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Painters and Floorcoverers Joint Committee v. Bello

United States District Court, D. Nevada

January 29, 2015

PAINTERS AND FLOORCOVERERS JOINT COMMITTEE; EMPLOYEE PAINTERS' TRUST; PAINTERS, GLAZIERS AND FLOORCOVERERS JOINT APPRENTICESHIP AND JOURNEYMAN TRAINING TRUST; PAINTERS INDUSTRY PROMOTION FUND; PAINTERS JOINT COMMITTEE INDUSTRY PROMOTION FUND; PAINTERS ORGANIZING FUND; SOUTHERN NEVADA PAINTERS AND DECORATORS AND GLAZIERS LABOR MANAGEMENT COOPERATION COMMITTEE TRUST; PAINTERS, GLAZIERS AND FLOORCOVERERS SAFETY TRAINING TRUST FUND, each acting by and through their designated fiduciaries John Smirk and Thomas Pfundstein; INTERNATIONAL UNION OF PAINTERS & ALLIED TRADES INDUSTRY PENSION TRUST FUND, acting by and through its designated fiduciary, Gary J. Meyers, Plaintiffs/Counter-Defendants,
v.
MICHAEL R. BELLO, an individual; AMERICAN CONTRACTORS INDEMNITY COMPANY, a California corporation; COMMITTED COMPANIES, LLC, a Nevada limited liability company; STEVE HUNTINGTON, an individual; JOHN DOES I-XX, inclusive; and ROE ENTITIES I-XX, inclusive. Defendants.

ORDER DENYING MOTION FOR DEFAULT JUDGMENT AND SETTING ASIDE DEFAULT (Dkt. ##56, 70)

ANDREW P. GORDON, District Judge.

Plaintiffs are trusts seeking to recover contributions allegedly owed to them by Walldesign, Inc. under a union contract. Walldesign is in bankruptcy, so the trusts filed this lawsuit against various other individuals and companies, including Steve Huntington (Walldesign's chief financial officer) and Committed Companies, LLC (a contractor allegedly liable for Walldesign's debts).[1]

Plaintiffs assert against Huntington a single claim of breach of fiduciary duty under the Employee Retirement Income Security Act. Plaintiffs allege Huntington breached his fiduciary duties by mishandling trust assets and that he is now liable for the money Walldesign owes the trusts. Although plaintiffs identify Committed as a defendant, they failed to provide any allegations or causes of action against it in the operative complaint.

Both Huntington and Committed failed to timely file answers.[2] The clerk of court entered default against them. Plaintiffs request that I enter default judgment. I decline to do so. Huntington has provided good cause for setting aside his default: (1) he appears to have had a good-faith belief that co-defendant Michael Bello was handling Huntington's representation, (2) he has meritorious defenses, and (3) plaintiffs will not be prejudiced. As to Huntington, I set aside the default and find no default judgment is warranted at this time. Plaintiffs also request attorney's fees but I decline to award fees at this time.

As to Committed, plaintiffs have not adequately proven damages nor filed a proper complaint against it. Committed has not moved to set aside its default, but I find default judgment is not yet warranted against it.

I. BACKGROUND

Plaintiffs are trusts and beneficiaries of a collective bargaining agreement ("CBA") between Walldesign and the International Union of Painters & Allied Trades, District Council 15, Local Union 159.[3] Under the CBA (and an accompanying memorandum of understanding), Walldesign had to make contributions to the trusts for every hour it employed union members on certain commercial projects and multi-family homes.[4] Single family homes were excluded.[5] After Walldesign failed to pay the contributions it allegedly owed, plaintiffs audited Walldesign's records. Plaintiffs have submitted that audit in support of their motion for default judgment.[6]

Plaintiffs allege that Huntington, as CFO with control over Walldesign's assets, owed fiduciary duties to the trusts. Huntington allegedly breached his duties by failing to pay the contributions Walldesign owed.

Huntington was served with the plaintiffs' Second Amended Complaint on January 6, 2014.[7] He immediately reached out to his co-defendant, Walldesign's former president Michael R. Bello.[8] Bello had arranged representation for Huntington during a prior Walldesign matter, and Bello told Huntington he would again arrange for counsel to represent Huntington in this lawsuit.[9] But Bello did not hire counsel for Huntington. Huntington never filed an answer, and the clerk entered default against him on February 12, 2014.[10] On March 15, 2014, Huntington finally received notice of the default.[11] Plaintiffs moved for a default judgment soon thereafter.[12]

II. DISCUSSION

A. Whether to set aside the default against Huntington

I may "set aside an entry of default for good cause."[13] To determine "good cause, " I must "consider three factors: (1) whether the party seeking to set aside the default engaged in culpable conduct that led to the default; (2) whether [he] had no meritorious defense; or (3) whether reopening the default judgment would prejudice the other party."[14] This standard is disjunctive- a finding that any these factors is true is sufficient for me to refuse to set aside the default.[15] These factors, however, "are more liberally applied in the context of a clerk's entry of default than in the default judgment context."[16]

"Crucially... judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits."[17] "Where timely relief is sought from a default... and the movant has a meritorious defense, doubt, if any, ...


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