United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 09-3147/10-1051
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Rod Marshall, Trustee of Contractors *
Laborers, Teamsters and Engineers *
Health & Welfare Plan and Contractors *
Laborers, Teamsters and Engineers *
Pension Plan; David Hayes, Trustee *
of Contractors Laborers, Teamsters *
and Engineers Health & Welfare Plan *
and Contractors Laborers, Teamsters *
and Engineers Pension Plan; *
Ron Fucinaro, Trustee of Contractors *
Laborers, Teamsters and Engineers * Appeal from the United States
Health & Welfare Plan and Contractors * District Court for the
Laborers, Teamsters and Engineers * District of Nebraska
Pension Plan; Robert Hayworth, *
Trustee of Contractors Laborers, *
Teamsters and Engineers Health & *
Welfare Plan and Contractors Laborers, *
Teamsters and Engineers Pension Plan; *
Timothy McCormick, Trustee of *
Contractors Laborers, Teamsters and *
Engineers Health & Welfare Plan and *
Contractors Laborers, Teamsters and *
Engineers Pension Plan; Laborers' *
International Union of North America, *
LOCAL 1140; Kim Quick, Trustee of *
Contractors Laborers, Teamsters and *
Engineers Health & Welfare Plan and *
Contractors Laborers, Teamsters and *
Engineers Pension Plan; *
*
Plaintiffs-Appellees, *
v. *
*
Theresa Baggett, doing business as *
Baggett Masonry, Inc., *
*
Defendant-Appellant. *
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Submitted: June 16, 2010
Filed: August 17, 2010
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Before RILEY, Chief Judge, CLEVENGER1 and COLLOTON, Circuit Judges.
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CLEVENGER, Circuit Judge.
Ms. Theresa Baggett appeals from a default judgment issued in favor of the
Trustees of the Contractors, Laborers, Teamsters and Engineers Health & Welfare
Plan and Pension Plan (“the Plans”) and the Laborers’ International Union of North
America, Local 1140 (“the Union”) (collectively “the plaintiffs”). Ms. Baggett argues
that the district court erred in granting the default judgment because the complaint
does not support a judgment against her in her individual capacity. We agree.
I
Ms. Baggett signed a Masonry Construction Agreement (“the Agreement”) on
December 29, 2003 that purported to be between Baggett Masonry, Inc., a Nebraska
corporation, and the Union. The Agreement required Baggett Masonry, Inc. to make
1
The Honorable Raymond C. Clevenger, III, United States Circuit Judge for the
Court of Appeals for the Federal Circuit, sitting by designation.
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contributions to the Plans based on the number of hours worked by its employees.
Ms. Baggett signed the Agreement as follows:
Baggett Masonry, Inc. (handwritten)
COMPANY NAME
Theresa Baggett (signature)
BY
President (handwritten)
TITLE
Baggett Masonry, Inc. made the requisite contributions to the Plans until September
30, 2007, when Ms. Baggett claims the Agreement was terminated. The plaintiffs
dispute Ms. Baggett’s claim that the terms of the Agreement were met and instead
argue that Baggett Masonry, Inc. owes the Plans additional money for subsequent
periods.
On April 14, 2008, the plaintiffs filed suit under 29 U.S.C. § 185(a) of the
Labor Management Relations Act and 29 U.S.C. § 1132 of the Employee Retirement
Income Security Act of 1974 (“ERISA”). The complaint was filed against
Ms. Baggett, styled as “Theresa Baggett d/b/a Baggett Masonry, Inc.,” and sought to
recover the allegedly delinquent contributions as well as liquidated damages and
attorney fees. The plaintiffs allege in the complaint that Ms. Baggett “is an individual
and operates a construction company doing business in the State of Nebraska.” The
Agreement, listing Baggett Masonry, Inc. as the party to the contract, was attached to
the complaint as an exhibit and became “a part of the pleading for all purposes.” See
Fed. R. Civ. P. 10(c). However, the plaintiffs did not join Baggett Masonry, Inc. as
a defendant. Instead, the plaintiffs only sued Ms. Baggett in her individual capacity.
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After Ms. Baggett failed to respond to the complaint, the plaintiffs filed a
motion for entry of default on June 30, 2008. The clerk of the court entered the
default on July 1, 2008. On July 25, 2008, in response to another motion of the
plaintiffs, the district court entered a default judgment against Ms. Baggett and
ordered her to submit to an audit. Ms. Baggett appeared in court on December 12,
2008 and provided the documents requested for the audit.
The district court entered a final default judgment in favor of the plaintiffs on
July 10, 2009 and awarded attorney’s fees to the plaintiffs on August 3, 2009. In total,
the district court entered judgment in the amount of $10,515.38 for contributions owed
to the pension plan, $18,788.00 for contributions owed to the health and welfare plan,
$8,233.75 for liquidated damages and interest, and $5,559.02 for attorney’s fees. On
August 7, 2009, Ms. Baggett filed a motion to set aside the July 10, 2009 default
judgment and the August 3, 2009 attorney’s fees order. The district court denied the
motion on December 14, 2009 and Ms. Baggett filed the present appeal.
II
Entry of default judgment does not preclude a party from challenging the
sufficiency of the complaint on appeal. See Black v. Lane, 22 F.3d 1395, 1399 (7th
Cir. 1994); Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir.
1988); Nishimatsu Constr. Co., Ltd. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th
Cir. 1975) (“A default judgment is unassailable on the merits but only so far as it is
supported by well-pleaded allegations, assumed to be true.”) (emphasis in original).
We thus properly have before us the question of whether the unchallenged facts in the
plaintiffs’ complaint constitute a legitimate cause of action against Ms. Baggett in her
individual capacity.
In Murray v. Lene, we recently reaffirmed an age-old doctrine regarding default
judgments and the requisite legal analysis to support such judgments. 595 F.3d 868,
871 (8th Cir. 2010). It is nearly axiomatic that when a default judgment is entered,
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facts alleged in the complaint may not be later contested. See Thomson v. Wooster,
114 U.S. 104 (1885); see also Fed. R. Civ. P. 8(b)(6) (“An allegation — other than
one relating to the amount of damages — is admitted if a responsive pleading is
required and the allegation is not denied.”). However, as we stated in Murray v. Lene,
“it remains for the [district] court to consider whether the unchallenged facts
constitute a legitimate cause of action, since a party in default does not admit mere
conclusions of law.” 595 F.3d at 871 (quoting 10A C. Wright, A. Miller & M. Kane,
Federal Practice and Procedure § 2688 at 63 (3d ed. 1998)); see also Ohio Cent. R.
Co. v. Central Trust Co., 133 U.S. 83, 91 (1890) (“[A]lthough the defendant may not
be allowed, on appeal, to question the want of testimony or the insufficiency or
amount of the evidence, he is not precluded from contesting the sufficiency of the bill,
or from insisting that the averments contained in it do not justify the decree.”);
Nishimatsu Constr. Co., Ltd., 515 F.2d at 1206 (“[A] default judgment may be
lawfully entered only ‘according to what is proper to be decreed upon the statements
of the bill, assumed to be true,’ and not ‘as of course according to the prayer of the
bill.’”) (quoting Thomson, 114 U.S. at 113).
Ms. Baggett does not contest the factual allegations of the complaint, but argues
that the district court erred in its legal analysis by finding the complaint sufficient to
support a judgment against her in her individual capacity. We note that it is of course
appropriate for a district court to enter a default judgment when a party fails to
appropriately respond in a timely manner. See, e.g., Inman v. Am. Home Furniture
Placement, Inc., 120 F.3d 117, 119 (8th Cir. 1997). Even so, it is incumbent upon the
district court to ensure that “the unchallenged facts constitute a legitimate cause of
action” prior to entering final judgment. See Murray, 595 F.3d at 871. We review the
legal sufficiency of the complaint de novo.
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III
Ms. Baggett points to a strikingly similar case in which a default judgment
finding an individual liable for actions taken as a corporate agent was upset on appeal
because the complaint failed to allege a rationale to support individual liability. See
Nishimatsu Constr. Co., Ltd., 515 F.2d at 1206-07. In that case, a default judgment
was entered against Jack D. Baize, who had entered into contracts with a Houston
bank as a representative of a foreign corporation. Id. at 1203. When relations
between the bank and its corporate customer soured, the bank filed a third party
complaint against Baize in his personal capacity, based on the contracts he signed as
a representative of the corporation. Id. After Baize failed to respond to the complaint,
the court entered a default judgment. Id. at 1204.
On appeal, Baize argued that he could not be personally liable on the contract
because he signed as a corporate agent. Id. at 1205. Notwithstanding his default, the
Fifth Circuit agreed that a default judgment against Baize should not have been
entered. Id. As here, Baize signed the contract in the corporation’s name followed
by “BY: Jack D. Baize.” See id. at 1205. The court found that this signature form
“unambiguously supported” the presumption that Baize intended to sign on behalf of
the corporation and indicated that “the principal alone and not the agent is a party to
the contract.” Id. at 1207. The court concluded that because the contract was attached
to the complaint filed with the district court, “not only do the pleadings fail to support
the judgment rendered against Baize but [] they disclose on their face a fact that would
defeat the appellee’s claim.” Id. at 1206.
Nebraska law, like Texas law, has well-established principles that protect a
corporate officer from personal liability for contracts signed on behalf of a
corporation. See Hecker v. Ravenna Bank 468 N.W.2d 88, 94 (Neb. 1991) (“As a
general rule, concerning liability on a corporate contract, a corporation’s directors or
officers are in the same position as agents of private individuals and are not personally
liable on a corporation’s contract unless the corporate directors or officers purport to
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bind themselves, or have otherwise bound themselves, to performance of the
contract”); Savorelli v. Stone, 96 N.W.2d 222, 227 (Neb. 1959) (“‘Where one acting
as the agent of a corporation makes a contract on its behalf, which is binding upon it,
[his] acts in that behalf create no individual or personal liability against him.’”)
(quoting Fremont Carriage Mfg. Co. v. Thomsen, 91 N.W. 376 (Neb. 1902)). Further,
the law of this circuit is clear that, absent piercing the corporate veil, officers of a
corporation cannot be held liable for ERISA obligations undertaken by the
corporation. See Minn. Laborers Health & Welfare Fund v. Scanlan, 360 F.3d 925,
928 (8th Cir. 2004); Pipe Fitters Health & Welfare Trust v. Waldo, R., Inc., 969 F.2d
718, 720-21 (8th Cir. 1992); Rockney v. Blohorn, 877 F.2d 637, 642-43 (8th Cir.
1989).
We conclude that for the plaintiffs to prevail against actions taken by Ms.
Baggett in her role as a corporate officer, we must find a theory in the complaint to
support imposing personal liability. Yet, we find nothing in the complaint to support
an assertion that Baggett Masonry, Inc. was a sham corporation or an indistinct
identity of Ms. Baggett. There are also no allegations of fraud or other illegal
machinations. The Agreement is clear on its face that Ms. Baggett executed the
contract in her official capacity as president of Baggett Masonry, Inc. Accordingly,
she cannot be held individually liable for the allegedly delinquent payments of the
corporation.
IV
The plaintiffs’ only line of defense against Ms. Baggett’s challenge is the
apparent fact that Baggett Masonry, Inc. was dissolved on August 16, 2002 for non-
payment of occupation taxes. The Nebraska Secretary of State automatically dissolves
corporate entities which fail to make timely payments. See Neb. Rev. Stat. § 21-323.
The plaintiffs argue that because Baggett Masonry, Inc. was not a corporation in good
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standing at the time Ms. Baggett signed the Agreement, Ms. Baggett’s signature on
the Agreement must be as an individual doing business as Baggett Masonry, Inc.
rather then as president of a corporation. According to the plaintiffs, Ms. Baggett’s
signature would thus bind her in her individual capacity and obviate the plaintiffs’
need to plead facts sufficient to allege a corporate veil piercing or alter ego theory.
Ms. Baggett responds that she is protected under Nebraska law by the
reinstatement provisions of Nebraska Revised Statute § 21-323.01 which provides that
“[w]hen the reinstatement is effective, it shall relate back to and take effect as of the
effective date of the administrative dissolution and the corporation shall resume
carrying on its business as if the administrative dissolution had never occurred.”
Baggett Masonry, Inc. was formally reinstated as a corporation by the State of
Nebraska in September 2009. Because the reinstatement relates back to the effective
date of dissolution, Ms. Baggett argues that she is shielded from individual liability
for corporate actions taken during the period of dissolution. Although § 21-323.01
provides retroactive effect after reinstatement, the statute does not state whether the
relation back provision re-establishes in full the protective corporate shield.
Neither Ms. Baggett nor the plaintiffs point to any Nebraska case law to guide
us on this unresolved point of law. We are also unable to find any statement from the
Nebraska Supreme Court on the question of whether the “relate back” language
provides for a corporation to adopt the actions of its officers that occurred while the
corporation was administratively dissolved.2 However, because the plaintiffs made
2
We note, however, that Iowa and Missouri have similar phrasing in their
reinstatement statutes. See Iowa Code § 490.1422(3) (“When the reinstatement is
effective, it relates back to and takes effect as of the effective date of the
administrative dissolution as if the administrative dissolution had never occurred.”);
Mo. Rev. Stat. § 351.488.3 (“When the reinstatement is effective, it relates back to
and takes effect as of the effective date of the administrative dissolution and the
corporation resumes carrying on its business as if the administrative dissolution had
never occurred.”). The courts in those states have found that the “relates back”
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no assertions in the complaint regarding an alleged deficiency in Baggett Masonry
Inc.’s corporate status, we do not consider the effect of Nebraska’s reinstatement
statute.
The plaintiffs’ use of the “d/b/a” styling in the caption of the complaint and the
allegation that Ms. Baggett “is an individual and operates a construction company
doing business in the State of Nebraska” do not equate to an allegation that Baggett
Masonry, Inc. had been administratively dissolved. Because the Agreement attached
to the complaint demonstrates that Ms. Baggett signed in an official capacity on behalf
of the corporation, the plaintiffs need to counter that fact with a factual assertion as
to why Ms. Baggett instead bound herself as an individual. The plaintiffs did not do
so and the complaint thus fails as a matter of law. The district court should have
dismissed the complaint against Ms. Baggett. See Murray v. Lene, 595 F.3d 868, 871
(8th Cir. 2010).
language provides liability coverage for actions taken by corporate officers while the
corporation was dissolved. See K & K Leasing, Inc. v. Tech Logistics Corp., 759
N.W.2d 812 (Iowa Ct. App. 2008) (“current statute provides continuing protection for
officers and directors of corporations that have been administratively dissolved”);
OHM Props., LLC v. Centrec Care, Inc., 302 S.W.3d 170, 175 (Mo. Ct. App. 2009)
(“actions occurring between the dissolution or ‘forfeiture’ and the date of ‘rescission’
or reinstatement relate back to the date of dissolution and are held as valid acts of the
original [] corporation”). In other states with reinstatement provisions, however, the
courts have refused to give effect to the corporate shield during the time the
corporation was administratively dissolved. See, e.g., Moore v. Occupational Safety
& Health Review Comm’n, 591 F.2d 991, 995-96 (4th Cir. 1979) (interpreting
Virginia law); see also Nigro v. Dwyer, 438 F.Supp. 2d 229, 233-38 (S.D.N.Y. 2006)
(discussing differing interpretations of New York law).
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V
Ms. Baggett also appeals the denial of her motion to set aside the default
judgment pursuant to Federal Rule of Civil Procedure 60(b). Because the default
judgment should not have been granted in the first instance, we need not reach this
issue. We vacate the default judgment entered against Ms. Baggett and remand the
case to the district court for further proceedings as may be appropriate.
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