plead or otherwise defend’ against a pleading
listed in Rule 7(a), entry of default under Rule 55(a) must precede grant of a default
judgment under Rule 55(b).” Johnson v. Dayton Electric Manufacturing Co., 140
F.3d 781, 783 (8th Cir. 1998) (citation omitted). See also Fraserside IP L.L.C. v.
Youngtek Solutions, Ltd., 796 F. Supp. 2d 946 (N.D. Iowa 2011) (“In short, . . . Rule
55 ‘requires two steps before entry of default judgment: first, pursuant to Fed. R. Civ.
P. 55(a), the party seeking a default judgment must have the clerk enter the default
by submitting the required proof that the opposing party has failed to plead or
otherwise defend; second, pursuant to Fed. R. Civ. P. 55(b), the moving party may
4

seek entry of judgment on the default under either subdivision (b)(1) or (b)(2) of the
rule.’” (citation omitted)).
I find that the plaintiffs have shown that service of process has been
accomplished by publication, and Nelson failed to plead or otherwise defend within
the time period allowed under the Federal Rules of Civil Procedure. The clerk is
therefore directed to enter Nelson’s default.
Because Nelson’s default has not yet been entered, I cannot enter a default
judgment at this time. Within twenty days of the clerk’s entry of default, Nelson may
attempt to establish good cause for setting aside the default. See, e.g., Fed. R. Civ.
P. 55(c). If Nelson fails to respond before this deadline, I will proceed to analyze and
resolve the plaintiffs’ motion for default judgment without further notice.2
IT IS ORDERED that:
1.

the clerk is directed to enter Lindsay A. Nelson’s default;

2.

Lindsay A. Nelson shall have twenty days from the date of the clerk’s
entry of default within which to establish good cause for setting aside
the default;

3.

the clerk is directed to send a copy of its entry of default, together with
a copy of this memorandum and order, to the following address: Lindsay
A. Nelson, 401 4th St., Apt. #1, Box 23, Yutan, NE 68073;

2

The plaintiffs need not refile their motion for default judgment.
5

4.

as explained in the memorandum accompanying this order, the
plaintiffs’ motion for default judgment will be resolved after Nelson has
had an opportunity to contest the clerk’s entry of default.

Dated November 19, 2013.
BY THE COURT

___________________________________________
Warren K. Urbom
United States Senior District Judge

6