Wisconsin Sheet Metal Workers Health and Benefit Fund et al v. CJ Contracting LLC

Filing 12

ORDER signed by Judge Rudolph T. Randa on 11/5/2013. Motion for Injunctive Relief 10 GRANTED to the extent that the Court finds: CJ Contracting is liable for violating ERISA; by 11/15/2013 CJ Contracting must submit to an audit of the company' s books covering 4/1/2012 to present; by 11/25/2013 Plaintiffs must file results of audit regarding amount of any unpaid contributions, interest, and liquidated damages, together with any claim for attorney fees with supporting documentation. (cc: all counsel) (cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
WISCONSIN SHEET METAL WORKERS HEALTH
AND BENEFIT FUND, MILWAUKEE AREA SHEET
METAL JOURNEYMEN AND APPRENTICESHIP
TRAINING FUND, WISCONSIN SHEET METAL
WORKERS 401(k) PROFIT SHARING PLAN, and
PATRICK LANDGRAF (in his capacity as Trustee),
SHEET METAL WORKERS NATIONAL PENSION
FUND, SHEET METAL OCCUPATIONAL HEALTH
INSTITUTE TRUST FUND,
Plaintiffs,

Case No. 13-C-991

v.

CJ CONTRACTING, LLC,
Defendant.

DECISION AND ORDER

This action was filed by Plaintiffs Wisconsin Sheet Metal Workers Health and
Benefit Fund; Milwaukee Area Sheet Metal Journeymen and Apprenticeship Training
Fund; Wisconsin Sheet Metal Workers 401(k) Profit Sharing Plan; Patrick Landgraf, in
his capacity as trustee (“Landgraf”); Sheet Metal Workers National Pension Fund; and
Sheet Metal Occupational Health Institute Trust Fund (collectively the “Plaintiffs”)
against Defendant CJ Contracting, LLC (“CJ”) alleging that CJ violated the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), by breaching its
obligations under the controlling collective bargaining agreement.

This matter is

before the Court on the Plaintiffs’ “motion for entry of injunctive relief” (ECF No. 10)
in the form of an order directing CJ to allow the Plaintiffs’ designated representative to
audit its books for the period of April 1, 2012, through the present. Also requested is
an award of any unpaid contributions, interest, and liquidated damages revealed by that
audit, and reasonable attorney fees and costs. The Plaintiffs submitted two proposed
orders.
Analysis
The Plaintiffs’ motion does not cite any statute or rule pursuant to which it is
made ― contrary to Civil Local Rule 7(a) (E.D. Wis.). Furthermore, although not
mentioned in the motion, the proposed order includes a finding that CJ violated the
Labor Management Relations Act of 1947, as amended (“LMRA”); ERISA; and the
effective collective bargaining agreement by failing to pay fringe benefit contributions
to the Plaintiff Funds1 on behalf of its employees and by failing to submit to an audit
of the company’s books and records for the relevant time period.
The docket reflects that on October 30, 2013, when the Plaintiffs filed their
motion, they also requested and obtained entry of default by the Clerk of Court. See
Fed. R. Civ. P. 55(a). Thus, although not explicitly requested, the procedural posture
of this action and the relief requested indicate that the Plaintiffs seek default judgment
pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure.
The determination of whether to enter default judgment is a matter of the
1

The Plaintiff Funds are the Plaintiffs except for Landgraf.

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Court’s discretion. See O’Brien v. R.J. O’Brien & Assocs., Inc., 998 F.2d 1394, 1398
(7th Cir. 1993). In resolving the motion, this Court may consider factors including the
amount of money potentially involved, whether material issues of fact or issues of
substantial public importance are present, whether the default is largely technical,
whether the plaintiffs have been substantially prejudiced by the delay involved, and
whether the grounds for default are clearly established or are in doubt. See 10A
Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and
Procedure, § 2685 (West 1998).
The amount of money involved in this action is unknown at this time. The
Plaintiffs’ claims are made on behalf of CJ’s employees and their considerable interest
in employee benefit plans ERISA is intended to protect and therefore, viewed from the
perspective of the public at large, are of public importance. While this action has not
been significantly delayed by the default, the grounds for the default are clearly
established by CJ’s failure to file a timely answer or other responsive pleading after
having been served with the Summons and Complaint. Accordingly, in the exercise of
discretion, default judgment is granted as to CJ’s liability for violating ERISA by
failing to pay fringe benefit contributions to the Plaintiff Funds and by failing to
submit to an audit of the company’s books and records for the relevant time period.
However, default judgment as to liability under the LMRA and the collective
bargaining agreement is denied because no such claims are alleged in the Complaint.

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Default judgment establishes, as a matter of law, that CJ is liable to the
Plaintiffs for the ERISA cause of action alleged in the Complaint. See e360 Insight v.
The Spamhaus Project, 500 F.3d 594, 602 (7th Cir. 2007) (citing United States v. Di
Mucci, 879 F.2d 1488, 1497 (7th Cir. 1989)). However, the motion requests injunctive
relief. The Complaint alleges that since the audit period of April 1, 2012, CJ has not
performed its obligations pursuant to the terms and conditions of the applicable
agreements by failing to make payments to the Plaintiff Funds for all of CJ’s covered
employees, failing to accurately report employee work status to the Plaintiffs (Compl.
¶ 12), and rejecting demands and attempts to schedule an audit of CJ’s book and
records for the relevant time period. (Id. at ¶¶ 15-16.) The Complaint further alleges
that as a result of CJ’s failure to make timely and prompt contributions, some of the
Plaintiff Funds’ beneficiaries and participants “could have eligibility terminated and
benefits reduced for which they would otherwise qualify, [and] . . . would be left
without an adequate remedy at law and would suffer severe and irreparable harm if
[CJ] is not . . . compelled to comply with the Labor Agreements and enjoined from
further breaches.” (Id. at ¶ 20.)
A default judgment does not answer whether a particular remedy is
appropriate. e360 Insight, 500 F.3d at 604 (quoting Di Mucci, 879 F.2d at 1497)
(“Because . . . liability was established by default, the law in this circuit indicates that
in a case such as this, an evidentiary hearing may be required to establish what type of
relief is necessary.”) The appeals court stated, “[t]his principle applies with equal if
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not greater force in the context of equitable relief, for which the law imposes a
requirement that the party seeking the injunction demonstrate the inadequacy of legal
relief.” Id. (quoting Walgreen Co. v. Sara Creek Property Co., B.V., 966 F.2d 273,
275 (7th Cir. 1992)) (“The plaintiff who seeks an injunction has the burden of
persuasion—damages are the norm, so the plaintiff must show why his case is
abnormal. . . . [W]hen, as in this case, the issue is whether to grant a permanent
injunction . . . the burden is to show that damages are inadequate. . . .”).
The Plaintiffs’ motion does not address the criteria for injunctive relief, which
requires that they demonstrate: “(1) that [they] [have] suffered an irreparable injury;
(2) that remedies available at law, such as monetary damages, are inadequate to
compensate for that injury; (3) that, considering the balance of hardships between the
plaintiff[s] and defendant, a remedy in equity is warranted; and (4) that the public
interest would not be disserved by a permanent injunction.” e360 Insight, 500 F.3d at
604. Furthermore, the affidavit in support of the motion does not proffer any facts to
support injunctive relief.
However, the Complaint establishes that for over a year CJ has not been
making payments. CJ has also not disclosed the number of covered employees that it
employs and has not allowed its books to be audited.
Absent information about the number of covered employees working for CJ
and an audit of its books and records, the Plaintiffs cannot ascertain the amounts of
unpaid contributions and cannot recover them. Thus, the Court concludes that the
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Plaintiffs have sustained irreparable harm. They have no adequate remedy at law
because without supporting evidence, any damage claim would be speculative.
Furthermore, any harm to CJ by requiring that it submit to an audit of its books
and records would be outweighed by the harm to the Plaintiffs. Unless they can
conduct the audit, the Plaintiffs will be unable to recover the amounts that CJ agreed to
pay to ERISA plans under the applicable collective bargaining agreement.
Furthermore, there is no indication that the enforcement of the collective bargaining
agreement under ERISA will disserve the public interest.
In sum, the Plaintiffs’ motion is granted with respect to default judgment as to
liability for the ERISA violations and granted with respect to the audit. No judgment
will be entered until the amounts of any unpaid contributions, interest, and liquidated
damages revealed by that audit are established. If the Plaintiffs’ audit establishes that
CJ owes unpaid contributions it may make a claim for reasonable attorney fees,
addressing the criteria for such award and providing supporting documentation to
establish the reasonableness of its claimed hourly fee, hours expended, and the nature
of the work performed in accordance with the case law of the Seventh Circuit. See
Stark v. PPM Am., Inc., 354 F.3d 666, 673 (7th Cir. 2004); Anderson v. AB Painting
and Sandblasting Inc., 578 F.3d 542, 544 (7th Cir. 2009).
Additionally, Federal Rule of Civil Procedure 54 instructs that, “[u]nless a
federal statute, these rules, or a court order provides otherwise, costs—other than
attorney[s'] fees—should be allowed to the prevailing party.” Fed. R. Civ. P. 54(d)(1).
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Following the entry of any judgment awarding costs, the Plaintiffs may file a bill of
costs with the Clerk of Court. See Civil L.R. 54.
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY
ORDERED THAT:
The Plaintiffs’ motion for relief (ECF No. 10) is GRANTED to the extent that
the Court finds:
(1) CJ is liable for violating ERISA;
(2) no later than November 15, 2013, CJ must submit to an audit of the
company’s books and records by the Plaintiffs Funds’ designated
representative; the audit is to cover the period of April 1, 2012, to the
present;
(3) no later than November 25, 2013, the Plaintiffs must file the results of the
audit regarding the amounts of any unpaid contributions, interest, and
liquidated damages revealed by that audit, together with any claim for
reasonable attorney fees, with supporting documentation.
Dated at Milwaukee, Wisconsin, this 5th day of November, 2013.

BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge
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