Pension & Benefits News Court grants default judgment for unpaid contributions but reduces attorney's fee award
Thursday, March 7, 2019

Court grants default judgment for unpaid contributions but reduces attorney's fee award

By Pension and Benefits Editorial Staff

A federal trial court in Minnesota has granted a motion for default judgment filed by a group of multiemployer plans for unpaid contributions and double interest as provided by ERISA Sec. 502(g)(2). However, the court reduced by about one-third the amount of attorney's fees requested by the plans, concluding in part that billing records indicated that the performance of administrative tasks was improperly billed at attorney hourly rates.

Unpaid contributions. Under a collective bargaining agreement, a cleaning company was required to make monthly contributions to a group of multiemployer plans on behalf of its covered employees for their hours worked. Upon auditing the cleaner's payroll and employment records, the funds determined there were hours worked by covered employees for which the cleaner did not submit contributions.

The funds filed suit seeking damages for unpaid contributions, double interest, and attorney's fees and costs in accordance with ERISA Sec. 502(g). After the cleaner failed to respond to the complaint within the required 21 days, the plans moved for a default judgment. The court explained that upon default, the factual allegations in a complaint are deemed admitted. The sole remaining issue is to determine damages.

Damages awarded. The court granted the funds' request for unpaid contributions in the amount of $2,915, as substantiated by an affidavit filed by the plans' coordinator and its accompanying audit invoice.

The court also agreed with the plans that they are entitled to double interest under ERISA Sec. 502(g)(2)(C), which provides that in addition to interest on unpaid contributions, a plaintiff is entitled to the greater of either the liquidated damages amount provided for under the plan or the total accrued interest amount on the unpaid contributions. In this instance the amount of liquidated damages would have been less than the accrued interest amount. Thus, the court granted the plans' motion for double interest in the amount of $1,364.14.

Attorney's fees. The plans sought attorney's fees in the amount of $3,987, but the court awarded only $2,432 in fees. Although ERISA provides for the recovery of attorney's fees, the party seeking to recover fees bears the burden of establishing that the requested fees are reasonable. In this instance, the court determined that the fee request was unreasonably high. The court explained that the plans' fee request more than doubled between a September 2018 hearing and a subsequent hearing in November, a period during which, the court explained, the plans' “attorneys primarily were tasked with supplementing the record to correct deficiencies of their own making.” Further, billing records showed that the attorneys expended time at an attorney billing rate to perform what appeared to be basic administrative responsibilities.

SOURCE: Nesse v. Hodges Cleaning Co. (DC MN).

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