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Warnick v. True Communications, Inc.

United States District Court, E.D. Virginia, Alexandria Division

March 15, 2016

ELIZABETH WARNICK, Plaintiff,
v.
TRUE COMMUNICATIONS, INC., et al., Defendants.

PROPOSED FINDINGS OF FACT AND RECOMMENDATIONS

JOHN F. ANDERSON, Magistrate Judge.

This matter is before the court on plaintiff's motion for default judgment (Docket no. 16) against defendants True Communications, Inc. ("True Communications"), Stephen Libonate ("Libonate"), John Delisi ("Delisi"), and True Communications, Inc. 401(k) Plan (the "Plan"). Pursuant to 28 U.S.C. § 636(b)(1)(C), the undersigned magistrate judge is filing with the court his proposed findings of fact and recommendations, a copy of which will be provided to all interested parties.

Procedural Background

Plaintiff filed the complaint in this action on October 22, 2015. (Docket no. 1) ("Compl."). Upon the filing of the complaint, summonses were issued for service on defendants. (Docket no. 2). On October 28, 2015, True Communications' registered agent, National Registered Agents, Inc., was served with a copy of the summons and complaint at 4701 Cox Road, Suite 285, Glen Allen, VA 23060. (Docket no. 4). On November 3, 2015, Delisi was personally served with a copy of the summons and complaint at 5 Rachel Drive, New Egypt, N.J. 08533. (Docket no. 9). On November 5, 2015, Libonate was served with a copy of the summons and complaint as co-fiduciary of the Plan and as a director of True Communications at 9521 Bridgewater Court, Frederick, MD 21701. (Docket nos. 5, 6). Libonate was also served in his personal capacity on November 5, 2015. (Docket no. 7). As discussed more fully below, service of process was proper as to all defendants. In accordance with Fed.R.Civ.P. 12(a), a responsive pleading was due from True Communications, Delisi, Libonate, and the Plan on November 18, 2015, November 24, 2015, November 26, 2015, and November 26, 2015, respectively. Defendants have not filed an answer or other responsive pleading and the time for doing so has expired.

On November 23, 2015, plaintiff filed a request for entry of default as to True Communications (Docket no. 10) along with an affidavit in support from Geoffrey S. Burke (Docket no. 10 at 2-3) and an exhibit (Docket no. 10-1). On November 25, 2015, the Clerk of Court entered default against True Communications pursuant to Fed.R.Civ.P. 55(a). (Docket no. 11). On December 1, 2015, plaintiff filed requests for entry of default as to Libonate and Delisi. (Docket nos. 12, 13). On December 2, 2015, the Clerk of Court entered default against Libonate and Delisi. (Docket nos. 14, 15).

On February 17, 2016, plaintiff filed a motion for default judgment against the defendants (Docket no. 16), a memorandum in support (Docket no. 17), affidavits in compliance with the Servicemembers Civil Relief Act, 50 U.S.C. § 3901 et seq. ) (Docket nos. 17-1, 17-2), an exhibit of the summary plan description of the Plan (Docket no. 17-3), an exhibit of plaintiff's timecards (Docket no. 17-4), exhibits of communications by True Communications employees (Docket nos. 17-5, 17-6, 17-7, 17-8, 17-9), a declaration from plaintiff (Docket no. 17-10) ("Warnick Decl."), and a notice setting a hearing on the motion for March 11, 2016 (Docket no. 18). The motion for default judgment, supporting papers, and notice of hearing were served on defendants by first-class United States mail on February 17, 2016 through the following addresses: Stephen Libonate, 9521 Bridgewater Court, Frederick, MD 21701; John Delisi, 5 Rachel Drive, New Egypt, N.J. 08533; and True Communications, Inc. and True Communications, Inc. 401(k) Plan, 22375 Broderick Drive, Suite 215, Sterling, VA 20166. (Docket nos. 16 at 3, 17 at 18, 18 at 2). On March 11, 2016, counsel for the plaintiff and the plaintiff appeared at the hearing before the undersigned and no one appeared on behalf of defendants.

Factual Background

The following facts are established by the complaint and the memorandum and materials submitted in support of the motion for default judgment (Docket no. 17).

Defendant True Communications provides telecommunications services to businesses targeting the Internet protocol-based voice, video, and data market throughout the United States. (Compl. ¶ 13). Defendants Stephen Libonate and John Delisi were at all times relevant to this action directors and shareholders in True Communications and named co-trustees of the Plan. (Compl. ¶¶ 3, 4; Docket no. 17, Ex. C at 4). Both Libonate and Delisi exercised discretionary authority and control over the management of the Plan. (Compl. ¶¶ 3, 4). Thus, Libonate and Delisi were fiduciaries to the Plan within the meaning of ERISA and parties in interest to the Plan under ERISA. See 29 U.S.C. §§ 1002(21), 1002(14)(A), (H). The Plan was established on November 1, 2012 and permitted participants to contribute a portion of their pay through payroll deductions. (Compl. ¶¶ 10, 11).

Plaintiff was hired by True Communications as its Director of Integrated Communication Services and began work on approximately August 4, 2009. (Compl. ¶ 14). Plaintiff's duties included the development of work statements, budgets, project staffing, project management, preparation of program and personnel budgets, and relationship building with customers. (Compl. ¶ 17). Plaintiff began participating in the Plan during her employment and made tax-deferred contributions of 15% of her annual salary to the Plan. (Compl. ¶ 16). In 2015, plaintiff agreed to continue her work at True Communications in exchange for an annual salary of $118, 000. (Warnick Decl. ¶ 7).

Beginning on January 10, 2015, defendants failed to contribute deductions withheld from plaintiff's salary into the Plan. (Compl. ¶ 18). Additionally, in June 2015, True Communications failed to pay plaintiff her wages for the two-week pay period of May 31, 2015 through June 13, 2015. (Compl. ¶ 18).

On July 7, 2015, Libonate sent an email to plaintiff and others indicating that True Communications was in the process of completing a "transaction" that would result in a "stronger company with a financial partner who has the financial resources to provide [True Communications] with the tools [it] need[s] to continue to win more contracts and grow." (Docket no. 17, Ex. E). Thereafter, on July 17, 2015, Libonate sent another email to plaintiff and others indicating that True Communications' "efforts to finalize the transaction arc nearing completion as [it] work[s] with the financial institutions to complete all of the necessary processes and paperwork." (Docket no. 17, Ex. F). On July 27, 2015, Libonate emailed plaintiff and others and expressed understanding that "there is concern about the status of the process we have undertaken to re-capitalize [True Communications]." (Docket no. 17, Ex. G). In this email, Libonate indicated that he "expect[ed] that the process will be completed by the end of [July 2015] and all payments that are pending will be satisfied." ( Id.). ) Libonate ended the email by expressing his understanding that "for some being put on furlough as a result of this process has been equally challenging and can be the cause of additional frustration, " but asked that plaintiff "bear with us for a little longer and we will have the re-capitalization completed." ( Id.). )

On August 11, 2015, Libonate indicated that $20 million dollars had been secured "to restructure [True Communications'] debt and procure the acquisition/merger of the business entity." (Docket no. 17, Ex. H). Libonate expressed that "[t]he release of funds is predicated on the acquisition/merger documents being completed, " which was "not yet complete but ongoing" and a resolution was expected "very shortly." ( Id.). )

On August 28, 2015, Libonate sent plaintiff a letter that terminated her employment effective August 28, 2015 and also indicated that plaintiff's "benefits [would] be covered in full through August 31, 2015." (Docket no. 17, Ex. 1). However, prior to her termination, plaintiff was not paid any wages for work completed from May 31, 2015 through her date of termination. (Compl. ¶ 24). During the period of May 31, 2015 through August 28, 2015, plaintiff alleges she worked approximately 520 hours. (Warnick Decl. ¶ 11). Defendants also failed to make contributions to the Plan on plaintiff's behalf for the period of January 10, 2015 through August 28, 2015. (Compl. ¶ 24).

Proposed Findings and Recommendations

Rule 55 of the Federal Rules of Civil Procedure provides for the entry of a default judgment when "a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend." Fed.R.Civ.P. 55(a). Based on defendants True Communications, Delisi, and Libonate's failure to file a responsive pleading in a timely manner, the Clerk of Court has entered default against these defendants. (Docket nos. 11, 14, 15). Because the Clerk of Court has not entered default against the Plan, the recommendations that follow only pertain to defendants True Communications, Delisi, and Libonate (hereafter the "defendants").

A defendant in default admits the factual allegations in the complaint. See 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."); see also GlobalSantaFe Corp. v. Globalsantafe.com, 250 F.Supp.2d 610, 612 n.3 (E.D. Va. 2003) ("Upon default, facts alleged in the complaint are deemed admitted and the appropriate inquiry is whether the facts as alleged state a claim."). Rule 55(b)(2) of the Federal Rules of Civil Procedure provides that a court may conduct a hearing to determine the amount of damages, establish the truth of any allegation by evidence, or investigate any other matter.

Jurisdiction and Venue

A court must have both subject matter and personal jurisdiction over a defaulting party before it can render a default judgment. Plaintiff alleges that this court has subject matter jurisdiction under Section 502 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132. (Compl. ¶ 7). This case is properly before the court under its federal question jurisdiction pursuant to 29 U.S.C. § 1132(e) because it is brought under ERISA for an alleged failure to make contributions in accordance with a defined-contribution plan or individual-account plan. Plaintiff further alleges that this court has subject matter jurisdiction under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. ) (Compl. ¶ 7). The FLSA states that any action to recover unpaid minimum wages may be maintained "in any Federal or State court of competent jurisdiction." 29 U.S.C. § 216(b). This case is also properly before the court pursuant to 29 U.S.C. § 216(b) because it is brought under the FLSA for an alleged failure to pay minimum wages. Thus, this court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. The court may also exercise supplemental jurisdiction over the remaining state law claims because they arise from a common nucleus of operative fact. See ) 28 U.S.C. § 1367; see also United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966).

The court also has personal jurisdiction over the defendants. As stated in the complaint, True Communications is a corporation formed under the laws of Virginia. (Compl. ¶ 2). Further, this court has personal jurisdiction over Libonate and Delisi because Virginia's long-arm statute authorizes the exercise of jurisdiction and both Libonate and Delisi satisfy the minimum contacts test under the Due Process Clause of the Fourteenth Amendment. See CFA Inst. v. Inst. of Chartered Fin. Analysts of India, 551 F.3d 285, 292 (4th Cir. 2009). Libonate and Delisi were directors and shareholders in True Communications, a Virginia corporation, and co-fiduciaries of the Plan, the address of which was in Sterling, Virginia (Compl. ¶¶ 3-5). Venue is proper in this court pursuant to 28 U.S.C. § 1391(b) because a substantial part of the events or omissions giving rise to the claims occurred in the Eastern District of Virginia. (Compl. ¶ 8). Venue is also proper in this court pursuant to 29 U.S.C. § 1132(e)(2) because the alleged breaches of fiduciary duty under ERISA occurred in this District. ( Id. )

For these reasons, the undersigned magistrate judge recommends a finding that this court has subject matter jurisdiction over this action, that the court has personal jurisdiction over the defendants, and that venue is proper in this court.

Service

Federal Rule of Civil Procedure 4(e)(1) authorizes service on an individual within a judicial district of the United States, provided that service adheres to the state law governing that practice in courts of general jurisdiction where the federal district court is located. Under Virginia law, serving an individual must first be attempted by in-person delivery of the complaint and summons. See Va. Code Ann. § 8.01-296(1). When serving a corporation, Federal Rule of Civil Procedure 4(h)(1) authorizes service through the manner prescribed in Rule 4(e)(1) or by delivering a copy of the summons and complaint to an officer, managing agent, general agent, or any other agent authorized by law to receive service of process.

On October 22, 2015, the Clerk of Court issued a summons addressed to True Communications, with service on National Registered Agents, Inc. as the corporation's registered agent, and additional summonses addressed to Libonate and Delisi in their personal capacities. (Docket no. 2). Executed copies filed with the court confirmed personal service of a copy of the summons and complaint on October 28, 2015 on National Registered Agents, Inc. at 4701 Cox Road, Suite 285, Glen Allen, VA 23060, as well as on November 5, 2016 on Libonate as a director of True Communications. (Docket nos. 4, 6). On November 3, 2015, Delisi was served in his personal capacity at 5 Rachel Drive, New Egypt, N.J. 08533. (Docket no. 9). On November 5, 2015, Libonate was served in his personal capacity at 9521 Bridgewater Court, Frederick, MD 21701. (Docket no. 7).

Based on the foregoing, the undersigned magistrate judge recommends a finding that defendants were served properly ...


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