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

Background

A group of employee benefit plans sued George Fajardo and American Eagle Environmental Co., alleging that the defendants were delinquent on contributions required by collective bargaining agreements and trust agreements. The plaintiffs asserted claims under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1145, and the Labor Management Relations Act (LMRA), 29 U.S.C. § 185. The complaint also sought an injunction requiring an audit and an award of attorney’s fees and costs.

Fajardo and American Eagle were served on October 28, 2019, but neither appeared. The Clerk entered default against both defendants on November 27, 2019. The plaintiffs then moved for default judgment. The defendants did not oppose or otherwise respond to that motion.

Court’s analysis

The court applied the factors used to decide whether to enter default judgment, including possible prejudice to the plaintiffs, the strength of their claims, the sufficiency of the complaint, the amount at stake, the possibility of a factual dispute, whether the default resulted from excusable neglect, and the preference for decisions on the merits.

The court concluded that these factors supported default judgment because the defendants’ refusal to participate prevented the plaintiffs from pursuing a decision on the merits. Because the defendants had not answered, the court treated the complaint’s factual allegations—other than allegations concerning damages—as true. The court found that those allegations and the supporting exhibits established delinquent contributions in violation of ERISA. It also found no basis to conclude that the failure to answer resulted from excusable neglect.

Audit and requested payments

The plaintiffs sought an injunction requiring an audit of financial records for the period from August 1, 2017, through the present. The requested records included tax returns, payroll and employee records, check registers, workers’ compensation reports, ledgers, bank statements, checks, tax forms, cash receipts journals, job-cost records, invoices, contracts, and other records the auditor considered necessary or relevant.

The court held that ERISA permits equitable relief, including an audit, when a benefit plan prevails in an action for delinquent contributions. It found the requested audit within the trustees’ authority under the trust documents and an appropriate way to calculate unpaid contributions.

The plaintiffs also asked the court to order payment of the contributions calculated by the audit. The court denied that request without prejudice. It explained that the court should retain a role in assessing damages. The plaintiffs could return after the audit to seek an award of unpaid contributions and interest.

Fees, costs, and disposition

The court found that the requirements for a mandatory attorney’s-fee award under ERISA were met: the employer was delinquent when the action was filed, the court entered judgment against the employer, and the plan provided for such an award. Judge Vince Chhabria found the requested $8,939.75 for 30 hours of attorney work reasonable and taxed the defendants $640.50 in costs.

The court granted default judgment, ordered the defendants to submit to an audit at their premises during business hours at a reasonable time, and required them to permit review of relevant financial records, including the records identified in the plaintiffs’ motion. The defendants were also ordered to pay $9,580.25 in attorney’s fees and costs. The request for payment of delinquent contributions calculated by the audit was denied without prejudice. The plaintiffs were ordered to serve the order on Fajardo and file proof of service by June 23, 2020.