Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-01834/USCOURTS-casd-3_08-cv-01834-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

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- 1 - 08cv1834 WQH (POR)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PAUL W. DONNDELINGER, an individual

and JAMES T. HOOVER, an individual,

Plaintiffs,

CASE NO. 08cv1834 WQH (POR)

ORDER

vs.

FRED WEBER SCHMIDT, an individual;

and FRED WEBER SCHMIDT, as Trustee of

the DOERRING & ASSOCIATES, INC.

PROFIT SHARING PLAN.,

Defendants.

HAYES, Judge:

The matters before the Court are the Application for Default Judgment (#15) and the

Motion for Preliminary Injunction (#9) filed by Plaintiffs.

On October 8, 2008, Plaintiffs, participants in the Doerring & Associates, Inc. Profit

Sharing Plan, filed a Complaint against Defendant Fred Weber Schmidt for breach of fiduciary

duty and to remove trustee under the Employee Retirement Income Security Act (“ERISA”),

29 U.S.C. Section 1001 et seq. The Complaint alleged that Schmidt, the Trustee of the

Doerring & Associates, Inc. Profit Sharing Plan (“the Plan”), engaged in improper conduct in

violation of ERISA. The Complaint sought to replace Schmidt as Trustee, an accounting, a

determination of damages, and other relief.

On October 10, 2008, this Court denied Plaintiffs motion for a temporary restraining

order under Rule 65(b) of the Federal Rules of Civil Procedure without notice to Defendant.

Case 3:08-cv-01834-WQH-POR Document 16 Filed 02/27/09 Page 1 of 5
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- 2 - 08cv1834 WQH (POR)

On October 27, 2008, Defendant Schmidt, in his individual capacity and in his capacity

as Trustee of the Plan, was personally served with the Summons and Complaint. 

Defendant Schmidt did not file an answer to the Complaint, in his individual capacity

or in his capacity as Trustee of the Plan, and has not filed any pleadings in the record of this

case.

On October 30, 2008, Plaintiffs filed a Motion for Preliminary Injunction requesting

that the Court immediately issue a Preliminary Injunction to remove Defendant Schmidt as

Trustee and to prevent him from using or removing any Plan assets and from subjecting the

Plan to further penalties, interest, sanctions or potential disqualification, and to appoint

Plaintiffs as successor co-trustees of the Plan. (Doc. #9-2).

On November 20, 2008, prior to the hearing on the Preliminary Injunction motion,

Plaintiffs filed a Request to Enter Default. (Doc. # 13).

On November 21, 2008, Counsel for Plaintiffs received a telephone message from

Schmidt in which Schmidt stated that he had been served with the pleadings and that he would

be willing to resign as Trustee of the Plan in order to save attorney fees. Counsel for Plaintiffs

called Schmidt that same day. Counsel for Plaintiffs informed Schmidt that an answer had

been due by November 17, 2008 and that Plaintiffs had requested an entry of default. Schmidt

informed counsel for Plaintiffs that he would be willing to resign as the Trustee. Counsel for

Plaintiffs informed Schmidt that Plaintiffs would go forward with the default in order to obtain

a court order removing him and appointing Plaintiffs as Successor Co-Trustees. Schmidt

indicated to counsel for Plaintiffs that he did not want to incur further attorney fees. (Doc. #

15-2, Declaration of Thomas Monson, page 2). 

On November 24, 2008, the Clerk of the Court entered Default. (Doc. # 14). 

On December 19, 2008, Plaintiffs filed the request that the Court enter a Default

Judgment restraining Fred Weber Schmidt from transferring or using any Plan assets, removing

Schmidt as trustee and appointing Plaintiffs as successor co-trustees of the Plan, requiring that

Schmidt turn over all documents pertaining to the Plan, requiring that Schmidt provide a full

accounting, and providing that the Court retain jurisdiction to enforce the judgment and to

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- 3 - 08cv1834 WQH (POR)

determine any further liability. (Doc. #15 at page 2 line 16 to page 4 line 5).

STANDARD OF REVIEW

Federal Rule of Civil Procedure 55(b) provides that judgment by default may be entered

by the Court. A district court may consider the following factors in exercising its discretion

to enter a default judgment:

(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 decision on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). “In applying this discretionary

standard, default judgments are more often granted than denied.” Philip Morris USA, Inc. v.

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

“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, 917-18 (9th Cir. 1987) (quotation omitted). “Plaintiff is required

to prove all damages sought in the complaint,” and “‘[a] judgment by default shall not be

different in kind [or] exceed in amount that prayed for in the [complaint].’” Phillip Morris

USA, 219 F.R.D. at 498.

In determining damages, a court can rely on the declarations submitted by the

plaintiff or order a full evidentiary hearing. Plaintiff’s burden in ‘proving up’

damages is relatively lenient. If proximate cause is properly alleged in the

complaint, it is admitted upon default. Injury is established and plaintiff need

prove only that the compensation sought relates to the damages that naturally

flow from the injuries pled.

Phillip Morris USA, 219 F.R.D. at 498 (quoting FED. R. CIV. P. 54(c)) (citing Cripps v. Life

Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992)).

RULING OF THE COURT

The record in this case established that Plaintiffs properly filed and served the

Complaint in this matter on Defendants. Prior to the application for default judgment, counsel

for Plaintiff spoke on the telephone with Defendant Schmidt confirming service and informing

Defendant that an answer was overdue. (Doc. # 15-2, Declaration of Thomas Monson, page

2). To date, Defendant Schmidt has not filed an answer or otherwise responded to the

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Complaint in this action on behalf of himself individually or as trustee of the Plan. There are

no facts to support any inference that failure to respond to the Complaint was due to excusable

neglect. The Complaint alleges facts which strongly support Plaintiffs’ claims that they are

entitled to the relief they seek under ERISA. Taking the allegations of the Complaint as true,

the Court concludes that the factors detailed in Eitel v. McCool strongly favor entry of default

judgment in this case. 782 F.2d at 1471-72. 

In support of the Application for Default Judgment, Plaintiffs have submitted

declarations and exhibits which establish that Plaintiffs would be able to prove by a

preponderance of the evidence that Defendant Schmidt breached his fiduciary duty to the Plan

and its participants. The Declaration of Donndelinger attached to the Application for a Default

Judgment states that he has personal knowledge of all facts set forth in the Declaration and

could testify competently to all the facts set forth in the declaration. The Declaration of

Donndelinger presents facts and exhibits detailing consistent and repeated ERISA violations

by Defendant Schmidt acting in his capacity as Trustee of the Plan. 29 U.S.C. §1104(a)

(fiduciary shall discharge duties solely in the interest of participants and beneficiaries); 29

U.S.C. § 1106(b) (prohibits self-dealing by a fiduciary); 29 U.S.C. § 1132(a)(a) (participant

may bring a civil action to enforce rights under the Plan).

Defendant has not answered, there are no disputes as to material facts, and the evidence

submitted establishes that Plaintiffs would entitled to prevail on the merits. The Court

concludes that Plaintiffs are entitled to judgment by default at this time. Based upon the facts

and exhibits presented in the Declaration of Donndelinger, Plaintiffs are entitled to the relief

sought in the Application for Default Judgment at page 2 line 16 to page 4 line 5 under ERISA.

29 U.S.C. § 1109(a) (fiduciary who breached fiduciary duty subject to equitable or remedial

relief as the court may deem appropriate including removal).

///

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IT IS HEREBY ORDERED that Plaintiffs’ Motion for Preliminary Injunction 

(Doc. # 9) is denied as moot and Plaintiffs’ Application for Default Judgment (#15) is granted.

Plaintiffs shall provide a Judgment (see Application for Default Judgment at page 2 line 16 to

page 4 line 5) for the Court’s signature forthwith.

DATED: February 27, 2009

WILLIAM Q. HAYES

United States District Judge

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