Opinion
04 Civ. 5262 (RJH) (KNF).
December 13, 2006
REPORT RECOMMENDATION
I. INTRODUCTION
In this action, the trustees of the Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund and Training Program Fund (the "Trustees") and the Mason Tenders District Council of Greater New York (the "Union"), by its Business Manager Anthony Silveri (collectively the "plaintiffs") allege that Thomas Faulkner d/b/a American Demolition and Thomas Faulkner ("Faulkner"), individually, (collectively "defendants") failed to permit and cooperate in the conduct of an audit of American Demolition's books and records, and failed to make contributions to the plaintiffs, as required by a collective bargaining agreement (the "Agreement") and the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001- 1461.
Upon the defendants' failure to file an answer or otherwise respond to the complaint, your Honor referred the matter to the undersigned to conduct an inquest and to report and recommend the amount of damages, if any, to be awarded to the plaintiffs against the defendants and to investigate any other matters essential to the entry of judgment.
The Court directed the plaintiffs to serve and file proposed findings of fact and conclusions of law, and an inquest memorandum setting forth their proof of damages, costs of this action, and their attorneys' fees. The Court also directed the defendants to serve and file any opposing memoranda, affidavits and exhibits, as well as any alternative findings of fact and conclusions of law they deemed appropriate.
Thereafter, the plaintiffs made an application to be relieved of the obligation of submitting an inquest memorandum and proposed findings of fact to the Court. The plaintiffs requested that the Court rely on the submissions previously made to your Honor in support of their motion for judgment by default. The Court granted the plaintiffs' request. The defendants did not file anything in opposition to the plaintiffs' submissions.
In support of their request for damages, the plaintiffs submitted: (1) the affidavit of Marguerite Stenson Wynne, Esq.; (2) a "summary of the attorneys' fees requested by plaintiffs"; and (3) contemporaneous time records for the legal services provided to the plaintiffs, in connection with this action.
The plaintiffs' submissions aver that they are entitled to: (1) an order directing the defendants to permit and cooperate in the conduct of an audit of the records of the defendants for the period December 6, 1999, to the present; (2) all contributions found to be due and owing, subsequent to the audit; (3) prejudgment interest on all such contributions; (4) all unpaid dues checkoffs and Political Action Committee ("PAC") contributions, including prejudgement interest; (5) a contractual penalty of $400, for the defendants' failure to permit an audit; (6) a permanent injunction barring the defendants from violating the terms of the parties' agreement, and requiring the defendants to pay timely and/or submit the required fringe benefit contributions and/or reports to the trust funds, and to cooperate in the conduct of audits, for so long as the defendants remain obligated to do so, pursuant to the Agreement; and (7) reasonable attorneys' fees and costs.
II. BACKGROUND
When a defendant defaults in an action, by failing to plead or otherwise defend against a complaint, the defendant is deemed to have admitted every well-pleaded allegation of the complaint except those relating to damages. See Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). In addition, the plaintiff is entitled to all reasonable inferences from the evidence presented. See Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). Based upon the submissions made by the plaintiffs, the complaint filed in the instant action, and the Court's review of the entire court file in this action, the following findings of fact are made:
The plaintiff Trustees are the trustees of jointly-administered, multi-employer, labor-management trust funds. The purpose of the Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund and Training Program Fund (the "Funds") is to provide various fringe benefits, such as retirement and medical benefits, to eligible employees, on whose behalf employers contribute to the Funds, pursuant to collective bargaining agreements between the employers and the Union. Pursuant to the Agreement between the defendants and the Union, to which the Funds are third-party beneficiaries, the defendants agreed, inter alia, to: (1) pay monetary contributions to the Funds; (2) submit contribution reports; (3) pay interest from the date of any delinquent contributions and pay all reasonable costs and attorneys' fees incurred by the Trustees, in recovery thereof; (4) deduct and remit to the Union dues checkoffs and PAC contributions, from wages paid to employees who authorized said deductions in writing; (5) permit and cooperate in audits; (6) pay the costs of any audit(s), if the defendants are found to be "substantially delinquent"; and (7) pay a $400 penalty, for the defendants' failure to permit an audit, and reasonable costs and attorney's fees incurred by the Funds in bringing an action to enforce the audit provision of the Agreement.
The trust funds are established and maintained pursuant to various collective bargaining agreements, in accordance with section 302(c)(5) and (c)(6) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5-6). The trust funds are employee benefit plans within the meaning of sections 3(1), 3(2), 3(3) and 502(d)(1) of ERISA, 29 U.S.C. §§ 1002(1), (2), (3), and 1132(d)(1), and multi-employer plans within the meaning of sections 3(37) and 515 of ERISA, 29 U.S.C. §§ 1002(37) and 1145.
The Mason Tenders District Council of Greater New York is a labor organization as defined by Section 2 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 152.
The plaintiffs instituted this action, after they were unable to verify the defendants' contributions to the Funds as of December 6, 1999. The defendants' failure to make the required contributions and to submit contribution reports to the plaintiffs, as well as their failure to comply with their audit obligations, violated the parties' collective bargaining agreement and ERISA.
III. CONCLUSIONS OF LAW
A default judgment in an action establishes liability, but is not a concession of damages. See Cappetta v. Lippman, 913 F. Supp. 302, 304 (S.D.N.Y. 1996) (citing Flaks v. Koegel, 504 F.2d 702, 707 [2d Cir. 1974]). Damages must be established by a plaintiff in a post-default inquest. See id. In conducting an inquest, the court need not hold a hearing "as long as it [has] ensured that there was a basis for the damages specified in the default judgment." Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997). The court may rely on affidavits or documentary evidence in evaluating the fairness of the sum requested. See Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir. 1993).Unpaid Fringe Benefit Contributions
ERISA provides that "[e]very employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement." 29 U.S.C. § 1145.
The plaintiffs contend that they are entitled to the unpaid contributions that the defendants were required to make to the Funds, under the Agreement, as well as prejudgment interest on those amounts. ERISA provides, in pertinent part, the following:
In any action under this title by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan — (A) the unpaid contributions, (B) interest on the unpaid contributions, (c) an amount equal to the greater of — (i) interest on the unpaid contributions, or (ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A). . . .29 U.S.C. § 1132(g)(2).
Although a court may award damages pursuant to 29 U.S.C. § 1132(g)(2), a court may not award damages where the amount to be conferred is uncertain. "Although damages do not have to be proven with mathematical precision, before a party can recover, the amount of damages must be demonstrated with 'reasonable certainty'. . . . The 'reasonable certainty' requirement demands that the plaintiff demonstrate more than 'merely speculative, possible, or imaginary' damages." Boyce v. Soundview Tech. Group, No. 03 Civ. 2159, 2004 WL 2334081, at *3 (S.D.N.Y. Oct. 14, 2004) (quoting Schonfeld v. Hilliard, 218 F.3d 164, 172 [2d Cir. 2000]).
ERISA requires all employers to maintain employee records that are "sufficient to determine the benefits due or which may become due to such employees." 29 U.S.C. § 1059(a)(1). Where an employer has not met this requirement, the results of an audit conducted of the employer's records may be used as a basis upon which to award damages. See Mo-Kan Teamsters Pension Fund v. Creason, 716 F.2d 772, 777-78 (10th Cir. 1983).
Since the evidence submitted to this Court is devoid of employee records and an audit has not been conducted, there is no basis upon which to determine, at this stage, the amount of unpaid contributions that should be awarded as damages. Similarly, without any evidence of the amount of unpaid contributions, that are owed to the plaintiffs, prejudgment interest cannot be awarded at this time. Moreover, the Court notes that the same holds true for the amount of delinquent dues checkoffs and PAC contributions that are owed to the plaintiffs.
Audit
In an action brought to enforce ERISA § 1145, a court may grant "such . . . legal or equitable relief as the court deems appropriate." 29 U.S.C. § 1132(g)(2)(E). Such relief may include an injunction directing a defendant to comply with a requirement, imposed by a collective bargaining agreement, that the defendant permit and cooperate in the conduct of an audit of its records. See, e.g.,Beck v. Levering, 947 F.2d 639, 641 (2d Cir. 1991) (holding that ERISA provides for injunctive relief). The United States Supreme Court has held that the right of employee benefit plan trustees to conduct such audits of contributing employers is consistent with the provisions of ERISA. See Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 573-574, 105 S. Ct. 2833, 2841-2842 (1985); see also Mason Tenders Dist. Council Welfare Fund v. Asturias, Inc., No. 01 Civ. 856, 2003 WL 179770, at *3-5 (S.D.N.Y. Jan. 23, 2003) (ordering the defendants to cooperate in the conduct of an audit).
In this action, the plaintiffs contend that, pursuant to the Agreement, they are entitled to conduct an audit of the defendants' books and records since the defendants have not permitted the plaintiffs to conduct an audit as required by the Agreement. Accordingly, in order to enable the plaintiffs to determine the amount of unpaid contributions owed to them, the Court finds that the defendants should be ordered to permit the plaintiffs to conduct an audit, as required by the Agreement.
Liquidated Damages
a. Statutory Liquidated Damages
By statute, the plaintiffs are entitled to liquidated damages for the defendants' failure to make the required contributions to the Funds. See 29 U.S.C. § 1132(g)(2)(c). Section 502 of ERISA provides that the amount of statutory damages to be awarded in an action to recover delinquent fringe benefit contributions shall be equal to the greater of: (1) the interest awarded on the unpaid contributions; or (2) liquidated damages specified under a fund plan in an amount not to exceed 20% of the amount of contributions determined by a court to have been unpaid. See 29 U.S.C. § 1132(g)(2).
The plaintiffs seek liquidated damages in an amount equal to the interest on the defendant's unpaid contributions. Id. However, as discussed above, the Court cannot determine the amount of unpaid contributions and interest owed to the Funds. Accordingly, the Court cannot determine the amount to award the plaintiffs as liquidated damages.
B. Contractual Liquidated Damages: Audit Penalty
A contract's "liquidated damages clause will be sustained only where '(1) the agreed sum is a reasonable estimate of potential damages, i.e.[,] not plainly or grossly disproportionate to the possible loss; and (2) actual damages are difficult to determine, or are not readily ascertainable. . . .'" Bristol Inv. Fund v. Carnegie Int'l Corp., 310 F. Supp. 2d 556, 566 (S.D.N.Y. 2003) (quoting Howard Johnson Int'l Inc. v. HBS Family, No. 96 Civ. 7687, 1998 WL 411334, at *5 [S.D.N.Y. July 22, 1998]). However, under "no circumstances . . . will liquidated damages be allowed where the contractual language and attendant circumstances show that the contract provides for the full recovery of actual damages, because liquidated and actual damages are mutually exclusive remedies under New York law." United States Fidelity and Guaranty Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 71 (2d Cir. 2004).
The plaintiffs seek liquidated damages for the defendants' failure to comply with an audit. The Agreement provides, in pertinent part: "In the event the Employer fails to produce the books and records necessary for an audit defendants are obligated to pay a penalty of $400.00." As noted above, the defendants have not provided the plaintiffs access to their records for an audit. Since the actual damages are not readily ascertainable, the Court cannot determine whether $400 is plainly or grossly disproportionate to the potential loss occasioned by the defendants' failure to make those contributions.
Joint and Several Liability
The plaintiffs seek an order from the court that the liability of the defendants, for any judgment be joint and several. The plaintiffs claim that Faulkner, the sole proprietor of American Demolition, should be held personally liable for American Demolition's obligations under the Agreement because he acted in American Demolition's interest, was vested with managerial authority and had control over American Demolition's obligations. Furthermore, according to the plaintiffs, Faulkner executed the Agreement in his individual capacity, and on behalf of American Demolition.
The Second Circuit has held that it is appropriate to look to state law to determine whether a collective bargaining agreement imposes personal liability on a signatory. See Lerner v. Amalgamated Clothing and Textile Workers Union, 938 F.2d 2, 5 (2d Cir. 1991).
Under New York law, in order to impute individual liability under ERISA, there must "be 'clear and explicit evidence' of the [individual] defendant's intent to add personal liability to the liability of the entity. . . ." Mason Tenders District Council Welfare Fund v. Thomsen Constr. Co., 301 F.3d 50, 53 (2d Cir. 2002). The factors to be considered in such a determination should be "the contract's length, the location of the liability provision relative to the signature line, the presence of the name of the signatory in the contract itself, 'the nature of the negotiations leading to the contract,' and the signatory's role in the corporation." Id.
In the instant case, the Agreement contains a clause purporting to impose personal liability upon Faulkner. However, "the mere presence of a personal liability clause in [an agreement]" signed by an officer of a corporation, without more, does not establish the "high degree of intention" needed to assign personal liability. Thomsen, 301 F.3d at 54; see also Salzman Sign Co. v. Beck, 10 N.Y.2d 63, 67, 217 N.Y.S.2d 55, 57 (1961). The plaintiffs have not made any other allegations in the complaint or provided any evidence concerning: (1) the length of the Agreement; (2) the location of the personal liability provision within it; (3) the negotiations that led to the Agreement; or (4) whether Faulkner's signature line indicated that he was signing in both an individual capacity and in his capacity as an officer of American Demolition. In the absence of such information, Faulkner should not be held personally liable for violations of the Agreement. Accordingly, the plaintiffs' request for an order, making the defendants jointly liable to them, should be denied.
Injunctive Relief
The plaintiffs seek a permanent injunction barring the defendants from "violating the Agreement and requiring the defendants to timely pay and/or submit the required fringe benefit contributions and/or reports to the Funds, permit and cooperate in the conduct of audits, pay the costs of the audits, remit dues checkoffs and PAC contributions deducted from the wages paid to employees who authorize said deductions in writing, and pay all amounts determined by the audits to be due and owing, for as long as defendants remain obligated to do so pursuant to the agreement." Complaint at 11-12.
Pursuant to 29 U.S.C. § 1132(g)(2)(E), a court shall award a Fund which prevails in an action brought under § 1145 "such other legal or equitable relief as the court deems appropriate." 29 U.S.C. § 1132(g)(2)(E). Accordingly, the plaintiffs may seek injunctive relief as a remedy in this action. See, e.g., Beck v. Levering, 947 F.2d at 641.
A court "may issue an injunction on a motion for default judgment provided that the moving party shows that (1) it is entitled to injunctive relief under the applicable statute and (2) it meets the prerequisites for the issuance of an injunction." Cablevision of Southern Conn. v. Smith, 141 F. Supp. 2d 277, 287-88 (D. Conn. 2001) (citation omitted). In the instant case, the first requirement has been met, since 29 U.S.C. § 1132(g)(2)(E) provides for equitable relief in actions brought to recoup unpaid contributions to multi-employer benefit plans. Therefore, in order to meet the second requirement, the plaintiffs must show irreparable harm and the absence of an adequate remedy at law. See King v. STL Consulting, LLC, No. 05 Civ. 2719, 2006 WL 3335115, at *9 (E.D.N.Y. Oct. 3, 2006) (citations omitted). "To satisfy the irreparable harm requirement, a party seeking injunctive relief ordinarily 'must show that the injury it will suffer is likely and imminent, not remote or speculative, and that such injury is not capable of being fully remedied by money damages.'" Id. (quoting NAACP v. Town of E. Haven, 70 F.3d 219, 224 [2d Cir. 1995]).
Here, the plaintiffs have not made a showing that they will likely suffer an injury incapable of being remedied fully by money damages. Since no evidence exists that monetary damages are insufficient to deter future conduct, the plaintiffs' request for a permanent injunction should be denied. See King v. Nelco Indus., Inc., No. 96 CV 4177, 1996 WL 629564, at *1 (E.D.N.Y. Oct. 23, 1996).
Attorneys' Fees and Cost
An award of reasonable attorneys' fees and costs, in an action such as this to recover unpaid union benefit contributions, is mandatory. See 29 U.S.C. § 1132(g)(2); Bricklayers Dist. Council Welfare Fund v. Pony Masonry Constr, Co., No. 92 Civ. 1663, 1995 WL 693262, at *3 (S.D.N.Y. Nov. 22, 1995), When fixing a reasonable rate for attorneys' fees, it is appropriate for a court to consider and to apply the prevailing market rates in the relevant community for similar legal work of lawyers of reasonably comparable skill, experience and reputation. See Blum v. Stenson, 465 U.S. 886, 895 n. 11, 104 S. Ct. 1541, 1547 n. 11 (1984). In addition, it is permissible for a court to rely upon its own knowledge of private firm hourly rates in deciding what reasonable attorney fees are in the community. See Miele v. New York State Teamsters Conf. Pens. Retirement Fund, 831 F.2d 407, 409 (2d Cir. 1987).
In the Second Circuit, a party seeking an award of attorneys' fees must support that request with contemporaneous time records that show, "for each attorney, the date, the hours expended, and the nature of the work done." New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983). Attorney fee applications that do not contain such supporting data "should normally be disallowed." Id. at 1154. Disallowance of attorneys' fees is permitted notwithstanding the mandatory language found at 29 U.S.C. § 1132(g)(2)(D). See Plumbers Local No. 371 Joint Plumbing Indus. Bd. Pension Fund v. Frank Liquori Plumbing and Heating, No. 95 Civ. 2892, 1996 WL 445065, at *5 (E.D.N.Y. June 26, 1996).
In prosecuting this action against the defendants, the plaintiffs engaged the service of the law firm Proskauer Rose LLP ("Proskauer Rose"). Four attorneys from Proskauer Rose worked on this matter: Marguerite Stenson Wynne, Esq. ("Wynne"), Michael Marra, Esq. ("Marra"), Corey S. Biller, Esq. ("Biller") and Sally L. Schneider, Esq. ("Schneider"). In addition to the attorneys who performed legal services in connection with this action, three "litigation support" staff members performed services on behalf of the plaintiffs.
Wynne submitted an affidavit to the Court describing the methods employed by her law firm in maintaining contemporaneous records of the legal services performed by the law firm on behalf of its clients. Moreover, Wynne attached copies of the contemporaneous billing records, relating to this action, with information showing, for each attorney, the date, the hours expended, and the nature of the work performed for the plaintiffs.
In addition to the information concerning the firm's contemporaneous billing records, Wynne's affidavit provides a limited description of her skill, experience and reputation, and that of Schneider. Wynne has been litigating labor and employment law actions for more than twenty-six years. Schneider has been prosecuting actions for the recovery of employee benefits, on behalf of the plaintiffs, for more than thirteen years. No information was provided to the Court regarding the experience of Marra or Biller. Moreover, no experiential information concerning the litigation support staff was provided to the Court.
a. Marra, Biller and Litigation Support Staff
Since the plaintiffs have not provided information concerning the skill, experience and reputation of Marra, Biller or the litigation support staff members who worked on this matter, the Court cannot assess whether their experience supports the rates of compensation the law firm billed the plaintiffs for their services. Therefore, the Court declines to recommend an award of attorneys' fees based upon work provided to the plaintiffs by Marra, Biller and the firm's litigation support staff members.See New York State Ass'n for Retarded Children, 711 F.2d at 1154.
b. Wynne and Schneider
The plaintiffs' submissions indicate that they incurred fees for: (a) 16.75 hours of work performed by Wynne, at an hourly rate of $265; and (b) .75 hours of work performed by Schneider, at an hourly rate of $350.
Based upon Wynne's experience handling labor and employment law litigation, and the work she performed as lead counsel in this action, the Court finds the hourly rate, at which she billed the plaintiffs for her work, is reasonable. However, the reasonableness of Wynne's hourly billing rate makes suspect the reasonableness of Schneider's hourly billing rate. The plaintiff's submissions indicate that Wynne has more than twice the years of experience Schneider has litigating actions of the labor and employment law ilk; however, Wynne's hourly billing rate is approximately 76% of Schneider's hourly billing rate. Moreover, Schneider's contribution to the litigation was minuscule. Therefore, the Court finds that it would not be reasonable to award the plaintiffs Schneider's attorney's fees in full. The Court finds that, $250 is a reasonable hourly rate at which to compensate for Schneider's legal services, based on her experience and the work she performed in connection with this action. Accordingly, the plaintiffs should be awarded attorneys' fees in the amount of $4,626.25, based on 16.75 hours of work performed by Wynne, at an hourly rate of $265 and .75 hours of work performed by Schneider, at an hourly rate of $250.
c. Costs
The plaintiffs have requested an award of costs in the amount of $373.54. In support of this request, the plaintiffs have provided the Court with an invoice, in the amount of $223.54, from a professional process service company. The Court finds that the process service fee is reasonable. Moreover, the plaintiffs paid $150 to the Clerk of Court for this judicial district, to commence this action. This cost is also reasonable. Accordingly, the Court finds that the plaintiffs should be awarded costs in the amount of $373.54.
IV. RECOMMENDATION
For the reasons set forth above, the Court recommends that: (1) the defendants be directed to cooperate in and, within 30 days of the entry of judgment, permit the conduct of an audit of their books and records for the period December 6, 1999, to the present; (2) the plaintiffs be awarded attorneys' fees in the amount of $4,626.25; and (3) the plaintiffs be awarded costs in the amount of $373.54. I recommend further that the plaintiffs' request for actual damages, prejudgment interest, liquidated damages and injunctive relief be denied, with leave to renew within 30 days of the completion of an audit.
* * *
The plaintiffs shall serve the defendants with a copy of this Report and Recommendation and submit proof of service to the court.
V. FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have ten (10) days from service of the Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Richard J. Holwell, United States District Judge, 500 Pearl St., Room 1950, New York, New York 10007, and to the chambers of the undersigned, 40 Centre St., Room 540, New York, New York 10007. Any requests for an extension of time for filing objections must be directed to Judge Holwell. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Am, 474 U.S. 140 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Candair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1998); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).