JOSEPH H. RODRIGUEZ, District Judge.
This matter comes before the Court on Plaintiffs' motion seeking entry of default judgment against Defendant Mazzco Enterprises, Inc. ("Defendant") [Dkt. Entry No. 14] pursuant to Fed. R. Civ. P. 55. The Court has considered Plaintiffs' submissions and notes that Defendant has not responded to the motion. For the reasons set forth below, Plaintiffs' motion for default judgment as to liability will be granted. Plaintiffs' request for damages will be held in abeyance pending a renewed application.
Because Defendant has failed to respond to Plaintiffs' Complaint and Motion, all facts are taken from Plaintiffs' Complaint [Dkt. Entry No. 1] and the certifications and the attachments in support of the Motion for Default Judgment [Dkt. Entry No. 14]. Plaintiffs, International Union of Painters and Allied Trades District Council 711 Health & Welfare, Vacation and finishing Trades Institute Funds, et al. (the "Funds"), filed suit against Defendant for failure to remit contributions pursuant to the terms of a collective bargaining agreement ("CBA") to which Defendant is a signatory employer. (Compl. ¶ 12; Poist Aff. Supp. Pls.' Mot. Def. J. ¶ 2)
Pursuant to the CBA, Defendant is required to make timely, monthly contributions to the Funds for each hour worked by each employee. (Compl. ¶ 11; Poist Aff. Supp. Pls.' Mot. Def. J. ¶ 3, Ex. A) The relevant portions of the CBA are attached to Plaintiffs' Affidavit as Exhibit A.
Defendant failed to remit contributions to the Funds for various periods between May 1, 2010 and August 31, 2010. (Poist Aff. Supp. Pls.' Mot. Def. J. ¶ 7) After Plaintiffs' Complaint was filed, service of the Summons and Complaint was made upon Defendant on February 17, 2014, by personally serving Mrs. Mazzco, Defendant's bookkeeper. (
Plaintiffs seek to recover (a) the amount of contributions owed by Defendant totaling $12,389.17; (b) accrued interest on the unpaid contributions in the amount of $2,876.52; and (c) liquidated damages under 29 U.S.C. § 1132(g)(2)(C)(ii) of the Employee Retirement Income Security Act of 1947 ("ERISA") totaling $2,876.52. (
"Before entering default judgment against a party that has not filed a responsive pleading, `the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties.'"
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. This action involves a federal question because the dispute arises under the Labor Management Relations Act ("LMRA") and ERISA. Section 301(a) of the LMRA provides that contractual disputes "between an employer and a labor organization representing employees in an industry affecting commerce . . . may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties." 29 U.S.C. § 185(a). Because this action involves Defendant's alleged violation of the parties' CBA, 29 U.S.C. § 185(a) is applicable. Further, section 515 of ERISA states that "[e]very 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. Because the Complaint alleges Defendant is an employer that has failed to make contributions in accordance with the CBA, 29 U.S.C. § 1145 is also applicable.
The Court has personal jurisdiction over Defendant pursuant to the jurisdiction provision of ERISA in section 1132(e)(2).
Federal Rule of Civil Procedure 55 governs the entry of default judgment. The Rule provides:
Fed. R. Civ. P. 55. Rule 55 contemplates a two-step process. "Prior to obtaining a default judgment under either Rule 55(b)(1) or Rule 55(b)(2), there must be entry of default as provided by Rule 55(a)."
Even when a defendant is properly in default, a plaintiff is not entitled to the entry of default judgment as of right, and the entry of such a judgment is left primarily to the discretion of the district court.
Courts must accept Plaintiffs' well-pleaded factual allegations as true, but need not accept Plaintiffs' factual allegations regarding damages as true.
However, the Court is not required to conduct such hearings as long as it ensures that there is a basis for the damages specified in the default judgment.
The Court must first confirm that the Defendant is properly in default. If the Defendant has failed to appear or file any responsive pleading, the Court must determine whether the Defendant was properly served.
Defendant was properly served with a copy of the Summons and Complaint on February 17, 2014. Defendant failed to appear or otherwise respond to the Complaint. Plaintiffs requested an entry of default as to the Defendant, and the Clerk of the Court entered Defendant's default on April 3, 2014. Therefore, the procedural prerequisite of Rule 55(a) has been satisfied.
Next, the Court must determine that Plaintiffs' allegations demonstrate a legitimate cause of action and a right to the requested relief. Defendant is deemed to have admitted the factual allegations of the complaint by virtue of its default, except those factual allegations related to the amount of damages.
The unchallenged factual allegations in the Complaint demonstrate that Plaintiffs state a legitimate cause of action under ERISA. Under section 515 of ERISA an employer who is obligated to make contributions to a multi-employer benefit plan under a collective bargaining agreement must make payments pursuant to the terms and conditions under the agreement. 29 U.S.C. § 1145. Taking as true the allegations in the Complaint, Defendant's failure to make payments is a violation of the CBA with Plaintiffs and, therefore, a violation of section 515 of ERISA.
Lastly, the Court must determine that default judgment is an appropriate sanction under the circumstances. Before imposing the extreme sanction of judgment by default, "district courts must make explicit factual findings as to: (1) whether the party subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking default, and (3) the culpability of the party subject to default."
The Court's sole consideration is whether the Plaintiff will be prejudiced if default is denied. Defendant has failed to make the required contributions to the Funds and has not responded to Plaintiffs' Complaint. Therefore, Plaintiffs have suffered and will continue to suffer if default judgment is not entered because delinquent contributions can negatively impact the Funds Trustees' ability to pay the Funds beneficiaries.
The district court has considerable latitude in determining the amount of damages.
Plaintiffs request this Court grant recovery against Defendant for unpaid contributions, interest, liquidated damages, and attorney's fees in the amount of $20,703.41.
The CBA requires Defendant to remit contributions on a monthly basis. Plaintiffs provide an exact figure of $12,389.17 in its Motion for Default Judgment, indicating the amount Defendant actually owes in unpaid contributions for periods between May 1, 2010 and August 31, 2010.
Plaintiffs have demonstrated they are entitled to unpaid contributions in the amount of $12,389.17.
Additionally, 29 U.S.C. § 1132(g)(2) of ERISA, permits the Court to enter judgment for interest, liquidated damages, reasonable attorney's fees, and such other legal or equitable relief as the Court deems appropriate.
Plaintiffs have demonstrated they are entitled to interest on the unpaid contributions from the time of nonpayment through February 28, 2015. ERISA requires that "interest on unpaid contributions shall be determined by using the rate provided under the plan, or, if none, the rate prescribed under section 6621 of the Internal Revenue Code of 1986." 29 U.S.C. § 1132(g)(2)(E). Plaintiffs have calculated interest pursuant to a "Policy for Collection of Delinquent Contributions" (the "Policy"). However, Plaintiffs have not demonstrated that Defendant is beholden to the Policy or otherwise shown that the Policy represents the interest rate under the CBA to which Defendant is a signatory.
In order to grant Plaintiffs' request for interest, the Court requires additional information showing how the Policy attaches to Defendant. If Plaintiffs cannot show Defendant is beholden to the Policy as part of the CBA, Plaintiffs award of interest shall be governed by ERISA and must be calculated using the rate under section 6621 of the Internal Revenue Code. Plaintiffs shall be permitted to renew their application for damages showing either 1) how the Policy attaches to Defendant; or 2) a detailed calculation of their requested interest under the rate prescribed by section 6621 of the Internal Revenue Code. The Court will hold the award of interest in abeyance pending Plaintiffs' renewed application for damages.
Plaintiffs have also demonstrated they are entitled to liquidated damages. Because Plaintiffs liquidated damages are based on their calculation of interest as permitted under 29 U.S.C. § 1132(g)(2)(C)(ii), the Court is unable to determine the appropriate amount to award for liquidated damages and will permit Plaintiffs to renew their application as described above.
Finally, Plaintiffs have demonstrated they are entitled to reasonable attorney's fees from June 1, 2013 through February 25, 2015 in the amount of $2,561.20.
For the reasons stated above, the Court will hold Plaintiffs' request for damages in abeyance pending a renewed application.
In light of the foregoing, Plaintiffs' Motion for Default Judgment [Dkt. Entry No. 14.] is granted in part as to Defendant's liability and held in abeyance in part. The Court reserves decision on the determination of damages. Plaintiffs have six (6) weeks to renew their application for damages consistent with the accompanying Order.