District Council 16 Northern California Health and Welfare Trust Fund v. Greater Bay Flooring, Inc. ( 2022 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 DISTRICT COUNCIL 16 NORTHERN CALIFORNIA HEALTH AND WELFARE Case No. 21-cv-02976-PJH 8 TRUST FUND, et al., 9 Plaintiffs, ORDER GRANTING MOTION FOR DEFAULT JUDGMENT 10 v. Re: Dkt. No. 24 11 GREATER BAY FLOORING, INC., 12 Defendant. 13 14 Before the court is plaintiffs’ motion for default judgment. The matter is fully 15 briefed and suitable for decision without oral argument. Having read the parties’ papers 16 and carefully considered their arguments and the relevant legal authority, and good 17 cause appearing, the court rules as follows. 18 A. Background 19 i. Factual History 20 This case is an enforcement action under the Employee Retirement Income 21 Security Act of 1974 (“ERISA”). Compl. (Dkt. 1) ¶ 3. Plaintiffs are employee benefit 22 funds and their trustees. Id. ¶ 1. The District Council 16 Northern California Health and 23 Welfare Trust Fund (“Health Fund”), the District Council 16 Northern California 24 Journeyman and Apprentice Training Trust Fund (“Apprentice Fund”), the Resilient Floor 25 Covering Pension Fund, and the Central Coast Counties Floor Covering Industry Pension 26 Fund (collectively the “Pension Funds”) are employee benefit plans as defined by ERISA 27 § 3(3), 29 U.S.C. § 1002(3). Id. Robert Williams and John Maggiore are trustees and 1 and fiduciaries of the Apprentice Fund. Id. Tom Cuddie is a trustee and fiduciary of the 2 Pension Funds. Id. District Council No. 16 of the International Union of Painters and 3 Allied Trades (“Union”) is a labor organization as defined in § 2(5) of the National Labor 4 Relations Act (“NLRA”), 29 U.S.C. § 152(5). Id. ¶ 2. The Union is a member of this suit 5 with respect to collecting union dues as part of the contribution claims. Id. All of the 6 above are referred to as “plaintiffs.” 7 Defendant Greater Bay Flooring, Inc. is a California corporation and an employer 8 by virtue of ERISA § 3(5), 29 U.S.C. § 1002(5), and NLRA § 2(2), 29 U.S.C. § 152(2). Id. 9 ¶ 3. 10 Plaintiffs filed their complaint against defendant on April 23, 2021. Id. Plaintiffs 11 allege that defendant entered into a bargaining agreement—the Northern California Floor 12 Covering Master Agreement—with the Union and the Floor Covering Association Central 13 Coast Counties which requires employer contributions to plaintiffs’ ERISA funds, union 14 dues, and to other benefit plans. Id. ¶ 10. Plaintiffs allege defendant has failed and 15 refused to comply with an audit of their payrolls from October 1, 2017 to the present. Id. 16 ¶ 14. Plaintiffs further allege defendant failed to report and pay contributions for hours 17 worked by their employees during the month of February 2021. Id. ¶¶ 15–16. 18 Plaintiffs raise a single cause of action for audit compliance, payment of delinquent 19 contributions, interest, liquidated damages, attorneys’ fees, and costs. Id. at 5. Plaintiffs 20 allege that defendant has a contractual duty to timely pay the required contributions to 21 plaintiffs’ respective plans, and defendant has a duty to permit an audit. Id. ¶ 18. 22 Plaintiffs further allege that defendant has a statutory duty to timely make required 23 payments to plaintiffs under ERISA. Id. ¶ 19. Plaintiffs assert that defendant is in breach 24 of its contractual and statutory duties. Id. ¶¶ 21–22. 25 Plaintiffs seek injunctive relief, alleging they are without an adequate remedy at 26 law and will suffer irreparable injury. Id. ¶ 23. Plaintiffs provide an extensive prayer for 27 relief including an order requiring defendant to permit an audit of its records and a 1 ii. Procedural History 2 Plaintiffs filed their complaint against defendant on April 23, 2021. Dkt. 1. On 3 April 27, 2021, a summons was issued to defendant. Dkt. 7. The summons was 4 returned executed on July 14, 2021. Dkt. 11. On August 3, 2021, plaintiffs moved for 5 entry of default against defendant. Dkt. 13. On August 8, 2021, default was declined. 6 Dkt. 17. On September 15, 2021, plaintiffs moved again for an entry of default. Dkt. 18. 7 Default was entered against defendant on September 20, 2021. Dkt. 19. The certificate 8 of service was issued on the same day. Dkt. 20. Plaintiffs moved for default judgment on 9 January 6, 2022. Dkt. 24. Defendant was served this motion on January 6, 2022, 10 January 7, 2022, and January 25, 2022. Dkt. 29, 32, 35. 11 B. Legal Standard 12 Under Federal Rule of Civil Procedure 55(b)(2), a plaintiff may apply for a default 13 judgment against a defendant who has failed to plead or otherwise defend an action. 14 See Ceres Imaging, Inc. v. S.C.A.L.E. AG Servs., LLC, No. 20-CV-06407-LB, 2021 WL 15 4467588, at *2 (N.D. Cal. Jan. 28, 2021). “A defendant's default does not automatically 16 entitle the plaintiff to a court-ordered judgment.” Id. at *3 (internal quotation marks 17 omitted). The decision to grant or deny a default judgment is within the court's discretion. 18 See Draper v. Coombs, 792 F.2d 915, 925 (9th Cir. 1986). 19 Before entering a default judgment, a court must determine whether it has subject 20 matter and personal jurisdiction. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). A 21 court must also ensure that the defendant was adequately served. See Timbuktu Educ. 22 v. Alkaraween Islamic Bookstore, No. C 06–03025 JSW, 2007 WL 1544790, at *2 (N.D. 23 Cal. May 25, 2007). 24 In deciding whether to enter a default judgment, a court considers “(1) the 25 possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the 26 sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility 27 of a dispute concerning material facts; (6) whether the default was due to excusable 1 decisions on the merits.” Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). 2 A court “is not required to make detailed findings of fact” in deciding a motion for 3 default judgment. Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). 4 “With respect to the determination of liability and the default judgment itself, the general 5 rule is that well-pled allegations in the complaint regarding liability are deemed true.” Id. 6 The discretionary decision to award fees has traditionally been governed by these 7 five factors: “(1) the degree of the opposing parties’ culpability or bad faith; (2) the ability 8 of the opposing parties to satisfy an award of fees; (3) whether an award of fees against 9 the opposing parties would deter others from acting under similar circumstances; (4) 10 whether the parties requesting fees sought to benefit all participants and beneficiaries of 11 an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the 12 relative merits of the parties’ positions.” Hummell v. S. E. Rykoff & Co., 634 F.2d 446, 13 453 (9th Cir. 1980). 14 C. Discussion 15 i. Jurisdiction and Service of Process 16 1. Subject Matter Jurisdiction and Personal Jurisdiction 17 A court has a duty to examine both subject matter and personal jurisdiction when 18 default judgment is sought against a non-appearing party. See In re Tuli, 172 F.3d at 19 712. 20 The court has subject matter jurisdiction over this matter because plaintiffs bring a 21 federal cause of action. Plaintiffs assert claims to enforce the term of their plans and to 22 enforce provisions of ERISA, 29 U.S.C. § 1132(a). Jurisdiction also exists under LMRA § 23 301, 29 U.S.C. § 185(c). The court also has personal jurisdiction over defendant 24 pursuant to ERISA section 502(e)(2), which provides that an action may be brought 25 against a defendant “where the plan is administered, where the breach took place, or 26 where a defendant resides or may be found, and process may be served in any other 27 district where a defendant resides or may be found.” 29 U.S.C. § 1132(e)(2). The 1 California corporation. Hallmon Decl. ISO Mot. for Default J. (Dkt. 26) ¶ 2. 2 2. Service of Process 3 A court must also assess whether the defendant against whom default judgment is 4 sought was properly served with notice of the action. See Penpower Tech. Ltd. v. S.P.C. 5 Tech., 627 F. Supp. 2d 1083, 1088 (N.D. Cal. 2008). Here, defendant has been served 6 the summons (Dkt. 11), notice of entry of default (Dkt. 20), and plaintiffs’ motion for 7 default judgment (Dkt. 35). 8 ii. Default Judgment 9 After entry of default, a court may grant default judgment on the merits of the case. 10 Fed. R. Civ. P. 55. “The district court’s decision whether to enter a default judgment is a 11 discretionary one,” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980), guided by the 12 following factors: 13 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, 14 (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default 15 was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring 16 decisions on the merits. 17 Eitel, 782 F.2d at 1471–72. 18 Here, the Eitel factors weigh in favor of granting default judgment. 19 1. Possibility of Prejudice to Plaintiffs 20 The first factor considers whether the plaintiffs will suffer prejudice. Here, because 21 defendant did not respond to plaintiffs’ complaint, plaintiffs’ only recourse is a default 22 judgment. Thus, this factor weighs in favor of default judgment. 23 2. Merits of Plaintiffs’ Claims & Sufficiency of Complaint 24 The second and third factors, often analyzed together, require the plaintiff “to 25 plead facts sufficient to establish and succeed upon its claims.” Craigslist, Inc. v. 26 Naturemarket, Inc., 694 F. Supp. 2d 1039, 1055 (N.D. Cal. 2010). After entry of default, 27 the factual allegations in the complaint related to liability are accepted as true and 1 required to make detailed findings of fact.” Id. 2 “ERISA requires employers to contribute to employee benefit plans in accordance 3 with the terms of collectively bargained agreements.” Trustees of Screen Actors Guild- 4 Producers Pension & Health Plans v. NYCA, Inc., 572 F.3d 771, 774 (9th Cir. 2009) 5 (citing 29 U.S.C. § 1145). As such, plaintiffs must prove the following: (1) the trusts are 6 multiemployer plans as defined by 29 U.S.C. § 1002(37); (2) the collective bargaining 7 agreement obligated defendant to make contributions; and (3) defendant did not make 8 the required contributions. See, e.g., 29 U.S.C. § 1145; Bd. of Trs. of the Sheet Metal 9 Workers Health Care Plan of N. Cal. v. Gervasio Env’t Sys., No. C 03–4858 WHA, 2004 10 WL 1465719, at *2 (N.D. Cal. May 21, 2004). 11 Plaintiffs’ complaint states a cognizable claim for relief. Plaintiffs are multi- 12 employer benefit plans as defined by ERISA, and the Union is a labor organization as 13 defined in the NLRA. Dkt. 1 ¶¶ 1, 2. Defendant is an “employer” as defined under ERISA 14 and the NLRA. Id. ¶ 3. Defendant is also bound by the bargaining agreement. Id. 15 Plaintiffs allege defendant was required to maintain time records and to submit to an 16 audit so plaintiffs can determine whether defendant was making full and timely payments 17 of all required amounts. Id. ¶¶ 14–15. Plaintiffs further allege that defendant failed to 18 comply with an audit of their records for the period from October 1, 2017 to present, and 19 that plaintiffs are entitled to recover unpaid contributions found through an audit, as well 20 as liquidated damages and interest on delinquent contributions. Id. 21 Pursuant to the terms of the bargaining agreement, and ERISA § 502(g), 29 22 U.S.C. 1132(g)(2), defendant is liable for any unpaid contributions, liquidated damages of 23 twenty percent, interest of five percent, audit fees, and reasonable attorneys’ fees and 24 costs. Christophersen Decl. ISO Mot. for Default J. (Dkt. 27) ¶¶ 6–13. Plaintiffs submit 25 evidence demonstrating that defendant failed to comply with the audit of its records for 26 the period from October 1, 2017 to the present. Id. ¶ 13. Evidence shows that plaintiffs 27 made multiple efforts to reach out to defendant regarding the audit, and that defendant 1 Id. ¶ 9. 2 Taking the allegations in the complaint as true, and as supported by evidence, 3 plaintiffs have made a strong showing of likelihood of success on the merits. Therefore, 4 the second and third Eitel factors weigh in favor of granting plaintiffs’ motion for default 5 judgment. 6 3. Money at Stake 7 The fourth factor considers the amount of money at stake in relation to the 8 seriousness of the defendant’s conduct. Eitel, 782 F.2d at 1471–72. Although plaintiffs 9 seek injunctive relief in the form of a court-ordered audit, they also seek to recover the 10 monetary amount of $6,503.39 which represents $5,368.00 in attorneys’ fees and 11 $1,135.39 in costs. These fees and costs are authorized by both 29 U.S.C. § 1132 and 12 the bargaining agreement. See Northwest Administrators, Inc. v. Albertsons, Inc., 104 13 F.3d 253, 257–58 (9th Cir. 1996). Thus, the sum of money at stake is appropriate and 14 weighs in favor of granting default judgment. 15 4. Possibility of a Dispute Concerning Material Facts 16 The fifth factor considers the possibility of a dispute of material fact. Eitel, 782 17 F.2d at 1471–72. But there is no indication that the material facts are in dispute, and the 18 well-pleaded allegations in the complaint as to liability are deemed admitted. See 19 Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977). Thus, this factor weighs 20 in favor of default judgment. 21 5. Excusable Neglect 22 “This factor favors default judgment where the defendant has been properly 23 served or the plaintiff demonstrates that the defendant is aware of the lawsuit.” 24 Wecosign, Inc. v. IFG Holdings, Inc., 845 F. Supp. 2d 1072, 1082 (C.D. Cal. 2012). 25 Defendant was served with the summons and complaint on July 14, 2021. Dkt. 11. 26 Plaintiffs notified defendant of the entry of default on September 20, 2021, and defendant 27 was served this motion on January 6, 2022, January 7, 2022, and January 25, 2022. Dkt. 1 in favor of default judgment. 2 6. Strong Policy Favoring Decisions on the Merits 3 “Cases should be decided upon their merits whenever reasonably possible.” Eitel, 4 782 F.2d at 1472. But defendant’s failure to respond to plaintiffs’ complaint “makes a 5 decision on the merits impractical, if not impossible.” PepsiCo, Inc. v. Cal. Sec. Cans, 6 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Accordingly, this factor weighs in favor of 7 granting default judgment. 8 * * * 9 In sum, all seven Eitel factors weigh in favor of granting default judgment. 10 iii. Relief 11 Once liability is established through a defendant's default, plaintiffs are required to 12 establish that the requested relief is appropriate. See Geddes, 559 F.2d at 560 (“The 13 general rule of law is that upon default the factual allegations of the complaint, except 14 those relating to the amount of damages, will be taken as true.”). 15 Under ERISA, plaintiffs that obtain a judgment in their favor in an action for unpaid 16 contributions under § 1145 are entitled to the unpaid contributions, interest, liquidated 17 damages, reasonable attorneys' fees and costs, and other legal or equitable relief as the 18 court deems appropriate. 29 U.S.C. § 1132(g)(2). Here, plaintiffs seek an order requiring 19 that defendant report and pay contributions for hours worked by its employees in 20 February 2021, and that defendant comply with an audit of its payrolls for the period from 21 October 1, 2017 to the present. No actual sums owed are yet provided by plaintiffs, as 22 the outstanding amounts, if any, can only be ascertained by audit. Thus, for purposes of 23 this motion, the unpaid contributions, interest and liquidated damages available should 24 the audit reflect they are warranted, must be deferred until such time they can be 25 ascertained. 26 Plaintiffs also seek $5,368 for attorneys’ fees and $1,135.39 for costs already 27 incurred. The court examines the five Hummell factors when awarding discretionary 1 plaintiffs. First, plaintiffs alleged that defendant failed to participate in plaintiffs’ audit 2 despite multiple efforts by plaintiffs to obtain that participation. See Villasenor v. Cmty. 3 Child Care Council of Santa Clara Cty., Inc., No. 18-CV-06628-BLF, 2021 WL 242924, at 4 *6 (N.D. Cal. Jan. 25, 2021) (“A losing defendant in an ERISA case is generally regarded 5 as culpable for their conduct because a losing defendant must have violated ERISA, 6 thereby depriving plaintiffs of rights under a benefit plan and violating a Congressional 7 mandate”) (internal quotation marks omitted). Second, plaintiffs believe defendant has 8 the ability to satisfy the fee award. Third, the award of fees and costs against defendant 9 would deter other employers from failing to comply with plaintiffs’ request to report and 10 pay fringe benefit contributions as required. Fourth, plaintiffs’ request for fees benefits all 11 participants and beneficiaries of the benefits plans because the fees enabled counsel to 12 enforce the plans. Fifth, defendant failed to respond to numerous requests from plaintiffs 13 to obtain defendant’s audit compliance. 14 Section 1132(g) authorizes attorneys' fees under ERISA, but they must be 15 reasonable. See Kemmis v. McGoldrick, 706 F.2d 993, 997–98 (9th Cir. 1983). Plaintiffs' 16 counsel in this action charged the following hourly billing rates: $250 for the shareholder 17 attorney, $245 for an associate attorney, and $145 for a paralegal. Dkt. 26 ¶ 16. The 18 reasonable hourly rate is calculated according to the prevailing market rates in the 19 relevant community. An hourly rate of $650 for lead counsel and $190 for senior 20 paralegals has been found to be reasonable for Bay Area ERISA specialists. Villasenor, 21 2021 WL 242924 at *8; see Echague v. Metro Life Ins. Co., 69 F. Supp. 3d 990, 996–97 22 (N.D. Cal. 2014) (finding $650 for lead counsel, $250 for associates, and $135 for 23 paralegals was reasonable for ERISA legal professionals in the Bay Area). Here, the 24 billing rates of plaintiffs' attorneys and paralegals fall below or are comparable to rates 25 that other courts have found to be reasonable for ERISA work in this area. Therefore, the 26 rates charged by plaintiffs' attorneys are reasonable. Moreover, plaintiffs’ counsel spent 27 29.8 hours on this matter, most of which was paralegal time. This is a reasonable 1 complaint filing fee, service of process, and legal research. Dkt. 26-5 at 8. Because 2 such costs are considered reasonable litigation expenses, plaintiffs are entitled to the 3 requested amount. 4 CONCLUSION 5 The court GRANTS plaintiffs’ motion for default judgment. Thus, the hearing 6 scheduled for March 10, 2022 is VACATED. By separate judgment, the court orders 7 defendant to comply with its audit obligations to commence within 30 days of the date of 8 this order. The court also enters judgment for the amount of attorneys’ fees and cost 9 incurred by plaintiffs to obtain this judgment. Plaintiffs may seek to amend this order and 10 judgment upon a proper showing should the audit reveal that amounts are owed for 11 unpaid contributions, interest, liquidated damages and further fees and costs. 12 IT IS SO ORDERED. 13 Dated: March 8, 2022 14 /s/ Phyllis J. Hamilton PHYLLIS J. HAMILTON 15 United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27