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MORTENSEN’S CARPETS, INC., a California Corporation, Defendant.
No. C 09-02069 RS.United States District Court, N.D. California, San Francisco Division.
May 13, 2010
ORDER GRANTING MOTION FOR DEFAULT JUDGMENT
Richard Seeborg, Magistrate Judge
Plaintiffs District Council 16 Northern California Health and Welfare Fund, its Joint Board of Trustees, and District Council 16 Northern California Apprentice Journeyman Training Trust Fund, together with Doug Christopher as their Trustee; Resilient Floor Covering Pension Fund, its Board of Trustees, Central Coast Counties Floor Covering Industry Pension Fund, and its Board of Trustees, together with Steve Havens as their Trustee (collectively the “funds”); and District Council 16 of the International Union of Painters and Allied Trades (the “union”) move for default judgment, liquidated damages, attorney fees, and costs pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure. Defendant Mortensen’s Carpets, Inc., (“MCI”) has not opposed the motion.
On May 6, 2010, an evidentiary hearing was held in accordance with Rule 55(b)(2), at which counsel for plaintiffs presented argument and evidence in favor of default judgment. MCI did not appear. For the reasons presented below, the motion is granted.
I. BACKGROUND
On December 11, 2002, MCI entered into a collective bargaining agreement with the union, which provided that MCI would make periodic contributions to the funds. The same parties also entered into two subsequent agreements, the most recent of which remains effective through June 30, 2011 (collectively, the “Agreements”). On May 12, 2009, the funds and the union filed a complaint alleging that MCI had breached the Agreements by failing to make timely contributions for work performed by its employees during October-December 2005; March-April 2006; June-October 2006; November 2008; and March 2009. Under the Agreements, such payments are calculated based on the total hours each employee works, and they are due on the fifteenth day of the month following the month in which the relevant labor was performed. Late payment subjects MCI to liability for liquidated damages, as well as attorney fees and costs. A declaration filed with
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the instant motion indicates that, for the time periods stated in the complaint, MCI underpaid the funds by a total of $25,824.97. When combined with interest and liquidated damages, this number climbs to $41,928.18.
The complaint also states that “Plaintiffs specifically reserve the right to conduct an audit of Defendant’s records pursuant to the terms of the Collective Bargaining Agreement and Trust Agreements and to collect any additional amounts found to be due on audit, or otherwise.” Complaint at 5. According to a declaration from Janet Dominguez, the audit referenced in the complaint was submitted to plaintiffs on May 22, 2009, ten days after plaintiffs filed the instant complaint. The audit reports that MCI had substantially underreported the hours worked by its employees; specifically, it reported only 541.50 out of 4,558.35 hours during the period January 1, 2005 through August 31, 2008. Exh. A to Dominguez Decl. As a result, according to the audit, MCI underpaid the funds by more than $75,000. Id. When this sum is added together with liquidated damages and interest, the total amount due and owing climbs to $96,933.20. Id. Beyond the sentence mentioning the audit, quoted above, no mention of these additional delinquencies appears in the complaint.
After MCI failed to respond to the complaint or make an appearance in the case, the Clerk of Court entered default. Plaintiffs now move for entry of default judgment against MCI pursuant to contract law and Section 1132 of the Employee Retirement Income Security Act of 1974 (“ERISA”). See 29 U.S.C. § 1132(g)(2). Plaintiffs seek $41,928.18, which represents MCI’s reported underpayments plus liquidated damages and interest for the time periods October-December 2005; March-April 2006; June-October 2006; November 2008; and March 2009. Based on the results of the audit, they also seek unpaid contributions, plus interest and liquidated damages, totaling $103,744.01.[1] Finally, they seek the cost of conducting the audit, $3,931.54; attorney fees through March 31, 2010, totaling $13,272.00; and the costs of suit through November 24, 2009,
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totaling $560.16. See Cox Decl. (calculating damages); Dominguez Decl. (same); Williams Decl. (calculating fees and costs). The total requested recovery is $163,435.88.
II. LEGAL STANDARD
Following entry of default, district courts are authorized to grant default judgment, so long as the judgment does not “differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c); see also Fed.R.Civ.P. 55. Entry of default judgment is within the court’s discretion Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980), and is governed by the following factors: (1) the merits of plaintiffs’ substantive claim; (2) the sufficiency of the complaint; (3) prejudice to plaintiffs; (4) the sum of money at stake; (5) potential disputes concerning material facts; (6) whether default was due to excusable neglect; and (7) the Federal Rules of Civil Procedure’s strong policy favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In considering the Eitel factors, all factual allegations in plaintiffs’ complaint are taken as true, except for those relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18
(9th Cir. 1987).
IV. DISCUSSIONA. Damages Not Identified in the Complaint
A threshold question in this dispute is whether plaintiffs can claim damages for delinquencies not specifically listed in their complaint. Recovery pursuant to a motion for default judgment, as noted above, must “not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c). The requested recovery described in the complaint differs significantly from the recovery requested in the motion for default judgment: plaintiffs’ evidence shows that MCI’s reported underpayments, liquidated damages, and interest for the time periods named in the complaint total $41,928.18. The results of the post-complaint audit, however, would almost triple this sum.
Here, plaintiffs’ complaint reserves the right to conduct an audit but makes no specific mention of the damages listed in the later-filed Dominguez Declaration. Nonetheless, plaintiffs’ counsel has filed a supplemental declaration in which he represents that MCI was informed multiple
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times in writing and by telephone of the additional amounts uncovered by the audit. As a result, MCI has had sufficient notice of all claims for liability and would not be unduly prejudiced by the entry of a default judgment that includes the additional amounts identified in the audit.
B. Eitel Factors One and Two: Merits of the Claim and Sufficiencyof the Complaint
As to the merits of the motion for default judgment, each of the Eitel factors must be considered in turn. With regard to the first two factors, 29 U.S.C. § 1145 provides that every employer who is obligated to make contributions under the terms of a collectively bargained agreement shall make them in accordance with the terms of such agreement. When a benefit plan wins a judgment in an action to enforce Section 1145, Section 1132 of the same title provides that the plan is entitled to the unpaid contributions, interest thereon, reasonable attorney fees and costs, and liquidated damages. 29 U.S.C. § 1132(g)(2). Section 1132(g)(2)(C)(ii) is the liquidated damages provision. It applies when: (1) the fiduciary obtains a judgment in favor of the plan; (2) unpaid contributions exist at the time of suit; and (3) the plan provides for liquidated damages. Idaho Plumbers Pipefitters Health Welfare Fund v. United Mech. Contractors, Inc., 875 F.2d 212, 215 (9th Cir. 1989); Operating Eng’rs Pension Trust v. A-C Co., 859 F.2d 1336, 1342 (9th Cir. 1988). Once subsection (ii) is triggered, liquidated damages become mandatory. Idaho Plumbers, 875 F.2d at 215. In situations not expressly governed by Section 1132(g)(2), however, a plaintiff may seek liquidated damages under applicable contractual provisions. Id. at 217.
Here, all the Idaho Plumbers factors are satisfied. The instant judgment satisfies the first factor; and the allegedly unpaid contributions all existed at the time the complaint was filed in May 2009, so the second factor is also satisfied. As to the final factor, the express terms of the Agreements provide for liquidated damages. See Williams Decl. (attaching relevant portions of the Agreements). Thus, 29 U.S.C. § 1132(g)(2), including its liquidated damages provision, is applicable here, making likelihood of success on the merits relatively high. Moreover, these allegations are properly pled in the complaint. Therefore the first two Eitel factors weigh in favor of granting the motion for default judgment.
C. Eitel Factor Three: Prejudice to Plaintiffs
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As noted above, plaintiffs’ claims against MCI for infringing the Agreements appear sound. If the Court were to deny plaintiffs’ motion for default judgment, plaintiffs would have no other avenue for recovery. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Consequently, the thir Eitel factor, possible prejudice to plaintiffs, weighs in favor of granting default judgment.
D. Eitel Factor Four: Sum of Money at Stake
The fourth Eitel factor concerns the amount of money at stake. Default judgment is disfavored when a large amount of money is involved or is unreasonable in light of the defendant’s actions Truong Giang Corp. v. Twinstar Tea Corp., No. C 06-03594 JSW, 2007 WL 1545173, at *12 (N.D. Cal. May 29, 2007). In determining if the amount at stake is reasonable, the court may consider plaintiffs’ declarations, calculations, pay stubs, and other documentation of damages. Id.
1. Unpaid and Underpaid Contributions, Liquidated Damages, andInterest
The amount of required contributions, as well as rates for liquidated damages and interest, are set forth in the contract and appear beyond cavil. Thus there can be no question these are reasonable amounts.
2. Attorney Fees, Audit Fees, and Costs of Suit
Section 1132(g) of ERISA requires the Court to award plaintiffs “reasonable attorney’s fees and costs of the action” when plaintiffs obtain a judgment in their favor or otherwise obtain the relief sought. 29 U.S.C. § 1132(g)(2)(D); Nw. Adm’rs, Inc. v. Albertson’s, Inc., 104 F.3d 253, 258 (9th Cir. 1996). Similarly, the Agreements provide that attorney fees are justified if a contribution is not made. Here, plaintiffs seek reimbursement for $13,272 in attorney fees, representing numerous hours logged by three senior attorneys and a paralegal. See Williams Decl. Plaintiffs’ attorney Blake E. Williams has submitted a declaration summarizing the tasks completed and indicating the hours each professional spent on this case along with their hourly rates. Id. While the submission of itemized timesheets would have been ideal, nonetheless the attorney fee amounts appear reasonable under the circumstances. Further, the complaint alleged that an audit would be conducted as part of the lawsuit, and the auditors have submitted a declaration in support of the
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$3,931.54 expended thereon. See Dominguez Decl. This cost is well within the realm of the ordinary. As for costs of suit, plaintiffs seek $560.16. See Williams Decl. This amount, too, is reasonable.
E. Eitel Factor Five: Possibility of a Dispute ConcerningMaterial Facts
MCI has not filed an answer in response to plaintiffs’ complaint, so no dispute concerning material facts has arisen. As the Clerk of Court has already entered default, the Court takes all well-pleaded facts, except those pertaining to damages, as true. TeleVideo Systems, 826 F.2d at 917-18. Additionally, the evidence plaintiffs submitted in support of their motion for default judgment, including the Agreement between plaintiffs and MCI, supports plaintiffs’ account of the events. Though there is a possibility of dispute as to the damages amount, there is little possibility of dispute as to MCI’s liability for damages.
F. Eitel Factor Six: Possibility of Excusable Neglect
There is also little possibility of excusable neglect. MCI was duly served with the complaint and summons. Plaintiffs likewise sent MCI notice of default and informed it of the default judgment hearing. MCI, however, has made no appearance.
G. Eitel Factor Seven: Strong Policy Favoring Decisions on theMerits
Though default judgment is disfavored, and a case should be decided upon its merits whenever reasonably possible, this preference for adjudication on the merits, standing alone, is not dispositive. PepsiCo, 238 F. Supp. 2d at 1177. When MCI failed to appear or to submit an answer to plaintiffs’ complaint, a judgment on the merits became impractical, if not impossible. See Philip Morris U.S.A., Inc. v. Cast World Prods, Inc., 219 F.R.D. 494, 501 (C.D. Cal. 2003).
H. Summary
In light of the seven factors discussed above, the entry of default judgment against MCI is appropriate for violations of ERISA and the Agreements’ provisions. Given MCI’s failure to litigate, plaintiffs have no other available remedy; nor is there any reason to suspect that plaintiffs’ evidence lacks trustworthiness. Moreover, plaintiffs’ claim for relief appears to be meritorious as pled; and the amounts at stake, in terms of unpaid contributions, liquidated damages, interest,
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attorney fees, audit fees, and costs, are not excessive given the allegations and the evidence presented. Finally, the fact that default was not due to any excusable neglect on MCI’s part weighs heavily in favor of granting default judgment. Even though there is a strong policy favoring decisions on the merits, MCI failed to take any action which would further that prospect. Default judgment, therefore, is appropriate.
V. CONCLUSION
Accordingly, plaintiffs’ motion for default judgment is granted. A judgment is filed herewith.
IT IS SO ORDERED.
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