Lesnik v.Eisenmann SE

Background

Gregor Lesnik and Stjepan Papes moved for default judgment on their claim under the Trafficking Victims Protection Reauthorization Act (TVPRA), 18 U.S.C. § 1595. The motion concerned ISM Vuzem d.o.o., ISM Vuzem USA, Inc., Vuzem USA, Inc., Robert Vuzem, Ivan Vuzem, and HRID-Mont d.o.o.

The plaintiffs alleged that ISM Vuzem d.o.o. recruited them internationally, brought them to the United States on B-1 visas, and assigned them to construction work, including work at a Tesla manufacturing plant in Fremont, California. They alleged that they were paid below minimum wage, worked very long hours, and faced threats involving withheld pay, medical benefits, visa cancellation, immigration status, being sent home at their own expense, and legal action. They also alleged poor living conditions.

The defendants did not appear or defend the case. For a default judgment, the court considers the factors identified in Eitel v. McCool, including prejudice, the strength of the claim, the sufficiency of the complaint, the amount at stake, possible factual disputes, whether the default resulted from excusable neglect, and the preference for decisions on the merits. Well-pleaded allegations about liability are generally treated as true after default, but damages must still be proven.

Jurisdiction and Service

The court found that it had subject-matter jurisdiction because the TVPRA claim arose under federal law. It found general personal jurisdiction over Vuzem USA, Inc. because it was a California corporation that dissolved only after the alleged violations. It found specific personal jurisdiction over ISM Vuzem d.o.o., ISM Vuzem USA, Inc., Robert Vuzem, and Ivan Vuzem based on alleged California-directed activities connected to the plaintiffs’ work and alleged mistreatment.

The court found that the plaintiffs had not shown that HRID-Mont d.o.o. took actions in California or directed actions toward California. It therefore found no specific personal jurisdiction over HRID-Mont d.o.o. and denied default judgment against that defendant. The court found that ISM Vuzem d.o.o., ISM Vuzem USA, Inc., Vuzem USA, Inc., Robert Vuzem, and Ivan Vuzem had been properly served under the Hague Service Convention and Federal Rule of Civil Procedure 4.

Papes’s TVPRA Claim

The court found that the allegations stated a claim for coerced labor under 18 U.S.C. § 1589 against ISM Vuzem d.o.o. and Robert Vuzem. The alleged threats included canceling the plaintiffs’ visas or endangering their immigration status, sending them home at their own expense, withholding pay if they became sick or reported injuries, and harming Papes’s reputation if he quit. The court found that nonphysical harm, including financial, psychological, and reputational harm, can qualify when serious enough to compel a reasonable person to work.

The court also found that the allegations stated a claim based on abuse or threatened abuse of law or legal process against ISM Vuzem d.o.o., Robert Vuzem, and Ivan Vuzem. The relevant allegations included threats to cancel visas, endanger immigration status, and sue Lesnik while he was hospitalized after a workplace accident.

The court found no allegations that ISM Vuzem USA, Inc. or Vuzem USA, Inc. directly coerced the plaintiffs’ labor. It nevertheless found that the allegations stated a beneficiary-liability claim against ISM Vuzem USA, Inc. because the company allegedly knowingly received financial benefits from the venture involving coerced labor. The court found no sufficient allegation that Vuzem USA, Inc. knowingly benefited from either plaintiff’s coerced labor and denied default judgment against that company.

The court concluded that Papes stated a TVPRA claim against ISM Vuzem d.o.o., ISM Vuzem USA, Inc., Robert Vuzem, and Ivan Vuzem. Six Eitel factors favored default judgment, while the policy favoring decisions on the merits weighed slightly against it. The court found that the six favorable factors outweighed the final factor.

Lesnik’s Claim and Settlement

The court found that Lesnik’s allegations could otherwise state a TVPRA claim against ISM Vuzem d.o.o., ISM Vuzem USA, Inc., Robert Vuzem, and Ivan Vuzem. But it held that Lesnik’s 2016 settlement agreement released employment-related claims arising from his workplace injury and covered the Vuzem entities and their specified related persons, including the alleged directors Robert Vuzem and Ivan Vuzem.

Lesnik argued that he could recover for actions after the settlement, including alleged legal actions taken against him after he was fired in 2017. The court rejected that argument because Lesnik did not allege that those later actions coerced him to perform labor or services. It also held that the settlement barred recovery for the earlier alleged violations. The court therefore denied Lesnik’s third motion for default judgment against all six defendants named in the conclusion.

Damages and Fees

Papes requested $1,500,000 in compensatory damages, $1,500,000 in punitive damages, and attorney’s fees. The court awarded $305,500 in compensatory damages, calculating $500 per day for 611 days of forced labor. It rejected the requested $200,000 for lost income because Papes did not provide evidence explaining how that amount was calculated.

The court awarded $305,500 in punitive damages, equal to the compensatory award. It denied attorney’s fees because Papes did not request a specific amount or provide the required supporting information and documentation.

Disposition

The court granted in part and denied in part the plaintiffs’ third motion for default judgment. It granted Papes default judgment on the TVPRA claim against ISM Vuzem d.o.o., ISM Vuzem USA, Inc., Robert Vuzem, and Ivan Vuzem, awarding $611,000 in total damages. It denied Papes’s request for attorney’s fees and denied his motion as to Vuzem USA, Inc. and HRID-Mont d.o.o. It denied Lesnik’s motion as to ISM Vuzem d.o.o., ISM Vuzem USA, Inc., Vuzem USA, Inc., Robert Vuzem, Ivan Vuzem, and HRID-Mont d.o.o.