United States District Court, D. Minnesota
GLEN JOHNSON, TIMOTHY GILLEN, KYLE JONES, STEVEN HALL, CLAYTON JOHNSON, MARK HUBBARD, STEVE PIPER, and BILL PATT, as Trustees of the Operating Engineers Local #49 Health and Welfare Fund; MICHAEL R. FANNING, as a Fiduciary of the Central Pension Fund of the International Union of Operating Engineers and Participating Employers; JOSEPH RYAN, BRUCE CARLSON, GLEN JOHNSON, FRANK FRATTALONE, LEE HILLER, TONY PHILLIPI, GREG WAFFENSMITH, and MARK RYAN, as Trustees of the Local #49 International Union of Operating Engineers and Associated General Contractors of Minnesota Apprenticeship and Training Program; THE OPERATING ENGINEERS LOCAL #49 HEALTH AND WELFARE FUND; THE CENTRAL PENSION FUND OF THE INTERNATIONAL UNION OF OPERATING ENGINEERS AND PARTICIPATING EMPLOYERS; and THE LOCAL #49 INTERNATIONAL UNION OF OPERATING ENGINEERS AND ASSOCIATED GENERAL CONTRACTORS OF MINNESOTA APPRENTICESHIP AND TRAINING PROGRAM, Plaintiffs,
ALLIED EXCAVATING, INC. and JEFFREY JEWISON, Defendants.
Christy E. Lawrie, McGRANN SHEA CARNIVAL STRAUGHN & LAMB,
CHTD, for plaintiffs.
E. Tegt, LARKIN HOFFMAN DALY & LINDGREN, LTD, for
MEMORANDUM OPINION AND ORDER SETTING ASIDE ENTRY OF
R. TUNHEIM Chief Judge
are three multi-employer jointly-trusteed fringe benefit
plans and their fiduciaries and trustees (collectively the
“Funds”). Defendant Allied Excavating, Inc.
(“Allied”) is an employer who executed a
collective bargaining agreement (“CBA”) with the
Associated General Contractors of Minnesota, Highway,
Railroad, and Heavy Construction Division and the
International Union of Operating Engineers, Local No. 49
(collectively, the “Union”). Defendant Jeffrey
Jewison (“Mr. Jewison”) is one of Allied's
corporate officers. The Funds served the summons and complaint
on Defendants on August 10, 2015. On September 2, 2015, after
Defendants failed to respond to the action, the Clerk of
Court granted the Funds' application for entry of default
pursuant to Fed.R.Civ.P. 55(a). The Funds now move, pursuant
to Fed.R.Civ.P. 55(b)(2), for entry of default judgment in
the amount of $141, 481.55 against Allied and $75, 569.85
against Mr. Jewison. Defendants move for the Clerk's
entry of default to be set aside pursuant to Fed.R.Civ.P.
Court finds that there is good cause to set aside the
default, given that Defendants' delay was excusable, they
have a potentially meritorious defense, and any resulting
likelihood of prejudice to the Funds is low. Therefore, the
Court will grant Defendants' motion to set aside the
entry of default and will deny as moot the Funds' motion
for entry of judgment.
have had a contractual relationship with the Union going back
to at least 2002. On August 29, 2011, Allied's CEO Pamela
Jewison (“Ms. Jewison”) executed a CBA with the
Union effective May 1, 2011, to April 30, 2014. (Decl. of
Michael Streater (“Streater Decl.”), Ex. N
(“First CBA”), Feb. 22, 2017, Docket No. 42; Aff.
of Mike Streater (“Streater Aff.”), Ex. B at 49,
Dec. 16, 2015, Docket No. 13.) On January 7, 2015, Ms.
Jewison executed a subsequent CBA with the Union effective
through April 30, 2017. (Streater Aff., Ex. A (“Second
CBA”); id., Ex. B at 50.) At all relevant
times, the applicable CBA required Allied to make monthly
contributions to the Funds on behalf of employees for hours
worked on tasks covered by the CBA. (First CBA at 15-17;
Second CBA at 15-17.)
addition, prior to the execution of the relevant CBAs, on
March 16, 2002, Mr. Jewison (then CEO of Allied) executed
the Operating Engineers Local #49 Health and Welfare Fund
Participating Agreement (“Welfare Participating
Agreement”). (Streater Aff., Ex. C.) The Welfare
Participating Agreement, which complements the CBA in force
at any given time, specifically obligates Allied to make
contributions to the Operating Engineers Local #49 Health and
Welfare Fund (the “Health & Welfare Fund”) as
specified in the applicable CBA, and it also purports to bind
in an individual capacity any corporate officer signing on
behalf of an employer. (Id.) The Welfare
Participating Agreement is “in effect for the period
stipulated in [the CBA applicable at the time of execution]
and any renewal or extension thereof.” (Id.)
gives the Funds the right to examine Allied's payroll and
employment records at any reasonable time in order to
determine if the company is in compliance with its fringe
benefit obligations. (Second CBA at 16; First CBA at 16.)
Pursuant to this authority, in February 2015, the Funds
selected Allied for an audit and requested access to
Allied's records going back to January 1, 2014. (Streater
Decl. ¶ 2; id., Ex. F.) After numerous
unanswered requests over many months, (id.
¶¶ 2-7), on August 7, 2015, the Funds filed this
lawsuit pursuant to 29 U.S.C. § 1145. The Funds
originally sought injunctive relief requiring Allied to
provide the requested documents. The Funds also seek to
collect any unpaid contributions as well as attorney fees and
damages as permitted under the terms of the CBA and by
statute. Defendants were personally served with
process on August 10, 2015. (Summons Returned Executed on
Jeffrey Jewison, Aug. 12, 2015, Docket No. 4; Summons
Returned Executed on Allied Excavating, Inc., Aug. 12, 2015,
Docket No. 5.)
did not respond to the complaint in the time required under
law, and on September 1, 2015, the Funds applied for entry of
default under Fed.R.Civ.P. 55(a). (Appl. for Entry of
Default, Sept. 1, 2015, Docket No. 6.) The Clerk entered
default the following day. (Clerk's Entry of Default,
Sept. 2, 2015, Docket No. 9.) Though they made no formal
appearance in Court, shortly after the lawsuit was filed,
Defendants communicated directly with the Funds regarding the
document requests. (Decl. of Melissa Urban-Brown
(“Urban-Brown Decl.”) ¶ 3, Feb. 22, 2017,
Docket No. 44.) Eventually, on September 16, 2015, Defendants
provided the auditor access to selected documents. (Streater
Decl. ¶ 11.) After additional requests, Allied provided
more records between January 25 and April 18, 2016. (Streater
Decl. ¶¶ 12-14; Decl. of Christy E. Lawrie
(“Lawrie Decl.”) ¶¶ 4-7, Feb. 22, 2017,
Docket No. 45.)
on the documents Defendants provided, in April 2016 the
Funds' auditor completed an audit invoice. (Aff. of
Michael Streater ¶ 6, July 18, 2016, Docket No. 23.) The
auditor concluded that Defendants owed $158, 462.54 in
delinquent contributions, of which $76, 583.38 was owing to
the Health & Welfare Fund (and thus, Mr. Jewison would be
personally responsible for this amount). (Id.) In
addition, the auditor determined the Funds were entitled to
$23, 769.38 in liquidated damages, $11, 487.51 of which was
due to the Health & Welfare Fund. (Id. ¶
7.) The auditor sent a copy of the audit invoice to Allied on
May 2, 2016. (Streater Decl. ¶ 18.) On July 18, 2016,
the Funds filed the instant motion for entry of judgment
against Defendants based on the auditor's calculations.
finally retained counsel in August 2016, (see Lawrie
Decl. ¶ 11); the following month, Defendants provided
additional documentation to the Funds, (id. ¶
13). As a result of this new information, the Funds revised
their audit, removing 2, 865 hours of work. (Streater Decl.
¶ 23.) This reduced the total delinquent contributions
by $47, 000. (Id.)
February 15, 2017, shortly before the scheduled hearing on
the Funds' motion for entry of judgment, Defendants filed
a motion to set aside the default pursuant to Fed.R.Civ.P.
55(c). Defendants argue there is good cause to set aside the
default because their delay in responding to the lawsuit was
excusable, the Funds will not be prejudiced if the default is
set aside, and they have three meritorious defenses. First,
Defendants argue that the Welfare Participating Agreement did
not effectively bind Mr. Jewison in his personal capacity.
Second, they assert that the CBA between Allied and the Union
was orally terminated in March 2015, based on conversations
the Jewisons had with Doug Zila, a former Business
Representative for the Union. (See Decl. of Pamela Jewison in
Supp. of Defs.' Mot. to Set Aside Entry of Default
(“Decl. of Pamela Jewison”), Ex. B, Feb. 15,
2017, Docket No. 36.) And third, they claim the revised audit
is overstated because it includes hours worked that are not
covered by the CBA.
MOTION TO SET ASIDE THE DEFAULT
[Fed. R. Civ. P.] 55(c) provides that the district court may
set aside an entry of default “[f]or good cause shown,
” and may set aside a default judgment “in
accordance with Rule 60(b).” Although the same factors
are typically relevant in deciding whether to set aside
entries of default [for good cause] and default judgments
[under Fed.R.Civ.P. 60(b)], “[m]ost decisions . . .
hold that relief from a default judgment requires a stronger
showing of excuse than relief from a mere default
order.” Conn. Nat'l Mortg. Co. v.
Brandstatter, 897 F.2d 883, 885 (7th Cir.
1990); accord Shepard Claims Serv., Inc. v. William
Darrah & Assocs., 796 F.2d 190, 193-94
(6th Cir. 1986); Meehan v. Snow, 652 F.2d
274, 276-77 (2d Cir. 1981). This is a sound distinction.
There is a “judicial preference for adjudication on the
merits, ” Oberstar v. FDIC, 987 F.2d 494, 504
(8th Cir. 1993), and it is likely that a party who
promptly attacks an entry of default, rather than waiting for
grant of a default judgment, was guilty of an oversight and
wishes to defend the case on the merits.
Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781,
783-84 (8th Cir. 1998).
to set aside entry of default is “committed to the
district court's discretion.” Id. at 785.
In determining whether to set aside an entry of default under
the relatively “lenient” good cause standard, the
Court weighs “whether the conduct of the defaulting
party was blameworthy or culpable, whether the defaulting
party has a meritorious defense, and whether the other party
would be prejudiced if the default were excused.”
Id. at 784.
Blameworthiness or Culpability
a defaulting party's conduct is excusable is the primary
factor relevant to whether there is good cause to set aside a
clerk's entry of default. See Id. (“[W]e
focus heavily on the blameworthiness of the defaulting
Whether the conduct of the moving party is excusable is an
equitable determination that considers all germane
circumstances surrounding the party's omission.
[Johnson, 140 F.3d at 784 (quoting Pioneer Inv.
Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507
U.S. 380, 395 (1993)).] Conduct that has been held excusable
includes “late filings caused by inadvertence, mistake
or carelessness.” Pioneer, 507 U.S. at 395. A
court will rarely excuse an intentional delay or disregard
for deadlines and procedural rules. Johnson, 140
F.3d at 784.
SICK, Inc. v. Motion Control Corp., No. 01-1496,
2002 WL 832609, at *2 (D. Minn. Apr. 30, 2002).
argue they mistakenly believed that their cooperation with
the Funds' efforts to obtain Allied's records in
order to complete the audit was a sufficient response to the
complaint. They assert that even after the entry of default
in September 2015, they were in contact with Doug Zila - then
a Business Representative for the Union - and their belief
that they were complying with the audit requirements was
based on Zila's representations to them. Furthermore,
Defendants argue that once they did retain counsel, their
counsel worked diligently with the Funds' counsel to move
forward in the case, and both sides had to cancel and
reschedule meetings for legitimate reasons, which led to some
additional excusable delay.
based on a mere belief that cooperation with an audit is a
sufficient response to a federal lawsuit, without more, may
not amount to excusable conduct. Cf. Bd. of Trs. of IBEW
Local Union No. 100 Pension Tr. Fund v. Elijah Elec.,
Inc., No. 1:06-1860, 2008 WL 4490023, at *3-4 (E.D. Cal.
Sept. 29, 2008) (setting aside entry of default in a similar
context when the defendant argued that the delay was
excusable because the defendant was actively engaged in the
plaintiffs' audit process, but also finding it relevant,
for the purpose of determining blameworthiness, that unlike
in the case at hand, the defendant's attorney had
abandoned him and the defendant had not received notice of
events in the litigation because the court did not have his
address). However, unlike in Elijah, the facts
before the Court indicate not only that Defendants mistakenly
believed that cooperation with the audit was sufficient, but
also that they held this belief because of representations
made by a Union employee. Defendants maintain that Zila
assured Defendants that their cooperation with the documents
was sufficient. The Court finds that Defendants' reliance
on a statement from a representative of the Union provides a
colorable explanation for Defendants' mistaken belief
that they need not respond in some other way in court, and
this fact makes Defendants' delay excusable.
Court notes that Defendants' delay was not as brief as in
some cases in which a default has been set aside. See,
e.g., Johnson, 140 F.3d at 783-84 (setting
aside entry of default when the delay was “relatively
brief, ” given that the defendant filed an answer to
the complaint one day after the entry of default and moved
for the default to be set aside less than two months later).
But length of delay alone is not dispositive on the question
of culpability. There is no evidence that Defendants acted in
bad faith or intended the delay in order, for example, to
take advantage of the Funds or manipulate the legal process.
See, e.g., Grant v. City of Blytheville,
841 F.3d 767, 772-73 (8th Cir. 2016) (finding a
district court did not abuse its discretion in setting aside
the entry of default when the court “perceive[d] no bad
faith or intentional effort to delay” by the defaulting
party); Johnson, 140 F.3d at 784-85 (setting aside
entry of default when the defaulting party continuously acted
in good faith, among other reasons); Iowa State Univ.
Research Found., Inc. v. Greater Continents Inc., 208
F.R.D. 602, 604 (S.D. Iowa 2002) (finding the defaulting