Employee Painters' Trust v. Cascade Coatings et al, No. 2:2012cv00101 - Document 69 (W.D. Wash. 2014)

Court Description: ORDER denying 68 Plaintiffs' Motion for Default Judgment by Judge James L. Robart.(MD) Modified on 2/10/2014-cc to Pro Se Parties (MD).

Download PDF

Employee Painters&#039; Trust v. Cascade Coatings et al Doc. 69 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 EMPLOYEE PAINTERS’ TRUST, et al., 11 Plaintiffs, 12 CASE NO. C12-0101JLR ORDER DENYING PLAINTIFFS’ MOTION FOR DEFAULT JUDGMENT v. 13 CASCADE COATINGS, et al., 14 Defendants. 15 I. 16 INTRODUCTION Before the court is Plaintiffs’1 motion for default judgment against Defendant 17 Mark Schlatter pursuant to Federal Rule of Civil Procedure 55(b)(2). (Mot. (Dkt. # 68).) 18 19 1 Plaintiffs include: the Employee Painters’ Trust, the Western Washington Painters Defined Contribution Pension Trust, the District Counsel No. 5 Apprenticeship and Training 21 Trust Fund, the Western Washington Painters Labor Management Cooperation Trust, the International Painters and Allied Trades Industry Pension Fund, and The International Union of Painters and Allied Trades District Counsel No. 5 (collectively “Plaintiffs”). 20 22 ORDER- 1 Dockets.Justia.com 1 The court has considered the motion, Plaintiffs’ supporting declarations (Read Decl. 2 (Dkt. ## 68-1, 68-2), James Decl. (Dkt. # 68-3), Urban Decl. (Dkt. ## 68-5, 68-6)), and 3 the applicable law, and DENIES Plaintiffs’ motion WITHOUT PREJUDICE as stated 4 below. 5 II. BACKGROUND 6 A. Factual Background 7 This is an employer benefits contribution case governed by the Employee 8 Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. Among 9 others, Plaintiffs have sued two “Cascade Coatings” entities: (1) Defendant Cascade 10 Coatings, a partnership (“Cascade Partnership”), which is a partnership comprised of 11 Defendants Walter James McLaughlin and Mark Stephen Schlatter (see Am. Compl. 12 (Dkt. # 47) ¶ 4), and (2) Defendant Cascade Coatings, Mr. Schlatter’s sole proprietorship 13 (“Cascade Proprietorship”) (see id. ¶ 5) (collectively “Cascade Coatings”). 14 The dispute arises as a result of Cascade Coatings’ alleged involvement as a 15 subcontractor on the Seattle-Tacoma International Airport Modernization Project 2 16 (“Airport Modernization Project”). A Project Labor Agreement (“PLA”) governs work 17 18 2 Plaintiffs never make clear what part of the Airport Modernization Project Cascade Coatings worked on and whether this sub-project was covered by the Project Labor Agreement 19 (“PLA”). (See 2d Am. Compl.) Although Plaintiffs refer to work on the “Port of Seattle Bus Maintenance Facility” in passing (see id. ¶ 16 (“Airport Modernization Project, aka Port of 20 Seattle Bus Maintenance Facility”)), and the audit report cites this same sub-project (see Read Decl. Ex. H), this sub-project is not described in the PLA as within the scope of the Airport 21 Modernization Project. (See Read Decl. Ex. A at 6-7.) Furthermore, the record does not indicate that the Airport Modernization Project was expanded to include the Bus Maintenance Facility. (See Dkt.) 22 ORDER- 2 1 done on the Airport Modernization Project and requires contractors to adhere to 2 collective bargaining agreements. (See Read Decl. Ex. A at 9.) In order to work on any 3 part of the Airport Modernization Project, a contractor must sign a “Letter of Assent” 4 agreeing to the terms and conditions of the PLA and collective bargaining agreements. 5 (Id. Ex. A at 19.) The PLA and collective bargaining agreements require contractors to 6 submit written reports and pay fringe benefit contributions to trusts benefitting local 7 unionized construction workers. (See id. Ex. A at 11-12.) 8 On September 12, 2011, a representative of Cascade Coatings allegedly executed a 9 letter of assent agreeing to be bound by the terms of the PLA. (2d Am. Compl. ¶ 21.) 3 10 Subsequently, Cascade Coatings submitted two monthly reports to the Employee 11 Painters’ Trust (“Painters’ Trust”) listing its employees who performed work covered by 12 the PLA and the number of hours worked. (Read Decl. ¶ 24.) Cascade Coatings also 13 paid fringe benefit contributions for these employees. (Id.) 4 However, Cascade Coatings 14 did not submit any subsequent reports or payments to the Trust. (See generally 2d Am. 15 Compl.) Thereafter, Painters’ Trust initiated this lawsuit because it believed Cascade 16 Coatings to be in breach of its obligations to report and make contributions pursuant to 17 18 3 The record does not contain a copy of the letter of assent signed by Cascade Coatings. 19 (See Dkt.) 4 There is a discrepancy in the record as to when these reports and payments were made. Mr. Read, who works as an administrator for the trusts, states in his declaration, “Mark Schlatter, 21 under the trade name Cascade Coatings, submitted only two monthly reports to the Trust Funds, for the months of September and October 2011.” (Read Decl. ¶ 24.) Conversely, Lindquist LLP, the firm who audited Cascade Coatings, states in its audit report, “[t]he Employer first and 22 last reported to the Trust for hours worked in October 2011.” (Read Decl. Ex. H at 146.) 20 ORDER- 3 1 the letter of assent, the PLA, underlying collective bargaining agreements, and ERISA. 2 (Id.) 3 B. Procedural Background 4 On January 18, 2012, Painters’ Trust filed suit against Mr. Schlatter, his business 5 partner Mr. McLaughlin, and their business partnership Cascade Partnership. (Compl. 6 (Dkt. # 1) ¶ 4.) Painters’ Trust did not originally sue Cascade Proprietorship. (See 7 generally id.) Painters’ Trust’s complaint sought damages and injunctive relief for 8 Defendants’ alleged failure to make employee benefit contributions. (See Compl. ¶¶ 249 35.) On June 27, 2012, Painters’ Trust filed an affidavit of proof of service, which attests 10 to having served “Defendant Cascade Coatings” with a copy of the summons and 11 complaint on April 17, 2012. (Aff. of Serv. (Dkt. # 8) at 1.) Later, in the joint status 12 report filed on August 17, 2012, Painters’ Trust implied that it had served Mr. Schlatter 13 by stating, “[o]nly Walter James McLaughlin has not been served because he cannot be 14 found.” (See Joint Stat. Rep. (Dkt. 12) at 5.) There is no indication in the record that Mr. 15 McLaughlin has ever been served. (See generally Dkt.) 16 After the Parties’ joint status report, Plaintiffs amended their complaint twice. 17 Initially, Painters’ Trust amended its complaint on October 3, 2012. (Am. Compl. 18 (Dkt. # 17).) The amended complaint named additional trust plaintiffs and additional 19 defendants, including Cascade Proprietorship, the Port of Seattle, and various insurance 20 companies. (Id. ¶ 5.) The amended complaint asserted bond claims against the new 21 insurance company defendants and a common law unjust enrichment claim against the 22 Port of Seattle. (See Am. Compl. ¶¶ 53-65.) Thereafter, Plaintiffs amended their first ORDER- 4 1 amended complaint on July 3, 2013. (See 2d Am. Compl.) Neither Mr. Schlatter, 2 Cascade Proprietorship, nor Cascade Partnership has ever answered Plaintiffs’ 3 complaints. (See Dkt.) 4 Next, on August 27, 2013, Plaintiffs filed three motions for entry of default, one 5 each against Mr. Schlatter, Cascade Proprietorship, and Cascade Partnership. 6 (Dkt. ## 48-50.) The court denied these motions because Mr. Schlatter and Cascade 7 Partnership were not properly served with Plaintiffs’ first or second amended complaints. 8 (See 9/30/13 Ord. (Dkt. # 51) at 9-10.) The court also ordered Plaintiffs to show cause 9 why Cascade Proprietorship should not be dismissed for being an improperly named 10 party in the suit. (Id.) In response to the court’s show cause order, Plaintiffs filed notice 11 of voluntary dismissal as to Cascade Proprietorship. (10/15/13 Not. (Dkt. # 53).) 12 Subsequently, on November 6, 2013, Plaintiffs filed a motion to dismiss many of 13 their bond claims under Federal Rule of Civil Procedure 41(a)(2). (Mot. to Dismiss 14 (Dkt. # 61).) 5 Plaintiffs wished to dismiss these claims because they had settled with 15 most insurance company defendants. The court granted this motion to dismiss on 16 December 2, 2013. (12/2/13 Ord. (Dkt. # 67).) 17 Buried within their motion to dismiss, Plaintiffs also mentioned their intention to 18 dismiss Cascade Partnership and Mr. McLaughlin as defendants under Federal Rule of 19 Civil Procedure 41(a)(1)(A)(i); however, Plaintiffs never provided formal notice to the 20 21 22 5 Plaintiffs dismissed all of their bond claims except for those against Platte River Insurance Company. (See Mot. to Dismiss at 5-6.) ORDER- 5 1 court voluntarily dismissing the claims against these Defendants. (See, e.g., Mot. to 2 Dismiss at 6 (“As to Coatings, a partnership [sic] and Walter James McLaughlin, these 3 parties are being dismissed via FRCP 41(a)(1)(A)(i).”).) Although Federal Rule of Civil 4 Procedure 41(a)(1)(A)(i) allows plaintiffs to voluntarily dismiss an action without a court 5 order, it requires “a notice of dismissal.” 6 Fed. R. Civ. P. 41(a)(1)(A)(i). Thus, Cascade 6 Partnership and Mr. McLaughlin are still defendants. 7 Plaintiffs renewed their motion for default against Mr. Schlatter in early 8 November. (See 11/6/13 Mot. for Def. (Dkt # 62).) This time, the court granted 9 Plaintiffs’ motion because they showed that Mr. Schlatter had been served with the 10 summonses and complaints, and that he had never answered. (11/15/13 Ord. (Dkt. # 65); 11 see generally Dkt.) The court has entered default only against Mr. Schlatter and not any 12 other defendants. (See generally Dkt.) 13 Plaintiffs now seek a default judgment against Mr. Schlatter in accordance with 14 Federal Rule of Civil Procedure 55(b). (See Mot.) Plaintiffs also ask the court to award 15 damages against Mr. Schlatter for unpaid fringe benefit contributions, liquidated 16 damages, interest, audit costs, and attorney’s fees and costs. (Id. at 2.) 17 18 6 19 20 21 22 While the federal rules do not explain what kind of notice is required under Federal Rule of Civil Procedure 41(a)(1)(A)(i), and notice in the form of a motion can be sufficient, the cases contemplate a formal motion inadvertently made under 41(a)(1)(A)(i), and not a single sentence tucked deep within some other motion as is the case here. See 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2363 (3d ed. 2013) (“The cases seem to make it clear that the notice is effective at the moment it is filed with the clerk . . . [and that] a notice in the form of a motion is sufficient . . . .”) (citing Williams v. Clarke, 82 F.3d 270, 272 (8th Cir. 1996) (plaintiff’s first motion to dismiss sought the permission of the court, but the court properly construed it as a notice of voluntary dismissal)). ORDER- 6 1 III. ANALYSIS 2 A. The Frow Rule Prohibits Default Judgment 3 As a threshold matter, it would be an abuse of discretion for this court to grant 4 Plaintiffs’ motion for default judgment because Plaintiffs allege the same claims against 5 Mr. Schlatter and the non-defaulted jointly and severally liable co-defendants, Mr. 6 McLaughlin and Cascade Partnership. Supreme Court and Ninth Circuit precedent 7 prohibit default judgment where a default judgment against one defendant could be 8 inconsistent with a judgment on the merits in favor of other defendants. See Frow v. De 9 La Vega, 82 U.S. 552, 554 (1872); In re First T.D. & Inv., Inc., 253 F.3d 520, 532 (9th 10 Cir. 2001). 11 Courts have discretion to enter default judgment as to fewer than all defendants. 12 Fed. R. Civ. P. 54(b); Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 8 (1980). 13 However, the general rule is that, “when one of several [jointly liable] 14 defendants . . . defaults, judgment should not be entered against that defendant until the 15 matter has been adjudicated with regard to all defendants, or all defendants have 16 defaulted.” 10A Charles Alan Wright & Arthur R. Miller, Federal Practice and 17 Procedure § 2690 (3d ed. 2013) (citing Frow, 82 U.S. at 554). In setting out this rule, the 18 Supreme Court warned against circumstances that could lead to logically inconsistent 19 adjudications as to liability. Frow, 82 U.S. at 554 (“Such a state of things is unseemly 20 and absurd, as well as unauthorized by law.”). Thus, the rule focuses on whether a 21 judgment on the merits in favor of some defendants could be inconsistent with a default 22 judgment against a jointly liable defendant. Where Frow applies, it would be an abuse of ORDER- 7 1 discretion for the court to enter a default judgment against some but not all defendants 2 prior to adjudicating the claims against the non-defaulted defendants. Gulf Coast Farms 3 v. Midwest Elec. Imp., 740 F.2d 1499, 1511-12 (11th Cir. 1984). 4 Moreover, the Ninth Circuit has held that Frow is not limited to complaints 5 asserting only joint liability, but extends to circumstances where the defendants have 6 closely related defenses or are otherwise similarly situated. See First T.D., 253 F.3d at 7 532. In First T.D., the Ninth Circuit considered whether the trial court acted properly 8 when it granted summary judgment in favor of 18 of 132 similarly situated investor9 defendants on the question of whether defendants’ interests were secured in a bankruptcy 10 proceeding, but also granted a default judgment against 88 non-answering defendants. 11 Id. at 525. The Court concluded that, because each individual defendant’s transaction 12 followed an identical pattern with almost identical legal documents, it would be 13 inconsistent to allow recovery against defaulting defendants on a legal theory that had 14 been rejected by the court as to the answering defendants. Id. at 532. Thus, in the Ninth 15 Circuit, the similar nature of the claims, facts, and legal issues asserted in the complaint 16 relative to each defendant is considered in addition to whether defendants are “jointly” 17 liable. 18 Under Frow and First T.D., the court finds that it would be an abuse of discretion 19 to grant Plaintiffs’ motion for default against Mr. Schlatter when Plaintiffs allege the 20 same claims against Cascade Partnership and Mr. McLaughlin, when Plaintiffs reference 21 the same supporting facts, and when all three Defendants are jointly and severally liable. 22 For instance, Plaintiffs’ complaint states in relevant part: ORDER- 8 1 Defendant Walter James McLaughlin (“McLaughlin”) was and/or is a partner, officer and decision maker of [Cascade Partnership] . . . . 2 ********** 3 4 Defendant Mark Stephen Schlatter was and/or is a partner, officer, and decision maker of [Cascade Partnership] and the sole proprietor of [Cascade Proprietorship.] 5 ********** 6 7 8 9 Defendants McLaughlin and Schlatter operated [Cascade Partnership] as a partnership. ********** Defendant [Cascade Partnership] and/or [Cascade Proprietorship] breached the Labor Agreements by Failing to timely and properly submit reports and contributions to the Trusts. 10 ********** 11 12 13 Defendants McLaughlin and/or Schlatter became personally bound, either as [Cascade Partnership’s] partners and/or business officers or [Cascade Proprietorship’s] sole proprietor and/or business officers, to the terms of the Labor Agreements collectively and or [sic] individually as the case may be. 14 (2d Am. Compl. ¶¶ 8-9, 27, 32, 46.) 15 Plaintiffs’ complaint shows that any potential liability against Mr. Schlatter, Mr. 16 McLaughlin, or Cascade Partnership is based on the same set of facts: signing the letter 17 of assent and failing to submit reports and contributions to the trusts. The complaint also 18 alleges the same breach of contract claim against the three Defendants, and alleges the 19 same personal liability and breach of fiduciary duty claims against Mr. Schlatter and Mr. 20 McLaughlin. (Id. ¶¶ 31-37, 45-52.) Mr. Schlatter and Mr. McLaughlin may also be 21 personally liable for breaching the PLA because, as partners in Cascade Partnership, they 22 are liable jointly and severally for all obligations of the partnership under Washington ORDER- 9 1 law. RCW 25.05.125. Based on these shared claims and facts, it is easy to imagine a 2 situation where adjudication on the merits for Mr. McLaughlin or Cascade Partnership 3 could be contrary to the default judgment against Mr. Schlatter. Although this situation is 4 remote because Cascade Partnership has not answered Plaintiffs’ complaints and Mr. 5 McLaughlin has not been served, the potential is there. A default has not been entered 6 against Cascade Partnership and Mr. McLaughlin, and they have not been properly 7 dismissed from this case. Thus, the court finds that it is inappropriate to enter default 8 judgment against Mr. Schlatter at this time. 9 B. 10 The Eitel Factors Weigh Against Granting Default Judgment The court finds that the Eitel factors also weigh against granting default judgment. 11 Courts may order default judgment after the entry of default pursuant to Federal Rule of 12 Civil Procedure 55(b)(2), but entry of default judgment is left to the court’s sound 13 discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising its 14 discretion, the court considers seven factors (the “Eitel factors”): (1) the possibility of 15 prejudice to the plaintiff if relief is denied; (2) the substantive merits of plaintiff’s claims; 16 (3) the sufficiency of the claims raised in the complaint; (4) the sum of money at stake; 17 (5) the possibility of a dispute concerning material facts; (6) whether the default was due 18 to excusable neglect; and (7) the strong policy favoring decisions on the merits when 19 reasonably possible. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 20 At the default judgment stage, the court presumes all well-pleaded factual 21 allegations related to liability. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 22 (9th Cir. 1987). The court, however, does not presume any factual allegations related to ORDER- 10 1 the amount of damages. Id. Thus, the plaintiff is required to prove all damages sought in 2 the complaint, and the court must ensure that the amount of damages is reasonable and 3 demonstrated by the evidence. Fed. R. Civ. P. 55(b); Fed. R. Civ. P. 8(b)(6); TeleVideo, 4 826 F.2d at 917-18. Also, “[a] default judgment must not differ in kind from, or exceed 5 in amount, what is demanded in the pleadings.” Fed. R. Civ. P. 54(c). 6 Default judgment is not warranted in this case. After weighing all of the Eitel 7 factors, the court finds that the second, third, fourth, fifth, and seventh factors weigh 8 against default judgment. Although the first and sixth factors favor default judgment, on 9 balance, the factors do not support default judgment against Mr. Schlatter at this time. 10 1. Factors Weighing Against Default Judgment 11 The second, third, and fifth Eitel factors weigh against default judgment because 12 Plaintiffs do not establish Mr. Schlatter’s liability, and there could be a material factual 13 dispute about whether he owes additional employer contributions. The second and third 14 Eitel factors focus on the merits of the plaintiff’s substantive claim and the sufficiency of 15 the complaint. Eitel, 782 F.2d at 1471-72. Courts frequently examine these factors 16 together, and the Ninth Circuit has suggested that they require a plaintiff to state a claim 17 on which it may recover. Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978); 18 accord PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d. 1172, 1175 (C.D. Cal. 2002). 19 This requires establishing a prima facie case. Danning, 572 F.2d at 1388; see also 20 Microsoft Corp. v. Lopez, No. C08-1743JCC, 2009 WL 959219, at *2 (W.D. Wash. Apr. 21 7, 2009). 22 ORDER- 11 1 Additionally, the fifth factor requires the court to consider whether there is any 2 possibility of a material dispute as to the facts. Eitel, 782 F.2d at 1471-72. Although 3 courts will accept as true all well-pleaded allegations regarding liability, necessary facts 4 not contained in the pleadings and legally insufficient claims are not established by 5 default. Danning, 572 F.2d at 1388. Thus, where pleadings are insufficient to establish 6 liability, the possibility of a material factual dispute can also arise. 7 To show substantive merit, sufficient pleading, and no possibility of a material 8 factual dispute, Plaintiffs must establish a prima facie case that Mr. Schlatter was 9 required to pay fringe benefit contributions and that he breached these obligations. (See 10 Read Decl. Ex. A at 11; 2d. Am. Compl. ¶¶ 32-33.) Plaintiffs’ claim is for a violation of 11 ERISA § 515, which requires “every employer who is obligated to make contributions to 12 a multiemployer plan . . . [to] make [them] in accordance with the terms and conditions 13 of such plan or agreement.” 29 U.S.C. § 1145; see also 29 U.S.C. § 1132(a)(3) 14 (establishing a trust’s right to sue to enforce the terms of multiemployer plans). In order 15 to successfully assert this claim, Plaintiffs must prove: (1) that they are multiemployer 16 trusts; (2) that the PLA, letter of assent, and collective bargaining agreement obligated 17 Mr. Schlatter to make employee benefit contributions; and (3) that Mr. Schlatter failed to 18 make contribution payments. See Bd. of Trs. of the Sheet Metal Workers Health Care 19 Plan of N. Cal. v. Gervasio Envtl. Sys., No. C03-04858, 2004 WL 1465719, at *2 (N.D. 20 Cal. May 21, 2004) (stating the elements of a § 515 claim). 21 Although Plaintiffs’ complaint and motion for default judgment contain some 22 relevant facts, they do not establish a prima facie case against Mr. Schlatter. Plaintiffs’ ORDER- 12 1 complaint and motion for default judgment establish: (1) that Plaintiffs are 2 multiemployer trusts (Read Decl. ¶ 10); (2) that Mr. Schlatter signed a letter of assent 3 obligating him to adhere to the PLA (2d. Am. Compl. ¶ 21); (3) that the PLA obligates 4 Mr. Schlatter to pay employer contributions for employee work done on a PLA-covered 5 project (Read Decl. Ex. A); (4) that Mr. Schlatter sent the trust administrators reports and 6 contributions for two months ending in October 2011 (Mot. at 4); and (5) that Mr. 7 Schlatter did not submit reports and contribution payments thereafter nor did he submit to 8 an audit of his employment records (id.). These facts do not establish liability as to 9 whether Mr. Schlatter owes additional employee contributions because they do not 10 establish whether he was obligated to continue reporting to the trusts or obligated to pay 11 contributions after October 2011. Despite Plaintiffs’ bald assertion that “the Trusts have 12 confirmed that [Cascade Partnership] and/or [Cascade Proprietorship] provided labor to 13 the Project and have failed to fully or properly report labor and pay contributions to the 14 Trusts” (2d Am. Compl. ¶ 34), the court cannot determine whether Mr. Schlatter is liable 15 for unpaid contributions without any information in the record about the scope of Mr. 16 Schlatter’s project under the PLA, the number of his employees dedicated to the PLA 17 project, the identity of these employees, and the number of months his employees worked 18 on the project. These material facts are missing from the record, they are necessary to 19 establish a prima facie case, and they could be disputed. 20 Plaintiffs’ audit report, submitted with their motion for default, does not supply the 21 missing facts. The audit report explains that to determine the alleged amount of Mr. 22 Schlatter’s unpaid employer contributions, auditors “compared the hours reported to the ORDER- 13 1 Trust to the hours listed in the Washington State Department of Labor and Industries 2 audit report [and] . . . summarized the findings and calculated the liquidated damages and 3 interest due to the Fund, as per the Trust Agreement.” (Read Decl. Ex. H at 145.) 4 However, the audit report does not explain how the auditors determined that the 5 employees listed actually worked for Mr. Schlatter on the PLA project. (See Read Decl. 6 Ex. H. at 148-49.) Because there is no connection between the employees listed and the 7 PLA project, key factual information regarding liability is missing. Plaintiffs have not 8 adequately pleaded their unpaid contribution claim and therefore the second, third, and 9 fifth Eitel factors weigh against default. 10 The fourth Eitel factor, the sum of money at stake, also weighs against granting 11 Plaintiffs’ motion. In general, default judgment is disfavored if there are large sums of 12 money involved. Eitel, 782 F.2d at 1472. This factor “balances the amount of money at 13 stake in relation to the seriousness of the [d]efendant’s conduct.” PepsiCo, 238 F. Supp. 14 2d at 1175. Thus, when the amount of money is unreasonable in light of the potential 15 loss caused by the defendant’s actions, the factor weighs against default judgment. 16 Truong Giang Corp. v. Twinstar Tea Corp., No. 06-CV-03594, 2007 WL 1545173, at 17 *12 (N.D. Cal. May 29, 2007). Here, Plaintiffs ask for $19,345.51 in delinquent fringe 18 benefits contributions, $2,396.12 in liquidated damages, at least $4,060.96 in interest, 19 $1,403.00 in audit fees, and $49,711.04 in attorney’s fees and costs. (See Mot. at 15.) 20 This amounts to almost $77,000.00 in damages. Plaintiffs themselves characterize this 21 amount as “a large sum of money.” (Mot. at 12.) Although ERISA authorizes such an 22 award (see 29 U.S.C. § 1132(g)(2)), and it is within the range awarded by other courts in ORDER- 14 1 ERISA unpaid contribution cases, 7 the problems with the substantive merits of Plaintiffs’ 2 claims and the potential for material factual disputes renders such a large award 3 unreasonable. See Eitel, 782 F.2d at 1472 (stating that a substantial judgment, considered 4 in light of the parties’ dispute as to material facts, supported the court’s decision not to 5 grant default judgment); accord Truong, 2007 WL 1545173, at *12 (finding that the 6 factor weighed against default because the sum sought was unsupported by evidence in 7 the record). Also, as addressed below, the court finds that the amount of attorney’s fees 8 requested is considerably inflated compared to what ERISA authorizes; this fact also 9 weighs against the reasonableness of the damages sought. The court thus finds that the 10 fourth Eitel factor weighs against default. 11 The seventh Eitel factor, the policy favoring decisions on the merits, also weighs 12 against granting Plaintiffs’ motion. The seventh factor reflects the general principle that 13 cases should be decided on their merits whenever reasonably possible. See Pena v. 14 Seguros La Commercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985). This factor almost 15 always weighs strongly against default judgment, although it is not dispositive. See, e.g., 16 Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp. 2d 1039, 1061 (N.D. Cal. 2010) 17 (factor not dispositive where a defendant fails to appear or defend itself in the action and 18 the other factors favor granting the motion); Phillip Morris USA, Inc., v. Castworld 19 7 In other § 515 employer contribution cases, courts in this circuit have awarded default judgments for unpaid contributions, liquidated damages, interest, and attorneys fees in amounts 21 ranging from $24,000.00 to almost $190,000.00. Compare Wine v. Winifred Elec. Inc., No. CV09-638-PHX-DGC, 2009 WL 1942887, at *2 (D. Ariz. July 2, 2009), with Bd. of Trs. of V.A. Local No. 159 Health and Welfare Trust Fund v. RT/DT, Inc., No. C12-0511JSW, 2013 WL 22 2237871, at *10 (N.D. Cal. May 21, 2013). 20 ORDER- 15 1 Prods., Inc., 219 F.R.D. 494, 501 (C.D. Cal. 2003) (noting “the mere existence of Fed. R. 2 Civ. P. 55(b) indicates that [the seventh] Eitel factor is not alone dispositive”). Here, 3 other factors favor not granting default judgment, and thus, the court finds that this factor 4 weighs against granting Plaintiffs’ motion. 5 2. Factors Favoring Default Judgment 6 Only two Eitel factors favor default judgment—the first and the sixth. The first 7 Eitel factor is the possibility of prejudice to the plaintiff if relief is denied. On a motion 8 for default judgment, “prejudice” exists where the plaintiff has no “recourse for 9 recovery” other than default judgment. Philip Morris, 219 F.R.D. at 499. In evaluating 10 this factor, the court must look at whether, if default judgment is denied, the plaintiff 11 would be deprived of a remedy until such time as the defendant chooses to participate. 12 See, e.g., Craigslist, 694 F. Supp. 2d. at 1061 (“[W]here a defendant’s failure to appear 13 makes a decision on the merits impracticable, if not impossible, entry of default judgment 14 is warranted.”). 15 Here, Plaintiffs are likely to be prejudiced because default judgment is their only 16 recourse to recover from Mr. Schlatter. Plaintiffs have already spent a significant amount 17 of time litigating this matter, Mr. Schlatter has not responded to any of their three 18 complaints (see Dkt.), and Mr. Schlatter’s counsel has withdrawn from the case 19 (see 11/15/13 Ord. (Dkt. # 65).) It is doubtful that Mr. Schlatter will ever participate in 20 the litigation, which makes a judgment on the merits impracticable. The court notes, 21 however, that any prejudice to Plaintiffs is mitigated by the fact that the court is denying 22 ORDER- 16 1 Plaintiffs’ motion for default judgment without prejudice. Nevertheless, the first factor 2 supports entry of default judgment. 3 The sixth factor, whether the entry of default is due to excusable neglect, also 4 favors entry of default judgment. In other contexts, “excusable neglect” has been defined 5 by its constituent parts. See Briones v. Riviera Hotel & Casino, 116 F.3d 379, 381 6 (1997). Neglect “has its normal, expected meaning, i.e., negligence, carelessness, 7 inadvertent mistake.” Id. Courts determine whether neglect is excusable using four 8 factors based on equitable principles: “(1) danger of prejudice . . . , (2) the length of the 9 delay and its potential impact on judicial proceedings, (3) the reason for the delay, 10 including whether it was within the reasonable control of the movant, and (4) whether the 11 movant acted in good faith.” Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 12 507 U.S. 380, 395 (1993). In the default judgment context, there is no excusable neglect 13 where a defendant is “properly served with the Complaint, the notice of entry of default, 14 [and] papers in support of the [default judgment] motion.” Shanghai Automation 15 Instrument Co., Ltd. v. Kuei, 194 F. Supp. 2d 995, 1005 (N.D. Cal. 2001). Further, “the 16 possibility of excusable neglect is remote” where a defendant participated early in a case, 17 but later stopped participating. PepsiCo, 238 F. Supp. 2d. at 1177. 18 There is no indication of excusable neglect in this case. The entry of default 19 against Mr. Schlatter was due to his failure to respond to any of Plaintiffs’ complaints 20 despite pre-litigation contact and his counsel’s appearance in the action. (See 11/15/13 21 Ord. (Dkt. # 64) at 2.) Mr. Schlatter was served with the second amended complaint on 22 September 20, 2013 (see Cert. of Serv. (Dkt. # 52)), and he failed to timely answer this or ORDER- 17 1 any other complaint. (See generally Dkt.) Mr. Schlatter had notice and opportunity to 2 appear in this litigation before Plaintiffs moved for default judgment; he did not do so. 3 Thus, the court finds that there is no excusable neglect and this factor supports default. 4 On balance, the Eitel factors do not support default judgment at this time. 5 Plaintiffs have failed to allege a prima facie case against Mr. Schlatter under ERISA 6 § 515, there is a possibility of material factual disputes, and the amount of damages 7 requested is unreasonable. These factors outweigh the possible prejudice to Plaintiffs’ 8 and outweigh the fact that Mr. Schlatter’s default was not due to excusable neglect. 9 Accordingly, the court DENIES Plaintiffs’ motion for default judgment. 10 C. Plaintiffs Have Not Substantiated Their Damages Claims 11 While not an independent basis for denying Plaintiffs’ motion, the court notes that 12 Plaintiffs have not properly substantiated their damages as required by the Federal Rules 13 of Civil Procedure and this court’s Local Rules. See Fed. R. Civ. P. 55; Local Rules 14 W.D. Wash. LCR 55(b)(2)(A). The court finds deficiencies in the amounts Plaintiffs 15 claim for unpaid employer contributions, interest, liquidated damages, and attorney’s 16 fees. 17 Generally, default judgment is a two step process: first, the court determines that a 18 default judgment should be entered; then, it determines the amount and character of the 19 recovery that should be awarded. TeleVideo, 826 F.2d at 915. The court must ensure that 20 the amount of damages is reasonable and demonstrated by the evidence, and the court 21 may rely on the declarations submitted by the plaintiff or order a full evidentiary hearing 22 to make its determination. Fed. R. Civ. P. 55(b); TeleVideo, 826 F.2d at 917-18; Geddes ORDER- 18 1 v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977); see also Fed. R. Civ. P. 8(b)(6) 2 (“An allegation—other than one relating to the amount of damages—is admitted if a 3 responsive pleading is required and the allegation is not denied.”). Additionally, this 4 court’s Local Rules require Plaintiffs to provide: 5 6 7 a concise explanation of how all amounts were calculated, and shall support this explanation with evidence establishing the entitlement to and amount of the principal claim, and, if applicable, any liquidated damages, interest, attorney’s fees, or other amounts sought. If the claim is based on a contract, plaintiff shall provide the court with a copy of the contract and cite the relevant provisions. 8 Local Rules W.D. Wash. LCR 55(b)(2)(A). Here, Plaintiffs fail to provide the requisite 9 evidence to establish their damages claims because they either: (1) do not demonstrate 10 that they are legally entitled to the amounts requested or (2) do not provide a concise 11 explanation of how the amounts were calculated. 12 1. Employer Contribution Amount 13 First, as discussed previously, Plaintiffs do not prove that Mr. Schlatter owes them 14 unpaid employer contributions, let alone prove the amount of these contributions. 15 Although Plaintiffs’ audit report contains both a summary of the total unpaid employer 16 contributions and unpaid employer contributions by employee, it does not contain any 17 information demonstrating that these employees actually worked on the project covered 18 by the PLA. (Read Decl. Ex. H. at 147-49.) Also, the audit does not give any 19 information as to the rates the auditors used to determine the appropriate employer 20 contribution levels for the various trusts. Without this information, the court cannot 21 22 ORDER- 19 1 evaluate the reasonableness of the unpaid contribution damages amount because it cannot 2 determine whether the amount was calculated using the proper rates. (Id.) 3 2. Interest and Liquidated Damages 4 Plaintiffs also do not provide adequate information to substantiate their liquidated 5 damages or interest claims. ERISA states in relevant part, “the court shall award the 6 plan . . . (B) interest on unpaid contributions, [and] (C) an amount equal to the greater 7 of— (i) interest on the unpaid contributions, or (ii) liquidated damages provided for under 8 the plan in an amount not in excess of 20 percent (or such higher percentage as may be 9 permitted under Federal or State law) of the [unpaid employer contributions] . . . .” 10 29 U.S.C. §§ 1132(g)(2)(B)-(C). The statute awards both interest and liquidated damages 11 to parties who obtain judgments in favor of trusts. See Plumbers & Pipefitters Nat. 12 Pension Fund v. Eldridge, 232 Fed. App’x 680, 683 (9th Cir. 2007). 13 Here, most of the underlying trust agreements state that interest on unpaid 14 employer contributions is 12 percent per annum. (See Read Decl. ¶ 25.) However, one 15 trust agreement states that interest should be calculated at the rate established under 26 16 U.S.C. § 6621 for the underpayment of taxes. (Id.) This code provision sets interest at 17 the sum of the federal short-term rate plus three percentage points. 26 U.S.C. 18 § 6621(a)(2). Plaintiffs do not state the interest rate they used for this rate calculation; 19 they merely provide a total interest amount for the combined underpayments to the trusts, 20 21 22 ORDER- 20 1 and therefore, the court does not have enough information to determine whether interest 2 is reasonable and calculated using the proper rates. 8 3 Additionally, ERISA awards liquidated damages in the amount that is equal to the 4 greater of either interest or liquidated damages designated by the trust agreement. Here, 5 Plaintiffs improperly ask for liquidated damages in the amount designated by the trust 6 agreements, when the statute requires liquidated damages equal to the interest, because it 7 is the greater number. 29 U.S.C. § 1132(g)(2)(C); see Morarty ex rel. Local Union No. 8 727 v. SVEC, 429 F.3d 710, 721 (7th Cir. 2005) (upholding a double interest award); 9 accord Board of Tr. of Laborers Health and Welfare Trust Fund for N. Cal. v. Shade 10 Const. and Eng’g, No. 06-6830 PJH, 2007 WL 3071003, at *6 (N.D. Cal. Oct. 19, 2007) 11 (awarding double interest under 29 U.S.C §§ 1132(g)(2)(B)-(C)). 12 3. Attorney’s Fees 13 Finally, Plaintiffs miscalculate their requested attorney’s fees and costs. Although 14 ERISA requires courts to award attorney’s fees and costs when a trust obtains a judgment 15 against a defendant on an employer contribution claim, the attorney’s fees and costs 16 awarded are limited to those incurred from obtaining that specific judgment. 29 U.S.C. 17 § 1132(g)(2)(D). ERISA states, “In any action under this subchapter . . . to enforce 18 section 1145 of this title in which a judgment in favor of the plan is awarded, the court 19 shall award the plan . . . reasonable attorney’s fees and costs of the action, to be paid by 20 the defendant.” Id. If the court granted default judgment in favor of Plaintiffs and 21 8 Plaintiffs also ask the court to increase the interest award by $4.92/day but do not 22 provide any information as to how they arrived at this per diem amount. (Mot. at 15 n. 3.) ORDER- 21 1 against Mr. Schlatter, Plaintiffs would be entitled to reasonable attorney’s fees associated 2 with the judgment on their § 1145 claim. However, Plaintiffs would not be entitled to 3 attorney’s fees for their claims against other defendants not brought under ERISA to 4 enforce § 1145. Specifically, Plaintiffs are not entitled to attorney’s fees under 5 § 1132(g)(2)(D) for their state law bond claims against insurance company defendants or 6 for their common law unjust enrichment claim against the Port of Seattle. Thus, 7 Plaintiffs overstate the amount of attorney’s fees and costs they should be awarded 8 because they improperly seek attorney’s fees and costs for the entire cost of pursuing this 9 litigation, not just for those fees and costs incurred from pursuing their § 1145 claim 10 against Mr. Schlatter. 9 11 IV. 12 CONCLUSION For the foregoing reasons, the court DENIES Plaintiffs’ motion for default 13 judgment against Mr. Schlatter (Dkt. # 68) WITHOUT PREJUDICE. If Plaintiffs wish to 14 / 15 / 16 / 17 / 18 19 9 Numerous entries in the Plaintiffs’ attorneys’ declarations and supporting documents suggest that they are seeking attorney’s fees equal to the total cost of the litigation. (See, e.g., 21 James Decl. at 8 (“Telephone call to Yuser [sic] regarding Bond Claims; telephone call to Washington Attorney regarding Bond Claims; meeting with Gia regarding bond claims . . . Research RCW 18.27.040 regarding Proceeding against Bond In Federal Court”); 22 Urban Decl. Ex. A. at 4 (“Review RCW bond provisions related to Trust bond claim.”).) 20 ORDER- 22 1 re-file for default judgment against Mr. Schlatter they must correct the deficiencies 2 identified in this order and so move within 60 days of the date of this order. 3 Dated this 9th day of February, 2014. 4 6 A 7 JAMES L. ROBART United States District Judge 5 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 ORDER- 23

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.