United States District Court, W.D. Wisconsin
R. ALEXANDER ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff,
AIR, LLC d/b/a TANTACOMM, CHARLES EATON, THE AIR, LLC d/b/a TANTACOMM 401K PLAN and THE AIR, LLC d/b/a TANTACOMM HEALTH PLAN, Defendants.
OPINION AND ORDER
WILLIAM M. CONLEY District Judge
case, the Secretary of the Department of Labor brought suit
against defendants Charles Eaton, Air, LLC d/b/a TantaComm
(“TantaComm”), the Air, LLC d/b/a TantaComm
401(k) Plan (“TantaComm 401(k) Plan”) and the
Air, LLC d/b/a TantaComm Health Plan (“TantaComm Health
Plan”), alleging violations of Title I of the Employee
Retirement Income Security Act. (Compl. (dkt. #1).) For the
reasons discussed below, the court will enter default
judgment against Eaton and TantaComm and dismiss all claims
against remaining defendants TantaComm 401(k) Plan and
TantaComm Health Plan.
Employment Retirement Income Security Act
(“ERISA”) is a federal law that sets minimum
standards for certain employee benefit plans. See 29 U.S.C.
§ 1001. The Secretary of Labor has authority to enforce
violations of the Act. § 1132(a)(2), (5). Pursuant to
that authority, on April 4, 2018, the Secretary filed a
complaint against Charles Eaton, TantaComm and TantaComm
401(k) Plan alleging a No. of violations of ERISA. (Compl.
(dkt. #1).) Defendants filed an answer on July 6, 2018.
(Answer (dkt. #5).) A few months into discovery, defendant
Eaton filed for bankruptcy and defendants’ attorney
withdrew from this case; defendants did not notice a new
April 16, 2019, plaintiff filed an amended complaint, which
alleged additional ERISA violations and added defendant
TantaComm Health Plan. (Am. Compl. (dkt. #18).) Defendants
thereafter failed to respond or otherwise defend their case.
On July 8, 2019, plaintiff filed a motion for entry of
default as to Eaton and TantaComm (Mot. Entry of Default
(dkt. #21)), which was granted by the clerk of court on July
16, 2019 (Clerk’s Entry of Default (dkt. #22)).
Plaintiff then filed this pending motion for default
judgment. (Mot. for Default J. (dkt. #23-1).) A default
judgment hearing was held on September 12, 2019. Plaintiff
appeared by attorney Elizabeth Arumilli; defendants did not
the clerk of court has entered default against Eaton and
TantaComm, the court accepts as true all factual allegations
in the complaint, except those relating to damages. In re
Catt, 368 F.3d 789, 793 (7th Cir. 2004). According to
the amended complaint, Charles Eaton was the President and
100% owner of TantaComm. Both Eaton and TantaComm were
fiduciaries and parties in interest to the TantaComm 401(k)
Plan from at least April 5, 2012 through June 4, 2016, and
the TantaComm Health Plan from at least September 12, 2013,
through October 10, 2016, within the meaning of ERISA §
3(14)(A), (C), (E) and (H), 29 U.S.C. § 1002(14) (A),
(C), (E) and (H).
April 5, 2012, through June 4, 2016, the 401(k) Plan’s
governing documents provided that participants could make
pre-tax contributions to the 401(k) Plan from their
compensation. During this time, TantaComm, under the
authority and control of Eaton, withheld $130, 357.78 from
its employees’ pay as salary deferral contributions
intended for the 401(k) Plan. Defendants never remitted the
contributions to the 401(k) Plan and instead retained the
contributions in TantaComm’s bank account and used them
to pay TantaComm’s expenses. Also during this same
time, TantaComm, under the authority and control of Eaton,
failed to remit $287, 233.80 in employee salary deferral
contributions in a timely manner. Plaintiff also alleged that
from September 12, 2013, through October 10, 2016, TantaComm,
under the authority and control of Eaton, withheld $24,
454.18 from its employees’ pay for contributions to the
Health Plan to pay health insurance premiums but never
remitted the contributions to the Health Plan and instead
retained them in TantaComm’s bank account and used them
to pay TantaComm’s expenses.
plaintiff alleges that TantaComm failed to file an annual
report for the 401(k) Plan year ending December 15, 2015.
on these factual allegations, which the court accepts as
true, plaintiff has sufficiently established that defendants
TantaComm and Eaton are liable for multiple ERISA violations.
The court now considers plaintiff’s requested relief
for these violations.
initial matter, the court notes that although defendant Eaton
has filed a Chapter 7 bankruptcy petition, plaintiff’s
action is not subject to the automatic bankruptcy stay.
Typically, the bankruptcy code imposes a stay on the
continuation of judicial proceedings against a debtor once he
has filed for bankruptcy. See 11 U.S.C. § 362(a)(1).
However, the code excepts proceedings to “enforce
police or regulatory powers of a governmental unit.”
§ 362(b)(4). This court has previously held that an
ERISA action falls under this exception, and that the court
may enter both an equitable and money judgment against the
debtor provided that the money judgment does not put the
Secretary of Labor in a position superior to that of other
creditors. See Perez v. Cargill Heating & Air
Conditioning Co., No. 14-cv-228-jdp, 2014 WL 5325372
(W.D. Wis. Oct. 20, 2014); see also Solis v. Wallis,
No. 11-cv-3019, 2012 WL 3779065 (N.D.Ill. Aug. 30,
2012); Solid v. Caro, No. 11-cv-6884, 2012 WL
1230824 (N.D. Ill. Apr. 12, 2012). Therefore, despite
Eaton’s pending bankruptcy claim, the court here will
continue with this action and enter judgment against him,
noting that plaintiff may only enforce the money judgment
against Eaton by pursuing a claim in the bankruptcy
plaintiff seeks a total of $203, 788.20 in monetary relief
from TantaComm and Eaton. ERISA provides that a fiduciary who
has breached his fiduciary duties under the Act may be held
“personally liable to make good to such plan any losses
to the plan resulting from each such breach.” 29 U.S.C.
§ 1109. The $203, 788.20 amount is the sum total of four
figures; each figure was determined after an investigation
and calculations performed by Tabitha Sabitino, an
investigator for the Chicago Regional Office of the Employee
Benefits Security Administration. (Sabatino Decl. (dkt.
determined that, from April 5, 2012, through June 4, 2016,
$130, 357.78 in employee contributions were withheld but were
not remitted to the 401(k) Plan. Sabitino also calculated
that defendants’ violations resulted in $46, 453.03 of
lost interest earnings to the 401(k) Plan. This figure
reflects a calculation of lost interest on both unremitted
employee contributions (which as noted above was determined
to be $130, 357.78) and untimely remitted employee
contributions (which Sabatino determined to be $287, 233.80).
Using those figures and the Internal Revenue Code § 6621
interest rates, Sabitino came to the $46, 453.03 total.
Similarly, Sabitino determined that $24, 454.18 of employee
contributions were withheld but not remitted to the Health
Plan; this resulted in $2, 523.21 in lost interest earnings,
also calculated using the Internal Revenue Code § 6621
interest rate. After reviewing these figures and
calculations, the court is satisfied that plaintiff has
proven up the requested monetary relief. Plaintiff also
requests injunctive relief that (1) permanently enjoins Eaton
and TantaComm from serving or acting as fiduciaries to any
ERISA-covered employee benefit plan and removing them from
any positions they now hold as fiduciaries of the Plans and
(2) permanently enjoins Eaton and TantaComm from violating
Title I of ERISA. ERISA authorizes injunctive relief that
“enjoin[s] any act or practice which violates any
provision of this subchapter” and other appropriate
equitable relief. 29 U.S.C. § 1132(a)(5). It is
“not uncommon for courts to issue injunctions as part
of default judgments.” Virgin Records Am., Inc. v.
Johnson, 441 F.Supp.2d 963, 965 (N.D. Ind. 2006) (citing
Johnson v. Kakvand, 192 F.3d 656 (7th Cir. 1999));
Arista Records, Inc. v. Beker Enters., Inc., 298
F.Supp.2d 1310, 1314 (S.D. Fla. 2003).
defendant has engaged in “repeated or
substantial” violations of their fiduciary duties, a
court may properly order their removal from their position as
fiduciary. Chesemore v. Alliance Holdings, Inc., 948
F.Supp.2d 928, 948 (W.D. Wis. 2013) (citing Katsaros v.
Cody,744 F.2d 270, 281 (2d Cir. 1984)). Here,
defendants failed to remit over one hundred thousand dollars
of employee contributions to the Plans over a period of
multiple years, as well as untimely remitting over two
hundred thousand dollars in ...