Opinion
22-cv-03609-JCS
04-27-2023
OPERATING ENGINEERS HEALTH AND WELFARE TRUST FUND FOR NORTHERN CALIFORNIA, et al., Plaintiffs, v. EMPIRE ENGINEERING & CONSTRUCTION, INC., et al., Defendants.
REPORT AND RECOMMENDATION RE MOTION FOR DEFAULT JUDGMENT RE: DKT. NO. 23
JOSEPH C. SPERO UNITED STATES MAGISTRATE JUDGE
I. INTRODUCTION
Plaintiffs-several union benefit trust funds and their trustees- assert claims against Defendants Empire Engineering & Construction, Inc. (“Empire Engineering”), Burch Engineering & Construction, Inc. (“Burch Engineering”), Clifton James Burch, and Elethia Marie Gentry Burch, under the Employee Retirement Income Security Act (“ERISA”) related to Defendants' late and unpaid fringe benefit contributions and refusal to undergo an audit. Defendants failed to appear or respond to the Complaint and the Clerk entered their default on October 20, 2022. Dkt. no. 15. Presently before the Court is Plaintiffs' Motion for Default Judgment Against All Named Defendants (“Motion”). The undersigned magistrate judge held a hearing on the Motion on April 14, 2023, and thereafter took supplemental briefing and evidence. For the reasons discussed below, the undersigned recommends that the motion be GRANTED.
The trust fund plaintiffs (collectively, “the Trust Funds”) are: Operating Engineers' Health and Welfare Trust Fund for Northern California (“Health Fund”); Pension Trust Fund for Operating Engineers (“Pension Fund”); Pensioned Operating Engineers' Health And Welfare Trust Fund (“Pensioned Health Fund”); Operating Engineers and Participating Employers Pre-Apprentice, Apprentice and Journeymen Affirmative Action Training Fund (“Affirmative Action Training Fund”); Operating Engineers Local Union No. 3 Vacation, Holiday and Sick Pay Trust Fund (“Vacation Fund”); and Operating Engineers Local 3 Heavy And Highway Trust Fund. See Compl. (dkt. 1) at 1.
Because Defendants have not appeared in the case and consented to the jurisdiction of a magistrate judge under 28 U.S.C. § 636(c), this case will be reassigned to a United States district judge for all further proceedings, including action on the recommendations of this report. Any party may file objections to these recommendations no later than fourteen days after being served with a copy of this report. As stated in the conclusion of this report, Plaintiffs are instructed to serve a copy of this report on Defendants and file proof of service to that effect.
Because a plaintiff's allegations are generally taken as true in the context of default judgment, this section summarizes Plaintiffs' allegations as if true. Nothing in this section should be construed as resolving any issue of fact that might be disputed if Defendants were to appear.
A. Factual Background
On or about September 1, 2011, Defendant Clifton Burch, on behalf of Defendant Empire Engineering, entered into the Independent Northern California Construction Agreement (the “Independent Agreement”) with the Operating Engineers Local Union No. 3 of the International Union of Operating Engineers, AFL-CIO (“Union”), which incorporates the Master Agreement (“Master Agreement”) between the Union and the Associated General Contractors of California, Inc. (“AGC”). Compl. (dkt. 1) ¶ 10; see also Brown Decl. ¶ 7 & Exs. A (Independent Agreement) B (2016-2020 Master Agreement), C (2020-2023 Master Agreement). The Independent Agreement and the Master Agreements (together, “the Collective Bargaining Agreements”), which incorporate the terms of the trust fund agreements that formed the Trust Funds (“Trust Agreements”), require the signatory employer (here, Empire Engineering) to pay contributions to various benefits funds, and authorize Plaintiffs to conduct audits and collect those contributions. Compl. ¶¶ 10-11; see also Brown Decl., Exs. B & C, Section 12.00.00-12.14.00 (governing obligations relating to fringe benefit contributions), D (sample trust agreement); Supplemental Declaration of Matthew Minser in Support of Plaintiffs' Motion for Default Judgment (“Minser Supp. Decl.”) ¶¶ 12-13 & Exs. A-J (remaining trust agreement excerpts).
The Court refers to the master agreements that cover the relevant period for this action, attached to the Brown Declaration as Exhibits B and C, as “the Master Agreements.”
Paragraph 12 of the Independent Agreement states that if the employer is a corporation, its principal shareholder(s) will “personally guarantee all payments of wages and fringe benefits, including fringe benefit contributions, liquidated damages, interest and collection costs, including, but not limited to, attorney's fees and auditor/accountant fees.” Compl. ¶ 10; Brown Decl., Ex. A (Independent Agreement), Paragraph 12. Plaintiffs allege that Defendant Clifton Burch was Defendant Empire Engineering's principal shareholder until April 2019 and that Defendant Elethia Marie Gentry Burch is currently Defendant Empire Engineering's principal shareholder. Compl. ¶ 10; see also Minser Decl., ¶¶ 12-13 (stating that searches of California Secretary of State website showed that Empire Engineering's November 24, 2020 Statement of Information listed Defendant Clifton Burch as the corporation's CEO, Secretary, CFO, Director, and Agent for Service of Process, while its November 2, 2021 Statement of Information listed Defendant Elethia Gentry Burch as the corporation's CEO, Secretary, CFO, Director, and Agent for Service of Process) & Exs. C (November 24, 2020 Statement of Information), D (November 2, 2021 Statement of Information).
According to the Complaint, Elethia Gentry Burch (who is married to Clifton Burch) also became the sole individual associated with Empire Engineering's Contractor's License - taking over for Clifton Burch on May 31, 2019. Compl. ¶¶ 18, 19. The Complaint alleges that this change was made after “Defendant Clifton Burch was convicted on or about February 20, 2019 of conspiring to defraud the United States in connection and conspiracy to commit mail and wire fraud all in connection with a federal construction contract[]” and that “a California Contractor's License may be denied based on an applicant's conviction for fraud.” Id. ¶ 21; see also Minser Decl. ¶ 8 (stating that “based on public records . . . Defendant Empire Engineering's California Contractor's License was first issued on February 10, 2005 and was reissued on May 30, 2008[,]” that “Defendant Empire Engineering's Contractor's License was associated solely with Clifton Burch from February 10, 2005 through April 23, 2019” and that “[a]s of May 31, 2019, Defendant Empire Engineering's California Contractor's License has been solely associated with Elethia Marie Gentry Burch”) & Ex. A (personnel list from the California Contractor's State License Board (“CSLB”) website as of June 10, 2022), B (contractor's license details from CSLB website).
According to the Complaint, Paragraphs 7 and 10 of the Independent Agreement provide that a related or successor entity to the signatory employer may be liable under the Collective Bargaining Agreements. Compl. ¶¶ 14-15; Brown Decl., Ex. A (Independent Agreement). In particular, Paragraph 7 provides:
If the Individual Employer forms or participates in a corporation, association, partnership, joint venture or firm for the purpose of performing work covered by this Agreement and which is controlled directly or indirectly by the Individual Employer, the Individual Employer shall notify the Union in writing the date following the formation or participation of the name and address of such entity. If the Individual Employer fails to give such notification it will pay into the Operating Engineers' Pension Trust Fund an amount not to exceed the wages, straight time and overtime, and fringe benefits that it would have paid if it had performed the work, plus twenty-five percent (25%) of the total amount not as a penalty but by way of liquidated damages.Compl. ¶ 14; Brown Decl., Ex. A (Independent Agreement), Paragraph 7. Paragraph 10 provides:
If the Individual Employer sells or transfers any or all of its assets, stock and/or operation, it will pay all fringe benefits including contributions, liquidated damages, interest and collection costs, including, but not limited to, attorney's fees and auditor/accountant fees it owes prior to the sale or transfer. If the Individual Employer sells or transfers any or all of its assets, stock, and/or operations, it will provide as a term of the sale or transfer that the buyer or transferee shall recognize the Union as the Employees' bargaining agent and will assume this Agreement.Compl. ¶ 15; Brown Decl., Ex. A (Independent Agreement), Paragraph 10. Plaintiffs allege that Defendant Burch Engineering is the successor of Defendant Empire Engineering and is therefore bound by the Independent Agreement pursuant to Paragraphs 7 and 10. Compl. ¶ 16; see also Minser Decl. ¶ 16 & Exs. F-M (evidence that Burch Engineering is a successor entity of Empire Engineering). Consequently, they allege, Burch Engineering is liable for all amounts Defendant Empire Engineering owes to Plaintiffs and is also bound to comply with Defendant Empire Engineering's obligation to submit to an audit. Compl. ¶ 17.
Under the Collective Bargaining Agreements and Trust Agreements, Defendants are required to regularly pay fringe benefit contributions, the amounts of which are determined by the hours worked by Defendants' employees. Compl. ¶ 12; see also Brown Decl. ¶¶ 11-15 & Exs. B-D. Contributions are due on the fifteenth (15th) day of the month following the month in which hours were worked and are considered delinquent if not received by the twenty-fifth (25th) day of that month. Id. Defendants are also required, pursuant to the Collective Bargaining Agreements and Trust Agreements, to pay liquidated damages in the amount of ten percent (10%) for each delinquent contribution, but in the amount of twenty percent (20%) for each delinquent contribution which is the subject of litigation. Id. Moreover, the Collective Bargaining and Trust Agreements provide that interest accrues on delinquent contributions at the rates reasonably set by the Trustees from the date they become delinquent, which is the twenty-sixth (26th) day of the month in which payment was due, until paid in full. Id.
The Collective Bargaining Agreements and Trust Agreements further require Defendants to maintain time records or timecards, and to permit an authorized Trust Fund representative to examine such records of Defendants as is necessary to determine whether Defendants have made full payment of all sums owed to ERISA Plaintiffs. Compl. ¶ 13. Should an audit of Defendants' records reveal Defendants have failed to provide full and prompt payment of all sums due to Plaintiffs, Defendants are required under the agreement to reimburse Plaintiffs for the amounts due, including audit fees. Id.
Plaintiffs allege in the Complaint that Defendants: 1) failed and refused to comply with an audit of their payroll records for the period from January 1, 2017 through December 31, 2020; 2) refused to report and pay contributions for hours worked by their employees during the months of September 2019, January 2020, and March 2021 through April 2022; and 3) failed to pay liquidated damages and interest on late paid contributions for the months of October 2018 through December 2018, June 2019, October 2019 through December 2019, February 2020 through March 2020, and May 2020 through February 2021. Id. ¶¶ 34-36.
Plaintiffs assert a claim under federal common law for successor liability against Defendant Burch Engineering (Claim One) and a claim against all Defendants for audit compliance, payment of delinquent contributions, interest, liquidated damages, attorneys' fees and costs under ERISA and the Labor Management Relations Act (“LMRA”) (Claim Two). Id. ¶¶ 3851. They ask the Court to award: 1) any unpaid contributions, due at the time of Judgment, including those determined as due by audit, timecards, or otherwise, including estimated contributions for any months Defendants fail to report to Plaintiffs, under ERISA, 29 U.S.C. § 1132(g)(2)(A), and the Collective Bargaining Agreements; 2) liquidated damages on any late-paid and unpaid contributions in an amount provided for under the Collective Bargaining Agreements, Trust Agreements and ERISA, 29 U.S.C. § 1132(g)(2)(C); 3) interest under § 1132(g)(2)(B); and 4) attorneys' fees and costs (including audit fees) under § 1132(g)(2)(D) and (E), the terms of the Collective Bargaining Agreements and the LMRA. Id.
B. Plaintiffs' Motion
In the Motion, Plaintiffs ask the Court to enter default judgment against all Defendants and award the following relief: 1) an order for Defendants to promptly submit to an audit of Empire Engineering for the time period January 1, 2017 through the December 31, 2020 and provide the necessary records to complete the audit; 2) estimated contributions, liquidated damages and interest in the amount of $92,298.90, based on unpaid contributions for the months of September 2019, January 2020, and March 2021 through December 2022 and late-paid contributions before this action was filed for the months of October through December 2018, June 2019, October through December 2019, February 2020, March 2020, and May 2020 through February 2021; 3) attorneys' fees in the amount of $10,271; and 4) costs in the amount of $1,262.29.
III. ANALYSIS
A. Legal Standards
After default has been entered against a party, a district court may grant an application for default judgment in its discretion. See Fed.R.Civ.P. 55(b)(2). If the court is satisfied that jurisdiction is proper and that service of process upon the defendant was adequate, it then considers several factors in determining whether to grant default judgment:
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In making its decision, the court takes all factual allegations in the complaint, except those relating to damages, as true. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (citing Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)).
B. Jurisdiction and Service of Process
As a preliminary matter, a court considering a motion for default judgment must determine whether it has both subject matter jurisdiction and personal jurisdiction, and dismiss sua sponte if it does not. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). The Court has “federal question” subject matter jurisdiction because Plaintiffs' claims “aris[e] under the . . . laws . . . of the United States,” specifically, ERISA. See 28 U.S.C. § 1331. The Court further finds that service on all defendants was adequate under Rule 4(e) and (h) of the Federal Rules of Civil Procedure as Plaintiffs personally served all named Defendants on August 30, 2022, and a Proof of Service of Summons was filed with this Court on October 14, 2022. See dkt. no. 13.
C. Eitel Factors
Several of the Eitel factors weigh in favor of granting default judgment simply because Defendants have not appeared in this action. As Defendants have failed to respond to the complaint or otherwise appear in this action, Plaintiffs will be left without a remedy, and therefore prejudiced, if default judgment is not granted. The sum of money is not so high as to weigh against granting judgment to the extent that damages are supported by evidence, an issue discussed separately below.
Defendants were properly served -- and there is no indication that their default is due to excusable neglect. To the contrary, Plaintiffs have supplied a declaration by the individual who was responsible for conducting an audit of Empire Engineering, Michael Quackenbush, who describes sending an official notification letter to Empire Engineering seeking records related to its unpaid contributions, as well as a follow-up email to Clifton Burch. Quackenbush Decl. ¶¶ 4-6 & Ex A (January 18, 2022 audit notification letter). According to Quackenbush, Mr. Burch responded to the email the same day stating: “To whom it may concern: I've been charged and convicted of a Federal Crime and No longer with the firm. In fact the firm is No longer doing business. In closing get in line with all the rest and do what you need to do.” Id. ¶ 6. Quackenbush further states that none of the requested records was ever provided and therefore the audit never occurred. Id.
Because Defendants have failed to respond to this action, no material facts in the record justify denying Plaintiffs' request for default judgment. Finally, while there is a strong public policy favoring the resolution of disputes on the merits, that is not possible in this case because Defendants have failed to appear to defend the case, and there is no indication that they intend to do so. The remaining factors, “the merits of plaintiff's substantive claim” and “the sufficiency of the complaint,” are intertwined where, as here, the case has not advanced beyond the pleading stage. Those factors also favor Plaintiffs' request for entry of default judgment.
In particular, ERISA authorizes the type of recovery Plaintiffs seek. Employers are required by law to make contributions to multiemployer plans as provided by collective bargaining agreements. 29 U.S.C. § 1145. If an employer fails to do so, a fiduciary of the plan may bring an action to recover:
(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 (or such higher percentage as may be permitted under Federal or state law)
(D) reasonable attorney's fees and costs of the action, to be paid by the defendant, and
(E) such other legal or equitable relief as the court deems appropriate.29 U.S.C. § 1132(g)(2). Each category of relief that Plaintiffs seek is authorized by subparts (A) through (E) of the statute. Further, LMRA section 301 allows third party beneficiaries to enforce an employer-labor organization agreement. Bd. of Motion Picture Indus. Pension Plan v. Revolver Film Co. U.S.A. Ltd., No. CV 16-5295-RSWL-EX, 2017 WL 3457107, at *4 (C.D. Cal. Aug. 11, 2017) (citing Audit Servs., Inc. v. Rolfson, 641 F.2d 757, 760 (9th Cir. 1981)). Thus, Plaintiffs are entitled to enforce the Trust Agreements and Collective Bargaining Agreements against Defendants.
Moreover, Plaintiffs have sufficiently alleged that Defendants breached their obligations to report and pay fringe benefits as required by the Collective Bargaining Agreements and the various trust documents they incorporate. These allegations are sufficient to establish liability not only as to the employer signatory, Empire Engineering, but also as to the principal shareholder Defendants (Clifton and Elethia Burch) and the successor entity, Burch Engineering, under the terms of the Independent Agreement, discussed above.
The Court further finds that in addition to the facts alleged in the Complaint establishing liability on the part of these defendants, Plaintiffs have presented evidence to support the conclusion that they are liable for the alleged violations of ERISA by Empire Engineering. In particular, Plaintiffs have presented evidence, cited above, showing that Clifton Burch was principal shareholder of Empire Engineering until April 2019 and that from May 2019 to the present, Elethia Burch has been principal shareholder. Likewise, Plaintiffs have presented evidence, cited above, that Burch Engineering is the successor to Empire Engineering.
Therefore, the Court concludes that entry of default judgment on Plaintiffs' claims is warranted as to all Defendants.
D. Relief Sought
Once liability is established through a defendant's default, a plaintiff is required to establish that the requested relief is appropriate. Geddes v.Grp., 559 F.2d 557, 560560 (9th Cir. 1977) (citing Pope v. United States, 323 U.S. 1, 12 (1944)). Plaintiffs must submit proof of their damages. See TeleVideo, 826 F.2d at 917-18.
1. Damages
a. Delinquent contributions
Plaintiffs seek $64,573.44 in unpaid contributions for the 24 months listed above, in Section II(B). Motion at 1-2; Minser Decl. ¶¶ 24, 28-33. Because Defendants did not report contributions due for these months, Plaintiffs estimated the amount due for each month using the Trust Funds' Collection Procedures, which provide that when an employer fails to submit monthly contribution reports to reports the hours worked by its employees (and pay the fringe benefits thereon), the Plaintiff Trust Funds are authorized to make an estimate of unreported amounts due based on the last report submitted, or an average of the last three months reported, whichever is greater. Brown Decl. ¶ 17; Minser Supp. Decl. ¶ 24 & Ex. K (Delinquency Collection Procedures). The last three months Defendants reported were December 2020, January 2021, and February 2021 and the average amount of the contributions paid for those months was $2,690.56. Minser Decl. ¶ 24(a); Minser Supp. Decl. ¶ 25 & Ex. L. Estimating the amount of unpaid contributions using that amount gives rise to the total amount sought by Plaintiffs for unpaid contributions, which should be awarded in full.
b. Liquidated damages on late and unpaid contributions
Plaintiffs' requests for liquidated damages fall into two categories: 1) those that are based on contributions that were paid late but before this action was initiated; and 2) those that are based on contributions that were unpaid at the time this action was initiated or subsequently came due and have not been paid.
As to the first category of liquidated damages, it is unclear whether these are authorized under ERISA because these amounts became due and were paid before the lawsuit was filed, in June 2022. See Idaho Plumbers & Pipefitters Health & Welfare Fund v. United Mech. Contractors, Inc., 875 F.2d 212, 216 (9th Cir. 1989). The undersigned has concluded, however, that liquidated damages may be available as a matter of contract on such late payments. Bd. of Trs. of Laborers Health & Welfare Trust Fund for N. Cal. v. Perez, 2011 WL 6151506, at * 11 (N.D. Cal. Nov.7, 2011). In particular, contractual liquidate damage and interest provisions are enforceable where “(1) it is ‘very difficult or impossible' to calculate the harm that stems from the breach, and (2) the amount of damages is a ‘reasonable forecast of just compensation for the harm.'” Trustees of Bricklayers Loc. No. 3 Pension Tr. v. Huddleston, No. 10-1708 JSC, 2013 WL 2181532, at *6 (N.D. Cal. May 20, 2013) (citing Idaho Plumbers, 875 F.2d at 217). Those requirements are met here.
First, “[w]hen 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.” See Bd. of Trustees v. Udovch, 771 F.Supp. 1044, 1048 (N.D. Cal. 1991). Second, the terms of the Master Agreements indicate that the parties have made a “good faith effort to set an amount equivalent to the damages they anticipate.” Id. (internal citations omitted). In particular, the liquidated damages provision in the Master Agreements provides:
It would be extremely difficult and impractical to fix the actual expense and damage to the Funds for each Individual Employer's default. Therefore, the amount of liquidated damages to the Trust Funds resulting from any Individual Employer's default, over and above attorneys' fees, audit fees and interest for delinquent contributions, shall be 10% of the unpaid contributions as of the delinquent date. However, if a lawsuit to collect delinquent contributions has been filed, the amount of liquidated damages on the unpaid contributions shall be increased to an amount equal to the greater of 20% of the unpaid contributions, or interest on the amount of the unpaid contributions from the delinquent date until the dates they are paid in full, at the rate referred to in Section 12.13.02 below.Brown Decl., Exs. B, C (Master Agreements), Section 12.13.01; see also id. Ex. D (Pension Fund Trust Agreement), Seventeenth Amendment to Article II, Section 10, Section 1(A)(3)(b), p. 2; Minser Supp. Decl. ¶¶ 15-16 & Exs. A-J; Huddleston, 2013 WL 2181532, at *6 (N.D. Cal. May 20, 2013) (finding on default judgment that similar language in collective bargaining agreement was sufficient to meet second Idaho Plumbers requirement for contractual enforcement of liquidated damages provision). Therefore, the Court finds that Plaintiffs are entitled to recover liquidated damages on contributions that were paid late but before this action was initiated as a matter of contract. The Court further finds that Plaintiffs have offered sufficient evidence to establish that they are entitled to $6,874.36 as to this category of liquidated damages, which was calculated using the 10% rate set forth in the Master Agreements and the contributions actually paid for the months at issue. See Brown Decl. ¶ 18.
Plaintiffs are also entitled to liquidated damages on the second category of unpaid contributions, both under ERISA and the relevant liquidated damages provisions in the Master Agreements (quoted above), the Trust Agreements and the Delinquency Collection Procedures, which provide for liquidated damages at a rate of 20% once a lawsuit has been filed. Brown Decl., Exs. B and C (Master Agreements), Section 12.13.01; Exhibit D (Pension Fund Trust Agreement), Seventeenth Amendment to Article II, Section 10, Section 1(A)(3)(b), p. 2; Minser Supp. Decl., Ex. K (Delinquency Collection Procedures). The Court further finds that Plaintiffs have offered sufficient evidence to establish that they are entitled to $12,914.64 as to this category of liquidated damages, which was calculated using the 20% rate set forth in the Master Agreement and the estimated contributions discussed above. See Minser Decl. ¶ 24.
The supplemental materials reflect that some of the trust agreements contain liquidated damages provisions that differ somewhat from the provisions in the Master Agreement. See Minser Supp. Decl. ¶ 16 & Exs. E,F, I, H and J. However, all of those trust agreements provide that the Board of Trustees is authorized to formulate and implement rules and regulations with regard to the collection of employer contributions. Id. Pursuant to those provisions, the Board of Trustees have adopted the Delinquency Collection Procedures, which specify that once a lawsuit has been filed, liquidated damages are calculated at twenty percent (20%), which is the rate Plaintiffs have used to calculate their liquidated damages here.
c. Interest
Plaintiffs seek $7,936.46 in interest on late and unpaid contributions. Motion at 2. The Master Agreement provides that “[u]npaid contributions shall accrue late interest charges from the delinquent date until paid, at the rate of 10% per year simple interest beginning on the delinquent date.” Brown Decl., Exs. B, C, Section 12.13.02; see also Minser Supp. Decl., Ex. K (Delinquency Collection Procedures). This provision may be enforced both as a matter of contract, for the reasons discussed above, and ERISA. See Sheet Metal Workers Pension Tr. of N. California v. Evolution Sheet Metal & Metal Fabrication, Inc., No. 20-CV-02110-PJH (LB), 2021 WL 3864585, at *9 (N.D. Cal. Mar. 25, 2021), report and recommendation adopted, No. 20-CV-02110-PJH, 2021 WL 3861545 (N.D. Cal. Aug. 30, 2021) (awarding 10% interest on unpaid contributions on default judgment pursuant to terms of collective bargaining and trust agreements). Further, Plaintiffs have presented evidence establishing the amount of interest they seek. Brown Decl., ¶ 18 (providing evidence establishing interest sought on late contributions paid before litigation was commenced); Minser Decl. ¶ 24 (providing evidence establishing interest sought on unpaid contributions due at the time litigation commenced or thereafter).Therefore, it is recommended that the full amount of interest requested by Plaintiffs be awarded.
At oral argument, Plaintiffs stipulated that their interest calculation is based only upon the underlying unpaid contributions and does not include interest on liquidated damages.
2. Audit
The Supreme Court has held that where a collective bargaining agreement gives the trustees of an employee benefit plan the right to audit an employer's books and records, it will be enforced. Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp. Inc., 472 U.S. 559, 581-82 (1985); see also Bd. of Trs. v. KMA Concrete Constr. Co., No C 10-05831 LB, 2011 WL 4031136, at *8 (N.D. Cal. Aug. 12, 2011) report and recommendation adopted, No. C 10-05831 SC, 2011 WL 4031100, at *1 (N.D. Cal. Sept. 8, 2011) (recommending the district court retain jurisdiction to account for further delinquencies discovered by an audit after proper showing by the plaintiff).
Here, the Master Agreement expressly provides for an audit of the employer's books and records, stating as follows:
The Union or the Trust Funds, or their agents or accountants may require the Individual Employer to submit to them for examination, any information relevant to the administration of the Trust Funds, to confirm the Individual Employer's reporting compliance, and the Individual Employer must submit such information pursuant to the terms of the Trust Agreements incorporated herein. If more than minor underpayments are found due on audit, the Individual Employer shall reimburse the Trust Funds, upon demand of the Trust Funds, the costs of said examination in addition to any other obligations it may have hereunder. Minor underpayments shall be defined as 10% of the proper contributions for the period tested.Brown Decl., Exs. B, C (Master Agreements), Section 12.01.04. Likewise, the Trust Agreements contain specific terms governing audits. For example, the Trust Agreement for the Pension Trust Fund for Operating Engineers provides:
The Board can require the Employer . . . to submit to it any information, data, report, or documents reasonably relevant to and suitable for the purposes of such administration . . . Reasonable cause appearing therefore upon notice in writing from the Board, a Contributing Employer must permit a certified public accountant appointed by the Board to enter upon the premises of such employer during business hours, at all reasonable time or times, and to examine and copy such books, records, papers or reports of such Contributing Employer as may be necessary to determine whether such Contributing Employer is making full and prompt payment of all sums required to be paid by him or it to this Fund.Brown Decl., Ex. D (Trust Agreement for the Pension Trust Fund for Operating Engineers), Article IV, Section 6; Minser Supp. Decl. ¶ 17 & Exs. A-J.
Plaintiffs have offered evidence that they gave written notice that an audit would be required for the period January 1, 2017 through December 31, 2020 but that Defendants refused to produce the books and records Plaintiffs requested. Quackenbush Decl. ¶¶ 4-7 & Ex. A (January 18, 2022 notice letter). Therefore, Defendants should be ordered to comply with Plaintiffs' audit request and supply the books and records requested in the January 18, 2022 notice letter.
3. Attorneys' Fees
Under ERISA and the terms of the Collective Bargaining Agreements and Trust Agreements, Plaintiffs are entitled to an award of reasonable attorneys' fees and costs. Federal courts have adopted the “lodestar” method for calculating the amount of reasonable attorneys' fees. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The lodestar figure is the product of the hours counsel reasonably spent on the case and a reasonable hourly rate. Id. To determine whether Plaintiffs' claimed hours are reasonable, the Court must review attorneys' time records to determine whether the hours are adequately documented in a manner that can be properly billed directly to clients. Id. at 434. Reasonableness is determined based on the prevailing market rate for similar work by similarly qualified counsel, not the amount that the attorneys would have actually charged the prevailing party. Welch v. Metro. Life Ins. Co., 480 F.3d 942, 946 (9th Cir. 2007).
Plaintiffs request $10,271 in attorneys' fees for the work of two attorneys (Matthew Minser and Luz Mendoza) and one paralegal (Alicia Wood), who billed the following amounts: 1) $1,225.50 in fees for Minser, who is a shareholder attorney, based on 4.3 hours of work at a rate of $285/hour between March 17, 2022 and December 31, 2022; 2) $7,049.00 in fees for Mendoza, base on 26.6 hours of work at a rate of $265/hour between May 1, 2022 and December 31, 2022; and 3) $1,996.50 in fees for Wood, based on 12.1 hours of work at a rate of $165/hour between March 17, 2022 and December 31, 2022. Minser Decl. ¶¶ 27-30 & Ex. L (billing records). Based on the submissions and the Court's knowledge about prevailing rates, the rates are reasonable. See Dist. Council 16 N. California Health v. Advantage Com. Servs., Inc., No. 21-CV-04716-TSH, 2022 WL 4137577, at *9 (N.D. Cal. Aug. 11, 2022), report and recommendation adopted in part sub nom. Dist. Council 16 N. California Health & Welfare Tr. Fund v. Advantage Com. Servs., Inc., No. 21-CV-04716-MMC, 2022 WL 17371091 (N.D. Cal. Aug. 30, 2022) (approving rates of $250-285 per hour for a shareholder attorney, $245-265 for an associate attorney, and $145-$165 for a paralegal at the same firm and noting that “[a]n hourly rate of $650 for lead counsel and $190 for senior paralegals has been found to be reasonable for Bay Area ERISA specialists”) (citations omitted). The Court also finds the time billed to be reasonable based on review of the billing records supplied by Plaintiffs. Therefore, it is recommended that the attorneys' fees requested by Plaintiffs be awarded in full.
Although the timesheets supplied by Plaintiffs reflect 5.3 hours billed by Minser, an entry for one hour spent updating a status report for a board of trustees meeting was stricken. Minser Decl., Ex. L (billing records) at 5.
4. Costs
Plaintiffs seek an award of $1,262.29 in costs. Minser Decl. ¶ 31 & Ex. L. The billing records supplied by Plaintiffs reflect that this amount consists of: 1) a filing fee in the amount of $402; 2) Lexis-Nexis legal research in the amount of $27.65; and 3) the costs of service of the complaint and summons on Defendants in the total amount of $832.64. Plaintiffs have presented evidence that they incurred all of these costs and the undersigned finds them to be reasonable. Therefore, Plaintiffs are entitled to all of their requested costs. Civ. L. R. 54-3(a)(1)(“The Clerk's filing fee is allowable if paid by the claimant.”), (2) (“Fees for service of process by someone other than the marshal acting pursuant to Fed.R.Civ.P. 4(c) are allowable to the extent reasonably required and actually incurred.”); see also Trs. of the Constr. Indus. & Laborers Health & Welfare Trust v. Redland Ins. Co., 460 F.3d 1253, 1258 (9th Cir. 2006)(“reasonable charges for computerized research may be recovered as ‘attorney's fees' under § 1132(g)(2)(D) if separate billing for such expenses is ‘the prevailing practice in the local community.'”).
The Minser Declaration states that Plaintiffs' cost request “is comprised of the filing of the Complaint, and service of process fees for service of the Summons and Complaint on Defendant.” Minser Decl. ¶ 32 (citing Minser Decl., Ex. L). The supporting exhibit, however, indicates that the amount Plaintiffs request also includes costs incurred conducting Lexis/Nexis legal research.
IV. CONCLUSION
For the reasons stated above, it is recommended that the Court GRANT Plaintiffs' Motion and enter default judgment against all defendants in this case. It is further recommended that the Court award $103,832.19 in damages, attorneys' fees and costs and order Defendants to promptly submit to the audit requested by Plaintiffs for the time period January 1, 2017 through the December 31, 2020 and provide the necessary records to complete the audit. The Court should also retain jurisdiction over this case so that once the audit is complete it may add to the Judgment any additional amounts found to be due upon presentation by Plaintiffs of proof of those amounts and appropriate briefing.
Plaintiffs are ordered to serve a copy of this Report on all defendants and file proof of service to that effect. Any objection to this Report must be filed within fourteen days of the date on which the Report is served.
IT IS SO ORDERED.