Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-06654/USCOURTS-cand-4_06-cv-06654-3/pdf.json

Parties Involved:
Board of Trustees of General Employees Trust Fund
Plaintiff
General Employees Trust Fund
Plaintiff
Victory Building Maintenance, Inc.
Defendant

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

GENERAL EMPLOYEES TRUST FUND and

BOARD OF TRUSTEES OF GENERAL

EMPLOYEES TRUST FUND,

Plaintiff,

 vs.

VICTORY BUILDING MAINTENANCE, INC.,

Defendants.

 /

No. C 06-6654 CW (MEJ)

REPORT AND RECOMMENDATION

RE: PLAINTIFFS’ MOTION FOR

DEFAULT JUDGMENT

I. INTRODUCTION

Before the Court is plaintiffs General Employees Trust Fund and Board of Trustees of

General Employees Trust Fund’s (collectively “Plaintiffs”) Motion for Default Judgment, filed

February 7, 2007. For the following reasons, the Court RECOMMENDS that the District Court

GRANT default judgment against defendant Victory Building Maintenance, Inc. (“Defendant”) and

award Plaintiffs attorney fees and costs in the amount of $6,156.00.

II. BACKGROUND

A. Factual Background

Plaintiff General Employees Trust Fund (“Trust Fund”) is a joint labor-management trust

fund organized pursuant to Section 302 of the Labor Management Relations Act (“LMRA”), 29

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U.S.C. § 186, for the purpose of administering employee benefit plans within the meaning of

Sections 3 and 4 of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1002. 

(Compl. for Audit Entry and for Damages at ¶ 5). Plaintiff Board of Trustees of General Employees

Trust Fund (“Board of Trustees”) is the plan administrator of employee benefit plans within the

meaning of Section 3(3) of ERISA, a fiduciary within the meaning of Section 3(21)(A)(iii) of

ERISA, and the named fiduciary within the meaning of Section 402(a)(1) of ERISA. As a fiduciary,

Board of Trustees has a duty to Defendant’s employees to collect funds for the benefit of said

employees, to invest and administer said funds, and to protect said funds from claims. (Id. at ¶ 6). 

Defendant is an employer within the meaning of Sections 3 (5), (11), and (12) of ERISA and

an employer in an industry affecting commerce within the meaning of Section 301 of the LMRA 

(Id. at ¶ 7). Defendant is bound to a collective bargaining agreement with Service Employees

International Union Local 1877 and its employees. (Id. at ¶ 9). The terms of the Collective

Bargaining Agreement bind Defendant to a trust agreement establishing the Trust Fund. (Id. at ¶

10). By the collective bargaining agreement and the trust agreement (collectively “Agreements”),

Defendant agreed to pay fringe benefit contributions to Trust Fund in accord with the terms set forth

in the trust agreement. (Id. at ¶ 11). Correspondingly, the Agreements authorize and oblige Board

of Trustees to enforce Defendant’s obligations to pay fringe benefit contributions to Trust Fund. (Id.

at ¶ 16). 

Pursuant to the Agreements, Defendant agreed to permit an accountant designated by Board

of Trustees to access Defendant’s books, records, papers, and other documents as necessary to

conduct an audit to determine the accuracy and sufficiency of Defendant’s performance of its

obligation under the Agreements. (Id. at ¶ 17). Correspondingly, the Agreements authorize and

obligate Board of Trustees to adopt appropriate collection procedures to ensure Defendant’s prompt

payments to Trust Fund and also to audit Defendant’s books, records, papers, and other documents

when necessary to determine whether Defendant is performing its obligations under the Trust

Agreement. (Id. at ¶ 16).

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Pursuant to the Agreements, Trust Fund demanded that Defendant submit to an audit for the

period from February 1, 2004, through the date of the audit. (Id. at ¶ 19). By letter dated August 29,

2006, Plaintiffs notified Defendant of the books, records, papers, and other documents required by

Trust Fund’s accountant in order to perform the audit. (February 7, 2007, Masson Decl. ¶5). 

Plaintiffs allege that Defendant has refused to produce said documents. (Pls.’ Compl. at ¶ 20). 

Plaintiffs further allege that because of Defendant’s refusal, Trust Fund is unable to determine

whether Defendant has fully met its obligations under the Trust Agreement. (Id. at ¶ 22). 

Based on the above allegations, Plaintiffs seek an order compelling Defendant to submit to

an audit and to produce all books, records, papers, and other documents requested by Trust Fund for

the purposes of performing the audit as required by the Agreements. Furthermore, in accord with

Defendant’s agreement to pay all court costs and attorney’s fees expended by Trust Fund in

attempting to secure Defendant’s compliance with the Agreements, Plaintiffs seek $5,581.00 in

attorney’s fees and $575.00 in legal costs, for a total amount of $6,156.00. (Id.) 

B. Procedural Background

On October 10, 2006, Plaintiffs filed a Complaint for Audit Entry and for Damages against

Defendant. 

On November 28, 2006, Plaintiffs served the Summons and Complaint upon Defendant by

personal service. (Jan. 9, 2007 Masson Decl.)

On December 5, 2006, Plaintiffs’ attorney advised Defendant by letter that its answer was

overdue and that if an answer was not received within 10 days, Plaintiffs would “take” Defendant's

default. (Jan. 9, 2007 Masson Decl., Ex. 2)

On January 10, 2007, the Clerk of Court entered default against Defendant pursuant to

Federal Rule of Civil Procedure (“FRCP”) 55(a).

On February 7, 2007, Plaintiffs filed a Motion for Default Judgment against Defendant, as

well as the Declaration of Elizabeth Masson in support thereof. 

On March 29, 2007, the Court held a hearing on the matter. Elizabeth Masson and Diane

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Sidd-Champion appeared on behalf of Plaintiffs. Defendant failed to appear at the hearing and did

not respond to Plaintiffs’ motion. 

III. DISCUSSION

A. Jurisdiction

When considering whether to enter a default judgment, a court has “an affirmative duty to

look into its jurisdiction over both the subject matter and the parties.” In re Tuli, 172 F.3d 707, 712

(9th Cir. 1999) (“To avoid entering a default judgment that can later be successfully attacked as

void, a court should determine whether it has the power, i.e., the jurisdiction, to enter the judgment

in the first place.”) Here, the District Court has subject-matter jurisdiction pursuant to Section

501(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1) and Sections 301(a) and © of the LMRA, 29 U.S.C. §§

185(a) and ©, which expressly grant federal district courts jurisdiction over any action arising under

a claim for the recovery of an unpaid or delinquent employee benefit contribution. Additionally,

Defendant conducts its business within the Northern District of California and the events giving rise

to this suit occurred within the Northern District of California; thus, the District Court has personal

jurisdiction over Defendant. Moreover, as Defendant was at all times a corporation, with its

principal place of business located in West Sacramento and Sacramento, California, under 28 U.S.C.

§ 1391, venue is proper in the Northern District of California.

Second, in deciding whether to grant or deny a default judgment, a court must assess the

adequacy of the service of process on the party against whom default is requested. Board of

Trustees of the N. Cal. Sheet Metal Workers v. Peters, 2000 U.S. Dist. LEXIS 19065, at *2 (N.D.

Cal. 2001) (noting that, in deciding whether to grant or deny default judgment, a court must first

“assess the adequacy of the service of process on the party against whom default is requested”). 

Here, Plaintiffs’ agent served Defendant with the Summons and Complaint on November 8. 

Furthermore, proper service of the Summons and Complaint is uncontested. Thus, the service of

process was adequate.

B. Legal Standard

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Federal Rule of Civil Procedure (“FRCP”) 55(b)(2) permits a court, following a default by a

defendant, to enter a final default judgment in a case. The court has discretion in determining

whether to grant or deny a motion for entry of default judgment. Draper v. Coombes, 792 F.2d 915,

924 (9th Cir. 1986) (citing Aldabe v. Aldabe, 616 F.2d 1089, 1092-93 (9th Cir. 1980) (“The district

court’s decision whether to enter a default judgment is a discretionary one.”)).

The Ninth Circuit has enumerated several factors which the court may consider in exercising

its discretion as to whether an entry of default judgment is proper: (1) the possibility of prejudice to

the plaintiff; (2) the merits of the plaintiff’s substantive claim and the sufficiency of the complaint;

(3) the sum of money at stake; (4) the possibility of dispute concerning material facts; (5) whether

default was due to excusable neglect; and (6) the strong policy underlying the Federal Rules of Civil

Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-2 (9th Cir. 1986).

In applying this discretionary standard, the factual allegations contained in the plaintiff's

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

Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir.1987); see also Kingvision Pay-Per-View,

Ltd. v. Rivers, 2000 WL 356378, *1 (N.D. Cal. 2000) (“Generally, upon an entry of default, the

factual allegations of the plaintiff’s complaint will be taken as true.”). 

Where a default judgment is granted, the scope of relief is limited by Federal Rules of Civil

Procedure 54© and 55(d): “A judgment shall not be different in kind from or exceed in amount that

prayed for in the demand for judgment [in the complaint.]”

C. Application to the Case at Bar

1. Prejudice to Plaintiffs

Under the first Eitel factor, this Court examines whether Plaintiffs will suffer prejudice if

default judgment is not granted. Eitel, 782 F.2d at 1471-72. Here, the parties entered into a

Collective Bargaining Agreement and a Trust Agreement obligating Defendant to pay fringe benefit

contributions to Trust Fund and to submit to an audit for the purposes of establishing Defendant’s

performance of said obligation. Defendant breached this obligation by refusing to produce all

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books, records, papers and other documents requested by Trust Fund’s accountant pursuant to the

Agreements. Because Defendant refused to produce the information requested, Trust Fund is unable

to determine whether Defendant has fully met all of its obligations to report and pay fringe benefit

contributions. Plaintiffs have potentially suffered damages not only in the delinquent amounts, but

also in the amount of any interest that would have accrued had the funds been contributed on time. 

If default judgment is not entered, Plaintiffs will be left with no alternative recourse against

Defendant and would be unable to collect the amounts owed. Thus, failure to grant Plaintiffs’

motion for default judgement would result in substantial prejudice to Plaintiffs.

2. Sufficiency of the Complaint and Likelihood of Success on the Merits

The second Eitel factor addresses the sufficiency of Plaintiffs’ complaint and the probability

of their success on the merits of their underlying claim. Walters v. Statewide Concrete Barrier, Inc.,

2006 WL 2527776, at *4 (N.D. Cal. 2006) (“A party seeking default judgment must state a valid

claim upon which it may recover.”). Here, Plaintiffs’ Complaint alleges all the facts necessary to

establish the elements of their claim. Plaintiffs brought the underlying ERISA claim pursuant to 29

U.S.C. § 1132(g), which grants the fiduciaries of an ERISA employee-benefits fund a federal cause

of action to enforce the employer's failure to meet its obligations to make ERISA contributions. To

prevail on a claim for unpaid ERISA contributions, a plaintiff must prove that: (1) the trust funds are

a qualified multi-employer plan as defined by 29 U.S.C. § 1002(37); (2) the defendant is an

employer obligated to contribute under the plan's terms; and (3) the defendant failed to contribute in

accordance to the plan. Board of Trustee of the Sheet Metal Workers Health Care Plan of N. CA v.

Gervasio Environmental Systems, 2004 WL 1465719, at *2 (N.D. Cal. May 21, 2004); Walters,

2006 WL 2527776, at *6.

As to the first prong of the Gervasio Environmental Systems test, the Trust Agreement is a

multi-employer plan to which more than one employer is required to contribute and which is

maintained pursuant to one or more collective bargaining agreements between one or more

employee organizations and more than one employer. Thus, the Trust Agreement is a qualified

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multi-employer plan as defined by 29 U.S.C. § 1002(37).

As to the second prong, by the Agreements, Defendant agreed to pay fringe benefit

contributions to plaintiff Trust Fund in accordance with the terms set forth in the Trust Agreement. 

(Pls.’ Compl. at ¶ 5). Thus, Defendant is an employer obligated to contribute under the plan's terms.

As to the third prong, Plaintiffs’ Complaint establishes Defendant’s failure to meet its

contractual obligation to allow Trust Fund to perform an audit. Thus, under Gervasio

Environmental Systems, Plaintiffs have demonstrated that they are entitled to recover unpaid ERISA

contributions. In sum, Plaintiffs have adequately demonstrated a substantial likelihood of success on

the merits of their underlying claim.

3. The Sum of Money at Stake in the Action

The third Eitel factor assesses the reasonableness of the potential award if a default judgment

is entered against Defendant. The Court must take into account the amount of money at stake in

relation to the seriousness of the defendant's conduct. Eitel, 782 F.2d at 1471. If the sum of money

at issue is reasonably proportionate to the harm caused by the defendant's actions, properly

documented, and contractually justified, then default judgment is warranted. Board of Trustees of

Cal. Metal Trades v. Pitchometer Propeller, 1997 WL 797922, at *2 (N.D. Cal. 1997). 

In the instant action, the remedy sought by Plaintiffs is limited to the damages that would be

reasonably expected to put Plaintiffs in the same position had Defendant fulfilled its contractual

obligations. These damages include (1) an audit proving the extent, if any, of unpaid monies owed

by Defendant to Trust Fund under the terms of the Bargaining Agreement, and (2) contractually

based attorney’s fees and other expenses equaling the cost to Plaintiffs of enforcing their

entitlements. Given Defendant’s refusal to perform its obligation to allow Trust Funds’ accountant

access to its books and records, such resulting damages are reasonable and would naturally be

expected to flow from Defendant’s breach of contract. Thus, the damages are reasonable,

documented, and contractually justified.

Generally a court has great discretion in determining damages. However, any award in an

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ERISA action to collect delinquent contributions must be governed by 29 U.S.C. § 1132, which

circumscribes the latitude given to courts in structuring an appropriate remedy. If the court enters a

default judgment in favor of the plaintiff, an award under this section is mandatory, not

discretionary. Northwest Administrators, Inc. v. Albertson's Inc., 104 F.3d 253, 257 (9th Cir. 1996)

(citing 29 U.S.C. § 1132(g)(2)). A judgment in favor of the plaintiff pursuant to 29 U.S.C. §

1132(g)(2)(D) and (E) includes “reasonable attorney's fees and cost of the action, to be paid by the

defendant,” and “such other legal or equitable relief as the court deems appropriate.” Id.

To be entitled to a mandatory award under § 1132(g)(2), the following three requirements

must be 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, 104 F.3d at 257. 

In the instant case, Defendant is delinquent in the performance of its contractual obligations. 

Second, for the reasons contained herein, this Court recommends that the District Court enter

judgment against Defendant. Third, the Agreements contain specific provisions providing for

employer liability for all court costs and attorney’s fees incurred by the Plaintiffs in compelling

Defendant to submit to an audit. (Pls.’ Compl. Ex. 1, Restated Trust Indenture Providing For

General Employees Trust Fund § 7.7). Therefore, because all the conditions necessary for an award

under § 1132(g)(2) are satisfied, Plaintiffs are entitled to a mandatory award under § 1132(g)(2).

Having determined that statutory damages are appropriate, the Court must determine the

propriety of the monetary amount requested. While the factual allegations in the complaint are

taken as true, the same presumption does not apply to the allegation of damages. TeleVideo Systems,

Inc., 826 F.2d at 917. As a result, Plaintiffs have the burden of proving the damages they have

purportedly sustained. Board of Trustees of Pipe Trades Dist. Council No. 36 v. Drexal Power, Inc.,

2004 WL 1753369, at * 1-2 (N.D. Cal. 2004).

Here, the only monetary damages that Plaintiffs request are $5,581.00 in attorney’s fees and

$575.00 in costs. (Feb. 7, 2007 Masson Decl. at ¶¶ 6-8). Thus, the Court finds Plaintiffs have met

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their burden of proof with respect to the amount of monetary damages requested by providing the

Court with precise calculations concerning attorney’s fees and costs.

4. Possibility of Dispute Concerning Material Facts

The fourth Eitel factor considers the possibility of dispute as to any material facts of the case. 

Here, Plaintiffs sufficiently allege all the facts necessary to maintain their claim for relief under

ERISA. Since Defendant has made no attempt to challenge the accuracy of the Complaint, no

dispute of material fact exists that would preclude the District Court from granting Plaintiffs’ motion

for default judgment.

5. Possibility of Excusable Negligence

The fifth Eitel factor contemplates the possibility that Defendant’s default was the result of

excusable neglect. Under this analysis, the Court considers whether Defendant was put on adequate

notice to apprise them of the pendency of the action brought against it. Phillip Morris USA, Inc. v.

Castworld Products, Inc., 219 F.R.D. 494, 500 (C.D. Cal. 2003). In addition, the Court also

considers whether the circumstances surrounding Defendant’s failure to answer the complaint are

sufficient to excuse or justify its default. Shanghai Automation Instrument Co. v. Kuei, 194

F.Supp.2d 995, 1005 (N.D. Cal. 2001) (Default cannot be attributed to excusable neglect where

defendants were properly served with the complaint, the notice of entry of default, and the papers in

support thereof). 

In the instant case, Defendant was properly served with both the Complaint and the Notice of

the Motion for Default Judgment. (January 9, 2007, Decl. Of Elizabeth Masson at ¶ 5). Defendant

is an ongoing business that has not entered into bankruptcy or dissolved as a corporate entity. 

Consequently, Defendant had the ability and every reasonable opportunity to oppose the underlying

action and there are no grounds on which the Court can find that the default resulted from excusable

neglect. 

6. Policy for Deciding on the Merits

Under the final Eitel factor, the Court must consider the strong policy of the federal courts in

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favoring decisions on the merits. However, this policy is not dispositive; rather, the Court still has

great latitude in exercising its discretion with regards to the relative weight of the remaining Eitel

factors. PepsiCo, Inc. v. California Security Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002). 

Furthermore, the “defendant's failure to answer the plaintiff’s complaint makes a decision on the

merits of a case impractical, if not impossible.” Id. As a consequence, the policy of favoring

decisions on the merits does not necessarily preclude a court from granting a default judgment when

the defendant fails to respond. Walters, 2006 WL 2527776, at *6. Here, Defendant has refused to

participate in the proceedings brought against it, despite adequate notice and opportunity to do so. 

Thus, default judgement is appropriate despite the strong policy of the federal courts in favoring

decisions on the merits. 

IV. CONCLUSION

Based on this analysis, the Court RECOMMENDS that the District Court GRANT Plaintiff’s

Motion for Default Judgment, award damages in the amount of $6,156.00, and order Defendant to

submit to an audit for the period from February 1, 2004, to the date of the audit, and to produce all

records necessary to determine whether Defendant has fully met all of its obligations to report and

pay fringe benefit contributions to Plaintiffs for all work performed by its covered employees. 

Pursuant to Federal Rule of Civil Procedure 72, any party may serve and file objections to

this Report and Recommendation within 10 days after being served.

IT IS SO RECOMMENDED.

Dated: April 11, 2007 

MARIA-ELENA JAMES

United States Magistrate Judge

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