Board of Trustees of the Laborers Health and Welfare Trust Fund for Northern…

Background

The Board of Trustees for various trust funds under an employee benefit plan sued Arturo Solorzano Munoz, doing business as Solorzano Landscape Construction. The Board alleged breach of a collective bargaining agreement and sought to compel an audit under Section 502 of the Employee Retirement Income Security Act, 29 U.S.C. § 1132.

Munoz was personally served with the summons and complaint but never appeared or communicated with the court. The clerk entered default. The Board then moved for default judgment, requesting an order requiring an audit and an award of attorney’s fees and costs.

Default Judgment

Under Federal Rule of Civil Procedure 55(b)(2), the court may enter judgment against a party who has defaulted. The court considered the factors identified in Eitel v. McCool, including the merits and sufficiency of the complaint, possible prejudice to the plaintiff, the amount at stake, whether factual disputes existed, whether the default resulted from excusable neglect, and the policy favoring decisions on the merits.

The court found that the Board’s allegations were sufficient to establish a claim under 29 U.S.C. § 1132(a)(3). The trustees were fiduciaries of the trust funds, and the governing documents required Munoz to submit to a records audit after a written request. The court found that Munoz did not submit to an audit despite multiple written requests and therefore breached the benefit-plan terms.

The remaining factors also favored default judgment. Without an audit, the Board would be unable to investigate whether Munoz had met his obligations to the trust funds. Munoz had received multiple demands and the lawsuit but did not appear, and the court found no indication that his default resulted from excusable neglect or that the material facts were disputed.

Audit Relief

The court granted the Board’s request for a mandatory injunction requiring Munoz to submit to an audit of records from January 2017 through the last completed quarter. The records could include wage reports, federal tax forms, payroll records, employee earnings records, time cards, contribution reports, workers’ compensation reports, certified payroll reports, personnel records, financial journals, vendor invoices, subcontract agreements, ledgers, job-cost records, records of related entities, and other books and records necessary to complete the audit or explain its results.

The court reasoned that Munoz had agreed to provide information reasonably relevant to plan administration and to permit an onsite audit of records necessary to determine whether he had made required payments. The requested employment records were reasonably relevant to plan administration and appeared necessary to verify compliance with the plan terms.

Attorney’s Fees and Costs

The court denied the Board’s request for fees under the trust agreement because the Board had not yet established that Munoz was in default on contributions. The complaint’s allegation that an audit might show unpaid contributions did not establish an actual delinquency.

The court also denied the Board’s alternative request for mandatory fees under 29 U.S.C. § 1132(g)(2). That provision applies to plaintiffs who prevail in suits to enforce the obligation to make contributions under 29 U.S.C. § 1145. Because the Board had not prevailed on a claim for unpaid contributions, the court found that provision inapplicable.

The court concluded that a discretionary fee award under 29 U.S.C. § 1132(g)(1) was warranted in principle. The Board had achieved some success by obtaining the audit, and the court found that the relevant factors favored shifting fees. However, the court denied the fee request as submitted because the Board had not sufficiently supported its requested $350 hourly rate. The court noted that the Board had not submitted the types of market-rate evidence discussed in Welch v. Metropolitan Life Insurance Company. The court found the $1,583.45 in requested costs adequately documented but did not enter an award on the existing submission.

Disposition

The court granted the requested audit relief and denied the fee request. The Board may file a supplemental statement supporting its request for attorney’s fees and costs by March 29, 2024, and may not seek reimbursement for time spent preparing that supplemental statement. Judge James Donato signed the order.