Carpenters Southwest Administrative Corporation v. Construction Technology Specialists, Inc.

CUENNTITREADL S DTIASTTERSIC DTI SOTFR CICATL ICFOOURRNTIA

CIVIL MINUTES - GENERAL

Case No. CV 19-470-GW-MAAx Date September 30, 2019

Title Carpenters Southwest Administrative Corporation, et al. v. Construction Technology

Specialists, Inc., et al.

Present: The Honorable GEORGE H. WU, UNITED STATES DISTRICT JUDGE

Javier Gonzalez Terri A. Hourigan

Deputy Clerk Court Reporter / Recorder Tape No.

Attorneys Present for Plaintiffs: Attorneys Present for Defendants:

Casey M. Jensen None Present

PROCEEDINGS: PLAINTIFFS' MOTION FOR ENTRY OF DEFAULT JUDGMENT [16]

Court confers with Plaintiff’s counsel. The Tentative circulated and attached hereto, is adopted as the

Court’s Final Ruling. Plaintiff’s Motion is GRANTED. A proposed judgment is to be filed by October

3, 2019.

: 03

Carpenters Southwest Administrative Corporation, et al. v. Construction Technology Specialists, Inc., et

al.; Case No. 2:19-cv-00470-GW-(MAAx)

Tentative Ruling on Application for Default Judgment

I. Background

Plaintiffs Carpenters Southwest Administrative Corporation (“CSAC”) and Board of

Trustees for the Carpenters Southwest Trusts (together, “Plaintiffs”), sued Defendant Construction

Technology Specialists, Inc. and Does 1-10 for failure to pay fringe benefit contributions, file

certain reports, and conduct an audit under the Labor-Management Relations Act of 1947

(“LMRA”), 29 U.S.C. § 185a and the Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. §§ 1132, 1145. See generally Complaint, Docket No. 1. Plaintiffs sought

damages for failure to pay the fringe benefit contributions, specific performance for the missing

reports, and injunctive relief and specific performance to conduct an audit. See Complaint ¶ 1.

Plaintiffs served Defendant on May 17, 2019. See Proof of Service, Docket No. 12.

Defendant did not file an answer or challenge service and has not appeared in this case. See

generally Docket; see also Amended Default by Clerk, Docket No. 14. On August 19, 2019,

Plaintiffs dismissed their claim for specific performance of certain missing reports. See Notice of

Dismissal, Docket No. 15. Plaintiffs now move for default judgment against Defendant, seeking

contributions in the amount of $11,064.15, pre-judgment interest in the amount of $6,243.54, audit

fees in the amount of $630.00, and attorney’s fees in the amount of $1,365.65, as well as an order

to submit to an audit and plaintiffs’ costs of suit. See generally Motion for Default Judgment

(“MDJ”), Docket No. 16.

Plaintiffs alleged the following: Plaintiffs are authorized to act as agents on behalf of

several ERISA trust funds (the “Plans”). See Complaint ¶ 2-4. Defendant is a contractor engaged

in the construction industry within the jurisdiction of the Southwest Regional Council of

Carpenters and its affiliated local unions (the “Unions”). See id. ¶ 12-13. On July 31, 2015,

Defendant executed a memorandum agreement with the Union, binding Defendant to the terms

and conditions of the Labor Agreement and subsequent amendments (the “Agreements”) between

the New Mexico Building Branch, Associated General Contractors and the Union. See id. ¶ 14-15.

The Agreement requires Defendant to pay fringe benefit contributions for every hour worked by

employees performing services covered by the Agreements, and on account of all compensation

paid to employees performing services covered by the Agreements. See id. ¶ 15. The Agreements

also required Defendant to make monthly reports to the Plans, and to pay for an audit if it appeared

that Defendant failed to report and pay all contributions. See id. ¶ 16, 20. Plaintiffs allege that

Defendant failed to report and pay all contributions owed for several months in 2015, and that

Defendant did not allow the Plans to conduct an audit. See Complaint Ex. 2; Complaint ¶ 35.

II. Legal Standard

Under Local Rule 55-1, a party requesting default judgment must make a showing as to the

following: (1) when and against what party the default was entered; (2) identification of the

pleading to which default was entered; (3) whether the defaulting party is an infant or incompetent

person; (4) that the parties in default are not in military service − such that the Servicemembers

Civil Relief Act does not apply; and (5) that notice has been served on the defaulting party, if

required by Federal Rule of Civil Procedure 55(b)(2). See C.D. Cal. L.R. 55-1; see also Philip

Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003).

On entry of default, well-pleaded allegations in the complaint regarding liability are

generally deemed true. See Geddes v. United Fin. Corp., 559 F.2d 557, 560 (9th Cir. 1977); see

also Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988) (holding that “facts

which are not established by the pleadings of the prevailing party, or claims which are not well-

pleaded, are not binding and cannot support the [default] judgment”), cert. denied sub nom.

Albright v. Alan Neuman Prods., Inc., 493 U.S. 858 (1989). However, any doubts about the

propriety of a default are usually resolved against the party seeking a default. See Pena v. Seguros

La Commercial, S.A., 770 F.2d 811, 814 (9th Cir. 1995); see also O’Connell & Stevenson, Cal.

Prac. Guide: Fed. Civ. Proc. Before Trial (The Rutter Group 2017) § 6:11.

This Court has discretion to refuse to enter a default judgment in an appropriate case. See

Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d 1089, 1092

(9th Cir. 1980). The Court may consider a variety of factors in the exercise of such discretion,

including:

(1) the possibility of prejudice to the plaintiff, (2) the merits of

plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4)

the sum of money at stake in the action, (5) the possibility of a

dispute concerning material facts, (6) whether the default was due

to excusable neglect, and (7) the strong policy underlying the

Federal Rules of Civil Procedure favoring decisions on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

III. Discussion

A. Local Rule 55-1

Plaintiffs have fulfilled the requirements under Local Rule 55-1. As to the first and second

requirements, default was entered against Defendant on July 9, 2019, with the summons and

Complaint served on May 17, 2019, and the answer due on June 7, 2019. See Amended Default

by Clerk, Docket No. 14; Proof of Service, Docket No. 12. There was no answer or motion to

dismiss filed by that date. See Docket. Defendant is not a minor, incompetent, or in military

service. See Declaration of Casey Jensen (“Jensen Decl.”), Docket No. 16-12, at ¶ 4. Finally,

Defendant did not appear, so no notice is required under Rule 55(b)(2) of the Federal Rules of

Civil Procedure. See generally Docket.

In sum, the Court finds that Plaintiffs have satisfied the requirements of Local Rule 55-1.

B. Eitel Factors

1. Risk of Prejudice to Plaintiffs

The first Eitel factor “considers whether plaintiff will suffer prejudice if default judgment

is not entered.” Design Collection, Inc. v. Going Out, Inc., No. CV 16-04297-FMO-(AGRx), 2016

WL 9185322, at *2 (C.D. Cal. Sept. 14, 2016). Here, if default judgment were not entered,

Plaintiffs “would be denied the right to judicial resolution of the claims presented, and would be

without other recourse for recovery.” Electra Entm’t Grp. Inc. v. Crawford, 226 F.R.D. 388, 392

(C.D. Cal. 2005). Because Plaintiffs sued Defendant for failure to pay fringe benefit contributions,

provide specific missing reports, and conduct an audit, with Defendant failing to appear, Plaintiffs

would be prejudiced if he they unable to recover from Defendant. This factor cuts in favor of

granting the MDJ.

2. Merits of Plaintiff’s Substantive Claims and Sufficiency of the Complaint

“Under an Eitel analysis, the merits of plaintiff’s substantive claims and the sufficiency of

the complaint are often analyzed together.” Dr. JKL Ltd. v. HPC IT Educ. Ctr., 749 F. Supp. 2d

1038, 1048 (N.D. Cal. 2010). These factors essentially require that Plaintiffs’ allegations “state a

claim on which the [plaintiff] may recover.” Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir.

1978). “The general rule of law is that upon default the factual allegations of the complaint, except

those relating to the amount of damages, will be taken as true.” TeleVideo Sys., Inc. v. Heidenthal,

826 F.2d 915, 917 (9th Cir. 1987) (internal quotation marks and citation omitted).

Plaintiffs assert their claim pursuant to Section 301 of the LMRA, 29 U.S.C. § 185a, and

Sections 502 and 515 of ERISA, 29 U.S.C. §§ 1132 and 1145. Section 301 of the LMRA and

Section 502 of ERISA authorize Plaintiffs to enforce Section 515 of ERISA. Section 515 provides:

Every 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, to the extent not inconsistent with law, make such contributions in accordance

with the terms and conditions of such plan or such agreement.

29 U.S.C. § 1145.

Plaintiffs allege that Defendant violated Section 515 of ERISA by not paying fringe benefit

contributions, providing reports, or allowing an audit, as required by the Agreements. See

Complaint ¶¶ 15, 16, 20, 35. Plaintiffs have adequately alleged that the Plans are multiemployer

plans covered by Section 515 of ERISA, see id. ¶¶ 6-10; see also Declaration of Norma Guerrero

(“Guerrero Decl.”), Docket No. 16-2, ¶ 8-9, and that Defendant was required to make contributions

to the Plans, file reports, and submit to audits under the terms of the Agreements, see id. ¶¶14-20;

see also Complaint Ex. 1. The memorandum agreement Defendant signed on July 31, 2015 bound

Defendant to the terms of the Agreements, which obligates signatories to pay contributions to the

Fund for each hour worked by their carpenter employees and provides for liquidated damages and

interest if a signatory employer fails to pay the fringe benefit contributions. See Guerrero Decl. ¶¶

10-14; see also Ex. 1, 4, 5 to Guerrero Decl., Docket No. 16-3-11. Moreover, Plaintiffs have

adequately alleged that Defendant failed to comply with the Agreements. See Declaration of Chris

Hidalgo, Docket No. 16-14; see also Complaint Ex. 2, Docket No. 1-2. As such, the Complaint

states an ERISA violation.

These allegations are sufficient for the Court to hold that the second and third Eitel factors

weigh in favor of default judgment.

3. Sum of Money at Stake in the Action

The fourth Eitel factor requires the Court to weigh the amount of money at stake against

the seriousness of a defendant’s conduct. See PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d

1172, 1176 (C.D. Cal. 2002); see also Eitel, 782 F.2d at 1471-72. “Default Judgment is disfavored

where the sum of money at stake is too large or unreasonable in relation to defendant’s conduct.”

Vogel v. Rite Aid Corp., 992 F. Supp. 2d 998, 1012 (C.D. Cal. 2014). “However, where the amount

is tailored to the specific misconduct of the defendant, default judgment may be appropriate.”

United Fabrics Int’l, Inc. v. U.S. Tops, Inc., No. CV 16-01252-JAK-(KSx), 2016 U.S. Dist. LEXIS

112543, *8 (C.D. Cal. Aug. 22, 2016).

Plaintiffs seek $11,064.15 in contributions, $6,243.54 in pre-judgment interest, $630 in

audit fees, and $1,365.65 in attorney’s fees, for a total of $19,303.34, as well as injunctive relief.

See Memorandum in Support of Motion for Default Judgment, Docket No. 16-1, p. 10. Plaintiffs

seek the amount to which they are entitled under the governing labor agreements. The amount of

money at stake is not so high as to weigh against the entry of default judgment.

4. Possibility of Dispute Concerning Material Facts

The fifth Eitel factor requires the Court to consider whether it is likely a dispute exists as

to any material facts in the case. See Eitel, 782 F.2d at 1471-72. “Where a plaintiff’s complaint

is well-pleaded and the defendant makes no effort to properly respond, the likelihood of disputed

facts is very low.” See United States v. Yermian, No. SACV 15-0820-DOC-(RAOx), 2016 WL

1399519, at *3 (C.D. Cal. Mar. 18, 2016); see also Landstar Ranger, Inc. v. Parth Enter., Inc., 725

F. Supp. 2d 916, 921 (C.D. Cal. 2010). Additionally, upon default, the factual allegations of the

complaint, except those relating to the amount of damages, will be taken as true. TeleVideo Sys.

Inc., 826 F.2d at 917.

Plaintiffs adequately allege violations of ERISA Section 515, as discussed above, and

Defendant’s failure to answer the Complaint indicates that it would be unable to dispute the

material facts in this matter. This factor weighs in favor of default judgment.

5. Possibility of Excusable Neglect

The underlying reason for the sixth Eitel factor is to uphold due process by requiring that

all interested parties be given notice reasonably calculated to apprise them of the pendency of the

action, and be afforded opportunity to present their objections before a judgment is rendered. See

Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 500 (C.D. Cal. 2003).

Defendant was served with the summons and the Complaint, see Docket No. 12, and did not file a

responsive pleading by the deadline, see Docket. This factor therefore weighs in favor of default

judgment.

6. Strong Policy Favoring Decision on the Merits

The seventh Eitel factor emphasizes that “cases should be decided upon their merits

whenever reasonably possible.” Eitel, 782 F.2d at 1472. However, “this preference, standing

alone, is not dispositive.” Id. “Defendant’s failure to answer Plaintiff’s Complaint makes a

judgment on the merits impractical, if not impossible.” Cal. Sec. Cans, 238 F. Supp. 2d at 1177.

Defendant failed to respond to Plaintiff, preventing a decision on the merits. Thus, this factor does

not strongly weigh against default judgment.

Taking into consideration the above, the Eitel factors weigh in favor of granting the

Motion.

C. Relief Sought

Plaintiffs seek the following in damages: (1) $11,064.15 in contributions, (2) $6,243.54 in

pre-judgment interest, and (3) $630 in audit fees, as well as (4) an order to submit to an audit, plus

plaintiff’s costs of suit. See Memorandum in Support of Motion for Entry of Default Judgment,

Docket No. 16-1, p. 10.

Plaintiffs have sufficiently established their entitlement to the $11,064.15 in contributions,

$6,243.54 in pre-judgment interest, and $630 in audit fees. The amount of unpaid contributions is

shown in the audit invoices from January 24, 2017 and February 7, 2017. See Declaration of Chris

Hidalgo Ex. 7-8, Docket Nos. 16-15-16. The amount of pre-judgment interest is $6,243.54, at

$1,066.73 in interest on the unpaid contributions at 7 percent per annum, $2,055.04 in interest

from the due date to September 30, 2019 accruing at $2.12 per day, and $3,121.77 in double

interest on contributions pursuant to 29 U.S.C. § 1132(g)(2)(C). Plaintiffs have also sufficiently

established their entitlement to $630 in audit fees through the audit invoices it attaches to this

Motion. The audit invoices list audit fees of $195.90 and $434.10, calculated at a rate of $75.00

per hour, for a total of $630 in audit fees. See Declaration of Chris Hidalgo Ex. 7, Docket No. 16-

15.

Finally, Plaintiffs have not pointed the Court a document or affidavit establishing their

entitlement to an audit. The Court asks Plaintiffs to make clear where in their supporting

documents their entitlement to an audit is established.

D. Attorney’s Fees and Costs

Lastly, Plaintiffs seek attorney’s fees of $1,365.65 and plaintiffs’ costs. See Memorandum

in Support of Motion for Default Judgment, Docket No. 16-1, p. 10.

Plaintiffs argue that they are entitled to attorneys’ fees based on Section 502(g) of ERISA,

which provides that if a judgment in favor of a plan is awarded, “the court shall award the plan . . .

reasonable attorney’s fees and costs of the action, to be paid by the defendant.” 29 U.S.C. §

1132(g). The Court would agree. Thus, Plaintiffs are entitled to reasonable fees.

Plaintiffs request $1,365.65 based on Local Rule 55-3. See Memorandum in Support of

Motion for Entry of Default Judgment, Docket No. 16-1, p. 3. Plaintiffs claim that the total

delinquent amount is $12,760.88 ($11,064.15 in unpaid contributions + $1,066.73 in interest on

the unpaid contributions + $650 in audit fees). Because the principal amount is over $10,000,

Plaintiffs fall within the bracket of Local Rule 55-3 entitling them to $1,200 plus 6% of the amount

over $10,000. See C.D. Cal. L.R. 55-3. Six percent of $2,760.88 is $165.65, so the Court would

grant Plaintiffs’ request for attorney’s fees of $1,365.65.

Finally, Plaintiffs seek plaintiff’s costs of suit but do not submit an amount. Without an

amount specified, the Court would deny Plaintiffs’ request subject to further submission on this

issue.

IV. Conclusion

Based on the foregoing discussion, the Court is inclined to GRANT the Motion for Default

Judgment, but would ask Plaintiffs: (1) to point to a provision in the Agreements entitling them to

an order requiring Defendant to submit to an audit, and (2) for further submission regarding the

amount of costs plus verification.