United States District Court, E.D. Virginia, Alexandria Division
R. ALEXANDER ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff,
DARLA PENA LOPEZ, et al., Defendants.
M. Brinkema United States District Judge
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") 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
Standard of Review
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
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.
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).
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.
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.
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.
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.
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. 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. ...