Walsh v. Gutters Perfect Inc ( 2022 )

SUSAN KUMLI 1 Acting Regional Solicitor 2 LAURA C. BREMER (Cal. Bar No. 162900) Counsel for ERISA 3 NATASHA MAGNESS (Wa. Bar No. 55920) 4 Trial Attorney UNITED STATES DEPARTMENT OF LABOR 5 90 7th Street, Suite 3-700 6 San Francisco, CA 94103-1516 Email: Magness.natasha.a@dol.gov 7 Telephone: 206-757-6757 8 Attorneys for Plaintiff Martin J. Walsh, United States Secretary of Labor 9 The Honorable Ricardo S. Martinez 10 IN THE UNITED STATES DISTRICT COURT 11 FOR THE WESTERN DISTRICT OF WASHINGTON 12 13 MARTIN J. WALSH, Case No. 2:21-cv-00635-RSM Secretary of Labor, 14 United States Department of Labor, ORDER GRANTING 15 Plaintiff, SECRETARY’S MOTION FOR v. DEFAULT JUDGMENT AGAINST 16 DEFENDANTS 17 GUTTERS PERFECT INC., dba LEAF FILTER, a Washington corporation, and 18 GUTTERS PERFECT, INC. 401(K) PROFIT SHARING PLAN, a Safe Harbor 19 Defined Contribution Plan 20 Defendants. 21 22 23 The United States Secretary of Labor (the “Secretary”) brought this action 24 requesting that the Court appoint an independent fiduciary to act as a fiduciary for 25 Gutters Perfect, Inc. 401(k) Profit Sharing Plan (“Plan”) pursuant to the Employee 26 Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1191c, and to 27 obtain other equitable relief to redress violations and enforce the provisions of ERISA 28 ORDER GRANTING SECRETARY’S U.S. DEPARTMENT OF LABOR 1 pursuant to Section 502(a)(2) and (5), 29 U.S.C. § 1132(a)(2) and (5). The Secretary now 2 brings a motion for entry of a default judgment against Defendants Gutters Perfect Inc., 3 (“Gutters Perfect”) and the Plan (together “Defendants”) under Rule 55(b)(2) of the 4 Federal Rules of Civil Procedure, seeking a judgment appointing an independent 5 fiduciary to perform various duties, including distribution of Plan participant’s retirement 6 savings from the Plan. 7 Following entry of default, courts are authorized to grant default judgment under 8 Federal Rule of Civil Procedure 55. In exercising its discretion, the factors the court may 9 consider include: (1) the possibility of prejudice to the plaintiff, (2) the merits of 10 plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at 11 stake in the action, (5) the possibility of a dispute concerning material facts, (6) whether 12 13 the default was due to excusable neglect, and (7) the strong public policy underlying the 14 Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 15 F.2d 1470, 1471–72 (9th Cir. 1986). In considering these factors, all factual allegations in 16 the plaintiff’s complaint are taken as true, except for those relating to damages. TeleVideo 17 Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–918 (9th Cir. 1987). After having considered 18 the documents filed in support of the motion, the Complaint, the file in this action, and all 19 other matters presented to the Court, including the discussion of the factors set forth in 20 Eitel, 782 F.2d at 1471–72, the Court finds as follows: 21 1. Gutters Perfect was dissolved by the State of Washington in March 2013. 22 2. Jack Mitchell Reed, the Plan’s sole trustee, is deceased, and as such is not 23 available to perform his duties as trustee such as authorizing the Plan’s asset 24 custodian, Charles Schwab and Co., Inc., to distribute plan assets to Plan 25 participants and beneficiaries. 26 27 28 [PROPOSED] ORDER GRANTING U.S. DEPARTMENT OF LABOR 1 3. Default was entered by the Clerk of the Court against Defendants on 2 September 13, 2021. 3 4. Defendants did not appear or otherwise defend in this action after the Secretary 4 served the Washington Secretary of State a copy of the summons and 5 complaint in this action in compliance with Federal Rules of Civil Procedure 6 4(e)(1) and 4(h)(1)(A), and Revised Code of Washington 23.95.450(4). 7 5. Absent entry of default judgment against Defendants and appointment of an 8 independent fiduciary, the Secretary and Plan participants and beneficiaries 9 would be prejudiced because the Plan’s asset custodian has custody of the Plan 10 assets (Plan participants’ retirement savings) and refuses to distribute the Plan 11 assets without authorization of the Plan’s sole trustee, who is deceased. 12 6. The Secretary has alleged sufficient facts in his complaint, which the Court 13 must accept as true for purposes of establishing liability, to show that Gutters 14 Perfect violated ERISA. In particular, Gutters Perfect failed to determine and 15 pay benefits under the Plan, resulting in participants’ and beneficiaries’ 16 inability to access plan assets and Gutters Perfect failed to act with the care, 17 skill, prudence, and diligence under the circumstances then prevailing that a 18 prudent person acting in a like capacity and familiar with such matters would 19 use in the conduct of an enterprise of a like character and with like aims as 20 21 required by 29 U.S.C. § 1104(a)(1)(B). 22 7. The Secretary does not seek a money judgment against Defendants. 23 8. There is no possibility of a dispute regarding the material facts alleged by the 24 Secretary. Governmental websites corroborate some of the Secretary’s 25 allegations such as Gutters Perfect’s status as a dissolved entity and the death 26 of sole trustee Jack Mitchell Reed in October 2019. 27 28 ORDER GRANTING SECRETARY’S U.S. DEPARTMENT OF LABOR 1 9. Default was not due to excusable neglect. The Secretary properly served 2 Defendants by way of the Washington Secretary of State and did not receive 3 any Response from Defendants. Publicly available documents show that the 4 company is no longer in operation, which supports a finding that default was 5 not the result of excusable neglect. 6 10. While public policy generally favors resolution of complaints on the merits, 7 this policy is not absolute and must be weighed against other equities such as 8 prejudice to the plaintiff. 9 10 THEREFORE, IT IS ADJUDGED AND ORDERED that: 11 1. Defendants violated 29 U.S.C. §§ 1104(a)(1)(A), 1104(a)(1)(B) and 1105(a)(1)-(3) 12 13 of Title I of ERISA, 29 U.S.C. §§ 1001-1191c. 14 2. AMI Benefit Plan Administrators, Inc. is hereby appointed as independent 15 fiduciary with discretionary authority over the administration and management of 16 the Plan, with all the rights, duties, discretion, and responsibilities of a trustee, 17 fiduciary, and Plan Administrator under ERISA to perform the following duties: 18 a. The independent fiduciary shall be responsible for marshaling, calculating 19 the account balances, allocating, paying out, distributing, and administering 20 Plan assets for all the assets in the Plan, and taking further action with 21 respect to the Plan as appropriate, and terminating the Plan when all of its 22 assets are distributed to all of the eligible Plan participants and 23 beneficiaries; 24 b. The independent fiduciary shall, pursuant to the procedures outlined in the 25 Employee Benefits Security Administration’s (“EBSA”) Field Assistance 26 Bulletin No. 2014-01, exercise reasonable care and diligence to identify and 27 28 ORDER GRANTING SECRETARY’S U.S. DEPARTMENT OF LABOR 1 locate each participant and beneficiary of the Plan who is eligible to receive 2 a distribution under the terms of the Plan; 3 c. The independent fiduciary shall have full access to all data, information, 4 and calculations in the possession of the Plan and under its control, 5 including information and records maintained by the Defendants, their 6 attorneys, their accountants, and other agents, as well as service providers 7 of the Plan; 8 d. The independent fiduciary shall comply with all applicable rules and laws; 9 e. The independent fiduciary has all the rights, duties, discretion and 10 responsibilities of a trustee, fiduciary and Plan Administrator under ERISA, 11 including filing annual and/or final Form 5500; 12 f. For services performed pursuant to this judgment, the independent fiduciary 13 shall receive compensation not to exceed $3,810.00 for fees and expenses 14 reasonably and necessarily incurred in administrating and terminating the 15 Plan; and 16 g. The independent fiduciary’s fees and expenses shall be paid from the assets 17 of the Plan, or alternatively by the Secretary out of EBSA’s Abandoned 18 Plan Fund, which was established to defray the expenses of the 19 administration and termination of low asset abandoned plans. 20 21 // 22 // 23 // 24 25 // 26 27 28 ORDER GRANTING SECRETARY’S U.S. DEPARTMENT OF LABOR 1 3. This Court retains jurisdiction of this action for purposes of enforcing compliance 2 with the terms of this Order and Judgment. 3 4 5 6 DATED this 12th day of January, 2022. 7 8 A 9 10 RICARDO S. MARTINEZ 11 CHIEF UNITED STATES DISTRICT JUDGE 12 13 Presented by: 14 SEEMA NANDA 15 Solicitor of Labor 16 SUSAN G. KUMLI 17 Acting Regional Solicitor 18 LAURA C. BREMER 19 Counsel for ERISA 20 /s/Natasha Magness 21 NATASHA MAGNESS U.S. Department of Labor, Office of the Solicitor 22 Trial Attorney 23 Attorneys for the Plaintiff Secretary of Labor 24 25 26 27 28 ORDER GRANTING SECRETARY’S U.S. DEPARTMENT OF LABOR