District Council 16 Northern California Health and Welfare Trust Fund v…

Background

The plaintiffs are several union benefit trust funds and their trustees. They alleged under the Employee Retirement Income Security Act of 1974 (ERISA) that Masterpiece Painting, Inc. failed to make required benefit contributions and failed to cooperate with an audit. Terrance Johnson allegedly personally guaranteed Masterpiece Painting’s payment obligations. Neither defendant appeared or answered, and the clerk entered default on January 18, 2023.

The plaintiffs moved for default judgment seeking $31,613.27 in monetary damages, including attorneys’ fees and costs, and an injunction requiring the defendants to produce documents needed for the audit.

Issues Identified by the Court

The court had not yet ruled on the motion. It referred the motion to the magistrate judge for a report and recommendation and ordered the plaintiffs to provide additional briefing and evidence.

Service of process. The court questioned whether Masterpiece Painting was properly served. The proof of service stated that documents were left with Jean Kim at an Oakland address identified as the company’s office or usual place of business. But the plaintiffs’ request for entry of default described that address as a post-office box. California law allows service at a person’s usual mailing address only when no physical address is known. The plaintiffs were ordered to provide a declaration stating whether they knew of another physical address or otherwise showing that service on Masterpiece Painting was proper.

The court stated that service on Johnson in his individual capacity was likely sufficient because a process server attempted personal service three times at an address identified as his residence before leaving the documents with an unidentified woman. The plaintiffs were nevertheless ordered to state whether they knew of another address where Johnson could be served.

Estimated contributions. The plaintiffs estimated unpaid contributions for months when defendants did not submit reports. Their collection procedures allowed estimates based on the last report, the average of the last three reported months, or the average of the last three months, whichever was greater. The plaintiffs used $909.02 per month based on September 2020, November 2020, and May 2021 reports.

The court noted that the plaintiffs’ approach used a later report to estimate an earlier delinquency and did not account for reports showing zero hours in several months. If those zero-hour reports were considered, the collection procedures could produce an estimate of no contributions owed for the disputed months. The plaintiffs had not provided evidence explaining a different interpretation of the procedures. The court also required an unredacted version of the procedures, subject to a possible motion to file it under seal.

The plaintiffs were ordered to show cause why the motion should not be denied as to contributions allegedly owed for December 2020, June 2021, July 2021, and March 2022 through February 2023, as well as interest and liquidated damages based on those contributions.

May 2021 contributions. The plaintiffs sought $913.48, including interest and liquidated damages, based on the May 2021 contribution report. The court found that the plaintiffs had not supported an additional $23.75 charge based on a higher contribution rate for one employee. It ordered the plaintiffs to explain why the amount should not instead be reduced to $887.56, consisting of $675.83 in principal, $61.73 in interest, and $150 in liquidated damages, or to accept the lower amount.

Late-payment interest and liquidated damages. The plaintiffs sought interest and liquidated damages for late-paid contributions for May, July, and September 2020. The court found that the plaintiffs had not provided evidence or an explanation supporting the amounts claimed and ordered them to show cause why those amounts should not be denied.

Attorneys’ fees and costs. The plaintiffs requested $10,699.50 in attorneys’ fees. Under ERISA, the lodestar method calculates fees by multiplying the reasonable hours worked by a reasonable hourly rate. The court found that the plaintiffs had provided no evidence supporting their proposed hourly rates and ordered them to explain why the fee request should not be denied on that basis.

The plaintiffs requested $1,488.21 in costs. Although the categories of costs were generally recoverable, the itemization included charges that appeared to relate to an earlier case involving the same defendants, which had been voluntarily dismissed without prejudice. The plaintiffs had not explained why those earlier costs, or costs for refiling and re-serving the defendants, were reasonably incurred. The court also questioned billing entries related to the earlier litigation and negotiations with a nonparty general contractor.

Order

The court ordered the plaintiffs to file a supplemental brief and supporting evidence by March 4, 2024. It ordered them to show cause why the motion for default judgment should not be denied as to Masterpiece Painting for defective service and why, if default judgment were granted, monetary damages should not be reduced to the amount stated in the conclusion—$887.56, described there as $675.82 in unpaid contributions, $61.73 in interest, and $150 in liquidated damages. The court stated that it would issue a report and recommendation after receiving the plaintiffs’ response. It did not grant or deny the default-judgment motion in this order.