United States District Court, D. Maryland
THOMAS E. PEREZ, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR Plaintiff,
GLOBAL RESEARCH SERVICES, LLC, ET AL., Defendants.
REPORT AND RECOMMENDATION
Mark Coulson United States Magistrate Judge
Report and Recommendation addresses the Motion for Default
Judgment filed by Plaintiff, the U.S. Secretary of Labor (the
“Secretary”), against Defendants Global Research
Services, LLC (“the Company”) and Julie E.
Garrett. (ECF No. 11.) The Company and Ms. Garrett have not
filed responses, and the time for doing so has passed.
See Loc. R. 105.2.a. On July 22, 2016, in accordance
with 28 U.S.C. § 636 and Local Rules 301 and 302, Judge
Hollander referred this case to me for a report and
recommendation on Plaintiff’s Motion. (ECF No. 13.) I
find that a hearing is unnecessary. See Fed. R. Civ.
P. 55(b)(2); Loc. R. 105.6 (D. Md. 2014). I respectfully
recommend that the Court GRANT the Secretary’s Motion
for Default Judgment and award damages and other equitable
relief, as set forth herein.
AND PROCEDURAL HISTORY
January 26, 2016, the Secretary commenced this action against
the Company, Ms. Garrett, and the Global Research Services,
LLC 401(k) Plan (“the Plan”), alleging violations
of the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. §§ 1109,
1132(a)(2) and (5). (ECF No. 1.) The Complaint alleges that
Ms. Garrett and the Company were fiduciaries of the Plan and
parties in interest with respect to the Plan, which is
governed by ERISA. The Secretary alleges that the Company
failed to make certain requisite employer contributions to
the Plan and that the Company and Ms. Garrett failed to
timely remit certain employee contributions to the Plan. The
Secretary claims that this practice constituted failure to
segregate Plan assets from the general assets of the Company,
such that the contributions remained in the Company’s
general funds and were not held in trust for the plan. The
Complaint alleges that Ms. Garrett and the Company thereby
failed to discharge their fiduciary duties with respect to
the Plan, and dealt with assets of the Plan in their own
interests, all in violation of ERISA.
of Service of Summons were Returned Executed for Ms. Garrett
and the Company on March 1, 2016. (ECF Nos. 4, 5.) The
Company and Ms. Garrett did not file answers or responsive
pleadings within the requisite time period. Upon the
Secretary’s Motion, the Clerk entered an order of
default against the Company and Ms. Garrett on April 22,
2016. (ECF No. 8.) The Secretary filed the pending Motion for
Default Judgment on July 22, 2016. The Secretary seeks an
order directing the Company and Ms. Garrett to restore to the
Plan the losses it suffered as a result of their failure to
remit certain employer contributions and to timely remit
certain employee contributions to the Plan. (ECF No. 11-3).
With respect those losses, the Declaration of Samantha S.
Truppi (Exhibit 2 to the Secretary’s Motion), states
that Ms. Garrett and the Company failed to remit a total of
$178, 051.42 in employer contributions to the Plan, which
would have earned $36, 559.90 in interest as of July 20,
2016. (Truppi Decl. ¶¶ 16-18, ECF No. 11-2.) Ms.
Truppi’s declaration also states that Ms. Garrett and
the Company failed to pay interest on untimely remitted
employee contributions, which totaled $6, 613.76 as of July
20, 2016. (Id. ¶¶ 22-25.) The Secretary
also asks the Court remove Ms. Garrett and the Company from
their fiduciary roles with respect to the Plan and to
permanently enjoin them from serving as fiduciaries,
trustees, advisors, or administrators and from engaging in
certain other decision-making activities, in relation to any
plan governed by ERISA, and from further violating ERISA.
for Entry of Default Judgment
determining whether to award a default judgment, the Court
accepts as true the well-pleaded factual allegations in the
Complaint as to liability. Entrepreneur Media, Inc. v.
JMD Entm’t Grp., LLC, 958 F.Supp.2d 588, 593 (D.
Md. 2013) (citing Ryan v. Homecomings Fin. Network,
253 F.3d 778, 780 (4th Cir. 2001)). Nonetheless, the Court
must consider whether the unchallenged facts constitute a
legitimate cause of action because a party in default does
not admit mere conclusions of law. United States v.
Redden, No. 09-cv-2688-WDQ, 2010 WL 2651607, at *2 (D.
Md. June 30, 2012) (citing Ryan, 253 F.3d at 790).
Although 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),
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 Court determines
that liability is established, the Court must then determine
the appropriate amount of damages. CGI Fin., Inc., v.
Johnson, No. 12-cv-1985-ELH, 2013 WL 1192353, at *1 (D.
Md. Mar. 21, 2013). The Court does not accept factual
allegations regarding damages as true, but rather must make
an independent determination regarding such allegations.
Entrepreneur Media, Inc., 958 F.Supp.2d at 593.
Rule of Civil Procedure 55 establishes the Court’s
legal framework for resolving this matter. “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 Fed.R.Civ.P. 55(b)(2).” Entrepreneur
Media, Inc., 958 F.Supp.2d at 593. A plaintiff’s
assertion of a sum in a complaint does not make the sum
“certain” unless the plaintiff claims liquidated
damages; otherwise, the complaint must be supported by
affidavit or documentary evidence. Redden, 2010 WL
2651607, at *2. Rule 55(b)(2) provides that “the court
may conduct hearings or make referrals . . . when, to enter
or effectuate judgment, it needs to . . . determine the
amount of damages.” The Court is not required to
conduct an evidentiary hearing to determine damages; it may
rely instead on affidavits or documentary evidence in the
record to determine the appropriate sum. See, e.g.,
Mongue v. Portofino Ristorante, 751 F.Supp.2d 789,
795 (D. Md. 2010).
ERISA, plan fiduciaries must discharge their duties with
respect to a plan “solely in the interest of the
participants and beneficiaries” for the exclusive
purposes of “providing benefits to participants and
their beneficiaries” and “defraying reasonable
expenses of administering the plan, ” they must do so
with “care, skill, prudence, and diligence, ” and
“in accordance with the documents and instruments
governing the plan.” 29 U.S.C. §
1104(a)(1)(A)-(B), (D). Plan assets must be held in trust,
and they must not inure to the benefit of the employer. 29
U.S.C. § 1103(a), (c). Additionally, plan fiduciaries
are prohibited from engaging in: (1) transactions that deal
with the plan’s assets in their own interests, (2)
transactions that they know or should know constitute a
direct or indirect transfer to a party in interest, and (3)
transactions involving the plan on behalf of a party whose
interests are adverse to those of the plan or its
participants and beneficiaries. 29 U.S.C. § 1106.
Secretary contends that the Company and Ms. Garrett were
fiduciaries of the Plan and that by failing to timely remit
certain employee contributions to the Plan, they: (1) failed
to hold all assets of the Plan in trust, (2) failed to ensure
that the assets of the Plan did not inure to the benefit of
the Company; (3) failed to discharge their duties with
respect to the Plan solely in the interest of its
participants and beneficiaries; (4) failed to discharge their
duties with skill, prudence, and diligence under the
circumstances; (5) failed to discharge their duties in
accordance with the documents and instruments governing the
Plan; (6) caused the plan to engage in transactions which
they knew or should have known constituted a transfer of Plan
assets to, or use of Plan assets by or for the benefit of, a
party in interest; (7) dealt with Plan assets in their own
interest or for their own account; and (8) engaged in
transactions involving the Plan on behalf of a party whose
interests were adverse to its interests or the interests of
its participants and beneficiaries, all in violation of the
ERISA provisions set forth above. (Compl. ¶ 19.) The
Secretary further alleges that, by failing to make certain
employer contributions to the Plan, the Company: (1) failed
to discharge its duties with respect to the Plan solely in
the interest of its participants and beneficiaries; (2)
failed to discharge its duties with skill, prudence, and
diligence under the circumstances; and (3) failed to
discharge its duties in accordance with the documents and
instruments governing the Plan, also in violation of ERISA.
(Compl. ¶ 20.) The Secretary contends that the Company
and Ms. Garrett are liable as co-fiduciaries for these
violations insofar as they participated knowingly in the
fiduciary breaches of each other, enabled each other’s
fiduciary breaches, and failed to make reasonable efforts
under the circumstances to remedy each other’s
fiduciary breaches, of which they had knowledge. (Compl.
¶¶ 21-23); see 29 U.S.C. § 1105(a).
Accepting these factual allegations as true, the Secretary
has thus stated a claim for relief under ERISA, and I
recommend that the Court enter a Default Judgment in favor of
the Secretary and against the Company and Ms. Garrett.
determined that Plaintiffs have established liability, it is
now appropriate to determine the relief to which the
Secretary is entitled. Under ERISA, any person who breaches
any fiduciary duty is personally liable to make good to the
plan any losses. 29 U.S.C. § 1109(a). Additionally, a
person who breaches his fiduciary duty “shall be
subject to such other ...