Eng'rs Pension Plan v. Baggett

• Decision Date: 17 August 2010
• Docket Number: Nos. 09-3147, 10-1051.,s. 09-3147, 10-1051.
• Parties: Rod MARSHALL, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; David Hayes, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Ron Fucinaro, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Robert Hayworth, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Timothy McCormick, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Laborers' International Union of North America, LOCAL 1140; Kim Quick, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Plaintiffs-Appellees, v. Theresa BAGGETT, doing business as Baggett Masonry, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

616 F.3d 849

Rod MARSHALL, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; David Hayes, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Ron Fucinaro, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Robert Hayworth, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Timothy McCormick, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Laborers' International Union of North America, LOCAL 1140; Kim Quick, Trustee of Contractors Laborers, Teamsters and Engineers Health & Welfare Plan and Contractors Laborers, Teamsters and Engineers Pension Plan; Plaintiffs-Appellees,

v.Theresa BAGGETT, doing business as Baggett Masonry, Inc., Defendant-Appellant.

Nos. 09-3147, 10-1051.

United States Court of Appeals,Eighth Circuit.

Submitted: June 16, 2010.

Filed: Aug. 17, 2010.

COPYRIGHT MATERIAL OMITTED.

Aaron A. Clark, argued, Omaha, NE, for appellant.

Jeff Miller, argued, Maynard H. Weinberg, Duncan Alexander Young, Sr., Keith I. Kosaki, on the brief, Omaha, NE, for appellee.

Before RILEY, Chief Judge, CLEVENGER ¹ and COLLOTON, Circuit Judges.

CLEVENGER, Circuit Judge.

Ms. Theresa Baggett appeals from a default judgment issued in favor of the Trustees of the Contractors, Laborers, Teamsters and Engineers Health & Welfare Plan and Pension Plan (“the Plans”) and the Laborers' International Union of North America, Local 1140 (“the Union”) (collectively “the plaintiffs”). Ms. Baggett argues that the district court erred in granting the default judgment because the complaint does not support a judgment against her in her individual capacity. We agree.

I

Ms. Baggett signed a Masonry Construction Agreement (“the Agreement”) on December 29, 2003 that purported to be between Baggett Masonry, Inc., a Nebraska corporation, and the Union. The Agreement required Baggett Masonry, Inc. to make contributions to the Plans based on the number of hours worked by its employees. Ms. Baggett signed the Agreement as follows:

Baggett Masonry, Inc. (handwritten)

COMPANY NAME

Theresa Baggett (signature)

BY

President (handwritten)

TITLE

Baggett Masonry, Inc. made the requisite contributions to the Plans until September 30, 2007, when Ms. Baggett claims the Agreement was terminated. The plaintiffs dispute Ms. Baggett's claim that the terms of the Agreement were met and instead argue that Baggett Masonry, Inc. owes the Plans additional money for subsequent periods.

On April 14, 2008, the plaintiffs filed suit under 29 U.S.C. § 185(a) of the Labor Management Relations Act and 29 U.S.C. § 1132 of the Employee Retirement Income Security Act of 1974 (“ERISA”). The complaint was filed against Ms. Baggett, styled as “Theresa Baggett d/b/a Baggett Masonry, Inc.,” and sought to recover the allegedly delinquent contributions as well as liquidated damages and attorney fees. The plaintiffs allege in the complaint that Ms. Baggett “is an individual and operates a construction company doing business in the State of Nebraska.” The Agreement, listing Baggett Masonry, Inc. as the party to the contract, was attached to the complaint as an exhibit and became “a part of the pleading for all purposes.” See Fed.R.Civ.P. 10(c). However, the plaintiffs did not join Baggett Masonry, Inc. as a defendant. Instead, the plaintiffs only sued Ms. Baggett in her individual capacity.

After Ms. Baggett failed to respond to the complaint, the plaintiffs filed a motion for entry of default on June 30, 2008. The clerk of the court entered the default on July 1, 2008. On July 25, 2008, in response to another motion of the plaintiffs, the district court entered a default judgment against Ms. Baggett and ordered her to submit to an audit. Ms. Baggett appeared in court on December 12, 2008 and provided the documents requested for the audit.

The district court entered a final default judgment in favor of the plaintiffs on July 10, 2009 and awarded attorney's fees to the plaintiffs on August 3, 2009. In total, the district court entered judgment in the amount of $10,515.38 for contributions owed to the pension plan, $18,788.00 for contributions owed to the health and welfare plan, $8,233.75 for liquidated damages and interest, and $5,559.02 for attorney's fees. On August 7, 2009, Ms. Baggett filed a motion to set aside the July 10, 2009 default judgment and the August 3, 2009 attorney's fees order. The district court denied the motion on December 14, 2009 and Ms. Baggett filed the present appeal.

II

Entry of default judgment does not preclude a party from challenging the sufficiency of the complaint on appeal. See Black v. Lane, 22 F.3d 1395, 1399 (7th Cir.1994); Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir.1988); Nishimatsu Constr. Co., Ltd. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir.1975) (“A default judgment is unassailable on the merits but only so far as it is supported by well-pleaded allegations, assumed to be true.”) (emphasis in original). We thus properly have before us the question of whether the unchallenged facts in the plaintiffs' complaint constitute a legitimate cause of action against Ms. Baggett in her individual capacity.

In Murray v. Lene, we recently reaffirmed an age-old doctrine regarding default judgments and the requisite legal analysis to support such judgments. 595 F.3d 868, 871 (8th Cir.2010). It is nearly axiomatic that when a default judgment is entered, facts alleged in the complaint may not be later contested. See Thomson v. Wooster, 114 U.S. 104, 5 S.Ct. 788, 29 L.Ed. 105 (1885); see also Fed.R.Civ.P. 8(b)(6) (“An allegation-other than one relating to the amount of damages-is admitted if a responsive pleading is required and the allegation is not denied.”). However, as we stated in Murray v. Lene, “it remains for the [district] court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.” 595 F.3d at 871 (quoting 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2688 at 63 (3d ed.1998)); see also Ohio Cent. R. Co. v. Central Trust Co., 133 U.S. 83, 91, 10 S.Ct. 235, 33 L.Ed. 561 (1890) (“[A]lthough the defendant may not be allowed, on appeal, to question the want of testimony or the insufficiency or amount of the evidence, he is not precluded from contesting the sufficiency of the bill, or from insisting that the averments contained in it do not justify the decree.”); Nishimatsu Constr. Co., Ltd., 515 F.2d at 1206 (“[A] default judgment may be lawfully entered only ‘according to what is proper to be decreed upon the statements of the bill, assumed to be true,’ and not ‘as of course according to the prayer of the bill.’ ”) (quoting Thomson, 114 U.S. at 113).

Ms. Baggett does not contest the factual allegations of the complaint, but argues that the district court erred in its legal analysis by finding the complaint sufficient to support a judgment against her in her individual capacity. We note that it is of course appropriate for a district court to enter a default judgment when a party fails to appropriately respond in a timely manner. See, e.g., Inman v. Am. Home Furniture Placement, Inc., 120 F.3d 117, 119 (8th Cir.1997). Even so, it is incumbent upon the district court to ensure that “the unchallenged facts constitute a legitimate cause of action” prior to entering final judgment. See Murray, 595 F.3d at 871. We review the legal sufficiency of the complaint de novo.

III

Ms. Baggett points to a strikingly similar case in which a default judgment finding an individual liable for actions taken as a corporate agent was upset on appeal because the complaint failed to allege a rationale to support individual liability. See Nishimatsu Constr. Co., Ltd., 515 F.2d at 1206-07. In that case, a default judgment was entered against Jack D. Baize, who had entered into contracts with a Houston bank as a representative of a foreign corporation. Id. at 1203. When relations between the bank and its corporate customer soured, the bank filed a third party complaint against Baize in his personal capacity, based on the contracts he signed as a representative of the corporation. Id. After Baize failed to respond to the complaint, the court entered a default judgment. Id. at 1204.

On appeal, Baize argued that he could not be personally liable on the contract because he signed as a corporate agent. Id. at 1205. Notwithstanding his default, the Fifth Circuit agreed that a default judgment against Baize should not have been entered. Id. As here, Baize signed the contract in the corporation's name followed by “BY: Jack D. Baize.” See id. at 1205. The court found that this signature form “unambiguously supported” the presumption that Baize intended to sign on behalf of the corporation and indicated that “the principal alone and not the agent is a party to the contract.” Id. at 1207. The court concluded that because the contract was attached to the complaint filed with the district court, “not only do the pleadings fail to support the judgment rendered against Baize but [ ] they disclose on their face a fact that would defeat the appellee's claim.” Id. at 1206.

Nebraska law, like Texas law, has well-established principles that protect a corporate officer from personal liability for contracts signed on behalf of a corporation. See Hecker v. Ravenna Bank 237 Neb. 810, 468 N.W.2d 88, 94 (1991) (“As a general rule, concerning liability on a corporate contract, a corporation's directors or officers are in the same position as agents of private individuals and...