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Trustees of Plumbers and Gasfitters Local 5 Retirement Savings Fund v. Phenix Plumbing, Inc.

United States District Court, D. Maryland

June 21, 2016

TRUSTEES OF THE PLUMBERS AND GASFITTERS LOCAL 5 RETIREMENT SAVINGS FUND, et al., Plaintiffs
v.
PHENIX PLUMBING, INC., RNR ENTERPRISE, INC. and RICHARD N. ROSENTHAL, Defendants.

          MEMORANDUM OPINION

          THEODORE D. CHUANG, United States District Judge.

         This case is before the Court on a Motion for Default Judgment against Defendants Phenix Plumbing, Inc. ("Phenix") and RNR Enterprise, Inc. ("RNR"). Having reviewed the Complaint, the Motion, and the supporting documents, the Court finds no hearing necessary. See D. Md. Local R 105.6. For the following reasons, the Motion for Default Judgment is GRANTED IN PART and DENIED IN PART.

         BACKGROUND

         The Complaint was filed by nine plaintiffs. Six of the plaintiffs consist of the trustees of the following employee benefit plans, as that term is defined in the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. (2012): the Plumbers and Gasfitters Local 5 Retirement Savings Fund ("Retirement Savings Fund"), the Plumbers and Pipefitters Apprenticeship Fund ("Apprenticeship Fund"), the Plumbers and Pipefitters Vacation Fund ("Vacation Fund"), the Plumbers and Pipefitters Medical Fund ("Medical Fund"), the Plumbers and Pipefitters National Pension Fund ("National Pension Fund"), and the International Training Fund, ("International Training Fund"). See 29 U.S.C. § 1002(3) and (37). The remaining plaintiffs consist of the Communication and Productivity Fund, a labor-management cooperation committee as that term is defined in the Taft-Hartley Act, 29 U.S.C. § 186(c)(9), and the Labor-Management Cooperation Act, 29 U.S.C. § 175a (2012); the Industry Promotion Fund, a trust fund; and the Plumbers Local Union No. 5 ("Local Union No. 5"), an unincorporated labor organization, as that term is defined in the Labor-Management Relations Act, 29 U.S.C. § 152(5).

         Defendants Phenix and RNR are companies engaged in an industry affecting commerce and are "employers" for purposes of ERISA and the Labor-Management Relations Act. See 29 U.S.C. §§ 1002(5), (9), (11), (12), and (14); and 29 U.S.C. §§ 142(1), (3) and 152(2). Phenix and RNR are corporate alter egos of one another and are therefore jointly and severally liable for any debts incurred by either corporate entity. Defendant Richard Rosenthal is a fiduciary of Phenix, as that relationship is defined in ERISA. See 29 U.S.C. § 1002(21)(A).

         Phenix and RNR are required to make regular contributions to the eight plaintiff trust funds, and to collect and deposit dues into Local Union No. 5's account pursuant to a Collective Bargaining Agreement ("CBA") between the Mechanical Contractors Associations of Metropolitan Washington, D.C. and Local Union No. 5 on terms set out in a series of trust agreements between the parties. By the terms of these agreements, Phenix and RNR must make contributions to the trust funds on a monthly basis, at varying rates based on the particular fund, with the amount of the contributions based on the number of hours of covered work performed by employees. Phenix and RNR must also deduct union dues from employees' paychecks and deposit those dues into Local Union No. 5's account on a monthly basis, with the amount of the deductions calculated based on the number of hours of covered work performed by the employees. The agreements also require Phenix and RNR to submit monthly reports detailing the hours worked by all covered employees, to ensure that the trusts and the Union can calculate the contributions and deductions owed. The agreements further provide that if Phenix and RNR fail to make timely payments to these funds, they are liable for (1) the unpaid contributions; (2) interest on delinquent payments, with the interest rate varying based on the fund at issue; (3) liquidated damages, calculated at varying rates based on the fund at issue; (4) and all reasonable costs and attorney's fees incurred in seeking to recover delinquent contributions.

         Phenix and RNR submitted the required reports for the period from March 2015 to July 2015, but did not make the corresponding contributions. During that same period, Phenix and RNR took the required deductions from employees' paychecks for the Local Union No. 5 dues but failed to forward those dues to the Local Union No. 5 account. Accordingly, on August 6, 2015, Plaintiffs filed a Complaint in this Court alleging six causes of action: (1) an ERISA action against Phenix and RNR for the unpaid contributions to the Retirement Savings Fund, the Apprenticeship Fund, the Medical Fund, the Vacation Fund, the National Pension Fund, and the International Training Fund; (2) a request for a payroll audit against Phenix and RNR; (3) a claim for a "working assessment and other amounts due, " which the Court construes as an action for breach of a collective bargaining agreement, pursuant to 29 U.S.C. § 185(a), against Phenix and RNR seeking the unpaid contributions to the Communication and Productivity Fund, the Industry Promotion Fund, and Local Union No. 5; (4) a request for a bond against Phenix and RNR; (5) a request for injunctive relief against Phenix and RNR; and (6) a claim for breach of fiduciary duty against Rosenthal. As to damages, as relevant here, Plaintiffs sought for Counts 1 and 3 the unpaid contributions, interest on those unpaid contributions at the rates specified in the relevant agreements, liquidated damages on those contributions at the rates specified in the relevant agreements, and all reasonable costs and attorney's fees associated with this litigation.

         On August 19, 2015, Phenix and RNR were served with the Complaint, but, to date, have failed to file a responsive pleading. On October 2, 2015, Plaintiffs filed a Motion for Clerk's Entry of Default as to both Phenix and RNR. The Clerk entered those defaults on October 21, 2015. On November 20, 2015, Plaintiffs filed a Motion for Default Judgment against Phenix and RNR seeking judgment in the amount of $85, 069.17 on only Counts 1 and 3 of the Complaint. On November 24, 2015, Plaintiffs voluntarily dismissed Counts 2, 4, and 5 of the Complaint. On January 11, 2016, Plaintiffs voluntarily dismissed Count 6 of the Complaint, the only count alleged against Defendant Rosenthal. To date, Phenix and RNR have not responded to the entry of default or to the Motion for Default Judgment.

         DISCUSSION

         I. Legal Standard

         Pursuant to Federal Rule of Civil Procedure 55(a), "[w]hen a party against whom a judgment for affirmative relief is sought 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). Pursuant to Rule 55(b)(2), after a default has been entered by the clerk, the court may, upon the plaintiffs application and notice to the defaulting party, enter a default judgment. Fed R. Civ. P. 55(b)(2). A defendant's default does not, however, automatically entitle the plaintiff to entry of a default judgment; rather, that decision is left to the discretion of the court. United States v. Moradi, 673 F.2d 725, 727 (4th Cir. 1982) ("[T]rial judges are vested with discretion which must be liberally exercised, in entering [default] judgments and in providing relief therefrom."); Dow v. Jones, 232 F.Supp.2d 491, 494-95 (D. Md. 2002). The Fourth Circuit has a "strong policy that cases be decided on their merits, " United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), but default judgment may be appropriate "when the adversary process has been halted because of an essentially unresponsive party." S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421-22 (D. Md. 2005); see H. F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir. 1970) ("[T]he default judgment must normally be viewed as available only when the adversary process has been halted because of an essentially unresponsive party. In that instance, the diligent party must be protected lest he be faced with interminable delay and continued uncertainty as to his rights.").

         In reviewing a Motion for Default Judgment, the court accepts as true the well-pleaded factual allegations in the complaint relating to liability. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001). The court must determine whether the allegations support the relief sought. See Id. To do so, the court may conduct an evidentiary hearing, see Fed. R. Civ. P. 55(b)(2), or may dispense with a hearing if there is an adequate evidentiary basis in the record from which to calculate an award. See Pope v. United States, 323 U.S. 1, 12 (1944) ("It is a familiar practice and an exercise of judicial power for a court upon default, by taking evidence when necessary or by computation from facts of record, to fix the amount which the plaintiff is lawfully entitled to recover and to give judgment accordingly."). Rule 54(c) limits the type of judgment that may be entered based on a party's default: "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). Thus, where a complaint specifies the amount of damages sought, the plaintiff is limited to entry of a default judgment in that amount. In re Genesys Data Techs., Inc., 204 F.3d 124, 132 (4th Cir. 2000).

         II. Liability

         Plaintiffs have dismissed the only claim against Rosenthal and directed their Motion for Default Judgment only to Phenix and RNR. Rosenthal will therefore be dismissed as a defendant in this action. Furthermore, because Plaintiffs have voluntarily dismissed Counts 2, 4, and 5 of the Complaint and directed the Motion for Default Judgment only to Counts 1 and 3 of the Complaint, the Court considers only those two counts. ...


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