Carpenters Pension Trust Fund for Northern California v. Hernandez

Background

The plaintiffs were the Carpenters Pension Trust Fund for Northern California and the Carpenters Annuity Trust Fund for Northern California. They filed an interpleader action, a procedure allowing a stakeholder with no claimed interest in disputed funds to place those funds with the court while competing claimants resolve their rights.

The complaint alleged that Michael Sanchez Hernandez participated in both Trust Funds. In 2005, he named his mother, Marcellina Hernandez, as his beneficiary. On October 31, 2018, he died while his girlfriend, Charlotte McKeague, was present. A few hours before his death, the Trust Funds received a form by email naming McKeague as beneficiary. Both women later claimed the benefits, and neither withdrew her claim.

The pension benefits were valued at $76,882.32, payable over 36 months. The annuity benefits were valued at $53,054.19 as of March 4, 2020, and at $59,284.21 as of October 13, 2020. The Trust Funds alleged that they had no interest in the benefits other than paying them to the proper beneficiary.

Marcellina Hernandez answered the complaint and filed a cross-claim against McKeague. She alleged that the beneficiary change was ineffective under the plan documents or fraudulent because McKeague completed the form without Michael Hernandez’s knowledge or agreement, the signature was forged, and he was unconscious and incapacitated when the form was sent.

Default and Service

McKeague signed and returned a waiver of service. The court found that the Trust Funds appeared to have complied with the federal service-waiver rule and that the waiver had no apparent deficiencies. The summons and complaint were therefore treated as served when the waiver was filed.

McKeague did not respond to the complaint. The clerk entered her default on September 21, 2020. The Trust Funds then moved for default judgment, served the motion on McKeague, and received no opposition.

Court’s Analysis

Under Federal Rule of Civil Procedure 55, a court may enter default judgment after default has been entered. The court considered the factors identified in Eitel v. McCool, including possible prejudice to the plaintiff, the merits and sufficiency of the claims, the amount at stake, the likelihood of factual disputes, whether the default resulted from excusable neglect, and the preference for decisions on the merits.

The court concluded that the factors favored default judgment. Without judgment, the Trust Funds would likely be unable to move forward even though they claimed no personal interest in the benefits. The Trust Funds sought no damages, and McKeague’s failure to answer left no indication of a factual dispute or excusable neglect. Although the rules favor decisions on the merits, the court stated that McKeague’s choice not to defend made such a decision impractical or impossible.

For the merits and sufficiency factors, the court relied on Ninth Circuit authority recognizing that an ERISA fiduciary may bring an interpleader action under 29 U.S.C. § 1132(a)(3)(B)(ii). ERISA is the federal law governing employee-benefit plans.

Ruling and Relief

The court granted the Trust Funds’ motion for default judgment against McKeague. It ordered the Pension Trust Fund to deposit a $76,882.32 check with the court by November 30, 2020, representing all of Michael Hernandez’s pension benefits.

It also ordered the Annuity Trust Fund to value the annuity benefits as of November 25, 2020, and deposit a check for that valuation amount with the court by November 30, 2020. The Trust Funds had to file and serve a declaration confirming both deposits and stating the annuity valuation.

Marcellina Hernandez and Charlotte McKeague were given until December 10, 2020, to object to the annuity valuation. If no objection was filed, the court would dismiss the Trust Funds from the case and discharge them and their related personnel from liability concerning the disputed benefits. The order left Hernandez’s cross-claim against McKeague as the remaining matter and ordered Hernandez to serve McKeague within 30 days and file proof of service.

Judge Edward M. Chen concluded by granting the default-judgment motion and ordering the relief described in the order. The order disposed of Docket No. 26.