International Painters and Allied Trades Industry Pension Fund v. Davanc Contracting, Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
INTERNATIONAL PAlNTERS AND
ALLIED TRADES INDUSTRY PENSION
FUND, et al. ,
Plaintiffs,
Civil Action No. 09-1797 (CKK)
v.
DAVANC CONTRACTING, INC.,
Defendant.
MEMORANDUM OPINION
(August 31, 2011)
This action is brought by Plaintiffs lnternational Painters and Allied Trades lndustry
Pension Fund (the "Pension Fund"), Gary J. Meyers, in his official capacity as a fiduciary
("Meyers"), the Political Action Together Fund ("PAT Fund"), and the Painters and Allied
Trades Labor Management Cooperation Initiative ("LMCI") (collectively, "Plaintiffs") against
Defendants Davanc Contracting, Inc. d/b/a Davanc Contracting Inc. ("Davanc"), Cumplido
Painting and Renovations, Inc. ("Cumplido Painting"), Cumplido Industries Inc. ("Cumplido
Industries"), William M. Cumplido, and Martha Cumplido (collectively, "Defendants") for legal
and equitable relief under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), 29 U.S.C. §§ 1001 et seq. Plaintiffs seek to recover unpaid contributions, liquidated
damages, interest and attorneys’ fees and costs incurred by the Fund pursuant to 29 U.S.C.
§ ll32(g)(2)(A)-(D) and a collective bargaining agreement entered under 29 U.S.C. § 185.
Although properly and timely served with the Amended Complaint and Summons, Defendants
failed to respond to the Complaint, and the Clerk of the Court, upon request by Plaintiffs, entered
default against Defendants on February ll, 201 l. See Clerk’s Entry of Default, Docket Nos.
[19], [20]. Presently before the Court is Plaintiffs’ [22] Motion for Judgment by Default; no
opposition has been filed in response. Having thoroughly considered the Amended Complaint,
Plaintiffs’ submissions and attachments thereto, applicable case law, statutory authority, and the
record of the case as a whole, the Court shall GRANT Plaintiffs’ [22] Motion for Default
Judgment, for the reasons stated below.
I. BACKGROUND
The Pension Fund is a trust fund established under 29 U.S.C. § l86(c)(5), and its Trustees
are fiduciaries and plan administrators for the international Painters and Allied Trades Industry
Pension Plan ("Pension Plan") and international Painters and Allied Trades Industry Annuity
Plan ("Annuity Plan"), both of which are multiemployer employee benefit pension plans. Am.
Compl. ilil 4-6. The Pension Fund and Meyers are also authorized collection agents for the PAT
Fund and LMCI (the "Ancillary Funds"), as well as for FTI, another multiemployer employee
benefit pension plan. Id. ilil 8-l2. The Pension Fund, the Pension Plan, the Annuity Plan, FTI,
and as allowed by law, LMCI, are known as the "ERISA Funds," and, together with the LMCI
and the PAT Fund, the "Funds." Ia’. il l4. The Pension Fund and Meyers are suing on behalf of
the Funds. Id. il 13.
Defendant Davanc was a Rhode Island corporation prior to October 20, 2008, when the
Rhode Island Secretary of State revoked Davanc’s authority to transact business in that state.
Am. Compl. il 15. Since that time, William M. Cumplido has operated Davanc as an
unincorporated sole proprietorship. Id. Defendants Cumplido Painting and Cumplido industries
are Rhode Island corporations that are alter egos of Davanc. Ia’. ilil 16-l7. Defendants William
M. Cumplido and Martha Cumplido are owners, officers, agents, or managing agents of Davanc,
Cumplido Painting, and Cumplido Industries. Ia'. ilil 18-19.
As set forth in the Amended Complaint, Plaintiffs assert that Davanc has entered into a
collective bargaining agreement ("Labor Agreement") with the one or more local labor unions or
district councils affiliated with the Intemational Union of Painters and Allied Trades, AFL-CIO,
CLC (collectively, the "Union"). Ia’. il 20. Plaintiffs also allege that Davanc has agreed to abide
by an Agreement and Declaration of Trust of the Fund ("Trust Agreement") as well as plan
documents for the ERISA Funds. Ia'. il 2l. Under the Labor Agreement, the Trust Agreement,
and the plan documents for the ERISA Funds, Davanc agreed to make certain contributions to
the Funds based on Davanc’s employees’ work, file monthly remittance reports with the Funds
detailing all employees’ work for which contributions were required, produce records necessary
to permit the Funds to conduct an audit, and pay certain costs associated with litigation if Davanc
failed to comply with its obligations. Ia’. il 22. Plaintiffs allege that Davanc has failed to make
the required monthly payments for the period from January 2006 through the present and that
Defendant has otherwise failed to report and remit contributions required under the agreements.
Id. ilil 27-50.
The Funds performed an audit of Davanc’s books and records for the period beginning
January 2006 to the present and discovered the existence of Cumplido Painting, a non-union
company whose employees performed work and continue to perform work covered under
Davanc’s collective bargaining agreement. Am. Compl. il 23. Further investigation revealed the
existence of Cumplido Industries, which identifies its business purpose as "painting" in
documents filed with the Rhode Island Secretary of State. Id. il 24. Davanc, Cumplido Painting,
and Cumplido Industries share substantially identical officers and management, including
William M. Cumplido, who is President of Davanc and Cumplido Industries and Vice President
of Cumplido Painting; and Martha Cumplido, who is Davanc’s registered agent and Cumplido
Industries’ Vice President. Ia’. il 25(a). The three companies also have interchangeable business
premises closely situated within approximately 300 feet of each other. Ia'. il 25(b). The
companies also share employees, equipment, and customers, and they have full awareness and
knowledge of Davanc’s unpaid obligations to the Funds. Ia’. il 25(c)-(f). Both William M.
Cumplido and Martha Cumplido had signing authority on Davanc’s bank accounts and made
decisions regarding the order in which Davanc issued payments to its creditors. Id. il 26. Davanc
used Cumplido Industries and Cumplido Painting to evade or avoid its obligations under the
collective bargaining agreement. Id.
Pursuant to the terms of Davanc’s agreements with the Funds, Plaintiffs assert that they
are entitled to: a monetary award for violation of 29 U.S.C. § 1145 in the amount of the unpaid
contributions to the ERISA Funds, liquidated damages, interest on the unpaid contributions, as
well as costs, audit expenses and attorneys’ fees (Count l); an audit of the records of Davanc,
Cumplido Industries, and Cumplido Painting to determine the precise amounts owed (Count ll);
after an audit, a monetary award for violation of 29 U.S.C. § ll45 in the amount of the
contributions found due and owing by the audit, together with late charges, interest, liquidated
damages, costs, and fees (Count III); an injunction requiring Defendants to comply with the
collective bargaining agreements with the Funds and requiring regular remittance reports (Count
IV); a monetary award for breach of the Labor Agreement (and its incorporated agreements) in
the amount of unpaid funds owed, including liquidated damages, interest and costs, and
reasonable attorneys’ fees (Count V); a monetary award for breach of the Labor Agreement (and
its incorporated agreements) for unpaid funds found due and owing by the audit (Count VI);
monetary and injunctive relief, including an accounting for breach of fiduciary duty by William
M. Cumplido and Martha Cumplido to the Pension Plan and Annuity Plan (Count VII); and a
monetary award for any losses resulting from prohibited transactions made by William M.
Cumplido and Martha Cumplido involving the Funds (Count lX'). Am. Compl. ilil 27-65.
Plaintiffs, in their instant motion, have moved for default judgment seeking: (l) a judgment in
favor of Plaintiffs and against Defendants, jointly and severally, for $634,297.39, a sum known
to be due and owing consisting of unpaid contributions, interest, liquidated damages, audit costs,
and attorneys’ fees and costs; (2) an order declaring that Davanc, Cumplido Painting, and
Cumplido Industries are jointly and severally liable as alter egos, joint employers or a single
employer, for Davanc’s debt to Plaintiffs; (3) an order declaring that William M. Cumplido and
Martha Cumplido breached their fiduciary duties to the Pension Fund and therefore jointly and
severally liable for Davanc’s debt to Plaintiffs; (4) an order awarding post-judgment interest; (5)
an order enjoining Defendants to complete and submit to the Funds any outstanding remittance
reports; (6) an order enjoining William M. Cumplido and Martha Cumplido to provide an
accounting of Pension Plan and Annuity Plan assets received and to restore any losses to these
Plans and correct any prohibited transactions. See Pls.’ Proposed Order.
Davanc was originally served with the Complaint and Summons on October 13, 2009,
and it was subsequently served with the Amended Complaint on January 7, 201 l. The remaining
Defendants were served with the Amended Complaint and Summons on January l3, 201 l.
l Plaintiffs’ Amended Complaint does not include a "Count Vlll."
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Defendants failed to file an answer or otherwise respond to Plaintiffs’ Amended Complaint, and
Plaintiffs subsequently moved for entry of default. See Pls.’ Request to Clerk to Enter Default,
Docket No. [17]. On February ll, 201 l, the Clerk of the Court entered default against
Defendants, See Default, Docket Nos. [19]-[20]. Plaintiffs subsequently filed the instant [22]
Motion for Judgment by Default, As of the date of this Memorandum Opinion, Defendants have
neither entered an appearance nor filed any pleadings in this case.
II. LEGAL STANDARD AND DISCUSSION
F ederal Rule of Civil Procedure 5 5(a) provides that the clerk of the court must enter a
party’s default "[w]hen a party against whom a judgment for affirmative relief is sought has
failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise." Fed. R.
Civ. P. 55(a). After a default has been entered by the clerk of the court, a court may enter a
default judgment pursuant to Rule 5 5(b). Fed. R. Civ. P. 55(b). "The determination of whether
default judgment is appropriate is committed to the discretion of the trial court." Int ’l Painters &
Allied Tmdes Indus. Pension Fund v. Auxier Drywall, LLC, 531 F. Supp. 2d 56, 57 (D.D.C.
2008) (citing Jackson v, Beech, 636 F.2d 831, 836 (D.C. Cir. 1980)).
Where, as here, there is a complete "absence of any request to set aside the default or
suggestion by the defendant that it has a meritorious defense, it is clear that the standard for
default judgment has been satisfied." Auxier Drywall, LLC, 531 F. Supp. 2d at 57 (internal
quotation marks omitted). The Clerk of the Court entered Defendant’s default, and the factual
allegations in the Complaint are therefore taken as true. See Inl ’l Painters & Allied Trades
Indus. Pension Fund v. R. W, Armine Drywall C0., lnc., 239 F. Supp. 2d 26, 30 (D.D.C. 2002).
The Court finds that Plaintiffs’ Amended Complaint sufficiently alleges facts to support their
claims. Plaintiffs are thus entitled to default judgment as to Defendants’ liability for their failure
to timely pay contributions to the Funds, to supply records necessary to permit the Funds to
determine if Defendants are making the payments as required under the terms of Labor
Agreement, the Trust Agreement, the plan documents for the ERISA Funds, and other related
agreements. Plaintiffs are also entitled to default judgment against Defendants William M.
Cumplido and Martha Cumplido for breach of fiduciary duty.
Although the default establishes a defendant’s liability, the Court makes an independent
determination of the sum to be awarded in the judgment unless the amount of damages is certain.
Adins v. Teseo, 180 F. Supp. 2d 15, 17 (D.D.C. 2001). Accordingly, the Court shall evaluate
Plaintiffs’ request for a judgment for damages based on the record they have provided the Court.
A. Judgmentfor Damages
Under Section 515 of ERISA, "[e]very employer who is obligated to make contributions
to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained
agreement shall . . . make such contributions in accordance with the terms and conditions of such
plan or such agreement." 29 U.S.C. § 1145. When an employer fails to make such contributions,
ERISA provides that the fiduciary for a plan may bring an action and obtain a mandatory award
for the plan consisting of:
(A) the unpaid contributions,
(B) interest on the unpaid contributions,
(C) an amount equal to the greater of-
(i) interest on the unpaid contributions; or
(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). interest is calculated using the rate provided under the plan, or, if none,
the rate prescribed by 26 U.S.C. § 6621. Id. ln addition to the remedies available under ERISA,
a benefit trust fund may, as a third-party beneficiary, recover for breach of a collective bargaining
agreement under 29 U.S.C. § l85(a). See Hudson Counly Carpenters Union Local Union No. 6.
v. I/.S.R. Constr, Corp., 127 F. Supp. 2d 565, 568 (D.N.J. 2000) ("lt is well-established that the
failure to make contributions to a union trust fund as required by a collective bargaining
agreement constitutes a violation of ERISA § 515 and a violation of [29 U.S.C. § 185]."); see
also Bugher v. Feightner, 722 F.2d 1356, 1357-60 (7th Cir. 1983) (explaining that ERISA
remedies are intended to supplement rather than supersede rights existing under 29 U.S.C. §
1 85(a)).
Plaintiffs have provided the Court with affidavits to support a damages award of
$624,332.47. Specifically, Plaintiffs contend that based on audit of Davanc for the period
January 1, 2006 through March 31, 2010 and an audit of Cumplido Painting for the period
January 1, 2008 through March 31, 2008, these companies owed $475,039.34 in contributions to
the Funds. See Pls.’ Mot. for J. by Default, Ex. 1 (Decl. of Thomas Montemore) il 9. Plaintiffs
have calculated that these companies owe interest on the unpaid amounts through February 15,
2011, in the amount of $34,181.98, based on the amount of unpaid contributions and the
fluctuating lRS interest rate as provided in § 10 of the industry pension plan, which adopts the
ERISA standard. See id. ERISA also provides that liquidated damages be awarded in the
amount of 20% of unpaid contributions, which equals $95,007.87. See ia'. Plaintiffs also
indicate that the audit cost $6,888.76 and that Article Vl, Section 6 of the Trust Agreement
provides for recovery of audit costs.
Plaintiffs also ask for attorneys’ fees and expenses in the amount of $23,179.44. See Pls.’
Mot. for J. by Default, Ex. 5 (Decl. of Jerome A. Flanagan) il 2. Plaintiffs have attached
supporting documentation showing that they have incurred $21,307.00 in attorneys’ fees and
$l,872.44 in expenses in litigating this action. See Pls.’ Mot. for J. by Default, Ex. 6 (Time and
Expense Details). This is based on 104.4 hours of attomey and paralegal time at rates of $220
per hour and $70 per hour, respectively, plus expenses for the filing fee, photocopies, legal
research, and various other items. See ia’. Plaintiffs have provided documentation showing that
these rates are reasonable for the services rendered. Accordingly, the Court shall award the
attorneys’ fees and costs requested. Thus, the total money judgment for Plaintiffs shall be
$634,297.39.
B. Judgment for Equitable Relief
Plaintiffs request judgment in the form of an order enjoining Defendants to complete and
submit any outstanding remittance reports to the Funds along with corresponding contributions,
Injunctive relief is permitted under ERISA "to enjoin a recalcitrant employer from failing to
comply with the benefit payment provisions of a labor agreement." Laborers Fringe Ben. Funds
v. Nw. Concrete & Constr., Inc., 640 Fl.2d 1350, 1351-52 (6th Cir. 1981) (per curiam).
Accordingly, the Court shall grant Plaintiffs’ motion for this relief.
Plaintiffs also seek a judgment that Davanc, Cumplido Painting, and Cumplido Industries
are alter egos that are jointly and severally liable for the debt to the Funds. "ln the ERISA
context, alter ego liability enables ERISA trustees to ‘recover delinquent contributions from a
sham entity used to circumvent the participating employer’s pension obligations."’ F lynn v.
Veazey Constr. Corp., 424 F. Supp. 2d 24, 33 (D.D.C. 2006) (quoting Flynn v. R.C. Tile, 353
F.3d 953, 958 (D.C. Cir. 2004)). ln order to determine whether businesses are alter egos, the
courts evaluates the similarities between the enterprises in ownership, management, business
purpose, operations, equipment, and customers. Ia’. According to the allegations in the
Amended Complaint, which the Court accepts as true because Defendants are in default, the
three companies have substantially identical officers and management, interchangeable business
premises, shared employees, shared equipment, the same or similar type customers, and full
awareness of the obligations to the Funds. Based on these facts, the Court finds that Davanc,
Cumplido Painting, and Cumplido Industries are alter egos and are jointly and severally liable for
the amounts owed by Davanc to the Funds.
Finally, Plaintiffs seek a judgment restraining and enjoining William M. Cumplido and
Martha Cumplido: (a) to render an accounting of Plan assets received and held by them and their
earnings, profits, or proceeds due the Plan or to allow an audit by the Plan to prepare such an
accounting; (b) to comply with goveming law and the terms of Plaintiffs’ plans of benefits with
respect to the care and custody of Plan assets and accounting for the custody of earnings on Plan
assets; (c) to make good to the Plan any losses resulting from each breach of fiduciary duty and to
restore to the Plan any profits which have been made through use of Plan assets by the fiduciary;
and (d) to correct any and all prohibited transactions. Plaintiffs contend that such relief is
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appropriate because the Cumplidos breached their fiduciary duties to the Funds. Under ERISA, a
person is a fiduciary with respect to a plan to the extent he exercises any discretionary authority
or discretionary control respecting management or disposition of its assets. 29 U.S.C.
§ 1002(2l)(A)(i). Courts have recognized that unpaid contributions may be considered plan
assets if they are defined as such in the plan agreements. See, e.g., Galgay v. Ganglo]j”, 677 F.
Supp. 295 , 300-01 (M.D. Pa. 1987). Here, the Trust Agreement unambiguously provides that all
employer contributions are plan assets from the date on which employees’ hours worked or paid
accrue. See Trust Agreement, Art. l, § 10. Plaintiffs have alleged that the Cumplidos exercised
discretionary authority or control over the unpaid contributions and maintained authority over the
defendant companies’ bank accounts and payments to creditors. Therefore, the Court may hold
them liable for breach of their fiduciary duties to the Funds.
III. CONCLUSION
For the reasons set forth above, the Court shall GRANT the Plaintiffs’ [22] Motion for
Judgment by Default. The Court shall award damages in the amount of $634,297.39 and order
other appropriate equitable and injunctive relief. An appropriate Order accompanies this
Memorandum Opinion.
Date:August31,2011 ii
coLLEEN KoLLAR-KoTELLY
United States District Judge
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