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Acosta v. Lopez

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

December 21, 2017

R. ALEXANDER ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff,
v.
DARLA PENA LOPEZ, et al., Defendants.

          MEMORANDUM OPINION

          Leonie M. Brinkema United States District Judge

         I. BACKGROUND

         Before the Court is a Report and Recommendation ("Report") issued by a magistrate judge on November 9, 2017 [Dkt. No. 15], which recommended that default judgment be entered against defendants Darla Pena Lopez ("Pena Lopez") and DP Technology Services, Inc. ("Company") (collectively, "defendants")[1] on all three counts in plaintiffs Complaint. See Report 10. The Report further recommended that plaintiff be awarded $68, 308.11 in damages. Id. The parties were advised that any objections to the Report had to be filed within 14 days and that failure to file a timely objection waived the right to appeal the substance of the Report and any judgment based on the Report. Id. On November 21, 2017, plaintiff filed a partial objection to the Report, in which he objected to the Report to the extent that it did not award the full relief requested in his Motion for Default Judgment. [Dkt. No. 16]. Specifically, plaintiff objected to the Report's recommendation that plaintiff not be awarded $5, 808.03 in missing employee contributions to the 401(k) Plan; $3, 799.52 in missing loan repayments to the 401(k) Plan; $1, 295.50 in interest to the 401(k) Plan; $7, 002.13 in interest to the Contractors Plan; and up to $7, 550.00 to the Contractors Plan, $2, 100.00 to the 401(k) Plan, and $3, 900.00 to the Health Plan to cover the costs associated with appointing an independent fiduciary. Pl. Obj. 15-16. Defendants did not file any objection either to the Report or to plaintiffs objections.

         II. DISCUSSION

         A. Standard of Review

         When a party files objections to a Report, "the court shall make a de novo determination of those portions of the report... to which objection is made." 28 U.S.C. § 636(b)(1)(C). The court may "accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." Id. The Court has reviewed the Report, plaintiffs motion for default judgment, the case file, and plaintiffs partial objection to the Report and adopts the Report in part, with the exception that plaintiff will be awarded the full relief requested in its Motion.

         B. Analysis

         The magistrate judge correctly determined that the Court has subject matter jurisdiction over this action under 28 U.S.C. § 1331 because it involves federal questions arising under the Employee Retirement Income Security Act of 1974 ("ERISA"). Report 2. The magistrate judge also correctly concluded that this Court has personal jurisdiction over defendants because Pena Lopez is a resident of Virginia and the Company transacts business in Virginia, id; that venue is appropriate in this district under 29 U.S.C. § 1132(e)(2) because the Plans are administered within the Eastern District of Virginia, Id. at 3; that plaintiff properly served defendants by serving Pena Lopez, in both her individual capacity and as the registered agent for the Company, with a copy of the Summons and Complaint, Id. at 3-4; and that defendants are in default because they have never responded in any way to this litigation, Id. at 4.

         The Court further finds that the magistrate judge correctly determined that plaintiff has pleaded the requirements for obtaining relief under ERISA. Specifically, plaintiff has adequately pleaded that the Plans are employee benefit plans within the meaning of 29 U.S.C. § 1002(3); that the Company has been the Plan Sponsor, Plan Administrator, and Named Fiduciary of the 401(k) Plan and the Health Plan and has been the Plan Administrator of the Contractors Plan since the Plans were established; that Pena Lopez is the Plan Trustee for each Plan; and that both defendants exercised authority or control in managing or disposing of the Plans' assets and had discretionary authority or responsibility in administering the Plans. Id. at 6. Therefore, the magistrate judge correctly found that plaintiff adequately pleaded that each defendant is a fiduciary of each Plan under 29 U.S.C. § 1002(21) and a party-in-interest under 29 U.S.C. §1002(14)(A), (C). Id.

         The Report properly found that plaintiff adequately pleaded that defendants failed to hold all assets of the 401(k) Plan and the Health Plan in trust, in violation of 29 U.S.C. § 1103(a), and that the Company deducted Health Plan insurance premiums from employee participants' paychecks between January and March 2014 but failed to remit payment to CareFirst BlueCross Blue Shield ("CareFirst"), the Plan's insurer, for those months, resulting in the retroactive cancellation of CareFirst's coverage as of December 31, 2013. Id. In addition, although not specifically addressed in the Report, plaintiff adequately pleaded and showed that between 2011 and 2014, the Company deducted "certain sums from the participants' pay for employee contributions and loan repayments to the 401(k) Plan but failed to remit them to the 401(k) Plan." Compl. ¶ 15.

         The Report correctly indicates that plaintiff adequately pleaded that defendants failed to make the prevailing wage fringe benefit contributions to the Contractors Plan required by 41 U.S.C. § 6703 from June 2012 through March 2014, Report 8, and, as such, failed to appropriately hold the assets of the Plan in trust, in violation of 29 U.S.C. § 1103(a), see Pl. Mem. [Dkt. No. 12-1] 11. Additionally, the record supports holding Pena Lopez and the Company jointly and severally liable under 29 U.S.C. § 1109 because each knowingly participated in fiduciary breaches of the other. Report 9. Accordingly, the magistrate judge appropriately recommended that defendants be removed as fiduciaries of the Plans; that defendants be required to provide to plaintiff the books, documents, and records relating to the finances and administration of the Plans; and that an independent fiduciary be appointed to distribute the assets of the Contractors Plan. Id. In addition, although not specifically addressed by the Report, plaintiffs requests that an independent fiduciary be appointed to effectuate the distribution of any assets restored to the Health Plan and the 401(k) Plan, as well as his request for an order directing defendants to make an accounting to plaintiff and the independent fiduciary of all contributions to the Plans, including all transfers, payments, or expenses incurred or paid in connection with the Plans, and barring defendants from serving in a fiduciary capacity with respect to any employee benefit plan subject to ERISA should be granted. Pl. Mem. 13-15.

         With respect to damages, the Report's conclusion that defendants owe $11, 331.62 in unremitted premiums to the Health Plan; $20, 621.85 in unpaid medical claims incurred by Health Plan participants when their coverage was retroactively canceled; and $36, 354.64 in unpaid benefit contributions to the Contractors Plan is fully supported by the record, and defendants, who have defaulted, have not objected to any of these calculations. Report 7-8.

         Plaintiff requested additional damages in the amount of $10, 903.05 in unremitted employee contributions, loan repayments, and interest to the 401(k) Plan; $7, 002.13 in interest on the unpaid Contractors Plan benefits; and the costs of the independent fiduciary to administer the three plans, up to $7, 550.00 for the Contractors Plan, $2, 100 for the 401(k) Plan, and $3, 900 for the Health Plan. The magistrate judge recommended against awarding these damages, see id., and plaintiff has objected to the recommendation.

         Although the Complaint did not allege a specific amount of money owed to the 401(k) Plan, it did allege a specific damages amount for unremitted Health Plan premiums and associated damages.[2] Relying on the general rule that "[w]hen a complaint demands a specific amount of damages, " a "court may not award additional damages when rendering a default judgment against the defendant, " the magistrate judge recommended against awarding the additional 401(k) Plan damages. Id. at 7 (quoting Precision Franchising LLC v. K-Squared. Inc., No. 1:11-cv-137, 2011 WL 4407936, at *6 (E.D. Va. Aug. 29, 2011), report and recommendation adopted. 2011 WL 4407562 (E.D. Va. Sept. ...


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