EINHORN v. CONNOR et al
OPINION. Signed by Judge Robert B. Kugler on 7/19/2016. (TH, )
NOT FOR PUBLICATION
(Doc. No. 10)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
William J. EINHORN,
Administrator, Teamsters Health &
Civil No. 15–5910 (RBK/AMD)
Welfare Fund of Philadelphia and Vicinity :
James CONNOR & Donna CONNOR
KUGLER, United States District Judge:
This matter comes before the Court on the Motion for Default Judgment of William J.
Einhorn, Administrator of the Teamsters Health & Welfare Fund of Philadelphia and Vicinity
(“Plaintiff”). Pursuant to Fed. R. Civ. P. 55(b), Plaintiff seeks the recovery of benefits
improperly paid to James and Donna Connor (“Defendants”), as well as attorney’s fees and
costs, plus interest. For the reasons set forth below, Plaintiff’s Motion (Doc. No. 10) is
GRANTED IN PART. The Court grants default judgment as to liability, attorney’s fees, and
costs, but reserves judgment on the issue of damages.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY1
This case derives from improperly distributed prescription drug and medical benefits. See
Compl. ¶ 1. Plaintiff is the Administrator of the Teamsters Health and Welfare Fund of
Due to the Clerk’s entry of default, the Court accepts as true the facts alleged in the Complaint,
except for those relating to damages. See Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d
Philadelphia and Vicinity (“Fund”), an ERISA-qualified “employee welfare benefit Plan”
(“Plan”). Id. ¶¶ 5–6. Plaintiff is a fiduciary of the Fund, and authorized to bring this action on the
Fund’s behalf. Id. ¶ 6. Mr. Connor was employed by Aramark Uniform Services. Id. ¶ 10. He
participated in the Fund pursuant to a Collective Bargaining Agreement (“CBA”) between
Aramark and Teamsters Local Union 676. Id. ¶ 10.
The Plan provides for coverage of a beneficiary’s spouse so long as they are not
separated. Id. ¶ 15. “Separated” means “living separate and apart (even under the same roof) with
an intent to abandon or terminate the martial relationship.” Id. The Plan requires participants to
notify the Fund in writing if they divorce or separate from their spouse. Id. ¶ 17.
The Connors married in January 2007. Id. ¶ 13. As a spouse of a beneficiary, Mrs.
Connor was eligible for healthcare coverage. See id. ¶ 15. The Connors, however, separated in
September 2007. Id. ¶¶ 14, 16. The couple never notified the Plan of their separation. See id. ¶¶
19–20. They submitted beneficiary and census cards that stated they were married, but failed to
note their separated status. Id. ¶ 19. The Fund learned of their separation via a census card dated
March 9, 2013. Id. ¶ 20. On April 18, 2013, Mrs. Connor informed the Fund that Mr. Connor
instructed her not to notify the Fund of their separation, so she could continue receiving benefits.
Id. ¶ 21. Between September 2007 and April 12, 2013, the Fund paid prescription drug benefits
and medical benefits on behalf of Mrs. Connor. Id. ¶ 18.
When the Fund notified Mr. Connor of the erroneous payments, he appealed the Fund’s
determination that distributions were improper. Id. ¶ 26. On August 8, 2013, the Appeals
Committee held a hearing at which Mr. Connor was present and represented by counsel. Id. ¶ 27.
The Appeals Committee denied Mr. Connor’s appeal on November 27, 2013. Id. ¶ 28. Neither
Mr. Connor nor Mrs. Connor have repaid or made arrangement to repay the Fund for the money
owed. Id. ¶ 29.
Plaintiff filed his Complaint on July 31, 2015 (Doc. No. 1). Mrs. Connor was served on
August 6, 2015 (Doc. No. 7), and Mr. Connor was served on August 27, 2015 (Doc. No. 8). Both
individuals failed to plead or otherwise defend the lawsuit. On October 6, 2015, the Clerk issued
an Entry of Default against both Mr. Connor and Mrs. Connor. Plaintiff filed this Motion for
Default Judgment (Doc. No. 10) on January 22, 2016.
Federal Rule of Civil Procedure 55(b)(2) allows the Court, upon motion, to enter default
judgment against a defendant that has failed to plead or otherwise defend a claim for affirmative
relief. Although the decision to enter default judgment is left principally to the discretion of the
district court, there is a well-established preference in this Circuit that cases be decided on the
merits rather than by default whenever practicable. Hritz v. Woma Corp., 732 F.2d 1178, 1180–
81 (3d Cir. 1984). Consequently, the Court must address a number of issues before deciding
whether a default judgment is warranted in the instant case. If it finds default judgment to be
appropriate, the Court will then consider the question of damages.
The Appropriateness of Default Judgment
The Court must determine whether it has both subject matter jurisdiction over Plaintiff’s
cause of action and personal jurisdiction over Defendants. See U.S. Life Ins. Co. in City of New
York v. Romash, 2010 WL 2400163 at * 1 (D.N.J. June 9, 2010). This Court has subject matter
jurisdiction because Plaintiff’s claim for improperly paid medical benefits arises under a federal
statute. See 29 U.S.C. § 1451. This Court has personal jurisdiction over Defendants because both
are domiciled in New Jersey. See Milliken v. Meyer, 311 U.S. 457, 462 (1940).
Entry of Default
The Court must ensure that the Clerk properly exercised the entry of default under
Federal Rule of Civil Procedure 55(a). Rule 55(a) directs the Clerk of Court to enter a party's
default when the 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.” Defendants
failed to plead or defend this action. Accordingly, the Clerk’s appropriately issued the entry of
default under Rule 55(a).
Cause of Action
The Court must determine whether the Complaint states a plausible cause of action. In
conducting this inquiry, the Court accepts as true a plaintiff’s well-pleaded factual allegations.
See, e.g., Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). The Court must
ascertain whether the unchallenged facts constitute a legitimate cause of action. Chanel, Inc. v.
Gordashevsky, 558 F. Supp. 2d 532, 536 (D.N.J. 2008). Plaintiff’s suit seeks to recover benefits
distributed to Mrs. Connor after the couple separated. In Luby v. Teamsters Health, Welfare, &
Pension Trust Funds, the Third Circuit held that an ERISA fund may recover mistaken
payments. See 944 F.2d 1176, 1186 (3d Cir. 1991).
A fiduciary is authorized to enforce provisions of a qualified plan. See 29 U.S.C. §
1132(a)(3). The Plan provides for spousal beneficiary coverage, but not when the couple is
separated. Compl. ¶15. If Defendants followed the Plan’s provisions and notified the Fund of
their separation, it would not have paid for Mrs. Connor’s healthcare. Id. ¶ 22. Defendants’
failure to notify the Fund of their separation led to the improper disbursement of healthcare
benefits to Mrs. Connor. Plaintiff therefore states a plausible cause of action.
The Court must consider the Emcasco factors when determining whether default
judgment is appropriate. Doug Brady, Inc. v. New Jersey Bldg. Laborers Statewide Funds, 250
F.R.D. 171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir.
1987)). The factors are (1) whether the defaulting party has a meritorious defense, (2) if the
plaintiff is prejudiced by not granting the default, and (3) the defaulting party’s culpability.
Emcasco Ins. Co., 834 F.2d at 74. The Court finds that all three factors favor granting default
judgment. First, there is no indication that Defendants have a cognizable defense to Plaintiff’s
allegations that they purposefully misled the Fund regarding their separation to ensure Mrs.
Connor’s continued healthcare coverage, contrary to the terms of the Plan. Second, because
Defendants wholly failed to answer the Complaint or otherwise appear, Plaintiff suffers
prejudice if he does not receive a default judgment. He has no alternative means of vindicating
his claim against Defendants. See Directv v. Asher, 2006 WL 680533 at *2 (D.N.J. Mar. 14,
2006). Third, Defendants’ failure to respond permits the Court to draw an inference of
culpability. See Surdi v. Prudential Ins. Co. of Am., 2008 Wl 4280081 at *2 (D.N.J. Sept. 8,
2008). Therefore, the Emcasco factors weigh in favor of entering default judgment. Plaintiff is
entitled to a default judgment against Defendants.
Plaintiff seeks $192,872.00 in fraudulently obtained medical benefits, $7,770.00 in
attorney’s fees, $656.61 in litigation costs, plus interest. The Court is not bound to accept as true
Plaintiff’s mere allegations concerning damages. See Comdyne I, 908 F.2d at 1149. Plaintiff has
failed to submit any documentation supporting his request for $192,872.00 in fraudulently
obtained medical benefits. The Court therefore reserves judgment on the issue of actual damages
and interest. Plaintiff is directed to file an affidavit supporting his request for an award of actual
damages and interest.
ERISA provides “in any action under this subchapter . . . by a participant, beneficiary, or
fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to
either party.” 29 U.S.C. § 1132(g)(1). Matthew D. Areman, Esq., submitted a Declaration
detailing his hourly fee, necessarily-incurred hours, and costs. See Areman Decl. (Doc. No. 10–
2). Plaintiff is entitled to $7,700 in reasonable attorney’s fees and $656.61 in costs.
For the reasons explained above, Plaintiff’s Motion is GRANTED IN PART, as to
liability, attorney’s fees, and costs. The Court directs Plaintiff to file an affidavit supporting his
request for an award of damages and interest.
/s Robert B. Kugler
ROBERT B KUGLER
United States District Judge
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