Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-03059/USCOURTS-cand-4_06-cv-03059-1/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:185 Labor/Mgt. Relations (Contracts)

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

BOARD OF TRUSTEES OF THE

LABORERS HEALTH AND

WELFARE TRUST FUND FOR

NORTHERN CALIFORNIA, et al.,

 Plaintiffs,

 v.

ATOLL TOPUI ISLAND, INC., a

California corporation, and

LOPETI KITEAU TOPUI, an

individual,

 Defendants.

____________________________/

No. C 06-3059 SBA

REPORT AND RECOMMENDATION RE

MOTION FOR DEFAULT JUDGMENT 

Plaintiffs are various fringe benefit trust funds established for the benefit of

members of the Northern California District Council of Laborers and the trustees of

those fringe benefit trust funds. See, Complaint, filed May 5, 2006. Defendant Atoll

Topui Island, Inc., ("ATI") is a corporation and is bound by a collective bargaining

agreement and various trust agreements to make timely contributions to plaintiff trust

funds for covered work performed by ATI's employees. Declaration of John J. Hagan

in Support of Plaintiffs’ Motion for Default Judgment, filed on October 26, 2006

("Hagan Decl.") at 4-8. Defendant Lopeti Kiteau Topui is an individual and the CEO,

President, and owner of ATI. Hagan Decl., at Ex. A; Declaration of Anne Bevington

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in Support of Motion for Default Judgment, filed October 26, 2006, ("Bevington

Decl.") at Ex. B.. 

On May 5, 2006, plaintiffs filed a complaint against ATI and Lopeti Kiteau

Topui seeking to collect unpaid contributions and other damages due to multiemployer benefit plans pursuant to the governing collective bargaining agreement. 

See, Complaint for Damages for Breach of Collective Bargaining Agreements, to

Recover Trust Fund Contributions and for a Mandatory Injunction. Plaintiffs also ask

the Court to compel defendants to comply with an audit as required by the collective

bargaining agreement. Id.

Plaintiffs served defendants with a copy of the Complaint. See, section I, infra. 

See also, Original Summons and Proofs of Service, filed on June 19, 2006; Amended

Proofs of Service, filed August 7, 2006. Defendants have not filed a response to the

Complaint.

In response to plaintiffs’ application for entry of default, the Clerk of the Court

entered default as to Atoll Topui Island, Inc. and Lopeti Kiteau Topui on August 9,

2006. 

On October 26, 2006, plaintiffs filed and served their motion for default

judgment. See, Motion for Default Judgment and Proof of Service (“Motion”). On

October 27, 2006, plaintiffs' Motion was referred to this court for Report and

Recommendation. 

On November 15, 2006, this court invited plaintiffs to submit supplemental

briefing in connection with several issues presented by their Motion. See, Order

Authorizing Supplemental Submissions re Motion for Default Judgment. 

On November 30, 2006, plaintiffs filed their supplemental submissions. 

Although plaintiffs served defendants with the court’s November 15th Order and with

plaintiffs’ November 30th submission, defendants filed no response. Certificate of

Service of November 15th Order, filed November 15, 2006; Proofs of Service

attached to Supplemental papers, filed November 30, 3006.

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On December 20, 2006, this court conducted a hearing in connection with

plaintiffs’ Motion. No appearance was made on defendants’ behalf.

In their Motion, plaintiffs seek a judgment against ATI (as an entity) and

Lopeti Kiteau Topui, individually, in the amount $43,904.25, to recover unpaid

contributions, liquidated damages, interest, attorneys’ fees and costs. Motion at 3;

Hagan Decl., at ¶21; Supplemental Memorandum in Support of Motion for Default

Judgment, filed November 30, 2006 ("Supp. Brief"). Plaintiffs also seek an order

compelling defendants to submit to an audit of defendants’ payroll records, and to

pay all additional amounts deemed owing by the auditor. Complaint at 6; Motion at

9-10 and 12.

I. Entitlement to Entry of Default Judgment

Plaintiffs seek entry of judgment by default against the entity Atoll Topui

Island, Inc., as well as against Lopeti Kiteau Topui, individually.

Plaintiffs were unable to effect personal service of the Summons and

Complaint on ATI and Mr. Topui. See, Original Summons and Proof of Service, filed

June 19, 2006; Amended Proof of Service re Lopeti K. Topui, filed August 8, 2006. 

Plaintiffs effected alternate service by leaving the documents with a resident over

eighteen years of age at the address believed to be Mr. Topui's residence and by

mailing copies of the documents to that address. Id.; Declaration of Anne Bevington,

filed November 30, 2006, ("Supp. Bevington Decl.") at ¶3. See also, F.R.C.P.

4(e)(2). Mr. Topui is the agent for service of process for ATI. Accordingly, service

on Mr. Topui satisfies the requirements for serving ATI. F.R.C.P. 4(h)(1).

We asked plaintiffs to submit information explaining the bases for their belief

that the summons and complaint had been delivered to Mr. Topui's residence. Order,

filed November 15, 2006. Plaintiffs have presented evidence that would support an

inference that the documents filed in this action have been served on Mr. Topui. 

First, plaintiffs obtained the address believed to be his residence (340 Chesapeake

Avenue) from Transunion, a credit reporting agency. Credit reporting agencies are a

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type of entity that is likely to have a consumer's most recent address. Second,

Transunion indicates that it has had that address for approximately two years, and

according to the process server, the current resident at one of Mr. Topui's former

addresses stated that Mr. Topui moved two years prior. Supp. Bevington Decl., at Ex.

A. The information from the current resident, therefore, supports an inference that

Transunion's records are up to date. Third, the process server left the summons and

complaint with a resident at the Chesapeake Avenue address, and there is no

indication from the process server that this resident denied that Mr. Topui lives there. 

Finally, plaintiffs have mailed multiple documents to the Chesapeake address and

none has been returned undeliverable. Supp. Bevington Decl., at ¶3. We

RECOMMEND that the District Court find that the alternate means of service

executed by plaintiffs satisfied plaintiffs' service requirement. 

Plaintiffs also served defendants with their motion for default judgment. See,

Proof of Service, attached to Motion, filed on October 26, 2006. 

ATI has failed to respond to the Complaint or otherwise to appear in the

proceedings, and the Clerk of the Court entered default as to this defendant. ATI

clearly constitutes an "employer"subject to liability under 29 U.S.C. §1145. See, 29

U.S.C. §1002(5).

Mr. Topui has failed to respond to the Complaint or otherwise to appear in the

proceedings, and the Clerk of the Court entered default as to Mr. Topui. Plaintiffs

seek to hold Mr. Topui personally liable for the alleged damages. Plaintiffs contend

that Mr. Topui is exposed to personal liability on the following grounds (1) that he

constitutes a "fiduciary" and is liable for breach of fiduciary duty as a result of his

failure to pay contributions owed to the trusts and (2) that he is an "employer" as

defined by ERISA and, therefore, is subject to suit under 29 U.S.C. §1145. 

Complaint; Motion at 8-9; Supp. Brief at 2-3.

Plaintiffs contend that Mr. Topui is a "fiduciary" as that term is defined by

ERISA, 29 U.S.C. §1002(21)(A). Motion at 8-9. In our November 15th Order we

informed plaintiffs that the Complaint did not set forth an express, discrete claim for

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breach of fiduciary duty. Plaintiffs argue that the Complaint clearly notifies Mr.

Topui that, in plaintiffs' view, he constitutes a fiduciary, that he failed to pay over

trust assets, and, most importantly, that plaintiffs seek damages from him personally

as a result of his failure to pay contributions. Supp. Brief at 2. It is plaintiffs'

position that the essential elements for a claim for breach of fiduciary duty appear in

the Complaint and that, by virtue of Mr. Topui's default, these allegations are deemed

admitted.

Considering the appropriate construction of the pleading rules viewed in light

of their purpose, we RECOMMEND that the District Court find that plaintiffs'

pleading is sufficient -- although by a narrow margin. Plaintiffs clearly allege that

Mr. Topui constitutes a "fiduciary," that unpaid contributions are trust assets, that Mr.

Topui exercised control over those assets when he failed to pay them to the trusts as

required, and that the failure to pay them was wrongful. Even if Mr. Topui would not

completely understand the legal theory on which plaintiffs' claims are premised, we

conclude that a rational person, even without substantial legal training, would have

understood that he was being sued individually and that plaintiffs were seeking to

hold him personally accountable independent of his corporation. In our view,

plaintiffs' allegations are sufficient to put Mr. Topui on notice of the claims against

him.

Although we recommend that the District Court find the pleading sufficient, we

ADMONISH plaintiffs that, in the future, claims such as this should be fully pled. 

There is no justification for plaintiffs' failure to plead an express claim styled "breach

of fiduciary duty" and avoid creating close calls such as this.

Having found that the pleading was sufficient to put Mr. Topui on notice of

plaintiffs' claim that defendant breached a fiduciary duty, we next consider whether

the allegations deemed admitted by default, together with the proffered evidence,

support plaintiffs' request for damages as against Mr. Topui.

//

//

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ERISA provides,

Except as otherwise provided in subparagraph (B), a person is a

fiduciary with respect to a plan to the extent (i) he . . . exercises any

authority or control respecting management or disposition of its assets.

29 U.S.C. §1002(21)(A)(i). 

Plaintiffs' claim for breach of fiduciary duty is premised on the assertion that

the governing trust agreements make employer contributions "plan assets" from the

moment they become due. If the evidence supports this assertion, then Mr. Topui's

failure to pay those contributions to the trusts when they came due amounts to an

exercise of authority or control over assets of the plan and renders Mr. Topui a

"fiduciary." However, if plaintiffs' premise is unsupported, then plaintiffs cannot

demonstrate that Mr. Topui acted as a fiduciary when he declined to pay

contributions that had come due.

Cline v. Industrial Maintenance Engineering and Contracting Co., 200 F.3d

1223 (9th Cir. 2000), does not purport to address the specific issue before us. 

However, language in Cline, if taken literally, would preclude a finding that employer

contributions are plan assets before they are actually paid over to the trust. 200 F.3d

at 1234 (employer contributions do not become plan assets over which fiduciaries

have a fiduciary obligation until paid over to the plan).

Plaintiffs urge us to follow the Central District of California and conclude that

the Ninth Circuit's general assertion in Cline does not preclude the contracting parties

from providing as a matter of contract that contributions become trust assets from the

moment due. Trustees of the Southern Cal. Pipe Trades Health & Welfare Trust

Fund v. Temecula Mechanical, Inc., 2006 WL 1991749. I find Judge Larson's 

reasoning in Temecula Mechanical persuasive. 

In the court's view, given the remedial purpose of ERISA, the Ninth Circuit

would endorse the Central District's decision that Cline does not preclude the parties

from making employer contributions "plan assets" as a matter of contract. 

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Our research confirms that this area of the law is complicated and that

reasonable minds may disagree about the extent to which the parties have or have not

agreed to make contributions "plan assets" from the moment they become due. 

The trust agreements to which ATI and Mr. Topui are bound state,

Trust Fund . . . which shall consist of all Contributions required by the

Collective Bargaining Agreements to be made for the establishment and

maintenance of the plan, and all interest, income and other returns

thereon of any kind whatsoever, and any other property received or held

by reason of or pursuant to this trust.

Hagan Decl., at ¶11 and Ex. D at 6. 

Pursuant to these agreements, trust assets include "contributions required . . . to

be made." This language encompasses contributions that are due (required to be

made) but that have not yet been paid. If the drafters intended to "vest" in the trust

only those contributions that the employer has actually paid, they easily could have

said so in clear, unambiguous terms. They did not. 

The Central District found that the phrases "money that will be paid," "which

are due and owing," and "money as shall be paid" each demonstrated an intent to

make unpaid employer contributions plan assets. Temecula, 2006 WL 1991749. The

contract language that Judge Larson of the Central District considered sufficient to

render contributions "plan assets" from the moment due is, in principal,

indistinguishable from the language "required to be made" in the trust agreements

before us. This court adopts the reasoning set forth by Judge Larson and

RECOMMENDS that the District Court find that plaintiffs have demonstrated that

the governing trust agreements make unpaid employer contributions "plan assets"

from the moment they become due.

We RECOMMEND that the District Court also find that, by failing to pay

contributions when due, Mr. Topui exercised authority and/or control over plan assets

and thus is deemed a "fiduciary." By unlawfully failing to pay contributions when

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1Because we recommend that the District Court find that Mr. Topui is liable for breach

of fiduciary duty, we need not address plaintiffs' alternate and separate argument that Mr. Topui

is liable as an "employer" under ERISA. Supp. Brief at 3. However, in the event that the

District Court does not accept our recommendation with respect to fiduciary liability, we briefly

address the contention that Mr. Topui is exposed to personal liability as an "employer." 

In our view, the Ninth Circuit has concluded that (absent a finding of fiduciary liability)

an owner of a corporation can be held personally liable for the unpaid contributions of the

corporation only where (1) plaintiffs have established the predicate for piercing the corporate

veil or (2) plaintiffs have presented evidence that the individual owner of the corporation himself

directly employed employees performing work covered by the relevant collective bargaining

agreement. Operating Engineers Pension Trust v. Reed, 726 F.2d 513, 515 (9th Cir. 1984). 

Plaintiffs' attempt to distinguish Reed is unavailing. The Ninth Circuit clearly states that

an owner ceases to be an "employer" once he incorporates.

Upon incorporation Reed ceased to be the employer, and Hal's Crane Co. became

the employer in question. Hal's Crane Co. alone should, absent special

circumstances, be responsible for the unpaid contributions after it became the

employer. . . . In this case Reed ceased direct employment of anyone upon the

creation of Hal's Crane Co.

726 F.2d at 515 (emphasis added). Reed goes on to state that the "proper standard for

determining when an individual will be held personally liable for the trust fund obligations of

a corporation controlled by that individual is [the standard for piercing the corporate veil]." Id.

Plaintiffs have not plead a predicate for piercing the corporate veil; nor have they plead

that Mr. Topui directly employed any covered employees. To the contrary, the Complaint

alleges that Mr. Topui acted at all times in the interests of ATI. E.g., Complaint at ¶3. We,

therefore, RECOMMEND that, if the District Court finds that plaintiffs have not established that

Mr. Topui breached a fiduciary duty, the District Court also find that plaintiffs have not

established that Mr. Topui constitutes an "employer" under ERISA. Under those circumstances

the Court would not enter any judgment against Mr. Topui.

8

due Mr. Topui breached his fiduciary duty to the plan beneficiaries and is subject to

personal liability for any losses he caused to the plan. 29 U.S.C. §1109(a).1

Given defendants’ complete failure to appear and the significant risk of

prejudice to the employee beneficiaries of the fringe benefit trusts when an employer

fails to make the required contributions, the sufficiency of plaintiffs’ complaint, and

the apparent merit of plaintiffs’ substantive claims, we RECOMMEND that the

District Judge find that plaintiffs are entitled to judgment by default against Atoll

Topui Island, Inc., and Lopeti K. Topui, individually. See, F.R.C.P. 55(b); Eitel v.

McCool, 782 F.2d 1470 (9th Cir. 1986).

//

//

//

//

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II. Specific Items of Relief Sought by Plaintiffs

Section 1132(g)(2) of ERISA provides that in an action for delinquent

contributions 

in which a judgment in favor of the plan is awarded the court shall award

the plan --

(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 . . . of the amount determined by the court under

subparagraph (A),

(D) reasonable attorneys’ fees and costs of the action . . ., and

(E) such other legal or equitable relief as the court deems appropriate.

For purposes of this paragraph, interest on unpaid contributions shall be

determined by using the rate provided under the plan . . ..

29 U.S.C. §1132(g)(2) emphasis added. 

A. Unpaid contributions

Plaintiffs seek unpaid contributions owing pursuant to the governing collective

bargaining agreement and trust agreements for work performed during two periods: 

(1) plaintiffs seek payment for unreported hours for work performed by Sailoame

Mapa from March 2, 2003, through November 14, 2004 and (2) plaintiffs seek

payment for unreported hours for work performed by Jeremy Smith from January

2004 through June 2004. Hagan Decl., at ¶¶17 and 19.

Unpaid contributions pertaining to these periods relate to work performed

under the Laborers Master Agreement between Associated General Contractors of

California, Inc. and the Northern California District Council of Laborers. Hagan

Decl., at ¶4 and Ex. A-E. By becoming signatories to a Memorandum Agreement

under which defendants agree to be bound by the Laborers Master Agreement and by

the terms of the Trust Agreements incorporated therein employers agree to be bound

by the terms of the Trust Agreements. Hagan Decl., at ¶4-8. The collective

bargaining agreement and Trust Agreements govern employer contributions to the

various employee fringe benefit trust funds and obligate employers to pay specified

amounts into employee benefit funds on behalf of their employees who perform

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covered work. Id., at Ex. A-E. Defendants became signatories to the Memorandum

Agreement on January 10, 2002. Hagan Decl., at Ex. A. 

Defendants have not invoked the procedures that would release them from their

obligations under these agreements. Hagan Decl., at ¶8. Accordingly, ATI and Mr.

Topui are obligated to pay contributions for covered work performed by ATI's

employees pursuant to the Laborers Master Agreement for the periods March 2003

through November 2004 and January 2004 through June 2004.

Plaintiffs seek unpaid contributions for these two periods in the amount of

$13,211.86. Hagan Decl., at ¶¶17 and 19 and Ex. I and K. In our November 15th

Order we asked plaintiffs to provide additional explanation about the basis for

plaintiffs' assertion that defendants owe $10,394.43 for hours worked by Mr. Mapa

because it appeared to us that plaintiffs might have incorrectly failed to credit certain

payments by defendants. See, Order, filed November 15, 2006. Plaintiffs have

persuaded us that their procedure for calculating unpaid contributions in the

circumstances presented is entirely appropriate. See, Supplemental Declaration of

John J. Hagan in Support of Motion for Default Judgment, filed November 30, 2006

("Supp. Hagan Decl.") at ¶¶3-7.

Because plaintiffs’ request for unpaid contributions is supported by the

evidence, we RECOMMEND that the District Court enter judgment against

defendants in the amount $13,211.86 for unpaid contributions for the periods March

2003 through November 2004 and January 2004 through June 2004.

B. Liquidated Damages and Interest

Plaintiffs seek liquidated damages and interest relating to the above unpaid

contributions. Motion at 3, 6-7; Hagan Decl., at Ex. I-L. Plaintiffs also seek

liquidated damages and interest relating to contributions that were delinquent but that

defendants later paid for work performed by "Journeymen" from July 2003 through

July 2006, and plaintiffs seek interest relating to contributions that were delinquent

but that defendants later paid for work performed by "Apprentices" from November

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2Plaintiffs state that these amounts were paid late by defendants or "recovered by the Trust

Funds from other sources." Hagan Decl., at ¶5.

11

2003 through June 2004.2 Motion at 3 and 7; Hagan Decl., at ¶¶13-14 and Ex. F and

G. 

1. Liquidated Damages as to unpaid contributions

Plaintiffs seek liquidated damages in an amount equal to interest with respect

to unpaid contributions. Motion at 3:19.

ERISA compels the court to award plaintiffs "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 . . . of the amount determined by the

court [as unpaid contributions]." 29 U.S.C. §1132(g)(2)(C). Liquidated damages are

“mandatory and not discretionary” if “the following three requirements [are] satisfied:

(1) the employer must be delinquent at the time the action is filed; (2) the district

court must enter a judgment against the employer; and (3) the plan must provide for

such an award.” Northwest Administrators, Inc., v. Albertson’s Inc., 104 F.3d 253

(9th Cir. 1996) citing Idaho Plumbers & Pipefitters v. United Mechanical

Contractors, Inc., 875 F.2d 212 (9th Cir. 1989). 

The collective bargaining agreement together with Trust Agreements provide

for an award of liquidated damages on delinquent contributions at the rate of $150.00

per month. Hagan Decl., at ¶13 and Ex. B. Therefore, plaintiffs have satisfied the

third Northwest requirement.

The evidence supports a finding that the liquidated damages sought in

connection with unpaid contributions for hours worked by Messrs. Mapa and Smith

pertain to contributions that were delinquent and unpaid as of May 5, 2006, the date

plaintiffs filed the complaint in this action. If the District Court adopts our

recommendation to enter judgment against defendants for these unpaid contributions,

then plaintiffs will have satisfied the first and second requirements as well.

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3See, n. 2, supra.

12

Therefore, we RECOMMEND that, if the District Court enters judgment

against defendants for unpaid contributions that were delinquent and unpaid as of

May 5, 2006, the Court also enter judgment for liquidated damages in connection

with those contributions.

We further RECOMMEND that the District Court award liquidated damages in

an amount equal to interest on the unpaid contributions pursuant to 29 U.S.C.

§1132(g)(2)(C)(i). ERISA provides for interest at the contract rate. 29 U.S.C.

§1132(g). Plaintiffs have presented evidence that the applicable rate of interest under

the Laborers Master Agreement and Trust Agreements is 18% per annum and that

interest on the unpaid contributions calculated through October 25, 2006, totals

$6,235.67. Hagan Decl., at ¶¶18 and 20. Therefore, we RECOMMEND that the

District Court enter judgment for statutory liquidated damages in the amount

$6,235.67. 

2. Liquidated Damages as to delinquent but paid contributions

Plaintiffs also seek liquidated damages in the amount $5,100.00 with respect to

the contributions that were delinquent but that defendants later paid in connection

with hours worked by "Journeymen" from July 2003 through July 2006. Hagan

Decl., at ¶13.

As we understand it, these contributions were late but were paid before May 5,

2006.3 With respect to contributions that were delinquent but were paid before

plaintiffs filed this action, plaintiffs cannot satisfy the first requirement imposed by

Northwest Administrators. Board of Trustees v. Udovch, 771 F.Supp. 1044 (N.D.Cal

1991); Idaho Plumbers, 875 F.2d 212. Accordingly, plaintiffs would not be entitled

to a mandatory award of liquidated damages under §1132(g)(2) of ERISA. Id. 

However, plaintiffs might be entitled to liquidated damages as a matter of contract. 

Idaho Plumbers, 875 F.2d at 217 (§1132(g)(2) does not preempt the federal common

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law of liquidated damages when that section does not apply); Udovch, 771 F.Supp. at

1047. 

A contractual “liquidated damages provision is enforceable in this setting, and

not void as a penalty, only if (1) ‘the harm caused by a breach [is] very difficult or

impossible to estimate’ and (2) the fixed amount is ‘a reasonable forecast of just

compensation for the harm caused.’” Udovch, 771 F.Supp. at 1048 citing Idaho

Plumbers, 875 F.2d at 217.

Plaintiffs satisfy the first prong of the test. “When an employer is delinquent in

paying contributions into a fringe benefit trust fund, the fund suffers some kinds of

harms that are very difficult to gauge.” Udovch, 771 F. Supp. at 1049. 

When we address the second prong of the test, whether the fixed amount is “a

reasonable forecast of just compensation for the harm caused,” we focus on the

“parties’ intentions.” Udovch, 771 F. Supp. at 1048. The negotiating parties “must

make a good faith attempt to set an amount equivalent to the damages they

anticipate.” Idaho Plumbers, 875 F.2d at 217. For the reasons explained in Udovch,

we focus “on the character of the process that led, at the time the contract language

was drafted, to the fixing of the liquidated damages figures or formulas.” 771

F.Supp. at 1048. We look for evidence that “the drafters made a good faith effort to

determine that there would be a rational relationship between the damages that would

be paid under the clause and the harms that would be suffered in most of the

situations that were reasonably foreseeable.” 771 F. Supp. at 1049 (emphasis in

original). 

The evidence (unrebutted as a result of default) supports an inference that the

negotiating parties considered this issue and made a good faith effort to establish a

liquidated damages rate that would be a reasonable forecast of just compensation for

the anticipated harms. The collective bargaining agreement states, 

liquidated damages shall be assessed on delinquent contributions at a flat

rate of one hundred and fifty dollars ($150.00) per month to reflect the

internal administrative costs incurred by the trust administrators in

monitoring and tracking such late contributions. . . . When economic

conditions warrant, the Trustees of the Trust Funds specified in this

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Agreement are authorized to amend the liquidated damages and interest

provisions of this Agreement. Any adjustments implemented by the

Trustees shall be reflective of the true increases in the administrative 

and legal costs associated with the recovery of delinquent Trust Fund

contributions.

Hagan Decl., at Ex. B (emphasis added). 

Accordingly, we also RECOMMEND that the District Court enter judgment for

plaintiffs for liquidated damages at the rate of $150.00 per month with respect to the

contributions that once were delinquent but were paid before May 5, 2006. 

The evidence supports a finding that the total amount of liquidated damages for

tardily paid contributions for the period July 2003 through July 2006 is $5,100.00. 

Hagan Decl., at ¶13 and Ex. F. Therefore, we RECOMMEND that the District Court

enter judgment for contract-based liquidated damages in the amount $5,100.00.

3. Interest

If the Court enters judgment in plaintiffs’ favor for unpaid contributions,

ERISA requires the Court to award plaintiffs “interest on the unpaid contributions.” 

29 U.S.C. §1132(g)(2)(B). As previously stated, ERISA provides that “interest on

unpaid contributions shall be determined by using the rate provided under the plan.” 

29 U.S.C. §1132(g)(2). Plaintiffs also seek interest in connection with delinquent

(but paid) contributions and are entitled to interest on these contributions as a matter

of contract.

Plaintiffs seek interest on all of the contributions (unpaid and tardily paid) at

the annual rate of 18%. Hagan Decl., at ¶¶13-16, 18, 20. Plaintiffs have submitted

evidence that supports a finding that 18% is the applicable interest rate under the

Trust Agreements. Hagan Decl., at Ex. B. 

Plaintiffs seek interest in the amount $6,235.67 for the unpaid contributions

relating to hours worked by Messrs. Mapa and Smith. Hagan Decl., at ¶¶13, 14, 18,

and 20. Interest on unpaid contributions has been calculated through October 25,

2006. In the event the District Court enters judgment in plaintiffs' favor, plaintiffs

might seek amendment of the judgment to reflect additional interest that has accrued

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from October 26, 2006, through the date of the judgment. Additionally, plaintiffs

seek interest in the amount $7,669.44 for the tardy contributions that were made for

work performed by Journeymen and Apprentices. 

We RECOMMEND that the District Judge grant plaintiffs’ request for a

judgment that includes interest at the rate of 18% on unpaid and tardily paid

contributions in the amount $13,905.11. We also RECOMMEND that the District

Court permit plaintiffs to move the Court to amend the judgment to include interest

that has accrued with respect to the unpaid contributions from October 26, 2006,

through the date of the judgment.

C. Request for Audit

The collective bargaining agreement to which defendants are signatories

governs employer contributions to the various employee fringe benefit trust funds and

obligates the employer to submit monthly reports documenting the number of hours

worked by covered employees together with the monthly payments indicated as

owing on each month’s report. Hagan Decl., at ¶¶5-7. The governing Trust

Agreements also obligate the employer to submit to an audit of its records for the

purpose of determining whether the employer has paid the appropriate amount of

contributions to the trusts. Hagan Decl., at Ex. C.

As a result of defendants’ failure to submit complete and timely reports as

contemplated by the governing agreements, plaintiffs have been unable to verify the

full extent of defendants’ obligations for the period since July 1, 2004. Hagan Decl.,

at ¶22. Plaintiffs, therefore, ask the Court to enter judgment compelling defendants to

submit to an audit for the period from July 1, 2004, through the present. Hagan Decl.,

at ¶22. 

Plaintiffs also ask the Court to compel defendants to provide the auditor with

the following documents,

Individual earnings records; federal tax forms W-3/W-2 and 1069/1099;

reporting forms for all Trust Funds, State DE-3/DE-6 Tax Reports;

Workers' Compensation insurance; employee time cards; payroll

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registers/journals; quarterly payroll tax returns (Form 941); check

register and supporting cash vouchers; forms 1120, 1040 or partnership

tax returns; general ledger; source records, including time cards and time

card summaries for all employees; certified payroll reports; personnel

records indicating job classifications and hire/termination dates; cash

disbursement journal; vendor invoices; copies of subcontract

agreements; cash receipts journal; job cost records; records of related

entities; and any other books and records that may be necessary to

complete the auditor's determination or provide additional explanation of

defendants' financial records.

Motion at 12.

Section 1132 of ERISA authorizes the Court to award “such legal and equitable

relief as the court deems appropriate.” 29 U.S.C. §1132(g)(2)(E). 

Accordingly, we RECOMMEND that the District Court enter judgment

compelling defendants to submit to an audit for the purpose of determining the full

amount of fringe benefit contributions, liquidated damages and interest owed for the

period July 1, 2004, through the present.

We further RECOMMEND that the District Court order defendants to provide

relevant records requested by the auditor including, without limitation, those listed

above. Plaintiffs’ requested documents include “records of related entities.” We note

that plaintiffs have not submitted evidence that would indicate that Mr. Topui has

operated entities other than ATI during the relevant period. Nonetheless, we

recommend that the District Court's Order clarify that the phrase “records of related

entities” refers to records from Atoll Topui Island, Inc., and other entities, if any, that

Mr. Topui has operated during the period covered by the audit that appear to offer

work covered under the relevant collective bargaining agreement. 

Plaintiffs also ask the Court to retain jurisdiction so that following the audit

plaintiffs may move to amend the judgment to include additional damages, if any,

found owing as a result of the audit. Motion at 12.

As stated on the record, we RECOMMEND that the District Court permit

plaintiffs to apply to the Court to amend the judgment to include all sums revealed as

due and owing by the audit -- on the following conditions: (1) plaintiffs demonstrate

that defendants had an opportunity during the course of the audit to present input to

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4This recommendation is not contrary to Int’l Union of Operating Engineers, v. Karr , 994

F.2d 1426 (9th Cir. 1993). In Karr the Trusts filed two separate lawsuits to recover delinquent

contributions, liquidated damages and interest for different periods. Defendant Karr appeared

in those actions. In the first action, the trial court granted the Trusts’ motion to compel an audit,

but the Trusts never conducted the audit. Instead, the parties settled both actions. Specifically,

Karr agreed to pay specified amounts in exchange for the Trusts dismissing the lawsuits. Neither

settlement contained a reservation of right to bring an action for additional payments found

owing by any subsequent audit of the relevant periods.

The Trusts later sought an audit, and when Karr refused, the Trusts filed a third action to

compel an audit and collect amounts found owing. In this third action, the Trusts sought to audit

a period that included months that had been the subjects of the prior settlements. The court

dismissed the third action as a matter of res judicata because the request for an audit was

subsumed in the settled first action and should have been brought in the settled second action.

The Court states, “the Trusts could have brought their claim to compel an audit and to recover

underpaid contributions found by the audit in the same action as their prior claims for delinquent

payments.” 994 F.2d at 1430 (emphasis in original).

The facts before us are distinguishable from those in Karr. In this case, the Trusts have

filed one action seeking a judgment for damages currently known to be owing as well as an audit

of the relevant period to more accurately assess the delinquencies. Defendants have not

appeared, and there is no settlement regarding the amounts owed for this period. The Trusts do

not seek to file a new lawsuit. They ask the court to retain jurisdiction to amend the judgment

to ‘correct’ the damages award in this lawsuit following the audit. It is within the Court’s power

to retain jurisdiction for the purpose of amending the judgment by default once an audit more

accurately assesses the damages.

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the auditor, (2) plaintiffs demonstrate that the auditor provided defendants with a

draft of his or her final report prior to submission of that report to the Board of

Trustees and that defendants were given an opportunity to communicate any

responses to the draft report to the auditor, (3) plaintiffs demonstrate that defendants

were given an opportunity to present information relating to the auditor's report

directly to the Board before the Board issues a final decision about whether

defendants owe additional amounts for the period July 1, 2004, to the present, and (4)

defendants are given sufficient notice of the pendency of any court proceedings and a

fair opportunity to challenge the accuracy of the audit before the District Judge.4 See,

Transcript December 20, 2006 hearing. 

D. Attorneys’ Fees and Costs

Section 1132(g) of ERISA requires the Court to award plaintiffs “reasonable

attorney’s fees and costs of the action” when plaintiffs obtain a judgment in their

favor or otherwise obtain the relief sought. 29 U.S.C. §1132(g)(2)(D); Northwest

Administrators, 104 F.3d at 258.

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Plaintiffs seek reimbursement of attorneys’ fees and costs in the amount

$5,451.61. Bevington Decl., at ¶¶5-7. 

1. Tasks Performed and Number of Hours Spent on Those Tasks

Plaintiffs seek fees in connection with 17.6 hours expended drafting and filing

the complaint, the request for default, and the instant Motion, and for effecting

service. Bevington Decl., at ¶¶6-7 and Ex. D.

We have reviewed counsel’s billing records and RECOMMEND that the

District Court find that the kinds of tasks performed by counsel were reasonably

undertaken. We also RECOMMEND that the District Court find that counsel

expended a reasonable number of hours completing those tasks.

Accordingly, we RECOMMEND that the District Court grant plaintiffs’

request for reimbursement of attorneys’ fees in connection with 17.6 hours.

2. Hourly Rates

Plaintiffs seek reimbursement of their attorneys’ time at the rate of $225.00 per

hour for Anne Bevington and James P. Watson. Bevington Decl., at ¶6. Plaintiffs

have presented no evidence in this action about counsel's experience and

qualifications in order to support the requested billing rate. Local Rule 54.6(b)(3). 

However, as stated in our November 15th Order, the court takes judicial notice of the

Supplementary Declaration of Bruce K. Leigh in Support of Motion for Default

Judgment, filed October 13, 2006, in C06-0328 JSW, setting forth counsel's

experience and qualifications. 

We have sufficient experience with local billing rates in these kinds of cases

(as well as many others) to conclude that Ms. Bevington’s and Mr. Watson's billing

rates are commensurate with the prevailing market rate in the Bay Area for lawyers of

their skill and experience doing the kind of work these matters involved. We,

therefore, RECOMMEND that the District Court approve reimbursement of their 

hours at the rate of $225.00 per hour. 

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3. Costs

Plaintiffs also seek costs in the amount of $1,491.61. Bevington Decl., at ¶5.

These costs were incurred for postage, filing fees, “in-house” photocopies,

process service and messenger fees and internet legal research. Id., at Ex. C. The

items for which reimbursement is sought constitute taxable costs and/or out-of-pocket

expenses normally chargeable to the client. Civil Local Rule 54-3. Accord, Harris v.

Marhoefer, 24 F.3d 16 (9th Cir. 1994) (fee award under 42 U.S.C. §1988). With the

exception of one cost item, we find that the amount plaintiffs request for costs is

reasonable. 

Plaintiffs' "cost transaction list" seems to reflect two charges for

messenger/service attempts on May 23, 2006. Bevington Decl., at Ex. C. We

expressly invited plaintiffs to explain this apparent double charge, but they were

unable to do so. See, Order, filed November 15, 2006; Transcript December 20,

2006, hearing. Therefore, we RECOMMEND that the District Court deny

reimbursement of the second charge for $95.00. 

We, therefore, RECOMMEND that the District Court grant plaintiffs’ request

for costs in the amount $1,396.61.

4. Recommendation re Fees and Costs

We recommended that the District Court reimburse plaintiffs for 17.6 hours

expended by counsel. We also recommended that Ms. Bevington's and Mr. Watson's

hours be reimbursed at the rate of $225.00 per hour. Finally, we recommend that the

District Court award costs in the amount $1,396.61.

For the reasons set forth above, if the District Court adopts this Court’s

recommendation to enter judgment in favor of plaintiffs on their claim for unpaid

contributions, we RECOMMEND that the District Court award plaintiffs attorneys'

fees and costs in the amount $5,356.61.

//

//

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III. Conclusion

We RECOMMEND that the District Judge enter judgment in plaintiffs’ favor

and against the entity Atoll Topui Island, Inc., and Lopeti Kiteau Topui, individually,

in the total amount $43,809.25 for (1) unpaid contributions, liquidated damages, and

interest through October 25, 2006, relating to contributions due for work performed

during the periods March 2003 through November 2004 and January 2004 through

June 2004, (2) liquidated damages and interest for contributions that were delinquent

but were paid before May 5, 2006, as well as (3) attorneys’ fees and costs reasonably

incurred in this action. We further RECOMMEND that the District Court permit

plaintiffs to move the Court to amend the judgment to reflect additional interest on

the unpaid contributions accrued from October 26, 2006, through the date of the

judgment.

We RECOMMEND that the District Court also enter an order compelling

defendants Atoll Topui Island, Inc., and Lopeti K. Topui to submit to an audit for the

period July 1, 2004 through the present, that the Court order defendants to provide

relevant records requested by the auditor, and that the District Court enter an

amended judgment for additional amounts found owing following an audit procedure

in which defendants received notice of the auditor’s findings and an opportunity to

respond.

The Court ORDERS plaintiffs to serve a copy of this Report and

Recommendation on defendants immediately.

IT IS SO REPORTED AND RECOMMENDED.

Dated: December 20, 2006

/s/ Wayne D. Brazil 

WAYNE D. BRAZIL

United States Magistrate Judge

Copies to: 

Plaintiffs with direction to serve defendants, 

SBA, wdb, stats

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