Opinion
CASE NO. C10-0194-MAT.
September 7, 2010
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
INTRODUCTION
Plaintiff Northwest Administrators, Inc. moves the Court for summary judgment against defendant Ace Paving Co., Inc. (Dkt. 8.) This matter was brought pursuant to the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (ERISA), to recover remittance reports, trust fund contributions, liquidated damages, interest, attorney's fees, and courts costs from defendant based on its labor agreement with Teamsters Local 589, the Teamsters Construction Industry Welfare Trust Agreement (TCWT), and the Western Conference of Teamsters Pension Trust Agreement (WCTPT). Plaintiff is the authorized administrative agent for and assignee of the TCWT and the Washington Teamsters Welfare Trust (WTWT), the latter of which became the successor trust following a merger effective January 1, 2010.
Following the filing of this lawsuit, defendant provided remittance reports and made all necessary payments, including liquidated damages, under the WCTPT for the time period at issue, November 2009 through January 2010. Defendant also provided remittance reports and paid contributions under the TCWT for this same time period. However, defendant failed to timely submit the TCWT contributions for the months of November and December 2009. The only remaining issue in this lawsuit is, therefore, whether defendant remains liable for liquidated damages, interest, and attorney's fees for that time period.
Defendant made a payment in early August 2010 covering court costs and all but a small amount of interest. (Dkt. 17, ¶ 5.)
Plaintiff seeks liquidated damages in the amount of $1,328.60 for November 2009 and $2,000.57 for December 2009, for a total liquidated damages award of $3,329.17, interest in the amount of $1.99, and attorney's fees in the amount of $6,361.75. ( See Dkts. 16-18.) Defendant contends the liquidated damages sought are unenforceable under Washington and federal common law as penalties and are not otherwise recoverable under ERISA. (Dkt. 12.) It seeks attorney's fees for its defense of this motion pursuant to 29 U.S.C. § 1132(g)(1). However, for the reasons described below, the Court finds plaintiff entitled to summary judgment and the liquidated damages, interest, and attorney's fees requested.
BACKGROUND
On or around July 28, 2003, defendant and Teamsters Local 589 entered into an agreement entitled the Heavy Construction Compliance Agreement. (Dkt. 9, Ex. B.) In so doing, defendant agreed to be bound by the June 1, 2003 through May 31, 2007 collective bargaining agreement between the Associated General Contractors of America, Inc., and several Teamsters Locals, including Local 589, and any successor collective bargaining agreements. ( Id.) It also agreed to be bound by the TCWT. ( Id. and Ex. A.) Defendant and Local 589 are currently parties to a collective bargaining agreement effective June 1, 2007 through May 31, 2012. ( Id., Ex. C.) The agreement requires defendant to make contributions to the Teamsters Construction Industry Fund for all employees covered by the agreement on or before the tenth day of the month following the month in which the relevant hours were worked. ( Id. at 13 (Section 7.2.1.))
Pursuant to the TCWT, a participating employer who makes delinquent contributions is required to pay liquidated damages in an amount equal to twenty percent of the delinquent contributions owed and interest on those delinquent contributions at the rate of twelve percent per annum from the date the contributions became due and payable until the contributions are paid. ( Id., Ex. A (Amendment to TCWT).) ( See also Dkt. 4, ¶ 7 (defendant admits in its Answer "that the Trust Agreements between Defendant and the Plaintiff Trusts contain provisions providing for payment of interest and liquidated damages under certain circumstances.")) It also requires the payment of reasonable attorney's fees, costs, and other reasonable expenses incurred in the collection of delinquent contributions. (Dkt. 9, Ex. A.)
Plaintiff, as the TCWT's authorized agent and assignee, receives monthly remittance reports from employers setting forth contributions owing for that month. ( Id., ¶ 20.) It did not receive any such reports from defendant for the months of November and December 2009. ( Id., ¶¶ 20-22.) By letter dated January 27, 2010, counsel for plaintiff requested from defendant the monthly reports and contribution payments for the period of November 2009 and beyond. ( Id., Ex. D.) It thereafter, on February 1, 2010, filed the lawsuit under consideration. (Dkt. 1.) On February 10, 2010, plaintiff received the TCWT remittance reports and contributions owed from defendant for November and December 2009. (Dkt. 9, ¶ 24 and Ex. E.) Defendant did not submit associated liquidated damages. ( Id., ¶ 27; Dkt. 13, ¶ 10.)
DISCUSSION
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party is entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient showing on an essential element of his case with respect to which he has the burden of proof. See Celotex, 477 U.S. at 322-23.
Genuine issues of material fact that preclude summary judgment are "disputes over facts that might affect the outcome of the suit under the governing law[.]" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding a summary judgment motion, the Court must view all facts and inferences therefrom in the light most favorable to the nonmoving party. See Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). "[A] party opposing a properly supported motion for summary judgment may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256 (citing Fed.R.Civ.P. 56(e)).
Plaintiff here seeks liquidated damages, interest, and attorney's fees based on defendant's failure to timely submit its TCWT contributions for the months of November and December 2009. Defendant objects to plaintiff's motion, contending the damages sought are unenforceable and void as a penalty, and that ERISA does not mandate such damages until the entry of a judgment. As discussed below, both of defendant's contentions lack merit.
In summarizing the "issues presented" in its brief, defendant states that there are genuine issues of material fact regarding both the legality of the liquidated damages provision at issue in this case and the availability of liquidated damages under ERISA. (Dkt. 12 at 3.) However, defendant did not thereafter identify any particular factual dispute.
A. Law Governing Liquidated Damages
Defendant states that it was not provided an opportunity to negotiate any of the provisions of the TCWT prior to entering into the agreement or provided any explanation as to the relation of the liquidated damages provision to any actual damages suffered as the result of unpaid contributions. (Dkt. 13, ¶¶ 6-7.) Defendant also states that the damages it has been forced to pay over the past two years, as a result of the downturn in the economy and resulting loss in revenues, has forced the delay in its ability to make required contributions. ( Id., ¶¶ 8-9.)
Defendant posits that the TCWT liquidated damages provision is unenforceable as a penalty under both state and federal common law. See, e.g., Walter Implement, Inc. v. Focht, 107 Wn.2d 553, 558-59, 730 P.2d 1340 (1987) ("`A provision in a contract which bears no reasonable relation to actual damages will be construed as a penalty.'"; applying a two part test to determine whether a liquidated damages clause may be enforced: "First, the amount fixed must be a reasonable forecast of just compensation for the harm that is caused by the breach. Second, the harm must be such that it is incapable or very difficult of ascertainment.") (quoting Northwest Collectors, Inc. v. Enders, 74 Wn.2d 585, 594, 446 P.2d 200 (1968)); Idaho Plumbers Pipefitters Health Welfare Fund v. United Mech. Contractors, Inc., 875 F.2d 212, 215 (9th Cir. 1989) (for a liquidated damages provision to be deemed void as a penalty under federal common law it must meet two conditions: "First, the harm caused by a breach must be very difficult or impossible to estimate. Second, the amount fixed must be a reasonable forecast of just compensation for the harm caused.") (citations omitted). However, for the reasons asserted by plaintiff and discussed below, this argument fails.
ERISA obligates participating employers to make contributions to a multi-employer trust fund in accordance with the contract and trust agreement. See ERISA Section 515, 29 U.S.C. § 1145. It provides, at § 1132(g)(2), specific remedies for delinquent contributions, including, in addition to the unpaid contributions, liquidated damages, interest, attorney's fees, and costs. As noted, defendant is also bound by a trust agreement containing terms as to damages owed as a result of delinquent contributions. (Dkt. 9, Exs. A-C.)
"Section 1132(g)(2) is `mandatory and not discretionary.'" Northwest Adm'rs Inc. v. Albertson's, Inc., 104 F.3d 253, 257 (9th Cir. 1996) (quoting Operating Eng'rs Pension Trust v. Beck Eng'g Surveying, Co., 746 F.2d 557, 569 (9th Cir. 1984)). Entitlement to a mandatory § 1132(g)(2) award requires that: "(1) the employer must be delinquent at the time the action is filed; (2) the district court must enter a judgment against the employer; and (3) the plan must provide for such an award." Id. (citing Idaho Plumbers Pipefitters Health Welfare Fund, 875 F.2d at 215).
Here, it is undisputed that defendant was delinquent in making its contributions at the time plaintiff filed this suit and that the trust agreement provides for liquidated damages, interest, attorney's fees, and courts costs. Also, as discussed further below, "mandatory fees are available under § 1132(g)(2) `notwithstanding the defendant's post-suit, pre-judgment payment of the delinquent contributions themselves.'" Id. at 258 (quoting Carpenters Amended Restated Health Benefit Fund v. John W. Ryan Constr. Co., 767 F.2d 1170, 1175 (5th Cir. 1985)). Plaintiff is, accordingly, entitled to liquidated damages, interest, and attorney's fees under § 1132(g)(2).
Defendant's reliance on state and federal common law is unavailing. ERISA contains an expansive preemption provision. See generally 29 U.S.C. § 1144(a) (ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA) and (c)(1) ("`State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law[.]"); Egelhoff v. Egelhoff, 532 U.S. 141, 146 (2001) (observing that ERISA's preemption provision is "`clearly expansive.'") (sources omitted); General Am. Life Ins. Co. v. Castonguay, 984 F.2d 1518, 1521 (9th Cir. 1993) ("ERISA's preemption clause is one of the broadest ever enacted by Congress, and it preempts even generally applicable laws, not just laws aimed exclusively at employee benefit plans[.]") (internal citations omitted).
Section 1132(g)(2)(C)(ii) specifically allows for a grant of "liquidated damages provided for under the plan in an amount not in excess of 20 percent[.]" Defendant fails to support the contention that the liquidated damages provision at issue here, allowing for twenty percent of delinquent contributions owing (Dkt. 9, Ex. A), may escape preemption.
Indeed, plaintiff entirely ignores the issue of preemption, focusing instead on distinguishable and inapplicable state and federal common law. For instance, in the Ninth Circuit decision relied upon by plaintiff, Idaho Plumbers Pipefitters Health Welfare Fund, 875 F.2d at 215, the Court noted that § 1132(g)(2) did not apply because there were no unpaid contributions at the time the suit in that case was filed. See also, e.g., Board of Trustees of Local 41, Int'l Bhd. of Elec. Workers Health Fund v. Zacher, 771 F. Supp. 1323, 1332 (W.D.N.Y. 1991) (same); Walter Implement, Inc., 107 Wn.2d at 555-59 (considering contract claim under state law). The Ninth Circuit also read the legislative history to indicate that "Congress intended only to preempt laws limiting liquidated damages to an amount below the 20% level when the terms of § 1132(g)(2) are satisfied." Idaho Plumbers Pipefitters Health Welfare Fund, 875 F.2d at 217 (emphasis in original). Here, as stated above and discussed further below, the terms of § 1132(g)(2) are satisfied. The state and federal common law cases relied on by defendant are, therefore, inapposite, and plaintiff is entitled to the liquidated damages, interest, and attorney's fees sought.
B. Liquidated Damages Award Prior to Judgment
Section 1132(g)(2)(C)(ii) provides for an award of liquidated damages "in an action to recover delinquent contributions . . . in which a judgment in favor of the plan is awarded[.]" Defendant avers that this provision, therefore, allows for liquidated damages only once a judgment has been awarded. See Idaho Plumbers Pipefitters Health Welfare Fund, 875 F.2d at 215 (§ 1132(g)(2)(C)(ii) "applies when (1) the fiduciary obtains a judgment in favor of the plan, (2) unpaid contributions exist at the time of suit, and (3) the plan provides for liquidated damages.") (emphasis added). Relying on a Sixth Circuit decision supporting this reading of § 1132(g)(2), defendant maintains that, because it paid all contributions owing, plaintiff's action — seeking liquidated damages alone — necessarily fails. In re Michigan Carpenters Council Health Welfare Fund, 933 F.2d 376, 388 (6th Cir. 1991) (concluding that § 1132(g)(2)(A) and (B) "apply only if there were unpaid contributions on the date of the award" because § 1132(g)(2) "provides that upon `a judgment in favor of the plan' the court shall award the plan ` the unpaid contributions' and `interest on the unpaid contributions.'") (quoting § 1132(g)(2)(A) and (B)) (emphasis added by court). However, defendant fails to support this reading of § 1132(g)(2) under Ninth Circuit law.
As stated above, the Ninth Circuit has held that "mandatory fees are available under § 1132(g)(2) `notwithstanding the defendant's post-suit, pre-judgment payment of the delinquent contributions themselves.'" Northwest Adm'rs Inc., 104 F.3d at 258 (quoting Carpenters Amended Restated Health Benefit Fund, 767 F.2d at 1175). In so doing, the Ninth Circuit rejected the contention that an employer was not obligated to pay liquidated damages and attorney's fees on contributions voluntarily paid prior to the entry of a judgment. Id.
It appears that, excluding the Sixth Circuit, every Court of Appeals to consider the issue concurs with the Ninth Circuit. See UAW Local 259 Soc. Sec. Dep't v. Metro Auto Ctr., 501 F.3d 283, 288-89 (3d Cir. 2007) (§ 1132(g)(2) remedies apply to all contributions unpaid at the time a suit is filed, even if the debts are partially satisfied before judgment); Operating Eng'rs Local 139 Health Benefit Fund v. Gustafson Constr. Corp., 258 F.3d 645, 654 (7th Cir. 2001) ("The interest and liquidated-damages provisions of ERISA apply . . . only to contributions that are unpaid at the date of suit (not the date of judgment, as argued by the defendant."); Iron Workers Dist. Council v. Hudson Steel Fabricators Erectors, Inc., 68 F.3d 1502, 1507 (2d Cir. 1995) ("[T]he provisions of § 1132(g)(2)(B) and (C) make reference to unpaid contributions not to establish a limit on qualifying judgments, but rather because the amount of an award of interest or liquidated damages should logically be predicated upon the amount of the unpaid contributions originally at issue, whether or not outstanding at the time of judgment, since that amount correctly measures the damage caused by the delinquency.") See also Carpenters Joiners Welfare Fund v. Gittleman Corp., 857 F.2d 476, 478 (8th Cir. 1988) (agreeing that "unpaid contributions" accounted for in § 1132(g)(2) means "contributions unpaid at the time suit was filed[.]")
These decisions reflect the intention that an employer not "escape its statutory liability for interest, liquidated damages or double interest, attorney fees, and costs simply by paying the delinquent contributions before entry of judgment in a § 1132(g)(2) action brought to recover delinquent contributions." Iron Workers Dist. Council, 68 F.3d at 1506. As stated by one court: "Permitting delinquent employers to avoid paying § 1132 penalties after suit is filed . . . would largely thwart the purpose of § 1132(g)(2) to provide plan fiduciaries with an effective weapon against delinquent employers. It would also anomalously cause only employers with legitimate legal arguments (. . . awaiting final judgment) to pay ancillary relief." Id. at 1508 (internal citations omitted). Accord UAW Local 259 Soc. Sec. Dep't, 501 F.3d at 289 ("The payment of interest compensates plans for one kind of cost[] incurred in connection with delinquencies, that is, the loss of interest. The purpose of the provision would be defeated if we allowed employers to avoid paying interest simply by satisfying their debt moments before the court issues judgment.") (quotation marks and quoted sources omitted).
Defendant unsuccessfully distinguishes the applicable, binding case law. It notes that Northwest Adm'rs, unlike this case, involved the entry of a judgment for unpaid contributions. See 104 F.3d at 258 (noting judgment entered in the amount of $60,037.60, including $42,821.62 in delinquent contributions). However, it remains that the Ninth Circuit in that case awarded liquidated damages and attorney's fees associated with both contributions that remained deficient and those paid prior to the entry of judgment. Id. at 257-58. The Court also explicitly rejected the contention that the mandatory fees provided for in § 1132(g)(2) may not be awarded in the absence of a judgment. Id. at 258 ("`fees may be awarded even though there is no judgment on the merits or when the dispute has become moot because relief is otherwise obtained.'") (quoting Lads Trucking Co. v. Board of Trustees of W. Conference of Teamsters Pension Trust Fund, 777 F.2d 1371, 1375 (9th Cir. 1985)).
At least one district court within the Ninth Circuit has applied the ruling in Northwest Adm'rs to a case, like this one, in which unpaid contributions were voluntarily paid in full prior to the entry of judgment. Trustees of the Constr. Indus. v. B Witt Concrete Cutting, Inc., 685 F. Supp. 2d 1158, 1163 (D. Nev. 2010) (finding an award of damages pursuant to § 1132(g)(2) mandatory even where delinquent contributions were paid prior to judgment; stating that the Ninth Circuit has "squarely rejected" the interpretation of the Sixth Circuit on this issue) (citing Northwest Adm'rs, 104 F.3d at 258, and In re Michigan Carpenters Council Health Welfare Fund, 933 F.2d at 388). See also Fanning v. Langenfelder Marine, Inc., No. 07-2182 (PLF), 2010 U.S. Dist. LEXIS 29827 at *4-6 (D. D.C. Mar. 29, 2010) (finding employer who paid all delinquent contributions after suit filed liable for twenty percent of the amount due pursuant to § 1132(g)(2)). As with cases involving partial payments of delinquent contributions, the conclusion that liquidated damages may be collected following the full payment of delinquent contributions supports the underlying purpose of § 1132(g)(2) and avoids the possibility that an employer may evade its obligations under this provision simply by paying delinquent contributions at some point prior to the entry of a judgment. Defendant's contention that § 1132(g)(2) is inapplicable because it paid all outstanding delinquent contributions prior to the entry of a judgment, therefore, fails.
Plaintiff provides several unpublished district court decisions from the Ninth Circuit recognizing that liquidated damages may be awarded even where unpaid contributions are tendered prior to the entry of judgment. (Dkt. 16, Exs. A-C.) However, those cases also involved other outstanding unpaid contributions. ( See id.)
CONCLUSION
In sum, the Court finds no issues of fact regarding either the enforceability of the collective bargaining and trust agreements at issue in this case or plaintiff's entitlement to the total amount of liquidated damages, interest, and attorneys' fees sought. Accordingly, plaintiff's motion for summary judgment is hereby GRANTED and plaintiff awarded liquidated damages in the amount of $3,329.17, interest in the amount of $1.99, and attorney's fees in the amount of $6,361.75.
DATED this 7th day of September, 2010.