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New Jersey Building Laborers' Statewide Benefit Funds v. Llanos Maintenance Service

United States District Court, D. New Jersey

August 28, 2019




         This matter comes before the Court on the unopposed motion for default judgment (D.E. 8) by plaintiffs New Jersey Building Laborers' Statewide Benefit Funds and the Trustees Thereof (“the Funds” or “plaintiffs”) against Llanos Maintenance Service (“Llanos”) and MJO Dry Wall Construction LLC (“MJO”) (collectively “defendants”). Plaintiffs initiated this action to recover on a judgment they had obtained in this district against Llanos from MJO, who they contend is liable for paying that judgment. For the following reasons, the Court denies the plaintiffs' motion for default judgment.

         I. Background

         This action is brought pursuant to Sections 502(a)(3) and 515 of the Employment Retirement Income Security Act (“ERISA”), as amended 29 U.S.C. §§ 1132(a)(3) and 1145, and Section 301 of the Labor Management Relations Act (“LMRA”) as amended, 29 U.S.C. § 185, to collect delinquent contributions to employee benefit plans and for related relief. (D.E. 1, Compl. ¶ 1.) Plaintiffs allege that defendant Llanos and the New Jersey Building Construction Laborers District Council and Local Unions (“the Union”) were parties to a collective bargaining agreement (“CBA”) which required Llanos to makes contributions to the Funds on behalf of employees. (Id. ¶¶ 8-9.) Plaintiffs assert that Llanos failed to make the required contributions and subsequently failed to cure the delinquencies despite demand. (Id. ¶¶ 11-12.) The dispute was submitted to arbitration on or about January 31, 2018, and on February 2, 2018, the arbitrator issued an opinion and award in favor of the Funds in the amount of $2, 957, 167.55.[1]The United States District Court, District of New Jersey entered judgment confirming the award on July 16, 2018. (Id. ¶ 14 & Ex. A.)

         Plaintiffs commenced the present action on August 23, 2018, naming MJO as a defendant along with Llanos, and describing a relationship where the defendants “acted as a single integrated enterprise” and constitute a “single employer for the purposes of collective bargaining operations.” (Id. ¶¶ 19, 24.) Alternatively, plaintiffs assert that “Llanos and MJO are alter egos of each other and are jointly and severally liable for Llanos's delinquent contributions” under the relevant ERISA provisions. (Id. ¶ 25.) In support of their alter-ego theory, plaintiffs allege that defendants shared common ownership, management, interrelated operations, and centralized control of labor relations. (Id. ¶ 17.) Specifically, MJO was incorporated in New Jersey in August 2017 with Valeriano Martinez, president of Llanos, serving as a principal. (Id.) Both companies perform construction work and MJO has a place of business and operations at Llanos's address, 315 Madison Street in Passaic, New Jersey. (Id.) Additionally, MJO “maintains working relationships with certain general contractors who have previously employed Llanos.” (Id.) Plaintiffs allege that “MJO was created to evade Llanos's obligations under the CBA, ” violating the terms of the CBA, which prohibit Llanos, its owners, officers, and agents from operating other business entities to circumvent their obligations thereunder:

In order to protect and preserve work for the employees covered by this Agreement and to protect the benefits to which employees are entitled to under this Agreement, and to prevent any device or subterfuge to avoid the protection and preservation of such work and benefits, it is agreed that when the Employer performs any work of the type covered by this Agreement at any work site (1) under its own name, or (2) under the name of another entity (whether a corporation, company, partnership, joint venture or another business entity) where the Employer, including its owners, stockholders, officers, directors, or partners, exercised either directly or indirectly (such as through family members or company employees) any significant degree of ownership, management or control, the terms of the Agreement shall be applicable to all such work.

(Id. ¶¶ 15, 21.)

         Plaintiffs further assert that “substantially all of Llanos's assets were transferred to MJO, ” and at all relevant times, a continuity of operations existed between defendants. (Id. ¶¶ 32-33.) The following allegations underpin this claim: MJO “employed substantially all of Llanos's management and supervisory personnel” and “a part of Llanos's workforce”; MJO “used Llanos's offices, equipment, and machinery”; there was overlap between the general contractors who employed Llanos and MJO; and the defendants “performed the same construction services.” (Id. ¶ 33.) Thus, plaintiffs conclude that to the extent that Llanos is no longer in business, MJO is a successor employer such that it is liable for their delinquent contributions. (Id. ¶ 35.)

         Three counts, all pursuant to Sections 502 and 515 of ERISA, comprise the Funds' complaint: the first is for unpaid contributions for the period between December 1, 2015 and March 31, 2017 against Llanos and MJO; the second is for unpaid contributions from March 31, 2017 through the present against Llanos and MJO; and the third is for unpaid contributions from March 31, 2017 through the present, asserted solely against MJO. (Id. ¶¶ 22-35.) Llanos and MJO were served a copy of the summons and complaint on September 28, 2018 and October 1, 2018 respectively. (D.E. 4, 5.) Notice of default was entered on November 14, 2018.

         On December 28, 2018, plaintiffs filed their motion for default judgment (D.E. 8) against both Llanos and MJO in the total amount of $2, 957, 167.55, comprised of a principal amount of $1, 793, 214.34; plus liquidated damages at 20% on delinquent contributions of $358, 642.87; interest on principal at 1.5% compounded per month from the date when contributions were due in the amount of $400, 999.61; attorney's fees totaling $403, 510.73; and the $800.00 arbitration fee. (D.E. 8-3, Aff. of Kimberly Kemple, 2-3.) As of the date of this Opinion and accompanying order, defendants have not appeared in this action or otherwise responded to the complaint or plaintiffs' motion for default judgment.

         II. Standard for Default Judgment

         Fed. R. Civ. P. 55(b)(2) authorizes the entry of a default judgment against a properly-served defendant who does not file a timely responsive pleading. Chanel, Inc. v. Gordashevsky, 558 F.Supp.2d 532, 535 (D.N.J. 2008) (Kugler, J.) (citing Anchorage Assocs. v. V.I. Bd. of Tax Review, 922 F.2d 168, 177 n. 9 (3d Cir. 1990)). In ruling on the motion, the Court accepts the complaint's well-pleaded factual allegations as true but “need not accept the moving party's legal conclusions or allegations relating to the amount of damages, ” and must “ascertain whether ‘the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.'” Id. at 535-36 (citing Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990)).

         Though “entry of a default judgment is largely a matter of judicial discretion, ” id. at 535, the Third Circuit has “repeatedly [] stated [its] preference that cases be disposed of on the merits whenever practicable, ” Mrs. Ressler's Food Prods. v. KZY Logistics LLC, 675 Fed.Appx. 136, 137 (3d Cir. 2017) (citations omitted). Accordingly, when exercising its discretion, the Court “must consider and make explicit factual findings as to the three Emcasco factors: ‘(1) whether the plaintiff will be prejudiced if default is not granted, (2) whether the defendant has a meritorious defense, and (3) whether the defendant's delay was the result of culpable misconduct.' ” Teamsters Health & Welfare Fund of Philadelphia & Vicinity v. Dubin Paper Co., No. 11-7137, 2012 WL 3018062, at *4 (D.N.J. July 24, 2012) (Simandle, J.) (quoting Chanel, Inc., 558 F.Supp.2d at 537 (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 73 (3d Cir.1987))). The Court must also be satisfied that it has subject matter and personal jurisdiction, and that the defendant was properly served. See Baymont Franchise Sys., Inc. v. Shree Hanuman, Inc., No. 13-5796, 2015 WL 1472334, at *2-3 (D.N.J. Mar. 30, 2015) (McNulty, J.).

         III. ...

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