U.A. Local 393 Health and Welfare Trust Fund v. THE KRAUTSTRUNK COMPANY, INC.

Background

U.A. Local 393 Health and Welfare Trust Fund, U.A. Local 393 Pension Fund, and Trustees Alex Hall and Eric Mussynski sued The Krautstrunk Company, Inc. under the Employee Retirement Income Security Act of 1974 (ERISA). The plaintiffs alleged that the company failed to pay required contributions for employee hours worked from October through December 2020. The company had agreed to follow a bargaining agreement with U.A. Local 393 that required contributions to the trust funds, along with liquidated damages, interest, and reimbursement of attorneys’ fees related to unpaid contributions.

The company was served on March 10, 2022. The clerk entered default on May 16, 2022. The company did not object to Magistrate Judge Nathanael Cousins’s recommendation that the plaintiffs’ motion for default judgment be granted.

Service and Jurisdiction

The court found that service was sufficient. Plaintiffs served Nicolas Perry, a person at the office of the company’s registered service agent who was at least 18 years old and apparently in control of the premises, and also mailed the summons and complaint to the agent.

The court found subject-matter jurisdiction because the claims arose under ERISA. It also found personal jurisdiction because the opinion states that the company was incorporated in California.

Liability

Applying the factors used to decide whether to enter default judgment, the court found that the plaintiffs would be prejudiced without a judgment, their complaint adequately stated an ERISA claim, the amount at stake was reasonable, a dispute about liability was unlikely, and the company’s failure to respond was not excusable neglect. Although federal procedure favors decisions on the merits, the court concluded that the company’s failure to answer made a merits decision impractical.

The court therefore granted the plaintiffs’ motion for default judgment as to liability. It held that the company was liable for unpaid contributions, liquidated damages, and interest on late payments under ERISA § 502(g)(2)(c), 29 U.S.C. § 1132(g)(2)(c). The court’s liability ruling did not establish the final amount of damages.

Damages

The plaintiffs originally sought $35,527.83 for unpaid contributions, liquidated damages, and interest. The court stated that damages allegations are not automatically accepted as true after default and that the plaintiffs must prove the damages sought. The court found that the unpaid-contribution and 20-percent liquidated-damages portions were sufficiently supported, although the opinion contains differing figures for the unpaid-contribution amount in its discussion.

The court found the interest calculations unclear. The plaintiffs’ calculations did not match the amounts in their chart, and the described method did not clearly follow the agreement’s provision that the unpaid amount, including liquidated damages, would bear interest at 10 percent annually until paid. The court required a supplemental declaration explaining all interest calculations, how they complied with the statute and contract, and the updated calculations through the present date.

The court found the plaintiffs’ request for attorneys’ fees and costs adequately supported and reasonable. The opinion states that those fees and costs totaled $12,931.70.

Disposition

The court adopted Magistrate Judge Cousins’s recommendation and granted default judgment on liability. It deferred judgment on damages and required the plaintiffs to file a supplemental damages submission by August 15, 2023. The order resolved docket item 33.