Local 365 Pension Fund v. Kaplan Bros. Blue Flame Corp.

Decision Date18 May 2021
Docket NumberCiv. No. 20-10536 (KM)(JBC)
PartiesLOCAL 365 PENSION FUND, et al. Plaintiffs, v. KAPLAN BROS. BLUE FLAME CORP., et al. Defendants.
CourtU.S. District Court — District of New Jersey


The Trustees of Local 365 UAW Pension Fund (the "Fund") initiated this action to recover withdrawal liability pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1001-1461, against defendant Kaplan Bros. Blue Flame Corp. ("Kaplan") and all unnamed trades or businesses under its common control. Because defendants have failed to answer or otherwise respond to the Complaint, the Trustees now move for default judgment. The Trustees seek entry of judgment for withdrawal liability, interest, liquidated damages, and attorneys' fees and costs, pursuant to 29 U.S.C. §§ 1132(g)(2)(A)-(D), 1145, 1399(c)(5), (6), 1451(b), and 29 C.F.R. § 4219.32.

For the reasons provided herein, I will grant the Trustees' motion and enter default.

I. Summary1
a. Factual Background

The Fund maintains an "employee pension benefit plan" under ERISA § 3(1), 29 U.S.C. § 1002(2), (the "Plan"). (Compl. ¶3). The Plan provides retirementincome to employees for whom employers make contributions and is maintained pursuant to collective bargaining agreements between employee organizations and various employers. (Id.). Thus, the Fund is a "multiemployer plan" within the meaning of ERISA § 3(37), 20 U.S.C. § 1002(37). (Id.).

At all relevant times, Defendant Kaplan was and remains an employer in an industry affecting commerce within the meaning of ERISA §§ 3(5), (11), and (12), 29 U.S.C. §§ 1102(5), (11), and 12). (Compl. ¶6). The Complaint alleges on information and belief that John Does One through Ten are employers related to Kaplan within the meaning of 26 U.S.C. § 414(b), (c), (m), (n) or (o). (Compl. ¶7).

Kaplan operated a business that employed members of the UAW Local 365 ("Union"). (Compl. ¶8). The terms and conditions of employment for Kaplan's employees were governed by collective bargaining agreements between Kaplan and the Union. (Compl. ¶9). Under those agreements, Kaplan was obligated to make certain contributions to the Fund, which it regularly and consistently made until its withdrawal in or around June 2019. (Compl. ¶¶9, 11).

b. The Complaint

On August 14, 2020, the Trustees filed its complaint against Kaplan and John Does One through Ten asserting claims for withdrawal liability (Count 1 as against Kaplan and Count 2 as against the unnamed defendants) and for injunctive relief in the form of enjoining the dissipation of defendants' assets (Count 3 against all defendants). (Compl. ¶¶10-30).

With respect to their claim for withdrawal liability (Counts 1 and ), the Trustees assert that in June 2019, Kaplan permanently ceased making its required contributions to the Fund, which constituted "complete withdrawal" under ERISA. (Compl. ¶11). Pursuant to ERISA § 4201, 29 U.S.C. § 1381, Kaplan "is obligated to pay withdrawal liability to the Fund for its proportionateshare of the Fund's unfunded vested benefits." (Compl. ¶12). The Trustees submit that, in accordance with ERISA § 4211, 29 U.S.C. § 1391 and the applicable provisions of the Trust Agreement, the Fund preliminarily calculated Kaplan's withdrawal liability to be $1,464,723. (Id.) On December 17, 2019, the Fund sent Kaplan a written demand for its withdrawal liability and informed Kaplan that it could amortize payments in eighty consecutive quarterly installments of $366.50 (Compl. ¶13), apparently a discount. The letter explained that the first quarterly payment would be due on February 17, 2020. (Id.). The letter further informed Kaplan that the calculated withdrawal liability was a preliminary amount as the December 31, 2019 valuation was not yet completed. (Id.; DE 1-1 ("Exhibit A")).

On February 20, 2020, the Fund sent Kaplan an updated withdrawal liability figure in the amount of $2,553,193. (Compl. ¶14). Although the total increased, the quarterly payment schedule of $366.50 did not change. (Id. DE 1-2 ("Exhibit B")).

On April 29, 2020, the Fund notified Kaplan that it had failed to make the first quarterly payment by February 17, 2020, and that, if such failure was not cured within sixty days, Kaplan would be in default within the meaning of ERISA § 4219(c)(5), 29 U.S.C. § 1399(c)(5) ("Default Notice"). (Compl. ¶16; DE 1-3 ("Exhibit C")). More than sixty days have elapsed since the Notice of Default was electronically mailed to Kaplan and, as of the filing of the Compliant, Kaplan has failed to make its first quarterly payment or any subsequent payment. (Compl. ¶17). Additionally, Kaplan did not request review of the withdrawal liability assessment within sixty days of its issuance, as required under ERISA § 4219 (b)(2), 29 U.S.C. § 1399(b)(2). (Compl. ¶18).

Such a default on withdrawal liability obligations causes the entire outstanding balance to become due and owing under ERISA § 4219 (c)(5), 29 U.S.C. § 1399(c)(5), and ERISA § 515, 29 U.S.C. § 1145. (Compl. ¶19). Additionally, the Trustees submit that Kaplan "is obligated to pay the greater of liquidated damages of twenty (20%) percent of the unpaid amount due and owing, or the amount of interest awarded, plus costs and attorneys' fees." (Compl. ¶21). The Trustees submit that the unnamed "John Doe" defendants are jointly and severally liable for those amounts. (Compl. ¶¶22, 25).

Regarding the Trustees' claim for injunctive relief (Count 3), the Complaint asserts the following:

Unless Defendants are restrained and enjoined from distributing, alienating, transferring, assigning, encumbering or otherwise disposing of their assets, Defendants will have no assets with which to meet their obligation to the Fund thereby causing the Fund and its pension participants and beneficiaries immediate and irreparable loss, damage, and injury for which the Fund will have no adequate remedy of law.

(Compl. ¶29). Further, the Complaint alleges that the Fund "will be subjected to irreparable hardship and injury in the event that Defendants are not immediately restrained and enjoined, and the status quo maintained during the pendency of this action." (Compl. ¶30).

Because defendants have failed to answer or otherwise respond to the Complaint, the Trustees now move for default judgment. The Trustees seek entry of judgment for withdrawal liability plus interest, liquidated damages, and attorneys' fees and costs, pursuant to 29 U.S.C. §1132(g)(2)(A)-(D), 1145, 1399(c)(5), (6), 1451(b), and 29 C.F.R. § 4219.32. (Trustees' Brief at 2).

II. Discussion
a. Legal Standard

"[T]he entry of a default judgment is left primarily to the discretion of the district court." Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984) (citing Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)). Because the entry of a default judgment prevents the resolution of claims on the merits, "this court does not favor entry of defaults and default judgments." United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984). Thus, before entering default judgment, the Court must determine whether the "unchallenged facts constitute a legitimate cause of action" so that default judgment would be permissible. DirecTV, Inc. v. Asher, 2006 WL 680533, at *1 (D.N.J. Mar. 14, 2006) (citing Wright, Miller, Kane, 10A Fed. Prac. & P. Civil 3d § 2688, at 58-59, 63).

"[D]efendants are deemed to have admitted the factual allegations of the Complaint by virtue of their default, except those factual allegations related to the amount of damages." Doe v. Simone, 2013 WL 3772532, at *2 (D.N.J. July 17, 2013). While "courts must accept the plaintiff's well-pleaded factualallegations as true," they "need not accept the plaintiff's factual allegations regarding damages as true." Id. (citing Chanel, Inc. v. Gordashevsky, 558 F. Supp. 2d 532, 536 (D.N.J. 2008)). Moreover, if a court finds evidentiary support to be lacking, it may order or permit a plaintiff seeking default judgment to provide additional evidence in support of the allegations. Doe, 2013 WL 3772532, at *2.

b. Prerequisites for Entry of Default Judgment

Before a court may enter default judgment against a defendant, the plaintiff must have properly served the summons and complaint, and the defendant must have failed to file an answer or otherwise respond to the complaint within the time provided by the Federal Rules, which is twenty-one days. See Gold Kist, Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 18-19 (3d Cir. 1985); Fed. R. Civ. P. 12(a).

Here, the Summons and Complaint were served on November 10, 2020 as to Kaplan Bros. Blue Flame Corp. c/o Charles J. Augusto, Jr., an officer of said defendant's company. The deadline to answer or otherwise respond to the Complaint fell on December 1, 2020. (DE 4, 5, 6). The Clerk's entry of default was duly noted on December 30, 2020 as to Kaplan (Clerk's entry following DE 7). Therefore, the prerequisites for default have been satisfied.2

c. Three-Factor Analysis

After the prerequisites have been satisfied, a court must evaluate the following three factors: "(1) whether the party subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking default, and (3) the culpability of the party subject to default." Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir. 1987)).

i. Factor one: Existence of meritorious defense

As always, evaluation of the first factor is made difficult by defendants' failure to answer or to oppose the motion for default judgment. Nevertheless, my independent review of the record does not suggest that the Trustees' claims arelegally flawed. See Doe, 2013 WL 3772532, at *5. Accepting the allegations in the Complaint as true, Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 ...

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