Mink v. Baltimore Behavioral-Health, Inc.
| Decision Date | 22 March 2013 |
| Docket Number | CIVIL NO.: WDQ-11-1937 |
| Parties | GAIL MINK, et al Plaintiffs, v. BALTIMORE BEHAVIORAL HEALTH, INC. et al. Defendants. |
| Court | U.S. District Court — District of Maryland |
Gail Mink and Robert Ziemski,1 individually and on behalf of other participants in retirement and disability plans ("collectively the "plaintiffs") sued Baltimore Behavioral Health, Inc. ("BBH") and William Hathaway for violations of the Employee Retirement Income Security Act ("ERISA")2 and the Racketeering Influenced Corrupt Organizations Act ("RICO").3 Pending are the plaintiffs' objection to the Magistrate Judge's Report and Recommendation ("R&R") on Mink's motion for default judgment. Also pending is the plaintiffs' motion for attorneys'fees. For the following reasons, the objection will be overruled; the motion for attorneys' fees will be granted.
The plaintiffs are members of the BBH Retirement and Disability Plans ("the Plans"), which were sponsored by BBH. ECF No. 4 ¶¶ 2, 4, 9. From 2009 to May 2010, the plaintiffs made contributions from their pay to the Plans, but the defendants failed to deposit the contributions and employer matches into the Plans.5 Id. ¶¶ 14, 16; ECF Nos. 18-2 ¶ 8, 18-5 ¶¶ 10-13. The defendants used the funds to pay taxes and other expenses. ECF No. 4 ¶¶ 28, 30. The defendants have not filed proper documentation with the Department of Labor since 2008. Id. ¶ 22.
On July 14, 2011, Mink filed suit on prudent investments, (2) failing to properly diversify, (3) failing to place contributions in thePlans, and (4) civil RICO violations. Id. On January 3, 2012, the Clerk of the Court entered default against the defendants. ECF No. 12. On March 30, 2012, the plaintiffs moved for default judgment.6 ECF No. 18.
On April 3, 2012, the motion for default judgment was referred to U.S. Magistrate Judge Susan K. Gauvey. ECF No. 19. On June 11, 2012, the plaintiffs submitted a damages chart detailing the missing contributions for over 60 employees. ECF No. 20-1. On November 29, 2012, the Magistrate Judge held a hearing on damages. See Docket. On December 4, 2012, the Magistrate Judge issued a report and recommendation ("R&R") recommending that the plaintiffs' motion be granted in part and denied in part. ECF No. 33. She recommended that: the motion be granted as to failing to deposit the required amounts into the Plans, but denied as to the other claims; the plaintiffs be awarded $49,290.62 plus pre- and post-judgment interest; the defendants be enjoined from wrongfully diverting employeecontributions; and reasonable attorneys' fees be granted if the plaintiffs submit proper documentation. ECF No. 33 at 20-21.
On December 13, 2012, the plaintiffs moved for $28,813.00 in attorneys' fees for work performed by Richard Neuworth, Esquire, Lucy Hirsch, Esquire, Michael Melick, Esquire, and Diane Eisemann.7 ECF No. 34 at 13. On December 18, 2012, the plaintiffs objected to the R&R, asserting that they are entitled to judgment on the RICO claim and treble damages. ECF No. 35.
A. Default Judgment
Under the Magistrate Judges Act, 28 U.S.C. § 636, a district judge may designate a magistrate judge to conduct hearings and report proposed findings of fact and recommendations for action on a dispositive motion. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b); see also Local Rule 301.5(b) (D. Md. 2011). A motion for default judgment is a dispositive motion for purposes of the Magistrate Judges Act. See Callier v. Gray, 167 F.3d 977, 980-82 (6th Cir. 1999); see also Local Rule 301.6.al (D. Md. 2011).
A party aggrieved by a magistrate judge's R&R on a dispositive motion must file "specific written objections to the proposed findings and recommendations" within 14 days. Fed. R. Civ. P. 72(b)(2). The reviewing judge "shall make a de novo determination of those portions of the [magistrate judge's] report . . . to which objection is made." 28 U.S.C. § 636(b)(1). The judge "may accept, reject, or modify, in whole or in part, the findings or recommendations," and "may also receive further evidence, or recommit the matter to the magistrate judge with instructions." Id.
Arguments raised for the first time in an objection to an R&R are waived. Diamond v. Colonial Life & Accident Ins. Co., 416 F.3d 310., 315 (4th Cir. 2005). The Court will not conduct de novo review based on "objections to strictly legal issues" When "no factual issues are challenged." Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982).8 Further, the "Court will reject" an objection that neither conducts "statutory analysis nor cites case law in support."9
Under Fed. R. Civ. P. 55 (b)(2), the Court may enter a default judgment against a properly served defendant who fails to file a timely responsive pleading. In reviewing a motion for entry of a default judgment, the plaintiff's well-pled allegations about liability are accepted as true. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-81 (4th Cir. 2001). However, the court must determine whether these unchallenged factual allegations demonstrate a legitimate cause of action. Id. If liability is established, the court must make an independent determination of damages and will not simply accept the damages allegations as true. E.g., Credit Lyonnais Sees. (USA), Inc. v. Alcantara, 183 F.3d 151, 154 (2d Cir. 1999).
The entry of a default judgment is left to the court's discretion, and the Fourth Circuit has a "strong policy" that "cases be decided on the merits." Dow v. Jones, 232 F. Supp. 2d 491, 494-95 (citing United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993)).
The plaintiffs object that the Magistrate Judge improperly recommended denying their RICO claim, ECF No. 35.
A plaintiff may bring a civil action for treble damages for a violation of RICO. 18 U.S.C. 1964(c). Theft or embezzlementfrom a plan subject to ERISA is a predicate offense for a RICO violation. 18 U.S.C. §§ 664, 1961(1), 1962. The elements of a civil RICO claim are "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (footnote call omitted).
The pattern element requires the establishment of "a threat of continued racketeering activity [that] depends on the specific facts of each case." H. J. Inc. v. Nw. Bell Telephone Co., 492 U.S. 229, 242 (1989). "Relevant factors include the number and variety of predicate acts and the length of time over which they were "committed, the number of victims, the presence of separate schemes and the occurrence of distinct injuries."10 "These factors are not exclusive, and no one of them is necessarily determinative; instead a carefully considered judgment taking into account all the facts and circumstances of the particular case," particularly the context, is required. Brandenburg, 859 F.2d at 1185.
The plaintiffs contend that the Magistrate Judge failed to apply the Morgan/Brandenburg test to find the pattern. ECF No. 35 at 2-3. The plaintiffs assert that there was a patternbecause there were more than 50 victims, distinct injuries, and at least fourteen predicate acts. Id. at 3. Further, they claim that the predicate acts continued with the defendants' refusal to file forms concerning the diversion of funds. Id.
Under the Morgan/Brandenburg factors, the defendants' actions were not a pattern under RICO. The defendants' diversion of the ERISA funds was a single scheme over a relatively short time. The predicate acts were all of the same character: misappropriating and not depositing a relatively small amount of funds. The Court agrees with the Magistrate Judge that this case "does not resemble the sort of extended, widespread, or particularly dangerous pattern of racketeering" that is subject to RICO penalties. Flip Mortg. Corp. v. McElhone, 841 F.2d 531, 538 (4th Cir. 1988); see ECF No. 33 at 12. Despite the diversion of funds, the defendants' conduct is not that "whose scope and persistence pose a special threat to social well-being."11 GE Inv. Private Placement Partners II v.Parker, 247 F.3d 543, 551 (4th Cir. 2001) (internal quotation marks omitted). The objection will be overruled, and the R&R will be adopted.
C. Attorneys' Fees
The plaintiffs seek attorneys' fees and claim that they are entitled to $28,813.00. ECF No. 34 at 13. The Magistrate Judge has recommended that the plaintiffs are entitled to reasonable attorneys' fees, and the Court will adopt that recommendation.
In deciding what constitutes reasonable hours and rates, courts consider: (1) time and labor expended; (2) the novelty and difficulty of the questions raised; (3) skill required; (4) the attorney's opportunity costs in bringing the litigation; (5) the customary fee for similar work; (6) the attorney's expectations at the start of the litigation; (7) time limitations imposed; (8) the amount in controversy and the results obtained; (9) the experience, reputation and ability ofthe attorney; (10) the undesirability of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship between attorney and client; and (12) attorney fee awards in similar cases. Brodziak v, Runyon, 145 F.3d 194 (4th Cir. 1998); see also EEOC v. Service News Co., 898 F.2d 958, 965 (4th Cir. 1990); Barber v. Kimbrell's, Inc., 577 F.2d 216, 226 n. 28 (4th Cir. 1978).
The plaintiffs request fees totaling $28,813.00:
+-------------------------------------------+
¦Person ¦Hours¦Rate/hour¦Total fees¦
+----------------+-----+---------+----------¦
¦Richard Neuworth¦19.80¦$450.00 ¦$8910.00 ¦
+----------------+-----+---------+----------¦
¦Lucy Hirsch...To continue reading
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