Sheet Metal Workers Pension Trust of Northern California v. Otavilla Mechanical…

Background

The plaintiffs are several employee benefit plans, including the Sheet Metal Workers Pension Trust of Northern California, along with trustees Rick Werner and Sean O’Donoghue. They alleged that Otavilla Mechanical Contractors, Inc. agreed to follow a bargaining agreement requiring employer contributions to the plans based on employees’ hours worked. The plaintiffs alleged that Otavilla failed to report and pay contributions from January 2022 through July 2023 and also failed to pay contractual interest and liquidated damages.

The plaintiffs’ counsel contacted Otavilla about the delinquent payments. Otavilla’s owner and chief executive officer, James Michael Allivato, disputed the obligation to pay. After the Union’s Board of Trustees confirmed that Otavilla was required to pay, Otavilla requested a payment plan but later stopped responding.

Default and Jurisdiction

The plaintiffs filed suit on February 17, 2023. Otavilla did not answer, and the clerk entered default on May 30, 2023. Otavilla also did not respond to the motion for default judgment.

The court found that service was sufficient because the plaintiffs served Allivato, identified as Otavilla’s owner and chief executive officer, and mailed Otavilla the notice of entry of default. The court found subject-matter jurisdiction under federal-question jurisdiction because the claims arose under the Employee Retirement Income Security Act of 1974 (ERISA) and related federal law. It also found personal jurisdiction because Otavilla’s principal place of business was in San Ramon, California, within the district.

Reasons for Granting Default Judgment

The court applied the seven factors used to decide whether default judgment is appropriate. It found that the plaintiffs would likely be prejudiced without a judgment because Otavilla had not responded. The court also found that the complaint adequately alleged an ERISA claim: Otavilla was an employer under ERISA, the agreements required it to make contributions and maintain relevant records, and it breached those obligations by failing to report and pay contributions.

The court found the amount sought reasonable because it was based on contractual formulas tied to Otavilla’s failure to pay. It found that a dispute about material facts was unlikely because Otavilla had been served, knew about the lawsuit, and had not challenged the complaint’s allegations. The court also found no indication that Otavilla’s failure to respond resulted from excusable neglect. Although federal procedure favors decisions on the merits, the court concluded that Otavilla’s failure to answer made such a decision impractical or impossible and that the other factors favored default judgment.

Damages and Fees

Unlike liability allegations, damages allegations are not automatically accepted as true in a default-judgment proceeding. The plaintiffs therefore submitted declarations, billing records, contracts, audit information, and communications with Otavilla.

The court awarded $175,885.52 in damages, consisting of unpaid contributions, liquidated damages, and interest. The court stated that the plaintiffs were entitled to $32,293.65 in liquidated damages and $7,610.35 in interest. The agreements provided for interest at 10 percent per year and liquidated damages based on specified percentages of delinquent contributions.

The court also approved $17,239.50 in attorneys’ fees and $752.28 in costs. It used the lodestar method, which calculates fees by multiplying reasonable hours by reasonable hourly rates, and found the submitted rates, hours, declarations, billing records, and supporting documents adequate.

Disposition

Judge Corley granted the plaintiffs’ motion for default judgment. The court awarded $175,885.52 in damages, $17,239.50 in attorneys’ fees, and $752.28 in costs, for a total judgment of $223,172.18. The order stated that it disposed of Docket No. 18.