Board of Trustees of the Laborers Health and Welfare Plan for Northern…

Background

The Board administers a multi-employer employee-benefit plan governed by the Employment Retirement Income Security Act (ERISA) and a trust agreement. The plan covered eligible dependents, including a lawful spouse, and made the participant responsible for benefits improperly paid for an ineligible dependent. The plan required timely written notice of a divorce, including a copy of the final marital dissolution, within 60 days of the event.

The Board alleged that Carmen Murillo claimed benefits as Galvez’s wife from approximately August 22, 2008, through October 14, 2014, even though Galvez and Murillo were divorced effective May 19, 2008. The Board paid approximately $41,731.19 in health benefits on Murillo’s behalf. Galvez first told the Board about the divorce in February 2016, when the Board received a copy of the final dissolution. The Board also alleged that Galvez received explanations of benefits showing that payments were being made for Murillo but did not notify the Board or stop the payments.

The Board previously sought default judgment, but the court denied that motion without prejudice. The Board then filed an amended motion. No opposition was filed.

Jurisdiction, Service, and Default Judgment Standard

The court determined that it had subject-matter jurisdiction under ERISA § 502(e)(1), 29 U.S.C. § 1132(e)(1). It also found that it had general personal jurisdiction over Galvez based on the plan’s administration in the district, the location from which benefits were paid, and Galvez’s residence in Tracy, California during the relevant period.

Galvez was personally served with the summons and complaint on October 15, 2019, and had not appeared. The court found service sufficient. It explained that, after a clerk enters default, the court considers whether default judgment is appropriate under the seven factors identified in Eitel v. McCool, including prejudice, the merits and sufficiency of the claims, the amount at stake, the possibility of factual disputes, excusable neglect, and the preference for decisions on the merits.

Claims

The Board asserted conversion and equitable restitution.

For conversion, the court explained that the plaintiff must show that the defendant knowingly or intentionally exercised ownership or control over property belonging to another. Money can support a conversion claim when it involves a specific, identifiable sum. The court found that the Board adequately alleged that Galvez knew benefits were being paid for Murillo, failed to provide required divorce documentation, and took no action to prevent continued payments. The court therefore found that the Board adequately stated a conversion claim.

For equitable restitution, the court relied on ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), which allows a plan fiduciary to seek relief for violations of ERISA or the plan’s terms. The court found that the Board adequately alleged that Galvez actively and deliberately ignored the plan’s reporting requirement and misled the Board, to its detriment, so that benefits were paid for an ineligible dependent. The court therefore found that the Board adequately stated a claim for equitable restitution.

Eitel Factors and Relief

The court found that the Eitel factors favored default judgment. It found that the Board would otherwise lack recourse to recover the amounts paid, that the requested amount reflected the alleged loss, that the relevant facts did not appear reasonably disputable, and that there was no evidence Galvez’s failure to respond resulted from excusable neglect. Although the policy favoring decisions on the merits weighed against default judgment, the court stated that this factor did not prevent entry of judgment because Galvez refused to participate.

The court found an evidentiary basis for awarding $41,731.19 in damages for the health benefits paid on Murillo’s behalf. It also granted the Board’s request for $6,681.92 in attorneys’ fees and costs, finding the requested hourly rates and documented work reasonable under the cited ERISA and trust-agreement provisions.

Disposition

Judge Gilliam granted the amended motion for default judgment. The court stated that the Board was entitled to $41,731.19 in damages and $6,681.92 in reasonable attorneys’ fees and costs. It directed the Board to submit a proposed form of judgment of no more than two pages by November 2, 2020.