United States District Court, D. Maryland
TRUSTEES OF THE NATIONAL ASBESTOS WORKERS MEDICAL FUND, et al., Plaintiffs,
STOTTS MECHANICAL INSULATION, INC., et al., Defendants.
REPORT AND RECOMMENDATION
CHARLES B. DAY, Magistrate Judge.
This Report and Recommendation addresses the Motion for Entry of Default Judgment (the "Motion") (ECF No. 7) and Correspondence Correcting Earlier Submission ("Motion Supplement") (ECF No. 12) filed by Trustees of the National Asbestos Workers Medical Fund; Trustees of the National Asbestos Workers Pension Fund; Trustees of the National Asbestos Workers Local Union No. 80 Supplemental Medical Fund, and Trustees of the National Asbestos Workers Local Union No. 80 Supplemental Pension Fund (collectively "Asbestos Worker Funds" or "Plaintiffs"). Plaintiffs brought this action under the Employee Retirement Income Security Act of 1974 ("ERISA") to recover delinquent pension fund contributions and related relief from Stotts Mechanical Insulation, Inc. ("Stotts Mechanical") and Linda Stotts (collectively "Defendants"). See 29 U.S.C. § 1001 (2012). The Clerk entered default against Defendants on April 8, 2014 (ECF No. 8). Defendants have not filed a response and the time for doing so has passed. See Local Rule 105.2(a) (D. Md.).
Pursuant to 28 U.S.C. § 636 and Local Rules 301 and 302, the Honorable Paul W. Grimm referred this matter to me for making a Report and Recommendation concerning default judgment and/or damages. For the reasons stated herein, I recommend the Court GRANT the Motion and award Plaintiffs damages and associated relief as enumerated below.
I. Factual and Procedural Background
Plaintiffs filed a Complaint on November 26, 2013 under ERISA, 29 U.S.C. § 1001, to collect contributions, damages, and other amounts owed by Defendants pursuant to their Collective Bargaining Agreements and Settlement Agreement. Compl. ¶¶ 3-6 (ECF No. 1); Mot. Suppl. Ex. A (ECF No. 12-1), Ex. B (ECF No. 12-2), Ex. C (ECF No. 12-3). The Asbestos Worker Funds qualify as multiemployer benefit plans under section 2 of ERISA, 29 U.S.C. § 1002, and were established pursuant to an agreement entered into between Stotts Mechanical and the Heat and Frost Insulators Local Union 50 and Local Union 80. Rockstroh Decl. ¶ 2 (ECF No. 7-4). Stotts Mechanical is an employer that agreed to contribute to the Asbestos Worker Funds on behalf of its employees and in consonance with its Collective Bargaining Agreements, which include the Restated Agreements and Declarations of Trust ("Trust Agreements"). Rockstroh Decl. ¶¶ 3, 5; Mot. Suppl. Ex. D (ECF No. 12-4), Ex. E (ECF No. 12-5).
Stotts Mechanical experienced substantial difficulty making the required benefit contributions. Rockstroh Decl. ¶ 6. In response to these difficulties, the parties entered into a Settlement Agreement on October 16, 2013 allowing for systematic payment over time of all amounts owed. Rockstroh Decl. ¶ 6; Mot. Suppl. Ex. A. The Settlement Agreement required payment of $62, 014.74 in contributions and accrued interest owed over a period of four months with interest assessed on the payments at the rate of 7% per annum. Rockstroh Decl. ¶ 6; Mot. Suppl. Ex. A ¶ 3. The Settlement Agreement further provided that Stotts Mechanical remain current in all future contributions for the duration of the settlement and file all monthly reports and payments on time as required by the Trust Agreements. Rockstroh Decl. ¶ 6; Mot. Suppl. Ex. A ¶ 8. Linda Stotts executed the Settlement Agreement, committing herself to act as guarantor for all amounts owed by Stotts Mechanical, including all future monthly contributions that become due during the life of the Settlement Agreement. Rockstroh Decl. ¶ 7; Mot. Suppl. Ex. A ¶ 11.
Should Stotts Mechanical fail to contribute, the Trust Agreements authorize the Asbestos Worker Funds to project the delinquency amount, calculated as the greater of the average of the monthly payments or reports that Stotts Mechanical actually submitted for either the last three months or the last twelve months. See Rockstroh Decl. ¶ 11; Mot. Suppl. Ex. D, art. 7, § 7; Mot. Suppl. Ex. E, art. 7, § 7. The Asbestos Worker Funds are also authorized to collect interest on the delinquency amount. See Rockstroh Decl. ¶¶ 14, 16. This amount is calculated differently for the Asbestos Worker Medical Funds and the Asbestos Worker Pension Funds according to their Trust Agreements. See Rockstroh Decl. ¶¶ 14, 16. The Asbestos Worker Medical Funds may collect interest at a rate of 8% from the due date to the date of payment, interest at a rate of 1.5% per month, or double interest as provided in the Trust Agreements. Rockstroh Decl. ¶ 14; Mot. Suppl. Ex. E, art. 7, § 6. The Asbestos Worker Pension Funds may collect interest at a rate of 8% from the due date to the date of payment or double interest as provided in the Trust Agreements. Rockstroh Decl. ¶ 16; Mot. Suppl. Ex. D, art. 7, § 6.
Plaintiffs served Defendants on February 11, 2014 (ECF Nos. 4, 5), alleging Stotts Mechanical breached its Collective Bargaining Agreements and Settlement Agreement by failing to pay the contribution amounts due to the Asbestos Worker Funds, and holding Linda Stotts liable for a portion of that delinquency under the terms of the Settlement Agreement. Compl. ¶¶ 3-6. Plaintiffs allege Stotts Mechanical failed to make the third settlement payment due on January 1, 2014; failed to make the fourth settlement payment due on February 1, 2014; failed to make contributions and to submit reports for February 2014; was late making contributions for September 2013 through November 2013; and is late making contributions for February 2014. Rockstroh Decl. ¶¶ 8, 10, 13. Defendants did not file an Answer or otherwise defend against allegations in the Complaint. Plaintiffs moved for Entry of Default (ECF No. 6) on March 27, 2014, and the Clerk entered an Order of Default (ECF No. 8) on April 8, 2014.
II. Standard of Review
Rule 55 of the Federal Rules of Civil Procedure governs entries of default and default judgments. Rule 55(a) provides that "[w]hen a party... has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Fed.R.Civ.P. 55(a). If, after entry of default, the plaintiff's complaint does not specify a "sum certain" amount of damages, the Court may enter a default judgment against the defendant pursuant to Rule 55(b)(2). In considering a motion for default judgment, the Court accepts as true the well-pleaded factual allegations in the complaint as to liability. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-81 (4th Cir. 2001). However, "liability is not deemed established simply because of the default... and the Court, in its discretion, may require some proof of the facts that must be established in order to determine liability." Id. The Fourth Circuit has a "strong policy that cases be decided on the merits, " United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), but finds that default judgment "is appropriate when the adversary process has been halted because of an essentially unresponsive party, " S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005).
If the plaintiff establishes liability, the Court then turns to the determination of damages. See Ryan, 253 F.3d at 780-81. The Court must make an independent determination regarding damages and cannot accept as true factual allegations. See Lawbaugh, 359 F.Supp.2d at 422. Rule 54(c) of the Federal Rules of Civil Procedure limits the type and amount of damages that may be entered as a result of a party's default, stating that a "default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings." Fed.R.Civ.P. 54(c). While the Court may conduct an evidentiary hearing to determine damages, it is not required to do so. See, e.g., Monge v. Portofino Ristorante, 751 F.Supp.2d 789, 794-95 (D. Md. 2010); Pentech Fin. Servs., Inc. v. Old Dominion Saw Works, Inc., No. 6:09cv00004, 2009 WL 1872535, at *2 (W.D. Va. June 30, 2009) (concluding that there was "no need to convene a formal evidentiary hearing on the issue of damages" after default judgment was entered against defendant because plaintiff submitted affidavits and printouts of electronic records establishing the amount of damages it sought); DirecTV, Inc. v. Yancey, No. Civ. A. 404CV00011, 2005 WL 3435030, at *2 (W.D. Va. Dec. 12, 2005) (concluding that a hearing was "not required to enter default judgment" because plaintiff "presented sufficient evidence to support its claim for damages, costs and fees by way of uncontradicted affidavits"). The Court may rely instead on affidavits or documentary evidence of record to determine the appropriate sum. See Monge, 751 F.Supp.2d at 794-95.
More than six months passed since Plaintiffs served the Complaint on Defendants, yet Defendants failed to plead or otherwise assert a defense. Therefore, the Court deems all of Plaintiffs' factual allegations in the Complaint not pertaining to damages admitted. Fed.R.Civ.P. 8(b)(6); Ryan, 253 F.3d at 780. Plaintiffs moved for both an entry of default and a default judgment on March 27, 2014, and Defendants still did not respond. It is within the Court's discretion to grant default judgment when a defendant is unresponsive. See Fed.R.Civ.P. 55(a)-(b); see also, Park Co. v. Lexington Ins. Co., 812 F.2d 894, 896 (4th Cir. 1987) (upholding a default judgment when the defendant lost its summons and did not respond within the proper period); Disney Enters. v. Delane, 446 F.Supp.2d 402, 405-06 (D. Md. 2006) (holding that entry of default judgment was proper because defendant had been properly served with complaint and did not respond, even after plaintiffs tried repeatedly to contact him); see also, Lawbaugh, 359 F.Supp.2d 418, 422 (D. Md. 2005) (concluding that default judgment was appropriate because defendant was "unresponsive for more than a year" after denial of his motion to dismiss, even though he was properly served with plaintiff's motions for entry of default and default judgment).
For the reasons stated below, it is my recommendation that Plaintiffs are entitled to default judgment. In determining damages, I find that no evidentiary hearing is necessary and instead rely on the declarations and other evidence of record, such as a delinquency calculation analysis ...