SERVICE EMPLOYEES INTERNATIONAL UNION LOCAL 32BJ, DISTRICT 36 et al v. SHAMROCKCLEAN INC.
Filing
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MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE EDUARDO C. ROBRENO ON 09/07/2018. 09/07/2018 ENTERED AND COPIES E-MAILED.(nds)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
SERVICE EMPLOYEES INTERNATIONAL
UNION LOCAL 32BJ, DISTRICT 36,
et al.
Plaintiffs,
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v.
SHAMROCKCLEAN, INC.
Defendant.
CIVIL ACTION
NO. 18-2180
M E M O R A N D U M
EDUARDO C. ROBRENO, J.
September 7, 2018
In this action, a labor union, the union’s pension
trust fund, and the trustee for the fund have brought claims
against a commercial cleaning company under the Employee
Retirement Income Security Act of 1974, alleging that the
company failed to make contributions to the pension fund, as
required by the collective bargaining agreement between the
company and the union.
Plaintiffs seek either the unpaid
installment amounts or a single-sum liability amount.
After
Defendant failed to appear, plead, or defend against Plaintiffs’
complaint, the clerk entered default.
entry of judgment by default.
Plaintiffs now move for
which Defendant did not appear.
The Court held a hearing, at
For the reasons that follow,
the Court will grant Plaintiffs’ motion, enter judgment, and
close the case.
I.
BACKGROUND
Plaintiffs are the Service Employees International
Union Local 32BJ District 36 (“the Union”), the Service
Employees International Union Local 32BJ District 36 Building
Operators Pension Fund (“the Fund”), and Wayne MacManiman, Jr.,
the trustee for the Fund (“the Trustee,” and together with the
Union and the Fund, “Plaintiffs”).
Compl. ¶¶ 1-5, ECF No. 1.
Defendant ShamrockClean, Inc. (“Defendant”) is Florida
corporation that provides commercial cleaning services and that
does business in Pennsylvanian and Delaware.
Id. ¶ 8.
The Fund is a joint labor-management trust plan
established pursuant to Section 302(c)(5) of the Labor
Management Relations Act, 29 U.S.C. § 186(c)(5), which was
created and is maintained to collect and receive contributions
from various employers having collective bargaining agreements
with the Union, and to provide pension benefits to eligible
participants and beneficiaries.
Id. ¶ 2.
Plaintiffs allege
that the Fund is an “employee benefit plan” within the meaning
of Section 3(2)(A) of ERISA, as well as a “multiemployer plan”
within the meaning of Section 3(37) of ERISA, and Section
4001(a)(3) of ERISA.
Id. ¶ 3.
2
Plaintiffs allege that Defendant was a party to a
collective bargaining agreement (“the CBA”) with the Union that
obligated Defendant to make prompt monthly contributions to the
Fund on behalf of employees represented by the Union and covered
by the CBA.
Id. ¶ 11.
According to Plaintiffs, during the 2015
plan year, Defendant effected a complete withdrawal from the
Fund, as defined by Section 4203(a)(1) of ERISA, by permanently
ceasing its obligation to contribute under the plan while
continuing to perform the same type of work, within the same
jurisdiction, for which it previously had a contribution
obligation.
See id. ¶ 12.
As a result, on December 15, 2017, the Fund sent
Defendant a letter advising it that the Fund had calculated
Defendant’s withdrawal liability in the amount of $152,836.00,
payable in 61 quarterly installments of $4,701.90, plus a final
payment of $3,127.83.
Id. ¶ 13; Ex. A.
The letter advised
Defendant that it had the right, within 90 days, to demand
certain information from the Fund in order to verify, request
review, and/or contest Defendant’s withdrawal liability and to
demand arbitration of any unresolved dispute.
Id. ¶ 14.
Plaintiffs allege that, despite the notice provided to
Defendant, including subsequent correspondence repeating
Defendant’s obligation, Defendant failed to make quarterly
installment payments that were due beginning on October 23,
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2017, and January 3, 2018.
Id. ¶ 16.
Accordingly, the Fund
sent another letter to Defendant notifying Defendant that it was
delinquent, and demanding payment immediately.
Id. ¶ 17.
Defendant continued to fail to make payment, and also failed to
make quarterly installment payments for the period ending April
3, 2018.
Id. ¶¶ 19, 20.
On May 23, 2018, Plaintiffs filed this action against
Defendant, bringing (1) one claim for unpaid withdrawal
liability installments in the amount of $12,512.70 (Count I),
and, in the alternative, (2) one claim for accelerated single
sum liability in the amount of $152,836.00 (Count II).
¶¶ 21-34.
Id.
Plaintiffs also seek pre-judgment interest,
liquidated damages, and attorneys’ fees and costs.
Id.
The summons and complaint were served on Defendant on
June 14, 2018.
ECF No. 2.
On July 9, 2018, Defendant having
failed to respond to the complaint, Plaintiffs filed a request
for entry of default.
ECF No. 4.
default the same day.
On July 17, 2018, Plaintiffs filed a
motion for default judgment.
The Clerk of Court entered
ECF No. 5.
The Court scheduled a hearing on Plaintiffs’ motion
for default judgment for August 13, 2018.
ECF No. 6.
The Court
also ordered Plaintiffs’ counsel to serve a copy of the order
setting the hearing on Defendant.
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See id.
On August 9, 2018,
Plaintiffs filed a certificate of service establishing that
service was made on August 4, 2018.
ECF No. 7.
On August 13, 2018, the Court held a hearing on the
motion for default judgment.
Neither Defendant nor any counsel
for Defendant appeared at the hearing.
The Court is now ready
to rule on the motion.
II.
LEGAL STANDARD
After a clerk enters default pursuant to Federal Rule
of Civil Procedure 55(a) against a party that has “failed to
plead or otherwise defend” an action, the party may be subject
to entry of a default judgment.
Fed. R. Civ. P. 55.
If “the
plaintiff’s claim is for a sum certain or a sum that can be made
certain by computation,” the clerk may enter a default judgment
in favor of the plaintiff.
Fed. R. Civ. P. 55(b)(1).
If those
circumstances do not apply, “the party must apply to the court
for a default judgment.”
Fed. R. Civ. P. 55(b)(2); see also,
e.g., Eastern Elec. Corp. of N.J. v. Shoemaker Constr. Co., 657
F. Supp. 2d 545, 552 (E.D. Pa. 2009) (granting motion for entry
of default judgment pursuant to Rule 55(b)(2)).
Whether or not to grant a party’s motion for entry of
default judgment “is left primarily to the discretion of the
district court.”
United States v. $55,518.85 in U.S. Currency,
728 F.2d 192, 194 (3d Cir 1984)).
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However, because a party is
not entitled to default judgment as of right, and because the
entry of default judgment precludes consideration of a case on
its merits, “[m]atters involving large sums should not be
determined by default judgments if it can reasonably be
avoided.”
Tozer v. Charles A. Krass Milling Co., 189 F.2d 242,
245 (3d Cir. 1951).
The Third Circuit has held that a district court
evaluating a motion for entry of default judgment should
consider three factors: “(1) prejudice to the plaintiff if
default is denied, (2) whether the defendant appears to have a
litigable defense, and (3) whether defendant’s delay is due to
culpable conduct.”
Chamberlain v. Giampapa, 210 F.3d 154, 164
(3d Cir. 2000) (citing $55,518.85 in U.S. Currency, 728 F.2d at
195).1
A court accepts as true any factual allegations, other
1
In non-precedential opinions, the Third Circuit has
criticized its own Chamberlain factors, noting that $55,518.05
in U.S. Currency originally set out the test in the context of a
motion to vacate a default judgment brought by a defendant,
where the defendant had the ability to assert a litigable
defense, if one existed, and to argue that his delay was due to
culpable conduct. See, e.g., Hill v. Williamsport Police Dept.,
69 F. App’x 49, 51-52 (3d Cir. 2003) (asserting that Chamberlain
“perhaps counterintuitively” applies the three-part test to a
motion seeking default judgment, but noting that, “[w]hatever
the merits” of Chamberlain, the Third Circuit’s Internal
Operating Procedures require the panel to follow Chamberlain
pending en banc review and reversal, and the district court “had
no choice but to do the same”). To the extent the Chamberlain
factors are “counterintuitive” where a defendant has not
appeared in the action, they are still the law in the Third
Circuit, and the Court is bound to apply them.
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than those as to damages, contained in the complaint.
DIRECTV,
Inc. v. Pepe, 431 F.3d 162, 165 n.6 (3d Cir. 2005).
III. DISCUSSION
Plaintiffs argue that default judgment is appropriate
because Defendant defaulted on its obligation to pay withdrawal
liability and failed to cure the default.
See Mem. Law Support
Mot. Default J. (“Pls.’ Mem.”), ECF No. 5-1.
“[B]efore granting a default judgment, the Court must
first ascertain whether ‘the unchallenged facts constitute a
legitimate cause of action, since a party in default does not
admit mere conclusions of law.’”
Chanel, Inc. v. Gordashevsky,
558 F. Supp. 2d 532, 536 (D.N.J. 2008) (quoting Directv, Inc. v.
Asher, No. 03-1969, 2006 WL 680533, at *1 (D.N.J. Mar. 14,
2006)).
The Court will first address whether Defendant is
liable to Plaintiffs for withdrawal liability, and whether
Plaintiffs have submitted sufficient information to justify the
relief sought.
The Court will then analyze whether the
Chamberlain factors indicate that the Court should grant
Plaintiffs’ motion.
Finally, the Court will determine the
appropriate amount of damages.
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A.
Plaintiffs’ Right to Recover Withdrawal Liability
Plaintiffs allege that Defendant failed to pay
“withdrawal liability,” as required under the CBA, ERISA, and
the the Multiemployer Pension Plan Amendments Act (“MPAAA”), 29
U.S.C. § 1381-1461.
See Compl. ¶¶ 12-16.
Under ERISA and the MPAAA, when an employer who is a
signatory to a multiemployer defined-benefit pension plan
withdraws from the plan, the employer must pay its fair share of
a plan’s “unfunded vested benefit” (“UVB”) prior to the
withdrawal.
29 U.S.C. § 1381(a).
This statutory requirement is
known as “withdrawal liability.”
The requirements for the notice and collection of
withdrawal liability are specified in Section 1399 of ERISA.
Upon an employer’s failure to pay withdrawal liability, a plan
sponsor may make a demand for withdrawal liability, which is
payable beginning no later than 60 days after the date of the
demand.
29 U.S.C. § 1399(c)(2).
If an employer fails to make a
withdrawal liability payment that is due, and does not cure that
failure within 60 days after the employer receives written
notification from the plan sponsor, the employer is in “default”
under Section 1399.
In the event of a default, a plan sponsor
may require immediate payment of the outstanding amount of the
employer’s withdrawal liability.
29 U.S.C. § 1399(c)(5).
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Any dispute between an employer and the plan sponsor
is generally resolved through arbitration.
Either party may
initiate an arbitration proceeding within a 60 day period after
the earlier of the date of notification or 120 days after the
date of the employer’s request for review.
29 U.S.C. § 1401.
If no arbitration proceeding has been initiated by either party
within the statutory time period, the amounts demanded by the
plan sponsor become due and owing as a matter of law.
Id.; see
also IUE Pension Fund v. Barker & Williamson, Inc., 788 F.2d
118, 130 (3d Cir. 1986).
Plaintiffs allege that (1) Defendant was required to
pay withdrawal liability; (2) Defendant failed to pay withdrawal
liability; (3) the Fund sent Defendant a letter on December 15,
2017, demanding the payment of the outstanding withdrawal
liability; and (4) Defendant failed to pay the outstanding
withdrawal liability within 60 days of the demand, as required
under ERISA.
See Compl. ¶¶ 11-17.
According to Plaintiffs,
Defendant then continued to fail to make quarterly payments, as
required, for October 23, 2017, January 3, 2018, and April 3,
2018.
See id. ¶¶ 16-20.
These allegations, which must be taken
as true for purposes of this motion, establish a violation of
Section 1381 and 1399 of ERISA.
Section 1145 of ERISA provides that every employer who
is obligated to make contributions to a multi-employer plan
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under the terms of the plan or under the terms of a collectively
bargained agreement must make such contributions in accordance
with the terms of the plan or agreement.
29 U.S.C. § 1145.
Under ERISA, an employer’s failure to make withdrawal liability
payments pursuant to Section 1401 is treated as a delinquent
contribution in accordance with Section 1145.
ERISA provides that in any action by a fiduciary
against delinquent employer contributors in which judgment in
favor of the plan is awarded, the court shall award the plan:
(A)
the unpaid contributions,
(B)
interest on the unpaid contributions,
(C)
an amount equal to the greater of—
(i)
interest
on
contributions, or
the
unpaid
(ii)
liquidated damages provided for
under the plan in an amount not
in excess of 20 percent (or such
higher percentage as may be
permitted under Federal or State
law) of the amount determined by
the court under subparagraph
(A),
(D)
reasonable attorney's fees and costs of
the
action,
to
be
paid
by
the
defendant, and
(E)
such other legal or equitable relief as
the court deems appropriate.
29 U.S.C. § 1132(g)(2).
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Thus, under Sections 1401 and 1145 of ERISA,
Plaintiffs have the right to recover the unpaid withdrawal
liability, together with the other damages, fees, and costs
specified in Section 1132(g).
B.
See 29 U.S.C. §§ 1145, 1401.
Chamberlain Factors
Next, the Court should consider the Chamberlain
factors: (1) prejudice to Plaintiffs if default judgment is
denied, (2) whether Defendants appear to have a litigable
defense, and (3)
conduct.
whether Defendants’ delay is due to culpable
Chamberlain, 210 F.3d at 164.
First, Plaintiffs will certainly be prejudiced if
default judgment is denied, as Plaintiffs have not yet received
the withdrawal liability that they are owed.
Second, Defendant does not appear to have a litigable
defense, at least on the papers that Plaintiffs have submitted:
Defendant withdrew from the Fund and has not paid withdrawal
liability, as required by the CBA and ERISA.
Plaintiffs
provided notice, as required under ERISA, and Defendant failed
to cure the default within 60 days and continued to fail to pay
withdrawal liability.
Given that the allegations are accepted
as true at this stage and that they establish Defendant’s
liability, there does not appear to be a litigable defense.
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With respect to culpable conduct, the final factor, it
does not appear that Defendant has committed any bad faith
conduct aside from simply failing to respond to the action.
The
Third Circuit has explained that “culpable conduct” is conduct
that is “taken willfully or in bad faith.”
Gross v. Stereo
Component Sys., Inc., 700 F.2d 120, 123-24 (3d Cir. 1991).
Plaintiffs have not provided any record evidence that
Defendant’s actions were in bad faith, but Defendant’s failure
to respond to the complaint and failure to attend the hearing
were both “willful,” in the sense that Defendant accepted
service of the complaint and the order setting the hearing and
therefore was aware of the complaint and the hearing.
To this
date, Defendant still has not responded to Plaintiffs’
Complaint, entered an appearance, or participated in this action
in any way, despite having accepted service through the
registered agent for service of process on the company.
On balance, the Chamberlain factors support the entry
of default judgment in this case.
C.
Damages
Having determined that Plaintiffs are entitled to the
entry of default judgment, the Court must calculate the proper
amount of damages and attorneys’ costs and fees.
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In support of their motion, Plaintiffs have submitted
an affidavit by their attorney explaining the calculation of
Defendant’s withdrawal liability as $152,836.00.
See
Certification of Amount Due in Support of Application for
Default Judgment, ECF No. 5-3.
The Court accepts this amount as
adequately supported by Plaintiffs’ counsel’s certification, and
unchallenged by Defendant.
Pursuant to Section 1132(g) of ERISA, Plaintiffs are
entitled to (1) the full amount of the unpaid contributions;
(2) interest on the unpaid contributions; (3) the greater of
interest on the unpaid contributions or liquidated damages
provided for under the plan in an amount not in excess of 20
percent; (4) reasonable attorney’s fees and costs of the action,
and (5) such other legal or equitable relief as the Court deems
appropriate.
See 29 U.S.C. § 1132(g)(2).
Section 1132(g) also
provides that interest on unpaid contributions shall be
determined by using the rate specified by the plan, or, if none,
the rate prescribed by the IRS.
See id.
Here, the unpaid contribution is equal to the amount
of withdrawal liability, which is $152,836.00.
The Plan
provides that interest accrues at the rate charged by the IRS
under Section 6621(a) of the Internal Revenue Code, which is 4
percent, plus one additional percentage point, which results in
an interest rate of 5 percent.
See Mot. Default J. Ex. A at 1
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¶ 2, ECF No. 5-2.
Under Section 1399 of ERISA, interest is
calculated from the date that the first payment was not made,
which in this case was October 23, 2017.
due is therefore $5,590.03.
The amount of interest
Regarding liquidated damages, the
Plan provides that if a delinquent contribution is not paid, the
Trustees will assess liquidated damages in an amount equal to 15
percent of the delinquent contribution.
$22,925.40 (15 percent of $152,836).
Here, that amount is
As the liquidated damages
amount is greater than the interest due, pursuant to Section
1132(g)(2)(C), liquidated damages are awarded in addition to
interest.
Thus, the total amount of damages is $181,351.43.
Finally, under Section 1132(g), Plaintiffs are
entitled to reasonable attorneys’ fees and costs.
§ 1132(g)(2)(D).
See 29 U.S.C.
Plaintiffs assert that their attorneys’ fees
and costs total $6,678.00 (consisting of $6,018.00 in attorneys’
fees and $660.00 in costs).
Plaintiffs based their calculation
on a rate of $200.00 per hour for attorneys and $110.00 per hour
for paralegals, which the Court finds reasonable in light of the
prevailing market rates in the community.
See Rode v.
Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990).
The Court
also finds that the number of hours billed is reasonable in
light of the work required in this case.
Therefore, under the
lodestar approach, see Hahnemann Univ. Hosp. v. All Shore, Inc.,
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514 F.3d 300, 310 (3d Cir. 2008), the attorneys’ fees are
reasonable.
IV.
CONCLUSION
For the reasons stated above, the Court will grant
Plaintiffs’ motion for entry of judgment by default, enter
judgment for Plaintiffs and against Defendant in the amount of
$188,029.43, together with post-judgment interest to run thereon
at the rate of 4 percent from the date hereof until paid, and
close the case.
An appropriate order follows.
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