United States District Court, D. Maryland
TRUSTEES OF NAT'L AUTO. SPRINKLER INDUS. FUND, et al., Plaintiffs,
UNITED AUTO. SPRINKLERS, INC., et al., Defendants.
REPORT AND RECOMMENDATION
CHARLES B. DAY, Magistrate Judge.
This Report and Recommendation addresses the Renewed Motion for Entry of Default Judgment Against Defendants (the "Motion") (ECF No. 20) and Correspondence Correcting Earlier Submission ("Motion Supplement") (ECF No. 23) filed by Trustees of the National Automatic Sprinkler Industry Welfare Fund; Trustees of the National Automatic Sprinkler Local 669 UA Education Fund; Trustees of the National Automatic Sprinkler Industry Pension Fund; and Trustees of the Sprinkler Industry Supplemental Pension Fund (collectively "Plaintiffs" or the "Collective Funds"). Plaintiffs brought this action under the Employee Retirement Income Security Act of 1974 ("ERISA") to recover delinquent pension fund contributions and related relief from United Automatic Sprinklers, Inc. ("United"); Michael Hillenbrand; and Andrea Hillenbrand (collectively "Defendants"). See 29 U.S.C. § 1001 (2012). The Clerk entered default against United and Michael Hillenbrand on April 30, 2012 (ECF No. 10) and against Andrea Hillenbrand on September 11, 2013 (ECF No. 18). 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
The Collective Funds qualify as employee benefit plans under ERISA. 29 U.S.C. § 1002(1); 29 U.S.C. § 1002(2)(A). They also qualify as multiemployer plans. 29 U.S.C. § 1002(37)(A). They were established pursuant to a series of collective bargaining agreements between United and Road Sprinkler Fitters Local Unions 699 and 709. ECF No. 23, Ex. B-L. Under these agreements, United agreed to contribute to the Collective Funds on behalf of its employees.
United failed to make the required benefit contributions. The parties entered into a settlement agreement on June 11, 2011, allowing for systematic payment over time of all amounts owed. ECF No. 23, Ex. A. The agreement required payment of $155, 981.05, constituting missed contributions and accrued interest at 7% per annum. This sum was to be paid in monthly installments of $9, 153.75 beginning July 1, 2011. The agreement further provided that previously assessed liquidated damages of $30, 486.33 would be waved so long as United made timely payments in conformity with the settlement agreement, paid future monthly contributions to the Collective Funds as they became due, and submitted all future monthly remittance reports as required by the collective bargaining agreements. Under the agreement, if United failed to abide by any of the conditions, Plaintiffs were entitled to immediately collect the entire remaining settlement debt and reassess liquidated damages. Michael and Andrea Hillenbrand agreed to personally guarantee all terms in the settlement agreement.
Plaintiffs filed a Complaint on January 6, 2012, under ERISA, 29 U.S.C. § 1002, alleging that Defendants had violated the terms of the settlement agreement by falling behind on settlement payments and failing to make subsequent monthly contributions to the Collective Funds. ECF No. 1. Plaintiffs sought to collect $134, 064.10 still owed pursuant to the settlement agreement; $76, 027.84 for subsequent past-due contributions to the Collective Funds; interest; $19, 514.74 in liquidated damages; costs and attorneys' fees.
Plaintiffs served Defendants with the Complaint alleging breaches of the collective bargaining agreements and settlement agreement. The Complaint was served on United and Michael Hillenbrand on January 17, 2012, and their time to respond expired, without reply, on February 7, 2012. The Court entered a default judgment against United and Michael Hillenbrand on April 30, 2012. The Complaint was served on Andrea Hillenbrand on June 6, 2012, and the time to respond expired, without reply, on July 7, 2012. The Court entered default judgment against Andrea Hillenbrand on September 11, 2013.
Plaintiffs' Motion alleges that while Plaintiffs have been successful in collecting $7, 690.39 from Defendants since the filing of the initial action, the amount owed by Defendants has nonetheless increased since that filing. Plaintiffs allege that even after applying the $7, 690.39 to what Defendants owe on past due contributions, Defendants still owe $160, 217.48 for subsequent past-due contributions to the Collective Funds, $49, 379.68 in interest assessed at 12% per annum, $42, 442.51 in liquidated damages, $505.00 in costs, $1, 381.25 in attorneys' fees, and $134, 064.10 in default on the settlement agreement.
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 (4th Cir. 2001) (citation omitted). 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." See Wright, et al., FEDERAL PRACTICE AND PROCEDURE § 2688 (3d ed. Supp. 2010); see also Ryan, 253 F.3d at 780-81 (holding that acceptance of facts plead by the non-defaulting party "does not necessarily entitle the [party] to the relief sought").
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. In determining damages, the Court cannot accept Plaintiffs' factual allegations as true and must make an independent determination. 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, e.g., Monge, 751 F.Supp.2d at 794-95 (citing cases in which damages were awarded after a default judgment, and without a hearing, based on affidavits, printouts, invoices, or other documentary evidence).
More than two years have passed since Plaintiffs served their 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' Motion was filed on June 2, 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, 895-96 (4th Cir. 1987) (upholding a default judgment when the defendant did not respond to the plaintiff's complaint, even though the defendant would have had a valid defense had it responded); Disney Enterprises, Inc. v. Delane, 446 F.Supp.2d 402, 405-06 (D. Md. 2006) (holding that entry of default judgment was proper because the defendant had been properly served with the complaint and did not respond, even after the 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 the defendant was "unresponsive for more than a year" after denial of his motion to dismiss, even though he was properly served with the plaintiff's motions for entry of default and default judgment).
For the reasons stated below, it is my recommendation that Plaintiffs be awarded 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 ...