The opinion
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
DISTRICT COUNCIL 16 NORTHERN Case No. 22-cv-04207-VC
CALIFORNIA HEALTH AND WELFARE
TRUST FUND, et al.,
ORDER GRANTING MOTION FOR
Plaintiffs, DEFAULT JUDGMENT
v. Re: Dkt. No. 29
BRYAN J. VALVERDE,
Defendant.
The motion for default judgment is granted.
The plaintiffs, several employee benefit plans and their fiduciaries and trustees, allege
that Bryan Valverde failed to make contributions to their plans and to submit to an audit, as
required by their collective bargaining and trust agreements. Valverde was properly served on
December 19, 2022, Dkt. No. 16, but he has failed to appear. The clerk entered default, and the
plaintiffs have now moved for default judgment.
The motion raises three issues. First, should default judgment should be entered under the
Eitel standard? Second, can the plaintiffs recover damages incurred after the complaint was
filed? And third, is it appropriate to issue an injunction requiring Valverde to comply with an
audit while also awarding estimated contributions?
I
The first question is straightforward. In deciding whether to enter default judgment,
courts look to the Eitel factors: “(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). These factors weigh in favor of entering default judgment. Valverde’s failure to respond
thwarts the plaintiffs’ ability to obtain a decision on the merits. He failed to file an answer, and
so the allegations in the complaint (except those related to damages) are accepted as true. Board
of Trustees of Bay Area Roofers Health & Welfare Trust Fund v. Fajardo, No. 19-CV-06586,
2020 WL 3396778, at *1 (N.D. Cal. June 19, 2020). Those well-pled allegations establish
Valverde’s liability, and the remaining supporting documents further support the plaintiffs’
claims. The amount of money sought is relatively small. Given Valverde’s failure to respond,
there is likely no dispute over material facts. Finally, there is no colorable argument for
excusable neglect. These factors outweigh the “strong policy” favoring a decision on the merits,
and so default judgment is appropriate.
II
The second issue—whether the plaintiffs can recover damages incurred after the
complaint was filed—has generated some debate in the case law.1 The complaint was filed on
July 20, 2022, and it alleges that Valverde failed to make contributions from March to June
2022. Compl. ¶¶ 14, 15. The complaint also says that the plaintiffs are entitled “any and all
contributions, and all liquidated damages and interest on delinquent contributions, found due on
timecards, audit, or otherwise including estimated contributions for months Defendant failed to
report to Plaintiffs, through the time of Judgment.” ¶ 16. The plaintiffs now say that Valverde
failed to make additional contributions due after the complaint was filed, and so they seek
contributions from April 2022 to September 2022 (plus liquidated damages and interest). They
also say that Valverde failed to file a contribution report for September 2022, and so they seek
estimated contributions for that month.
1 The plaintiffs’ other requests for damages and attorneys’ fees are supported by the record.
Under Federal Rule of Civil Procedure 54(c), “[a] default judgment must not differ in
kind from, or exceed in amount, what is demanded in the pleadings.” That rule is partly
motivated by due process concerns. A complaint is supposed to give a defendant adequate notice
of the claims against them, so that the defendant can decide whether it’s worth it to defend
against those claims. Trustees of the St. Paul Electrical Construction Industry Fringe Benefit
Funds v. Martens Electric Co., 485 F. Supp. 2d 1063, 1064–65 (D. Minn. 2007). Based on the
complaint, a defendant may decide that given “the (high) likelihood that he will be found liable,
or the (low) amount of damages the plaintiff is seeking, he will not make an appearance, but will
instead permit a default judgment to be entered against him.” Id. at 1065. If the defendant
chooses not to make an appearance, the plaintiff does not need to give the defendant notice that
they are seeking default judgment, see Fed. R. Civ. P. 5(a)(2)—but relief is limited to what’s in
the complaint to ensure that the defendant has notice of what they’ve given up. See Martens
Electric, 485 F. Supp. 2d at 1065.
Relying on these principles, at least two district courts have suggested that it might be
inappropriate, in the context of a default judgment, to award damages against an employer for
contributions the employer failed to make after the complaint was filed—even if the complaint
referenced the possibility of those future damages. See id. at 1064–69; Board of Trustees of Sheet
Metal Workers Local 104 Health Care Plan v. Total Air Balance Co., No. 08-2038, 2009 WL
1704677, at *4–5 (N.D. Cal. June 17, 2009). For example, in Total Air Balance, Judge Conti
reasoned, “[a] vague statement in the complaint that suggest[s] the possibility of future liability,
coupled with a statement of intent to recover on that liability, cannot generally amount to ‘a short
and plain statement of the claim showing that the pleader is entitled to relief.’” 2009 WL
1704677, at *4 (quoting Fed. R. Civ. P. 8(a)(2)); see also Martens Electric, 485 F. Supp. 2d at
1068. Judge Conti expressed concern that “giving judicial effect to a vague statement that only
portends future liability could potentially result in a failure of due process” because the
defendant could “face liability far beyond that specifically described by the complaint.” Total Air
Balance, 2009 WL 1704677, at *4. The solution to this concern, apparently, is to require a
plaintiff seeking default judgment to file an amended complaint at or near the time of judgment
specifying the precise amount of damages they seek. Id. at *5.2
The concerns expressed in these two district court rulings appear to be misplaced, and
their proposed solution seems both impractical and unfair to plaintiffs whose opponents have
failed to appear in court. It’s not uncommon for a complaint to allege that a defendant is engaged
in an ongoing course of conduct that will cause future damages. Such a complaint adequately
puts the defendant on notice of their potential liability. In a patent infringement case, for
instance, a plaintiff might allege that a defendant’s product infringes their patent, and they might
seek all damages incurred before judgment. Or in a wage-and-hour case, an employee might
allege that their employer’s violations are ongoing and seek unpaid wages up to the time of
judgment. When a case like that is litigated on the merits and the plaintiff is awarded their
requested damages, there’s never any argument that the complaint didn’t give the defendant
adequate notice of their potential liability. And there’s certainly never any suggestion that the
plaintiff should have filed an amended complaint on the eve of judgment. Why should it be
different in the context of a default judgment? If a complaint puts the defendant on notice that
the plaintiff seeks damages for ongoing harm, and if the plaintiff then proves up their claim for
damages in a motion for default judgment, why shouldn’t the plaintiff be able to recover? It is
the defendant, after all, who made the choice not to appear in court to defend against the
plaintiff’s claims.
Nor does it seem fair to require the plaintiff to file an amended complaint at or near the
time of the motion for default judgment. After all, that amended complaint must again be served,
the defendant must again be given a chance to respond, the plaintiff must again seek entry of
default from the clerk’s office, and only then can the plaintiff file a motion for default judgment.
2 Notwithstanding these concerns, both courts ultimately awarded damages for the post-
complaint contributions because the defendants had not merely been served with the complaint;
they had received notice of the motion for default judgment as well. Total Air Balance, 2009 WL
1704677, at *4–5; Martens Electric, 485 F. Supp. 2d at 1069. Like the defendants in those cases,
Valverde has been served with the motion for default judgment. Dkt. No. 34.
By the time that process is done, there might be new delinquent contributions, leading to an
indefinite loop of further amendments, entries of default, and motions for default judgment. See
Total Air Balance, 2009 WL 1704677, at *5. There is no reason to put the plaintiff through those
paces in a case where the defendant has chosen not to appear—particularly given that defendants
in the default judgment context often make it difficult to complete service. See, e.g., Dkt. No. 15
(granting a request for an extension of time to serve Valverde given repeated difficulties in
serving him). And as Total Air Balance shows, defendants can manipulate this process by paying
past damages whenever a new complaint is filed and then immediately returning to their old
ways moving forward. Total Air Balance, 2009 WL 1704677, at *4–5.
In Martens Electric, Judge Schiltz expressed concern that a plaintiff seeking ongoing
damages could delay filing a motion for default judgment and allow damages to rack up in the
meantime: A “pension fund [could] seek a default judgment in a month—or in ten months—or in
a year—or in ten years,” and the defendant would have no notice of that motion. Martens
Electric, 485 F. Supp. 2d at 1067. But that concern seems more theoretical than real because in
practice, there’s no incentive to wait. Pension plans want their contributions so they can invest
them and pay out benefits. And it’s likely that the longer a plan waits before seeking default
judgment, the more difficult it will be to collect that judgment. Anyway, to the extent this is a
concern at all, district courts can easily address it by setting deadlines following a defendant’s
failure to appear for the filing of a motion for default judgment. And in the unlikely event that a
plaintiff waits an excessive amount of time before seeking default judgment, a court can consider
that when deciding the motion. After all, default judgment is not automatic; the court must
consider the Eitel factors, including the sum of money at stake.
Here, the complaint alleges that Valverde has engaged in an ongoing course of conduct—
his failure to report and pay his required contributions. And the complaint asserts an entitlement
to future delinquent contributions. Those allegations were enough to put Valverde on notice and
to allow him to make an informed decision about whether to defend the case on the merits.
Valverde chose not to defend, and so it is appropriate to award damages for the harm incurred
after the complaint was filed.
III
The final issue in this case is whether the plaintiffs are entitled to both estimated
contributions for September 2022 and an injunction requiring Valverde to comply with an audit
of his records. Some courts have held that it is inappropriate to award both estimated damages
and an audit for the same period. See, e.g., Gesualdi v. Reid, 198 F. Supp. 3d 211, 223 (E.D.N.Y.
2016). For an injunction to issue, the plaintiffs must have no adequate remedy at law. Id. at 222–
23. These courts reason that, if a contract allows for estimated contributions, the plaintiffs do
have an adequate remedy at law for any missed payments, and so an audit is unnecessary. See id.
at 223. Moreover, allowing for both estimated damages and an audit creates pragmatic problems:
“Should the Court grant the application in its entirety, and the defendants thereafter comply with
the Court’s injunction, what then? If the audit reveals vast sums of unclaimed delinquent
contributions, do the plaintiffs return to court, seeking to upset a judgment? If the audit instead
reveals significantly fewer delinquent contributions than estimated, would that render a judgment
based on the estimated sums suspect?” Id. (quoting Ferrara v. A Star Business Services of New
York Corp., No. CV 11-5841, 2013 WL 1233114, at *8 n.3 (E.D.N.Y. Feb. 26, 2013)). Based on
those concerns, a number of courts have rejected requests for an audit when the plaintiffs also
seek estimated contributions.
At least in this case, the audit and the estimated damages serve distinct purposes. The
estimated damages will compensate the plaintiffs only for September 2022, the month when
Valverde did not submit a contribution report. The audit, in contrast, might reveal that Valverde
underpaid in other months. The estimated damages cannot fully compensate the plaintiffs for the
harm in this case—Valverde’s refusal to comply with the contractually-mandated audit. As for
the pragmatic concerns, the plaintiffs have said that if the audit reveals that the estimated
contributions were over-compensatory, they will credit that amount against Valverde’s account.
Dkt. No. 40. Given that explanation, it’s appropriate to award both forms of relief.
A separate judgment will follow.
IT IS SO ORDERED.
Dated: June 22, 2023 =
VINCE CHHABRIA
United States District Judge