Opinion
CV-23-00195-PHX-JZB
11-08-2023
Zeferino Lopez, et al., Plaintiffs, v. AG West Logistics LLC, et al., Defendants.
TO THE HONORABLE STEPHEN M. MCNAMEE, SENIOR UNITED STATES DISTRICT JUDGE:
REPORT AND RECOMMENDATION
Honorable John Z. Boyle, United States Magistrate Judge
This Report and Recommendation is filed pursuant to General Order 21-25. Pending before the Court is Plaintiffs' Amended Motion for Default Judgment Against Defendants Ag West Logistics, LLC (“Ag West”), and Rudy Mireles, or in the Alternative to Amend the Complaint (“Amended Motion for Default”) (doc. 30), and Plaintiffs' Amended Memorandum of Law in support of the motion (doc. 30-1). This Court recommends that Plaintiffs' Amended Motion for Default be granted.
General Order 21-25 states in relevant part:
When a United States Magistrate Judge to whom a civil action has been assigned pursuant to Local Rule 3.7(a)(1) considers dismissal to be appropriate but lacks the jurisdiction to do so under 28 U.S.C. § 636(c)(1) due to incomplete status of election by the parties to consent or not consent to the full authority of the Magistrate Judge,
IT IS ORDERED that the Magistrate Judge will prepare a Report and Recommendation for the Chief United States District Judge or designee.
IT IS FURTHER ORDERED designating the following District Court Judges to review and, if deemed suitable, to sign the order of dismissal on my behalf: Phoenix/Prescott: Senior United States District Judge Stephen M. McNamee.
I. Background
a. The Complaint
On January 30, 2023, Plaintiffs Zeferino Lopez, Jorge Marias, Juan Enriquez, Florentino Vidal, Manuel Bojorquez, and Ramiro Rocha filed a complaint against Defendants Ag West and Rudy Mireles for violations of the Migrant and Seasonal Agricultural Worker Protection Act (“AWPA”), 29 U.S.C. §§ 1821(d)(2), 1822(a), and for violations of the Internal Revenue Code (“IRC”), 26 U.S.C. § 7434. (Doc. 1 at 9, ¶¶ 38-39.) On May 10, 2023, Counsel for Plaintiffs motioned for leave to amend this complaint. (Doc. 14.) This Court granted that motion (doc. 16) and hereafter cites to the First Amended Complaint (“FAC”). (Doc. 17.)
In the FAC, Plaintiffs allege generally that they were employed by Defendants as seasonal lemon harvesters in and around Yuma, Arizona during the 2021-22 lemon harvest, and that “Defendants violated the AWPA's provisions relating to wage payment, wage statements and working arrangements, as well as AWPA's prohibition against providing false and misleading information to workers.” (Id. at 2, ¶ 4.) Plaintiffs allege they were agricultural workers and Defendants were farm labor contractors within the meaning of the AWPA. (Id. at 3, ¶¶ 11-13.) Plaintiffs allege Defendant Mireles is the owner of Defendant Ag West. (Id. at 2, ¶ 3.) Plaintiffs Lopez, Marias, Enriquez, Vidal, and Bojorquez allege that, between October and November 2021, Defendants issued nonpayroll checks that “did not show the basis on which wages were paid, the number of piecework units earned, the number of hours worked, or the specific sums withheld and the purpose of each sum withheld.” (Id. at 4-5, ¶ 18.) These Plaintiffs allege that although Defendants started issuing payroll checks with the required information in November 2021, Plaintiffs' year-end W2 forms did not accurately reflect their year-to-date earnings, i.e., their W2s omitted their wages from the non-payroll checks. (Id. at 4-10.) Plaintiffs allege Defendants' failures constitute violations of 29 U.S.C. § 1821(d) (doc. 17 at 9, ¶ 38), which provides that all farm labor contractors and agricultural employers or associations must provide a written statement to each worker for each pay period indicating “(A) the basis on which wages are paid; (B) the number of piecework units earned, if paid on a piecework basis; (C) the number of hours worked; (D) the total pay period earnings; (E) the specific sums withheld and the purpose of each sum withheld; and (F) the net pay[.]”Plaintiffs further allege Defendants' failure to remit FICA taxes separately constitutes a failure to pay wages promptly when due under 29 U.S.C. § 1822(a). (Doc. 17 at 9, ¶¶ 38-39.) All Plaintiffs allege Defendant Ag West willfully filed fraudulent information returns in violation of the IRC, 26 U.S.C. § 7434. (Id. at 10, ¶¶ 4243.) Plaintiffs request $500 in statutory damages for each AWPA violation for each Plaintiff, $5,000 in statutory damages for each IRC violation for each Plaintiff, injunctive relief, and attorneys' fees and costs. (Doc. 17 at 11.)
Plaintiff Rocha alleges only that his W2 does not accurately reflect his earnings and that Defendants did not properly withhold taxes from his pay. (Doc. 17 at 9, ¶¶ 37, 39.) He does not allege Defendants failed to provide him a wage statement. (Id.)
b. Procedural History and Service
On March 9, 2023, Plaintiffs served Defendant Mireles through process server by delivering the summons to his residence and leaving it with his spouse.(Doc. 7); Fed.R.Civ.P. 4(e)(2)(B). On April 13, 2023, Plaintiffs moved to permit alternative service for Defendant Ag West and extend the time for service. (Doc. 8.) Plaintiffs' counsel averred her hired process server attempted to serve Ag West through its registered agent, Defendant Mireles, or managing partner Martina Robinson, on eight separate occasions. (Doc. 8 at 4.) Plaintiffs' counsel further averred she attempted to mail a request for waiver of service, complaint, summons, civil cover sheet, consent to magistrate jurisdiction, and sealed summons to three different addresses for Ag West. (Id. at 3-4.) After contacting the post office, Plaintiffs' counsel was told delivery had been attempted twice on each package and would not be re-attempted. (Id. at 4.) Plaintiffs asserted that service of Ag West in a manner consistent with state law was permitted by Fed.R.Civ.P. 4(e)(1). (Id.) Plaintiffs cited Arizona Rule of Civil Procedure 4.1k, which permits, when other forms of service become impracticable, that “the Court on its own motion without notice to the person to be served - order that service be accomplished in another manner[,]” including at a minimum, to “mail the summons, the pleading being served, and any court order authorizing an alternative means of service to the last-known business or residential address of the person being served.” (Id. at 5.) Plaintiffs further asserted that service via certified mail had been completed pursuant to A.R.S. § 29-3119, which permits service upon a limited liability company by certified mail when the agent for process cannot be served with reasonable diligence. (Id.) Plaintiffs alternatively requested they be permitted to serve by publication or by serving the Secretary of Labor. (Id. at 6.) Plaintiffs filed a second motion to that effect on April 28, 2023. (Doc. 10.)
It is noteworthy Plaintiffs' Counsel stated that her initial process server rejected the job due to Defendants being evasive in the past. (Doc. 8 at 2-3.)
On April 28, 2023, this Court granted that motion and permitted service by publication pursuant to Ariz. R. Civ. P. 4.1(1) or through the Secretary of Labor pursuant to 29 U.S.C. § 1812, and granted Plaintiffs until June 12, 2023, to effect service. (Doc. 12 at 4-5.)
On May 1, 2023, the Clerk of Court entered default against Defendant Rudy Mireles. (Doc. 13.) On May 10, 2023, Plaintiffs filed a motion to amend the complaint and allow for alternative service of the amended complaint upon Defendant Mireles. (Doc. 14.) On June 9, 2023, Plaintiffs filed a third motion for extension of time to serve Defendant Ag West. (Doc. 15.)
On June 10, 2023, Plaintiffs' counsel filed an affidavit swearing or affirming that (1) a copy of the complaint, summons, this Court's order permitting alternative service, and a cover letter were mailed to Defendant Ag West at four separate addresses; and (2) that service was made upon the U.S. Attorney for the District of Arizona, the Attorney General, and the U.S. Secretary of Labor pursuant to Fed.R.Civ.P. 4(i)(1), (2). (Doc. 18 at 2-3.) Exhibit B to Plaintiffs' notice is the affidavit of counsel for the Wage and Hour Division of the Department of Labor's Office of Solicitor stating he had received and accepted service of the complaint, summons, and order on May 26, 2023, and mailed them to Defendant Ag West. (Doc. 18-2 at 2.) The affiant stated he had also mailed Defendant Ag West Plaintiffs' FAC. (Id.) Plaintiffs' counsel also affirmed that Defendant Ag West had been served by publication in the Yuma Sun and Phoenix Capitol Times newspapers. (Doc. 18 at 5-6.)
On June 12, 2023, the Court granted Plaintiffs' May 10, 2023 motion to amend, denied Plaintiffs' motion to permit alternative service of the FAC upon Defendant Mireles, and granted Plaintiffs' motion for an extension of time to serve Defendant Ag West. (Doc. 16.)The Court granted Plaintiffs until July 14, 2023, to effect service upon Ag West. (Id.)
The Court found alternative service against Defendant Mireles was unnecessary as he had already been served under Fed.R.Civ.P. 4. (Id. at 2.) Therefore, any subsequent pleading only needed to be served pursuant to Fed.R.Civ.P. 5(a).
Although Defendant Mireles was already in default, on July 10, 2023, Plaintiffs' counsel filed another affidavit that service of the FAC, summons, original complaint, and “order extending service” had been completed upon Defendant Mireles by mailing copies to his last known addresses. (Doc. 20.) The same day, Plaintiffs' counsel filed an affidavit of service noting service of the FAC, summons, and accompanying documents had been completed by mail to Defendant Ag West's last known addresses. (Doc. 19 at 4.)
On July 14, 2023, Plaintiffs applied for entry of default judgment with respect to Defendant Ag West. (Doc. 22.) Plaintiffs' counsel submitted an amended application allowing for three additional mailing days under Fed.R.Civ.P. 6. (Doc. 23.)
On August 2, 2023, the Clerk entered default against Ag West. (Doc. 24.) On August 29, 2023, Plaintiffs lodged a motion for default judgment by all Plaintiffs against all Defendants, and for a motion to exceed the page limit. (Doc. 25.) The Court granted Plaintiffs' motion and ordered the clerk to file the lodged motion for default. (Doc. 26.) On September 1, 2023, Plaintiffs filed a motion for leave to file an Amended Motion for Default. (Doc. 28.) The Court granted the motion and directed the Clerk to file the lodged motion. (Doc. 29.) Plaintiffs' Amended Motion for Default and accompanying memorandum are currently before the Court.
II. Plaintiffs' Amended Motion for Default Judgment
a. Legal Standard
Under Rule 55(a) of the Federal Rules of Civil Procedure, “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). Once a party's default has been entered, the district court has discretion to grant default judgment against that party. See Fed.R.Civ.P. 55(b)(2); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).
In assessing a motion for default judgment, the district court first “has an affirmative duty to look into its jurisdiction over both the subject matter and the parties.” Tuli v. Republic of Iraq, 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 judgment in the first place.”). Once jurisdiction is satisfied, the court must determine whether default judgment is proper under the Eitel factors. See Eitel v.McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Specifically, a court should consider:
(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.Id. In applying the Eitel factors, “the factual allegations of the complaint, except those relating to damages, will be taken as true.” Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977).
b. Discussion
i. Jurisdiction
“When entry of default is sought against a party who has failed to plead or otherwise defend, a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties.” Tuli, 172 F.3d at 712. Plaintiff's assert claims arising under the AWPA and IRC. (Doc. 17.) The Court has subject matter jurisdiction over claims arising out of federal law, including the AWPA, 29 U.S.C. § 1854(a), and IRC, 28 U.S.C. § 1331. Venue and personal jurisdiction requirements are also satisfied because Defendants were properly served and are headquartered and doing business in Yuma, Arizona. (Doc. 17 at 3, ¶¶ 12-13.) Defendant Ag West is an Arizona Limited Liability Company headquartered in Yuma County, Arizona and is conducting business operations in Arizona. (Doc. 17 at 3, ¶ 12.) Defendant Mireles is a resident of the State of Arizona. (Id., ¶¶ 11-13.) After Plaintiffs completed service of the original complaint, summons, and accompanying documents upon Defendant Ag West by certified mail to the Department of Labor, (doc. 18-2 at 2), 29 U.S.C. § 1812(5), and by publication, (doc. 18 at 5-6), Ariz. R. Civ. P. 4.1(1), Defendant Ag West was served by mail to its last known addresses with the FAC, this Court's order extending the service deadlines, the summons, the original complaint, and this Court's order permitting alternative service. (Doc. 19 at 4); Fed.R.Civ.P. 5(b)(2)(C). After Defendant Mireles was served at the outset of this action (doc. 7), he was served with the FAC and accompanying documents by mail to his last known addresses. (Doc. 20); Fed.R.Civ.P. 5(b)(2)(C).
Accordingly, service is complete, and the Court has personal jurisdiction of the parties and subject matter jurisdiction over the causes of action.
ii. Eitel Factors
Having determined that this Court has jurisdiction, the Court will examine whether entry of default judgment is proper under the Eitel factors.
1. The First, Fifth, Sixth, and Seventh Eitel Factors
When Defendants have not responded or participated in any litigation, the “first, fifth, sixth, and seventh [Eitel] factors are easily addressed.” Zekelman Industries Inc. v. Marker, No. CV-19-02109-PHX-DWL, 2020 WL 1495210, at *3 (D. Ariz. March 27, 2020).
The first factor weighs in favor of default judgment because denying Plaintiffs' Amended Motion for Default will leave them “without other recourse for recovery,” PepsiCo, Inc. v. California Security Cans., 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002), and prejudice would exist if Plaintiffs' Motion was denied because they would lose the right to a “judicial resolution” of their claims. Elektra Entertainment Group, Inc. v. Crawford, 226 F.R.D. 388, 392 (C.D. Cal. 2005). The fifth factor weighs in favor of default judgment because the well-pleaded factual allegations in the FAC are taken as true, and there is no “genuine dispute of material facts” that would preclude granting the Amended Motion for Default. PepsiCo, 238 F.Supp.2d at 1177. The sixth factor considers whether the default was due to excusable neglect. Here, Defendants' failure to participate after being served does not indicate that default was due to excusable neglect. See Twentieth Century Fox Film Corp. v. Streeter, 438 F.Supp.2d 1065, 1071-1072 (D. Ariz. 2006). The seventh factor-favoring decisions on the merits-generally weighs against default judgment; however, “the mere existence of Rule 55(b) indicates that ‘this preference, standing alone, is not dispositive,'” PepsiCo, 238 F.Supp.2d at 1177, and is not sufficient to preclude the entry of default judgment in this case. Warner Bros. Entertainment Inc. v. Caridi, 346 F.Supp.2d 1068, 1073 (C.D. Cal. 2004) (explaining that the seventh Eitel factor “standing alone, cannot suffice to prevent entry of default judgment for otherwise default judgment could never be entered” and courts have concluded that “this factor does not weigh very heavily”). Here, a decision on the merits is impossible, given that Defendants failed to appear. In sum, the first, fifth, sixth, and seventh factors weigh in favor of default judgment.
2. The Second and Third Eitel Factors
The second and third Eitel factors-the merits of the claim and the sufficiency of the complaint-are “often analyzed together and require courts to consider whether a plaintiff has state[d] a claim on which [he] may recover.” Vietnam Reform Party v. Viet Tan-Vietnam Reform Party, 416 F.Supp.3d 948, 962 (N.D. Cal. 2019). Here, the Court must first examine Plaintiffs' status under the AWPA.
a. Violations of the AWPA
Plaintiffs allege they were agricultural workers within the meaning of the AWPA. (Doc. 17 at 3, ¶ 11.) Plaintiffs cite 29 U.S.C. § 1802(10)(A) for the definition of seasonal agricultural worker, which means
an individual who is employed in agricultural employment of a seasonal or other temporary nature and is not required to be absent overnight from his permanent place of residence-(i) when employed on a farm or ranch performing field work related to planting, cultivating, or harvesting operations; or (ii) when employed in canning, packing, ginning, seed conditioning or related research, or processing operations, and transported, or caused to be transported, to or from the place of employment by means of a day-haul operation.(Id.) Plaintiffs allege they were “employed in agricultural employment of a seasonal or other temporary basis in and around Yuma County, Arizona.” (Id.)
Plaintiffs further allege Defendants Mireles and Ag West are “farm labor contractors” within the meaning of the AWPA. (Id. at 3, ¶ 12-13.) The statute defines a “farm labor contractor” as
any person, other than an agricultural employer, an agricultural association, or an employee of an agricultural employer or agricultural association, who, for any money or other valuable consideration paid or promised to be paid, performs any farm labor contracting activity.29 U.S.C. § 1802(7). “‘[F]arm labor contracting activity' means recruiting, soliciting, hiring, employing, furnishing, or transporting any migrant or seasonal agricultural worker.” 29 U.S.C. § 1802(6). Plaintiffs allege Defendants recruited, solicited, hired, employed, furnished, or transported the Plaintiffs and other migrant and seasonal agricultural workers. (Doc. 17 at 3, ¶ 12-13.)
Plaintiffs allege that Defendants violated the AWPA's wage statement provisions by “failing to provide the Plaintiffs with wage statements listing the basis on which wages were paid; the number of piecework units earned; the number of hours worked, nor the specific sums withheld, if any; and the purpose of each sum withheld.” (Id. at 9, ¶ 38.) Plaintiffs argue the failure “to timely report a worker's earnings to the Internal Revenue Service so as to credit the worker's Social Security earnings record[]” also violates the wage payment provisions of the AWPA at 29 U.S.C. §§ 1822(a), 1832(a). (Doc. 30-1 at 10.) Plaintiffs allege that by failing to remit the appropriate Federal Insurance Contributions Act (“FICA”) and Federal Unemployment Tax Act (“FUTA”) taxes to the appropriate state and federal agencies, Defendants violated the AWPA's wage payment provisions. (Doc. 17 at 9, ¶ 38-39.)Plaintiffs allege these violations were intentional and were “the natural consequences of the conscious and deliberate actions of the Defendants, occurred as part of Defendants' regular business practices and were intentional within the meaning of the AWPA, 29 U.S.C. § 1854(c)(1).” (Id. at 10, ¶ 40.) Plaintiffs allege they suffered concrete, particularized injuries as a result, including the denial of, or delay in receiving, unemployment benefits to which they would otherwise be entitled, or the misreporting of wages to the Social Security Administration. (Doc. 17 at 10, Doc. 30-1 at 4, 21.)
Plaintiffs cite case law supporting the proposition that the failure to timely report earnings and remit FICA taxes violates the unpaid wages provision of the AWPA. (Doc. 30-1 at 10, citing Saintida v. Tyre, 783 F.Supp. 1368, 1372 (S.D. Fla. 1992); (Id. at 13, citing Fanette v. Steven Davis Farms, LLC, 28 F.Supp.3d 1243, 1262 (N.D. Fla. 2014)).
In Plaintiffs' Amended Motion for Default, Plaintiffs note both the complaint and First Amended Complaint cite the wrong code sections of the AWPA, i.e., §§ 1822(a), 1821(d)(2), which apply to migrant agricultural workers. (Doc. 30-1 at 2.) Plaintiffs maintain this was a scrivener's error, and that, because “[t]he Plaintiffs are seasonal agricultural workers [ ]the proper code sections are, in fact, 29 U.S.C. §§1831(c)(2) and 29 U.S.C. 1832(a).” (Id.) Plaintiffs argue, however, that “substantively this correction makes no difference in Plaintiffs' claims because the protections are the same, under both provisions, making this mistake nothing more than a typo in code sections.” (Id.) Plaintiffs assert they are willing to amend the complaint with the Court's leave. (Id.)
This Court concludes it is unnecessary for Plaintiffs to file an amended complaint to cite the correct code provisions. A plaintiff “is not required to state the statutory or constitutional basis for his claim, only the facts underlying it.” McCalden v. Cal. Libr. Ass'n, 955 F.2d 1214, 1223 (9th Cir. 1990) (superseded by rule on other grounds as explained in Harmston v. City & Cnty. of San Francisco, 627 F.3d 1273, 1279-80 (9th Cir. 2010)). “[U]nder the Federal Rules of Civil Procedure, a complaint need not pin plaintiff's claim for relief to a precise legal theory.” Skinner v. Switzer, 562 U.S. 521, 530 (2011). Federal Rule 8(a) “generally requires only a plausible ‘short and plain' statement of the plaintiff's claim, not an exposition of his legal argument.” Id. Furthermore, and importantly, the correct code provisions at 29 U.S.C. §§ 1831(c)(2), 1832(a)-which apply to seasonal farm workers-are substantively identical to §§ 1821(d)(2) and 1822(a)-which Plaintiffs cited in the FAC and apply to migrant farm workers. (Doc. 17 at 17, ¶¶ 38-39.) Consequently, Defendants still had fair notice of the allegations they were supposed to defend against. See Kuhn v. Three Bell Cap., No. 23-CV-02958-PCP, 2023 WL 6780524, at *2 (N.D. Cal. Oct. 12, 2023) (“[T]he complaint's allegations must give the defendant ‘fair notice' and ‘enable the . . . party to defend itself effectively.'”) (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)).
The FAC asserts Plaintiffs were agricultural workers “of a seasonal or other temporary basis,” and the Defendants farm labor contractors, under the AWPA. (Doc. 17 at 3.) Plaintiffs cited the correct statutory definition for seasonal agriculture worker in the FAC. (Doc. 17 at 3, ¶ 11, citing 29 U.S.C. § 1802(10)(A)). Plaintiffs Lopez, Marias, Enriquez, Vidal, and Bojorquez allege that for different periods of time between October 8th and November 12, 2021, Defendants paid them with non-payroll checks unaccompanied by any written statement detailing the basis of pay, the number of hours worked, the number of piecework units earned, and the specific sums withheld and the purpose of the withholding.(Doc. 17 at 3-4.) Plaintiffs allege that when Defendants started issuing payroll checks, the checks did not accurately reflect their year-to-date earnings. (Doc. 17 at 3-9.) Plaintiffs further allege their W2s did not accurately reflect their year-to-date earnings. (Doc. 17 at 3-9.) Plaintiffs Lopez, Marias, and Bojorquez further allege that Defendants had not reported non-payroll wages to the Arizona Department of Economic Security, which denied their applications for unemployment insurance due to insufficient reported earnings. (Doc. 17 at 5 ¶ 22, 7 ¶ 29, 9 ¶ 36.)
The number of non-payroll checks each Plaintiff received and the specific dates involved varies by Plaintiff. (Doc. 17 at 5-9.)
Because the Court accepts these allegations as true and finds that Defendants are farm labor contractors who recruited, solicited, hired, employed, furnished, or transported the Plaintiffs and other migrant and seasonal agricultural workers (Id. at 4, ¶¶ 15-18), Plaintiffs have “state[d] a claim on which the [they] may recover.” PepsiCo, 238 F.Supp.2d at 1175. Thus, the second and third Eitel factors support an entry of default judgment with respect to Plaintiffs' AWPA claims.
b. Plaintiffs' Internal Revenue Code claims
The Internal Revenue Code, 26 U.S.C. § 7434(a) provides, “If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, such other person may bring a civil action for damages against the person so filing such return.” “Information returns” include annual income tax and FICA statements. 26 U.S.C. § 6724(d)(1)(A). Upon a finding of liability under § 7434(a), “the defendant shall be liable to the plaintiff in an amount equal to the greater of $5,000 or the sum of-(1) any actual damages sustained by the plaintiff as a proximate result of the filing of the fraudulent information return (including any costs attributable to resolving deficiencies asserted as a result of such filing), (2) the costs of the action, and (3) in the court's discretion, reasonable attorneys' fees.” 26 U.S.C. § 7434(b). If the Court finds a defendant liable under this section, “[t]he decision of the court awarding damages . . . shall include a finding of the correct amount which should have been reported in the information return.” 26 U.S.C. § 7434(e). When bringing an action under this section, plaintiffs are required to file a copy of the complaint with the Internal Revenue Service. 26 U.S.C. § 7434(d).
All Plaintiffs allege that Defendant Ag West “willfully filed W-2 forms containing fraudulent information regarding [those Plaintiffs'] earnings[]” for the year 2021. (Doc. 17 at 10, ¶ 43.) Plaintiffs allege Ag West violated section 7434 by omitting from their W2s the earnings they received through non-payroll checks. (Id.) These allegations, accepted as true, establish that Ag West willfully filed fraudulent earnings information. Thus, the second and third Eitel factors support an entry of default judgment with respect to Plaintiffs' IRC claims.
3. The Fourth Eitel Factor
The fourth Eitel factor considers “the amount of money at stake in relation to the seriousness of Defendant's conduct.” PepsiCo, 238 F.Supp.2d at 1176. “If the sum of money at stake is completely disproportionate or inappropriate, default judgment is disfavored.” Twentieth Century Fox Film Corp., 438 F.Supp.2d at 1071.
Here, Plaintiffs seek $500 each in statutory damages “or actual damages if greater[,]” for the AWPA violations; $5,000 each in statutory damages against Defendant Ag West for violations of the Internal Revenue Code, 26 U.S.C. § 7434(b); injunctive relief requiring Defendants to file amended information on Plaintiffs' W2 tax forms; injunctions against further violations under the AWPA; and reasonable attorneys' fees and costs. (Doc. 17 at 11.) Plaintiffs allege a total of $35,500 in statutory damages. (Doc. 30-1 at 24.)
The Court finds that the amount requested is reasonable and not disproportionate or inappropriate. The specific amounts of pecuniary damages Plaintiffs seek, aside from reasonable attorney fees, are prescribed by statute. 26 U.S.C. § 7434(b); 29 U.S.C. § 1854(c)(1). Thus, the fourth Eitel factor weighs in favor of default judgment. Overall, the Court finds that the Eitel factors weigh in favor of entering default judgment against Defendants.
iii. Damages
1. Statutory Damages
Having found that entry of default judgment is proper under the Eitel factors, the Court will turn to the issue of damages. Unlike the allegations in the FAC, the Court does not take allegations relating to damages as true. Geddes, 559 F.2d at 560; see also TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Indeed, plaintiffs have the burden of “proving up” damages, and “if the facts necessary to determine damages are not contained in the complaint, or are legally insufficient, they will not be established by default.” Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003). Courts may rely on declarations submitted by the plaintiff in determining appropriate damages. Tolano v. El Rio Bakery, No. CV-18-00125-TUC-RM, 2019 WL 6464748, at *6 (D. Ariz. Dec. 2, 2019) (citing Philip Morris USA, Inc., 219 F.R.D. at 498).
Plaintiffs cite $35,500 in total statutory damages. (Doc. 30-1, at 24.) Plaintiffs' damages computation is as follows:
| Violation of 26 U.S.C. 7434 | Wage statements 29 USC 1822(d)(2) or 1831(c)(2) | Wage payment 29 USC 1822(a) or 1831(a) | TOTAL DAMAGES | TOTAL NOT REPORTED ON FORM | |
| Zeferino Lopez | $5000 | $500 | $500 | $6000 | $1,755 |
| Juan Enriquez | $5000 | $500 | $500 | $6000 | $2,909.07 |
| Jorge Delgado Marias | $5000 | $500 | $500 | $6000 | $776.36 |
| Manuel Gamez Bojorquez | $5000 | $500 | $500 | $6000 | $1,400 |
| Florentino Galindo Vidal | $5000 | $500 | $500 | $6000 | $2,496.26 |
| Ramiro Rocha | $5000 | $500 | $5500 | $530.08 |
Without addressing each factor in detail, the Court finds that the total AWPA damages-i.e., $500 per Plaintiff per violation of code sections 29 U.S.C. §§ 1831(c)(2), 1832(a)-considering the number of Plaintiffs involved, is not unduly burdensome or disproportionate to the violations alleged. Plaintiffs allege repeated, substantive violations of federal law affecting their eligibility for state and federal benefits and the benefit amounts. (Doc. 17 at 10, ¶ 41, Doc. 30-1 at 4, 13.) Plaintiffs cite caselaw indicating that $500 damages are consistent with those awarded in other, similar cases. (Doc 30-1 at 18, citing Leach v. Johnston, 812 F.Supp. 1198, 1212 (M.D. Fla. 1992); Avila v. A. Sam & Sons, 856 F.Supp. 763 (W.D.N.Y. 1994), affd sub nom. Avila v. A. Sam & Sons Produce Co., 60 F.3d 812 (2d Cir. 1995)). It is also apparent that Defendants were able to comply with these code provisions, as they eventually complied with the law and issued wage statements through their payroll system while withholding the appropriate taxes. (Doc. 17 at 5, ¶ 20, 6 ¶ 24, 7 ¶ 27, 8 ¶¶ 31, 34.) These facts go to the Defendants' culpability and their ability to prevent future violations. Plaintiffs also state the current action is the only way they will recover under the AWPA, and that they have not recovered on other related claims. (Doc. 30-1 at 20.)
The Court also finds Plaintiffs entitled to $5,000 per violation of 26 U.S.C. § 7434. Section 7434 provides that the defendant “shall be liable to the plaintiff in an amount equal to the greater of $5,000 or the sum of-(1) any actual damages sustained by the plaintiff as a proximate result of the filing of the fraudulent information return (including any costs attributable to resolving deficiencies asserted as a result of such filing), (2) the costs of the action, and (3) in the court's discretion, reasonable attorneys' fees.” Plaintiffs do not allege damages exceeding the $5,000 amount. (Doc. 17 at 11.) Plaintiffs are seeking the minimum statutory penalty under this code section. Overall, the Court finds Plaintiffs' demands accurately encapsulate their statutory entitlement. 26 U.S.C. § 7434(b); 29 U.S.C. § 1854(c)(1).
2. Injunctive Relief
The AWPA countenances injunctive relief. 29 U.S.C. § 1854(c)(1). Plaintiffs seek relief “[e]njoining Defendants from failing to file with the Internal Revenue Service amended W-2 forms so as to include the full amount of the Plaintiffs' earnings with Defendant Ag West Logistics, LLC[,]” and to permanently enjoin Defendants from violating the AWPA. (Doc. 17 at 11.)
The Court finds the specific injunctive relief requested to be appropriate, e.g., Sanchez v. Overmyer, 891 F.Supp. 1253, 1259 (N.D. Ohio 1995), but the Court would decline to issue an overbroad injunction prohibiting Defendants from future violations of the AWPA. (Doc. 17 at 11.) “Injunctions are not set aside under [Federal Rule of Civil Procedure] 65(d) unless they are so vague that they have no reasonably specific meaning.” E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1297 (9th Cir. 1992) (citing Portland Feminist Women's Health Center v. Advocates for Life, 859 F.2d 681, 685 (9th Cir.1988)). While the Ninth Circuit has “not adopted a rule against ‘obey the law' injunctions per se[,]” F.T.C. v. EDebitPay, LLC, 695 F.3d 938, 944 (9th Cir. 2012), “the language of injunctions [must] be reasonably clear so that ordinary persons will know precisely what action is proscribed.” Portland Feminist Women's Health Ctr. v. Advocs. for Life, Inc., 859 F.2d 681, 685 (9th Cir. 1988) (quotations and citations omitted). The Court finds an injunction requiring Defendants to follow the AWPA “and its attendant regulations” (doc. 17 at 11) is overbroad. The Court recommends injunctive relief requiring Defendants to “report Plaintiffs' full earnings to the Internal Revenue Service for the 2021 lemon harvest season.” (Doc. 30-1 at 23.)
3. Attorneys' Fees and Costs
Additionally, the Court concludes that Plaintiffs are entitled to reasonable attorneys' fees and costs, which Plaintiffs must separately move for. Fed.R.Civ.P. 54(d).
III. Conclusion and Recommendation
Having reviewed Plaintiffs' Amended Motion for Default and the underlying documents in the record, the Court finds that the Eitel factors weigh in favor of granting default judgment for Plaintiffs for the requested amount.
Accordingly, IT IS RECOMMENDED that Plaintiffs' Amended Motion for Default (doc. 30) be GRANTED.
IT IS FURTHER RECOMMENDED that Plaintiffs be awarded $35,500 in total statutory damages under the AWPA and IRC as set forth in their memorandum accompanying their Amended Motion for Default, and that those damages be apportioned accordingly. (Doc 30-1 at 24.)
IT IS FURTHER RECOMMENDED that, of the $35,500 in total statutory damages, Defendants Mireles and Ag West be held jointly and severally liable for the $5,500 in cumulative statutory violations under the AWPA.
Other Courts have found joint and several liability appropriate for individual LLC owners as “agricultural employers” under the AWPA. Leiva v. Clute, No. 4:19-CV-87-TLS-JPK, 2020 WL 8514822, at *21 (N.D. Ind. Dec. 16, 2020), report and recommendation adopted, No. 4:19-CV-87 RLM-JPK, 2021 WL 307302 (N.D. Ind. Jan. 29, 2021); Jimenez v. GLK Foods LLC, No. 12-CV-209, 2016 WL 2997498, at *17-18 (E.D. Wis. May 23, 2016).
IT IS FURTHER RECOMMENDED that, of the $35,500 in total statutory damages, Defendant Ag West be held solely liable for the remaining $30,000 in statutory violations under the IRC.
Plaintiffs only allege violations of the IRC against Defendant Ag West. (Doc. 17 at 10-11).
IT IS FURTHER RECOMMENDED that, consistent with 26 U.S.C. § 7434(e), the Court find Defendants under-reported Plaintiffs' earnings in the following amounts: Zeferino Lopez, $1,755; Juan Enriquez, $2,909.07; Jorge Marias, $776.36; Manuel Bojorquez, $1,400; Florentino Vidal, $2,496.26; Ramiro Rocha, $530.08. (Doc. 30-1 at 24.)
IT IS FURTHER RECOMMENDED that, consistent with 26 U.S.C. § 7434(e), the Court find Plaintiffs' correct total wages from Defendant Ag West for the year 2021 are as follows: Zeferino Lopez, $5,818.93; Juan Enriquez, $9,485.18; Jorge Delgado Marias, $4,629.18; Manuel Gamez Bojorquez, $4,973.37; Florentino Galindo Vidal, $6,154.39; Ramiro Rocha, $9,886.92.
The Court calculated these sums by adding Plaintiffs' under-reported earnings (Doc. 301 at 24) with the total “wages, tips, [and] other compensation” stated on each Plaintiff's 2021 W2 form provided by Defendant Ag West. (Doc. 30-2 at 11; Doc. 30-3 at 20; Doc. 30-4 at 15; Doc. 30-5 at 13; Doc 30-6 at 14; Doc. 30-7 at 18.)
IT IS FURTHER RECOMMENDED that the Court order Defendants to file amended W2 forms for all Plaintiffs setting forth the true amount of their total earnings as set forth above within ninety (90) days of the Court's adoption of this Report and Recommendation, if it is adopted.
IT IS FURTHER RECOMMENDED that Plaintiffs have no later than 14 days after entry of Judgment to file an application for attorneys' fees and costs.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment. The parties shall have 14 days from the date of service of a copy of this Report and Recommendation within which to file specific written objections with the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(b) and 72. Thereafter, the parties have 14 days within which to file a response to the objections. Failure to timely file objections to the Magistrate Judge's Report and Recommendation may result in the acceptance of the Report and Recommendation by the district court without further review. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003). Failure to timely file objections to any factual determinations of the Magistrate Judge will be considered a waiver of a party's right to appellate review of the findings of fact in an order of judgment entered pursuant to the Magistrate Judge's Report and Recommendation. See Fed.R.Civ.P. 72 .