Board of Trustees of the Bay Area Roofers Health & Welfare Trust Fund v. Elite…

Background

The plaintiffs were the boards of trustees of five trust funds and Carlos Opfermann, a trustee. The opinion states that the funds were employee benefit plans and that Elite was an employer bound by a collective bargaining agreement and a trust agreement. Those agreements required Elite to make contributions on behalf of certain employees and authorized the plaintiffs to request and review business records.

The plaintiffs’ auditor notified Elite that the trust funds would audit the period from January 1, 2022, through December 31, 2022. The auditor requested six categories of documents, including time cards, payroll journals, tax records, personnel records, and cash-disbursement journals. Elite did not produce the documents after the auditor and plaintiffs’ counsel made repeated requests.

The Clerk entered Elite’s default after Elite failed to respond to the complaint. The court later entered default judgment. That judgment required Elite to submit to an audit on at least two weeks’ written notice and to provide the requested records for 2022. It also awarded the plaintiffs $6,229 in fees and costs, allowed them to seek additional monetary relief if supported by the audit, and retained jurisdiction to enforce or amend the judgment.

Motion to Set Aside the Default and Default Judgment

Elite moved to set aside the entry of default and the default judgment. Courts consider three factors for such a motion: whether the party’s conduct caused the default, whether the party has a meritorious defense, and whether reopening the case would prejudice the opposing party. The court explained that any one factor can be enough to refuse to set aside the default.

The court addressed only whether Elite had identified a meritorious defense. To meet that requirement, Elite had to provide specific facts that would constitute a defense. Elite argued that the audit request was outside the scope of the collective bargaining agreement and trust agreement because it sought records for all employees, not only employees who performed work covered by the collective bargaining agreement. Elite’s owner also stated that providing the records could subject Elite to employee lawsuits.

The court rejected that argument. It found that the trust agreement expressly allowed the plaintiffs to inspect records concerning “all employees,” including time cards and individual earnings. The court also found that the agreement did not limit that authority to employees whom Elite claimed performed covered work.

The court relied on the Supreme Court’s decision in Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., which held that an employer participating in a multiemployer benefit plan could be required to provide records for employees the employer claimed were not plan participants. The court explained that those records could help trustees verify whether the employer had correctly identified covered employees. It further found that the trust agreement in this case did not expressly or implicitly limit the plaintiffs’ audit authority in the way Elite argued.

The court also noted that Elite’s proposed answer listed other defenses, including comparative negligence, equitable estoppel, laches, and unclean hands, but did not provide specific facts supporting them. Elite did not argue in its motion that any defense unrelated to the scope of the audit could justify setting aside the default.

Ruling

Judge Maxine Chesney found that Elite had not identified a meritorious defense and therefore denied Elite’s motion to set aside the entry of default and default judgment. The court expressly did not decide whether Elite’s failure to appear resulted from negligence rather than blameworthy conduct or whether the plaintiffs would be prejudiced if the default and default judgment were set aside. The court also vacated the scheduled hearing and decided the motion based on the written submissions.