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National Electrical Benefit Fund v. 3W Electric, LLC

United States District Court, D. Maryland, Southern Division

March 20, 2017

NATIONAL ELECTRICAL BENEFIT FUND and NATIONAL ELECTRICAL ANNUITY PLAN Plaintiffs,
v.
3W ELECTRIC LLC, Defendant.

          MEMORANDUM OPINION

          Paul W. Grimm, United States District Judge

         National Electrical Benefit Fund ("NEBF") and National Electrical Annuity Plan ("NEAP") (referred to collectively as "Plaintiffs",, filed this civil enforcement action under the Employee Retirement Income Security Act of 1974 ("ERISA",, 29 U.S.C. S 1001 et seq., seeking delinquent pension contributions pursuant to SS 502 and 515 of ERISA, 29 U.S.C. SS 1132, 1145. Compl. ¶¶ 1, 8-10, ECF No. 1. I struck Defendant's Answer filed pro se by a member of the LLC, ECF NO.5, for failure to comply with Local Rule 101.1(a), which requires corporate defendants to be represented by counsel. Order, ECF NO.6. Defendant did not file any further response to the pleadings. Plaintiffs have since filed a Motion for Clerk's Entry of Default, ECF No., , which was granted, ECF No. 10, and a Motion for Default Judgmen,, Pls.' Mot., ECF NO.9,, to which Defendant has also not responded. A Suggestion of Bankruptcy, Def's Bankr. Sugg. ECF No. 11, was filed giving notice that the United States Bankruptcy Court for the Western District of Arkansas ordered relief for a Mr. William Weems on October 25, 2016. Having reviewed the filings, I find that a hearing is unnecessary in this case. See Loc. R. 105.6 (D. Md.). Plaintiffs have demonstrated liability and established the damages they seek. Accordingly, Plaintiffs' Motion for Default Judgment will be granted.

         Background

         Plaintiffs are multiemployer pension benefit plans subject to ERISA. 29 U.S.C. SS I002(3), 1003(a); Compl. ¶¶ 3-4. NEBF is a defined benefit plan and NEAP is a defined contribution plan. 29 U.S.C. SS 1002(34)-(35;; Compl. ¶¶ 3-4. Both plans were established pursuant to an agreement between the International Brotherhood of Electrical Workers and the National Electrical Contractors Association. Compl. ¶¶ 3-4.

         Defendant, 3W Electric, LLC, is an Arkansas limited liability company ("Defendant" or "the LLC"). Id. ~ 6. Defendant is an employer who agreed to participate in NEBF and NEAP pursuant to agreements with the International Brotherhood of Electrical Workers Local Union 222, the collective bargaining representative of the company's employees. Id. ~ 7. Plaintiffs' complaint seeks a total of $178, 535.61 in damages and attorney's fees and costs, as well as injunctive relief directing Defendant to submit required payroll reporting forms for the months of February 2016 until present, along with any corresponding contribution,, interest, and liquidated damages, or submit to an audit. Id. at ¶¶ 8-10.

         Mr. Weems, a member of the LLC, filed apro se Answer on August 29, 206.. ECF No. 5. The Answer stated that Defendant intended to file for bankruptcy under Title 13. Id. I struck the Answer from the record for failure to comply with Local Rule 101.1(a), which requires corporate defendants to be represented by counsel. Order, ECF NO.6. I did, however, advise Mr. Weems to notify the court if Defendant did file for bankruptcy. Id. On September 14, 2016, Plaintiffs filed a Motion for Clerk's Entry of Default, ECF No., , and a Motion for Default Judgment, ECF NO.9. The Office of the Clerk entered an Order of Default for want of answer or other defense on October 6, 2016. ECF No. 10. On October 31, 2016, a Suggestion of Bankruptcy was filed with the Court. Def.'s Bankr. Sugg., ECF No. 11. The Suggestion explained that Mr. Weems filed a bankruptcy petition and that the United States Bankruptcy Court for the Western District of Arkansas ordered relief for that petition on October 25, 2016. Id.

         Standard of Review

         Rule 55 of the Federal Rules of Civil Procedure establishes a two-step process when a party applies for default judgment. First, the rule provides that "when 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). Following the Clerk's entry of default, "the plaintiff [then may] seek a default judgment." Godlove v. Martinsburg Senior Towers, LP, No. 14-CV-132, 2015 WL 746934, at *1 (N.D. W.Va. Feb. 20, 2015); see also Fed. R. Civ. P. 55(b). "The Fourth Circuit has a 'strong policy' that 'cases be decided on their merits.'" S. E.C. v. Lawbaugh, 359 F.Supp.2d 418, 420 (D. Md. 2005) (citing Dow v. Jones, 232 F.Supp.2d 491, 494 (D. Md. 2002)). However, "default judgment may be appropriate when the adversary process has been halted because of an essentially unresponsive party." Id. at 420-22.

         In determining whether to grant a motion for default judgment, the Court takes as true the well-pleaded factual allegations in the complaint, other than those pertaining to damages. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001). If the Court finds that "liability is established, [it] must then determine the appropriate amount of damages." Agora Fin., LLC v. Samler, 725 F.Supp.2d 491, 484 (citing Ryan, 253 F.3d at 780-81.. In order to do so, "the court may conduct an evidentiary hearing, or may dispense with a hearing if there is an adequate evidentiary basis in the record from which to calculate an award." Mata v. G0. Contractors Grp., Ltd., No. TDC-14-3287, 2015 WL 6674650, at *3 (D. Md. Oct. 29, 2015); see also Fed. R. Civ. P. 55(b).

         Discussion

         Mr. Weems's Automatic Stay

         As an initial matter, Mr. Weems's Suggestion of Bankruptcy asks that this action be stayed under 11 U.S.C. 9 362. Id. The filing of a Chapter 13 bankruptcy petition automatically stays "the commencement or continuation ... of a judicial . . . action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title." 11 U.S.C. 9 362(a)(1) (emphasis added). "The purpose of the automatic stay, in addition to protecting the relative position of creditors, is to shield the debtor from financial pressure during the pendency of the bankruptcy proceeding." Winters ex rel. McMahon v. George Mason Bank, 94 F.3d 130, 133 (4th Cir. 1996). It is well settled that an automatic stay only applies to the debtor, not co-defendan's or related parties. See e.g., Kreisler v. Goldberg, 478 F.3d 209, 213 (4th Cir. 2007) (holding that the automatic stay did not apply to actions against debtor's non-bankrupt subsidiary corporation;; Williford .. Armstrong World Indus., 715 F.2d 124, 126 (4th Cir. 1983) (holding that the automatic stay did not apply to codebtors, but observing that such a stay can extend to codebtors of consumer debts). As I understand it, Mr. Weems filed for bankruptcy relief, Def.'s Bankr. Sugg., but Mr. Weems is not a named party to this case. See Compl. ¶¶ l, 6. The only named Defendant is the LLC. Id.

         A member or agent of an Arkansas LLC is not liable for the debts of the company. Ark. Code Ann. 9 4-32-304 ("[A] person who is a member, manager, agent or employee of a limited liability company is not liable for a debt, obligation, or liability of the limited liability company, whether arising in contract, tort, or otherwise . . . ."). Furthermore, under Arkansas law, an LLC is a separate legal entity from its members. See Anderson v. Stewart, 234 S.W.3d 295, 298 (Ark. 2006) (applying the "nearly universal rule that a corporation and its stockholders are separate and distinct entities, even though a stockholder may own the majority of the stock(]" to an LLC and its sole member). Thus, a member's bankruptcy does not automatically stay proceedings against an LLC.

         An automatic stay further prevents "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. S 362(a)(3). But a member's ownership interest in an LCC does not give that member direct ownership interest in the assets of the LCC. See Kreisler, 478 F.3d at 214 (holding that a parent corporation's ownership interest in a subsidiary LLC "does not give the parent any direct interest in the assets of the subsidiary."). As the Fourth Circuit explained in Kreisler, the owner of an LLC could have established ownership interest in the assets, but chose instead to create an LLC and "[h]aving assumed whatever benefits flowed from that decision, it cannot now ignore the existence of the LLC in order to escape its disadvantages." Id. Although Mr. Weem's ownership interest in the LLC may be part of the bankruptcy estate, the property interests of the LLC remain its own and are not protected by Mr. Weems's automatic stay.

         Nor, does this case fall under the "unusual circumstance"" exception which extends the protection of an automatic stay to third parties. In AH. Robins Co., Inc. v. Piccinin, the Fourth Circuit explained that an

unusual situation . . . arises when there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor. An illustration of such a situation would be a suit against a third-party who is entitled to absolute ...

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