Opinion
Case No. 3:19-cv-02025-YY
05-27-2020
BOARDS OF TRUSTEES OF THE AGC OPERATING ENGINEER HEALTH AND WELFARE FUND; OPERATING ENGINEERS PENSION FUNDS; and INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL 701-AGC TRAINING TRUST FUND, Plaintiffs, v. ROSS ISLAND SAND & GRAVEL CO, an Oregon Corporation, Oregon Registry No. 029100-16, Defendant.
FINDINGS AND RECOMMENDATIONS
FINDINGS
Plaintiffs, who are the Boards of Trustees of the AGC-Operating Engineer Health and Welfare Fund, Operating Engineers Pension Funds, and International Union of Operating Engineers Local 701-AGC Training Trust Fund, have brought suit against defendant Ross Island Sand & Gravel ("Ross Island") pursuant to Employee Retirement Income Security Act ("ERISA") provisions 29 U.S.C. §§ 1132 and 1145 for failure to pay fringe benefits contributions. Compl., ECF #1. Ross Island has not filed an Answer or otherwise appeared in this matter. On January 29, 2020, plaintiffs filed a Motion for Entry of Default (ECF #6), which the court granted on February 26, 2020 (ECF No. 8). Plaintiffs have now filed a Motion for Default Judgment (ECF #9), which should be granted for the reasons discussed below.
I. Subject Matter Jurisdiction
Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). "It is to be presumed that a cause lies outside this limited jurisdiction, . . . and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. "If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fed. R. Civ. P. 12(h)(3); see also Fiedler v. Clark, 714 F.2d 77, 78-79 (9th Cir. 1983) (recognizing that the court may sua sponte dismiss an action if it finds that subject matter jurisdiction is lacking).
Here, plaintiffs have brought a claim pursuant to ERISA provisions 29 U.S.C. §§ 1132 and 1145. Because plaintiffs' claim arises under federal law, the court has subject matter jurisdiction.
II. Personal Jurisdiction
A district court "has an affirmative duty" to determine whether it has personal jurisdiction over a defendant before entering a default judgment. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). "A judgment entered without personal jurisdiction over the parties is void." Id.
The Supreme Court has recognized two types of personal jurisdiction: general, or "all-purpose," jurisdiction, and specific jurisdiction. Daimler AG v. Bauman, 571 U.S. 117, 127-28, 132 (2014). "With respect to a corporation, the place of incorporation and principal place of business are 'paradig[m] . . . bases for general jurisdiction.'" Id. at 137 (citation omitted). "Those affiliations have the virtue of being unique—that is, each ordinarily indicates only one place—as well as easily ascertainable." Id. "These bases afford plaintiffs recourse to at least one clear and certain forum in which a corporate defendant may be sued on any and all claims." Id. Additionally, 29 U.S.C. § 1132(e)(2), which governs ERISA claims, provides:
Where an action under this subchapter is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found.29 U.S.C. § 1132(e)(2).
Here, Ross Island is an Oregon corporation. See Compl. ¶ 6, ECF #1. Accordingly, personal jurisdiction exists over Ross Island in this case. See Daimler AG, 571 U.S. at 137.
III. Service of Process
Before entering a default judgment, the court must "assess the adequacy of the service of process on the party against whom default is requested." Bank of the West v. RMA Lumber Inc., No. C 07-06469 JSW, 2008 WL 2474650, at *2 (N.D. Cal. June 17, 2008). "[I]n the absence of proper service of process, the district court has no power to render any judgment against the defendant's person or property unless the defendant has . . . waived the lack of process." S.E.C. v. Ross, 504 F.3d 1130, 1138-39 (9th Cir. 2007).
Plaintiffs filed an affidavit showing that on December 26, 2019, a process server delivered a true and correct copy of the summons and complaint "at the Office of the Registered Agent with Magali Sosa-Tirado, General Counsel, at the corporate offices of The Pamplin Group, which Ross Island Sand and Gravel Co. is one of its subsidiaries, in the absence of Ankur Doshi, its Registered Agent," who "was no longer with the company." ECF #5.
Rule 4(h) sets forth the acceptable methods of serving corporations:
Unless federal law provides otherwise or the defendant's waiver has been filed, a domestic or foreign corporation, or a partnership or other unincorporated association that is subject to suit under a common name, must be served:
(1) in a judicial district of the United States:Fed. R. Civ. P. 4(h).
(A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or
(B) by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process and—if the agent is one authorized by statute and the statute so requires—by also mailing a copy of each to the defendant; or
(2) at a place not within any judicial district of the United States, in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i).
While the Ninth Circuit has not addressed this issue, other courts have held that service on the general counsel of a corporation constitutes service on a "managing or general agent" under Rule 4(h)(1)(B). See United States v. Cornwell, No. 6:18-cv-2194-Orl-22EJK, 2020 WL 674092, at *5 (M.D. Fla. Feb. 11, 2020); American Centennial Ins. Co. v. Handal, 901 F. Supp. 892 899 (D.N.J. 1995). Moreover, where there is a close relationship between two corporations, service on the general counsel for one corporation may be adequate. See Troll Busters LLC v. Roche Diagnostics GmbH, No. 11CV56-IEG WMC, 2011 WL 3859721, at *9 (S.D. Cal. Aug. 31, 2011) (holding that serving general counsel of the domestic operating arm of a German corporation was sufficient to serve the foreign corporation). Here, service on general counsel at the office of "The Pamplin Group," the parent company of Ross Island, constituted sufficient service on the "managing or general agent" for purposes of satisfying Rule 4(h)(1)(B).
IV. Pertinent ERISA Provisions
Under 29 U.S.C. § 1154:
[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.Plaintiffs are entitled to bring a civil action for an employer's failure to pay. 29 U.S.C. § 1132.
If judgment is entered in favor of the plaintiffs, the "court shall award":
(A) the unpaid contributions,29 U.S.C. § 1132(g)(2). An award is mandatory if (1) the employer is delinquent at the time the action is filed; (2) the plan provides for such an award; and (3) the district court enters judgment against the employer. Masonry Indus. Tr. Admin., Inc. v. Chris Lee Masonry, Inc., No. 3:14-CV-01570-HZ, 2016 WL 3396939, at *2 (D. Or. June 14, 2016).
(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) of the amount determined by the court under subparagraph (A),
(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."
V. Plaintiffs' Claim
Plaintiffs are the Boards of Trustees of the AGC-International Union of Operating Engineers Local 701 ("Local 701") Health and Welfare Fund, Pension Funds, and Training Trust Fund (collectively "Trust Funds"). Compl. ¶ 1, ECF #1. Plaintiffs have submitted evidence that Ross Island entered into a Dredge Agreement with Local 701 in which it agreed to pay fringe benefits contributions to the Trust Funds, as well as remit deductions for vacation and union dues. Pardee Decl., Ex. 1, at 34-35, ECF #10; id., Ex. 3, at 52, 60, ECF #10-2. Additionally, Ross Island agreed to abide by the terms and conditions of the Trust Agreements of the Trust Funds. Id., Ex. 1, at 34, ECF #10. Those Trust Agreements allow for liquidated damages, interest, attorney's fees, and costs for delinquent payment of contributions, and give the Board of Trustees authority to adopt Delinquency Procedure and Guidelines, which include rates for liquidated damages and interest. Id., Ex. 4, at 28, ECF #10-8; id., Ex. 5, at 82; id. ¶ 14, ECF #10 (citing Ex. 4, at 28, Ex. 5, at 51, and Ex. 6, at 26).
According to the Dredge Agreement, the vacation and dues deductions were to be paid to the fringe benefit administrator. Pardee Decl., Ex. 1, at 35, ECF #10; id., Ex. 3, at 52, ECF #10-2.
Plaintiffs claim that Ross Island failed to make fringe benefits contributions between August 2019 through February 2020 in the amount of $122,449.28. Mot. 3, ECF #9; see also Pardee Decl., Ex. 10-11 (spreadsheet). Plaintiffs also claim that Ross Island owes liquidated damages, interest, attorney's fees, and costs pursuant to the terms of the Trust Agreements. VI. Eitel Analysis
The district court's decision whether to enter a default judgment is a discretionary one. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising its discretion, the court considers the following factors under Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986):
(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. at 1471-72. Each of the Eitel factors is discussed below.
A. Factor One: Possibility of Prejudice to Plaintiffs
In assessing this factor, courts have considered whether a plaintiff would be without recourse for recovery if the motion for default judgment is not granted. See, e.g., J & J Sports Prods., Inc. v. Cardoze, 2010 WL 2757106, at *5 (N.D. Cal. July 9, 2010); PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002).
The court held a hearing on May 21, 2020, at which plaintiffs' counsel represented that, in the fall of 2019, she had discussions with Ross Island's former general counsel regarding its ongoing failure to pay fringe benefits contributions. Where those discussions failed to result in the relief that plaintiffs seek, they had no recourse for recovery other than to file this action.
B. Factors Two and Three: Merits of Claims and Sufficiency of Complaint
Upon entry of default, this court must take the well-pleaded factual allegations of the complaint as true. See Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) ("The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true."); Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) ("In reviewing a default judgment, this court must take the well-pleaded factual allegations of [the complaint] as true").
The complaint and the documents that plaintiffs have submitted in support of their claim establish that Ross Island entered into the Dredge Agreement in which it agreed to abide by the terms and conditions of the Trust Agreements, including the payment of fringe benefits. Id., Ex. 1, at 34, ECF #10. However, Ross Island failed to make fringe benefits contributions between August 2019 through February 2020 in the amount of $122,449.28. Pardee Decl., Ex. 10-11 (spreadsheet). Additionally, under ERISA statutes and the terms of the Trust Agreements, Ross Island owes liquidated damages, interest, attorney's fees, and costs. Id., Ex. 4, at 40, 56, 62, ECF #10-8; id., Ex. 5, at 82, 88, ECF #10-9; 29 U.S.C. § 1132(g)(2).
C. Fourth Factor: Sum of Money at Stake
Under the fourth Eitel factor, "the court must consider the amount of money at stake in relation to the seriousness of [d]efendant's conduct." PepsiCo, 238 F.Supp.2d at 1176-77; see also J&J Sports Productions, Inc. v. Cardoze, 2010 WL 2757106, at *5 (N.D. Cal. July, 2010) ("a large sum of money at stake would disfavor default damages," such as a request for $114,200 in damages); Board of Trustees of the Sheet Metal Workers v. Vigil, 2007 WL 3239281, at *2 (N.D. Cal. Nov. 1, 2007) ("[D]efault judgment is disfavored if there were a large sum of money involved").
Here, the sum sought is not small, but is amply supported by the evidence that plaintiffs have presented.
D. Fifth Factor: Possibility of Dispute Over Material Facts
In addressing the fifth factor, the court considers the possibility that there is a dispute concerning material facts. As mentioned above, "[u]pon entry of default, all well-pleaded facts in the complaint are taken as true, except those relating to damages." PepsiCo, 238 F.Supp.2d at 1177. Thus, "[t]he fifth factor . . . weighs in favor of default judgment when the claims in the complaint are well-pleaded." Joe Hand Prods. v. Holmes, 2015 WL 5144297, at *7 (D. Or. Aug. 31, 2015). Otherwise stated, "[b]ecause all allegations in a well-pleaded complaint are taken as true after the court clerk enters default judgment, there is no likelihood that any genuine issue of material fact exists." Elektra Entm't Grp., Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005).
Here, plaintiffs well-pleaded complaint and evidence establishing the merits of their claim. In fact, Ross Island provided the Trust Funds with remittance reports that reflected the amounts it was supposed to pay, but simply did not make the payments. Pardee Decl., Ex. 8, ECF #10-11. Thus, the possibility of a dispute regarding the material facts is low, if it exists at all.
E. Sixth Factor: Excusable Neglect
The sixth factor pertains to the possibility that the default resulted from excusable neglect. As noted above, plaintiffs' counsel had discussions with Ross Island's former general counsel in the fall of 2019 regarding Ross Island's ongoing failure to pay these contributions. Additionally, according to plaintiff's counsel, this is one of a number of similar lawsuits by trust funds against Ross Island in the District of Oregon as well as the Western District of Washington, and to the best of counsel's knowledge, Ross Island has not appeared in any of those cases. See, e.g., AGC-International Union of Operating Engineers Local 701 Pension, Health and Welfare, and Training Trust Funds, et al v. Ross Island Sand & Gravel Co., 3:18-cv-00549-SB (D. Or.) (default judgment entered August 29, 2018).
F. Policy Favoring Decision on the Merits
Factor seven is "the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits," specifically the policy that "[c]ases should be decided upon their merits whenever reasonably possible." Eitel, 782 F.2d at 1472. However, "this policy, standing alone, is not dispositive, especially where a defendant fails to appear or defend itself in an action." Joe Hand Promotions, Inc. v. Machuca, 2014 WL 1330749, at *6 (E.D. Cal. Mar. 31, 2014). Where a defendant has failed to answer a complaint, it "makes a decision on the merits impractical, if not impossible." Pepsi Co., 238 F.Supp.2d at 1177. Rule 55 allows the court to terminate a case before hearing the merits when a defendant fails to defend an action. Fed. R. Civ. P. 55. "Thus, the preference to decide cases on the merits does not preclude a court from granting default judgment." Pepsi Co. 238 F. Supp. 2d at 1177 (internal quotation omitted).
A decision on the merits in this case is impossible because defendant has failed to appear, plead, or defend this action. Additionally, all other factors weigh in favor of a default judgment. Therefore, the seventh factor is not dispositive and does not preclude the court from entering a default judgment against defendant.
VII. Damages
While this court assumes the facts in the complaint are true, "neither the default nor the allegation in the complaint can establish the amount of damages." Lasheen v. Embassy of the Arab Republic of Egypt, 625 F. App'x. 338, 341 (9th Cir. 2015) (cited pursuant to Ninth Circuit Rule 36-3). Before the court can enter a default judgment for a sum that is uncertain, the plaintiff must prove damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 916-17 (9th Cir. 1987).
Plaintiffs claim the unpaid fringe benefits contributions total $122,449.28. Mot. 3, ECF #9; see also Pardee Decl., Ex. 10-11 (spreadsheet). This amount is not in dispute. In fact, Ross Island provided the Trust Funds with remittance reports reflecting the amounts due, but has not paid. Pardee Decl., Ex. 8, ECF #10-11.
Additionally, plaintiffs seek liquidated damages of $19,756.12 at 10% and interest of $2,243.51 at 12%. The Delinquency Procedure and Guidelines call for liquidated damages and interest at those rates. Pardee Decl., Ex. 7, at 3, 5, ECF #10-10. Accordingly, those sums are also correct and due.
Plaintiffs seek attorney's fees of $1,540. Attorney's fees are authorized by 29 U.S.C. § 1132(g)(2) and the terms of the Trust Agreements and Delinquency Procedure and Guidelines. Pardee Decl., Ex. 4, at 62, ECF #10-9; Ex. 7 at 6, ECF #10-10. Generally, attorney's fees are calculated using the lodestar method, i.e., by multiplying the number of hours worked by the reasonable hourly rate. See Perdue v. Kenny A., 559 U.S. 542, 551 (2010) (holding "the lodestar approach" is "the guiding light" when determining reasonable fees). In determining the "reasonable hourly rate to use for attorneys and paralegals[,]" the court looks to the "prevailing market rates in the relevant community." Gonzalez v. City of Maywood, 729 F.3d 1196, 1205 (9th Cir. 2013) (citations and internal quotation marks omitted). The court also excludes hours "that are excessive, redundant, or otherwise unnecessary." McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009) (quoting Hensley v. Eckerhart, 461 U.S. 424, 434 (1983)). The party seeking fees bears "the burden of documenting the appropriate hours expended in the litigation, and [is] required to submit evidence in support of those hours worked." United Steelworkers of Am. v. Ret. Income Plan For Hourly-rated Emps. Of Asarco, Inc., 512 F.3d 555, 565 (9th Cir. 2008) (quotations omitted).
The court looks to the "prevailing market rates in the relevant community" to determine reasonable hourly rates. Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984). The relevant community "is one in which the district court sits." Davis v. Mason County, 927 F.2d 1473, 1488 (9th Cir. 1991). This court uses the most recent Oregon State Bar Economic Survey as a benchmark for comparing an attorney's billable rate with the fee customarily charged in the locality. Precision Seed Cleaners v. Country Mut. Ins. Co., 976 F. Supp. 2d 1228, 1244 (D. Or. 2013); see also Cope land-Turner v. Wells Fargo Bank, N.A., No. 11-cv-37-HZ, 2012 WL 92957, at *2 (D. Or. Jan. 11, 2012) ("Judges in the District of Oregon use the Oregon State Bar Economic Survey . . . as a benchmark for assessing the reasonableness of hourly billing rates."). The Economic Survey sets forth rates charged by Oregon attorneys in the relevant year, including rates specific to communities such as Portland.
Plaintiffs' counsel, Noelle Dwarzski, seeks an hourly rate of $275 for 5.6 hours of work performed between December 12, 2019, through May 25, 2020. Dwarzski Decl. ¶ 4, ECF #11. She has submitted an itemized list of the work that she performed on this case and the time spent. Id., Ex. A; Dwarzski Supp. Decl., Ex. A, ECF #17.
Dwarzski, who works at a firm in Seattle, Washington, has been licensed to practice law for at least 13 years. The median rate for Portland attorneys with 13 to 15 years of experience is $300. See OREGON STATE BAR, 2017 ECONOMIC SURVEY 39 tbl.36 (2017). Dwarzski's rate of $275, which is under the median for Portland attorneys with her level of experience, is reasonable.
Plaintiffs also seek costs of $535, specifically, $400 for the filing fee and $135 for the service fee. Dwarzski Decl., Ex. B, ECF #11. "Unless a federal statute, these rules or a court order provides otherwise, costs—other than attorney's fees—should be allowed to the prevailing party." Fed.R.Civ.P. 54(d)(1). "Rule 54(d)(1) creates a presumption in favor of awarding costs to the prevailing party, and a district court has limited discretion to deny fees under the rule." Goldberg v. Pac. Indem. Co., 627 F.3d 752, 758 (9th Cir. 2010). Additionally, the Trust Agreements and Delinquency Procedure and Guidelines authorize the Trustees to recover the costs of this litigation. Pardee Decl., Ex., 4, at 62, ECF 10-9; id., Ex. 7, at 6, ECF #10-10.
Finally, the proposed judgment seeks post-judgment interest of 0.19% pursuant to 28 U.S.C. § 1961. Plaintiffs determined the 0.19% per annum post-judgment interest rate by using an average of the rates posted by the U.S. Department of the Treasury Daily Treasury Yield Curve Rates for the week of March 18, 2020, through March 25, 2020, the week before the motion for default judgment was filed. That interest rate is accurate, and post-judgment interest at that rate therefore should be awarded.
RECOMMENDATIONS
Plaintiffs' Motion for Default Judgment (ECF #9) should be GRANTED and the proposed Default Judgment (ECF #16-1) should be issued.
SCHEDULING ORDER
These Findings and Recommendations will be referred to a district judge. Objections, if any, are due Wednesday, June 10, 2020. If no objections are filed, then the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within 14 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement.
NOTICE
These Findings and Recommendations are 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 a judgment.
DATED May 27, 2020.
/s/ Youlee Yim You
Youlee Yim You
United States Magistrate Judge