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Downs v. JSP Companies, Inc.

United States District Court, District of Columbia

February 22, 2018

ADAM M. DOWNS, et al., Plaintiffs,
v.
JSP COMPANIES, INC., et al., Defendants.

          MEMORANDUM OPINION

          DABNEY L. FRIEDRICH UNITED STATES DISTRICT JUDGE

         Before the Court is the Plaintiffs' Motion for Entry of Default Judgment. Dkt. 9. For the reasons that follow, the motion will be granted in part and denied in part.

         I. BACKGROUND

         The plaintiffs are administrators of two benefit plans: the Laborers' International Union North America National Pension Fund (“LIUNA Pension Fund”) and the Service Contract Education and Training Trust Fund (“Education Fund”). Compl. ¶¶ 5, 7, Dkt. 1. Both plans are multiemployer employee benefit plans organized under the Employee Retirement Income Security Act (“ERISA”). Id. ¶¶ 6, 8; see 29 U.S.C. § 1002(3), (37). As set forth in the complaint, the plans provide pension, education, and job training benefits to eligible employees on whose behalf employers contribute pursuant to collective bargaining agreements with the Laborers' International Union or its affiliated district councils. Compl. ¶¶ 6, 8. The complaint alleges that Defendant JSP Companies, Inc. (“JSP”) is a corporation with its primary office in Washington, D.C. and an “employer in an industry affecting commerce” as defined by ERISA. Id. ¶ 9; see 29 U.S.C. § 1002(5), (11), (12). Defendant Jaime Canales is the owner and president of JSP. Compl. ¶ 10. Under ERISA and collective bargaining agreements with Public Service Employees Union 527, JSP must make contributions to the LIUNA Pension Fund and the Education Fund based on the number of hours worked by its employees in covered employment. See Id. ¶¶ 11, 12, 23, 24. JSP is also obligated to pay interest on delinquent contributions. See Id. ¶¶ 17, 29. In this action, the plaintiffs seek a total judgment of $142, 397.81 based on allegations that the defendants failed to make required contributions. Id. ¶¶ 21, 32; Pls.' Mot. at 1-3, Dkt. 9; Pls.' Mem. at 10-15, Dkt. 9-1. The plaintiffs also seek equitable relief, namely orders directing the defendants to submit to an audit, pay audit costs, pay delinquent contributions and interest identified by the audit, and comply with their contractual and statutory obligations. See Compl. at 18-19; Pls.' Mem. at 15-17.

         The plaintiffs filed the complaint in this action on January 24, 2017. Dkt 1. Jaime Canales was duly served with the complaint and summons on February 2, 2017. Aff. of Service, Dkt. 3. JSP was duly served with the complaint and summons on February 9, 2017. Aff. of Service, Dkt. 4. Because the defendants did not answer or otherwise respond to the complaint within the time period allotted by Rule 12 of the Federal Rules of Civil Procedure, the plaintiffs requested an entry of default. Dkt. 5. The plaintiffs also mailed a copy of their request to the defendants. Dkt. 5-4. The Clerk of the Court entered default on March 13, 2017. Dkt. 7; Dkt. 8. On September 1, 2017, the plaintiffs moved this Court to enter a default judgment against the defendants under Rule 55(b)(2). Dkt. 9. The case was reassigned to the undersigned judge on December 4, 2017.

         II. LEGAL STANDARD

         The Federal Rules of Civil Procedure empower a federal district court to enter a default judgment against a defendant who fails to defend its case. Fed.R.Civ.P. 55(b)(2); Keegel v. Key W. & Caribbean Trading Co., 627 F.2d 372, 375 n.5 (D.C. Cir. 1980). While federal policy generally favors resolving disputes on their merits, default judgments are appropriate “when the adversary process has been halted because of an essentially unresponsive party.” Mwani v. bin Laden, 417 F.3d 1, 7 (D.C. Cir. 2005) (quotation marks omitted).

         Obtaining a default judgment is a two-step process. First, the plaintiff must request that the Clerk of Court enter default against a party who has failed to plead or otherwise defend. Fed.R.Civ.P. 55(a). The Clerk's default entry establishes the defaulting defendant's liability for the well-pleaded allegations of the complaint. See Boland v. Providence Constr. Corp., 304 F.R.D. 31, 35 (D.D.C. 2014). Second, if the plaintiff's claim is not for a “sum certain, ” the plaintiff must apply to the court for a default judgment. Fed.R.Civ.P. 55(b). At that point, the plaintiff “must prove his entitlement to the relief requested using detailed affidavits or documentary evidence on which the court may rely.” Ventura v. L.A. Howard Constr. Co., 134 F.Supp.3d 99, 103 (D.D.C. 2015) (quotation marks and alterations omitted).

         When ruling on a motion for default judgment, a court “is required to make an independent determination of the sum to be awarded.” Fanning v. Permanent Sol. Indus., Inc., 257 F.R.D. 4, 7 (D.D.C. 2009) (quotation marks omitted). In that inquiry, the court has “considerable latitude.” Ventura, 134 F.Supp.3d at 103 (quotation marks omitted). The court may conduct a hearing to determine damages, Fed.R.Civ.P. 55(b)(2), but the court is not required to do so “as long as it ensures that there is a basis for the damages specified in the default judgment, ” Ventura, 134 F.Supp.3d at 103 (quotation marks and alterations omitted).

         III. ANALYSIS

         A. Jaime Canales

         The plaintiffs assert that Jaime Canales can be held personally liable for the unpaid contributions because he is an “employer” or a “fiduciary” under ERISA. See Compl. ¶ 10 (citing 29 U.S.C. § 1002(5), (21)); Pls.' Mem. at 3-4. The Court disagrees.

         Canales is JSP's president and owner. “Officers of a corporation do not fall within ERISA's definition of an ‘employer, ' and thus officers cannot be held personally liable for a corporation's alleged ERISA violations by virtue of their relationship to the employer alone.” Oliver v. Black Knight Asset Mgmt., LLC, 812 F.Supp.2d 2, 14-15 (D.D.C. 2011). Rather, ERISA liability for unpaid contributions generally extends to individual corporate owners or officers only when they act as the “alter egos” of their corporations or when circumstances permit piercing the corporate veil. See Int'l Bhd. of Painters & Allied Trades Union v. George A. Kracher, Inc., 856 F.2d 1546, 1550 & n.28 (D.C. Cir. 1988).

         Here, the plaintiffs do not sufficiently allege-indeed, it appears they do not attempt to allege-that Canales acted as an “alter ego” of JSP or that circumstances permit piercing the corporate veil. In particular, the plaintiffs do not allege that (1) Canales and JSP lack separate personalities due to a unity of interest and ownership, based on factors such as the nature of corporate ownership and control, failure to maintain adequate corporate records and formalities, and commingling of funds and corporate assets; and (2) an inequitable result would follow if the JSP's actions were treated as those of JSP alone. See Labadie Coal Co. v. Black, 672 F.2d 92, 96-97 (D.C. Cir. 1982) (describing standard); United States v. Dynamic Visions, Inc., 220 F.Supp.3d 16, 25 (D.D.C. 2016). Therefore, Canales cannot be held personally liable as an “employer” under ERISA. See Oliver v. Black Knight Asset Mgmt., LLC, 812 F.Supp.2d 2, 16 (D.D.C. 2011) (dismissing ...


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