Opinion
21-CV-7923 (DLC) (JW)
02-07-2023
DEMOS P. DEMOPOULOS, et al., Plaintiffs, v. ROLLIN DAIRY CORP., Defendant.
REPORT & RECOMMENDATION
JENNIFER E. WILLIS United States Magistrate Judge
TO THE HONORABLE DENISE L. COTE, U.S.D.J.:
This case was originally referred for a Report and Recommendation by District Judge Vernon S. Broderick. On August 17, 2022, the case was reassigned to District Judge Denise L. Cote, to whom this Report and Recommendation is now addressed.
Before the Court is a reference for a recommendation as to whether notice was sufficient in this case, as well as for a determination of liability and a Damages Inquest as to defaulting defendant Rollin Dairy Corporation (“Defendant”). For the following reasons, I recommend that notice be deemed sufficient in this matter and that the Plaintiffs, Demos P. Demopoulos, Michael Spinelli, Lawrence Cuomo, and Robert Patrizio as the Trustees and Fiduciaries of the Local 584 Pension Trust Fund (together, “Plaintiffs”), be awarded damages from Defendant under the Employee Retirement Income Act of 1974 (“ERISA”) in the amounts set below for Defendant's withdrawal liability, interest on the withdrawal liability, statutory damages, and attorney's fees and costs.
BACKGROUND
A. Factual Background
In light of Defendant's default, the well-pleaded allegations in Plaintiffs' Complaint, dated September 22, 2021 (Dkt. No. 1) are deemed to be true, except for those allegations relating to damages. See Villanueva v. 179 Third Ave. Rest Inc., 500 F.Supp.3d 219, 225 (S.D.N.Y. 2020), report and recommendation adopted sub nom. Villanueva v. 179 Third Ave. Rest. Inc., No. 16-cv-8782 (AJN) (RWL), 2021 WL 2139441 (S.D.N.Y. May 26, 2021) (citing Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009)). With respect to Plaintiffs' claims for damages, Plaintiffs have submitted their Proposed Findings of Fact and Conclusions of Law, dated June 9, 2022 (Dk. No. 54), with supporting declarations and exhibits.
This standard applies to the instant case without regard to the minor typographical error in Plaintiffs' Complaint, discussed below.
Plaintiffs are Trustees and Fiduciaries of the Local 584 Pension Trust Fund (the “Fund”), an employee benefit fund located at 265 West 14th Street, No. 802, New York, New York, 10011. See Compl. ¶¶ 5, 8, 10. Defendant is Rollin Dairy Corp, a New York Corporation that maintains its principal place of business at 1320 Motor Parkway, Islandia, New York, 11749. See Proposed Findings ¶ 10. The Fund was created pursuant to multiple collective bargaining agreements between Local 553, I.B.T. (and its predecessor, Local 584, I.B.T.) and various employers. See Id. ¶ 4. It is operated by the terms of the Trust Agreement. See Id. ¶ 6.
Pursuant to the Local 584 Pension and Welfare Trust Funds Agreements and Declaration of Trust (“The Trust”) entered into by both parties and governed by the Employee Retirement Income Security Act, as amended 29 U.S.C. § 1001, et seq., Defendant was obligated to contribute to the Fund on behalf of employees covered by the agreements. See Proposed Findings p. 3 ¶ 12. The Fund is both an “employee benefit plan” per 29 U.S.C. § 1002(3) and a “multiemployer plan” per 29 U.S.C. 1002(37). See Id. p. 5 ¶ 3.
Plaintiffs claim that, by ceasing operations covered by a series of collective bargaining agreements to which Defendant was a party, Defendant effected a withdrawal from the fund during the fiscal year ending on March 31, 2021. See Proposed Findings p. 6 ¶ 13. After Plaintiffs' actuary calculated the present value of Defendant's withdrawal liability, Plaintiffs sent a demand letter to the Defendant, noting this amount and demanding that Defendant pay it over eighty quarterly payments of $43,410.20 per quarter. See Id. ¶ 18. Both the demand letter and the complaint incorrectly note that Defendant effected a complete withdrawal during the year ended March 31, 2020 rather than on March 31, 2021. See Compl. ¶ 15, For reasons discussed fully below, the court views this as a typographical error that does not bar recovery. See Demand Letter dated Feb. 16, 2021, Nicosia Decl. Ex. E (Dkt. No. 56).
Plaintiffs claim that Defendant neither contested that they had withdrawn, nor made any of the demanded quarterly payments, nor made any effort to cure their default within sixty (60) days of Plaintiffs' notice. See Proposed Findings pp. 3-4 ¶¶ 17-21. As a result of Defendant's default, Plaintiffs demanded an immediate payment of Defendant's withdrawal liability per 29 U.S.C. 1399(c)(5). See Proposed Findings p. 6 ¶ 14. Per the Trust Agreement, Defendants are liable for interest on delinquent contributions, including accelerated, immediate payments, at a rate of one-and-one-half percent equal to eighteen percent per annum. See Proposed Findings p. 4 ¶ 23.
B. Procedural History
Plaintiffs commenced this action by filing a Complaint on September 22, 2021 (Dkt. No. 1). On December 9, 2021, the Honorable Vernon S. Broderick, U.S.D.J. ordered Defendants to show cause why the Court should not enter a default judgment against them pursuant to Federal Rule of Civil Procedure 55(b) (Dkt. No. 20). Defendant failed to do so. On March 25, 2022, this matter was referred to this Court to address two issues. First, there is a question as to whether Plaintiffs' notice provided to the Defendant was deficient such that it precludes them from a receiving default judgment in their favor. See March 25th Order at 2-3. Second, assuming Defendants can be held liable, this Court must perform an inquest on damages. See id. Regarding Defendant's liability, Judge Broderick noted that Plaintiffs' requested withdrawal liability figure was not supported by their filings to that point. See id.
On June 9, 2022 Plaintiffs filed the Proposed Finding of Fact and Conclusions of Law (Dkt. No. 54), the Inquest Memorandum (Dkt. No. 55), the Affidavit of Sandy Nicosia (Dkt. No 56), the Affidavit of Michael Carroll (Dkt. No. 57), and the Declaration of Daniel Treiman (Dkt. No. 58).
DISCUSSION
C. Adequacy of Notice
Under ERISA, fulfilling the statutory notice requirements is a pre-requisite to recovering employer withdrawal liability. See Amalgamated Lithographers of Am. v. UNZ & Co. Inc., 670 F.Supp.2d 214, 223 (S.D.N.Y. 2009). The statute requires only that this notice (1) notifies the withdrawing employer of the amount of liability and schedule for liability payments and (2) demands payment in accordance with the schedule. See 29 U.S.C. § 1399(b) . The “notice provisions are liberally construed to protect pension plan participants.” Board of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 175 (3d Cir. 2002). On February 16, 2021, Sandy Nicosia, acting as Fund Administrator of the Plan, sent a letter to Defendant's address that contained both of these elements. See Demand Letter dated Feb. 16, 2021, Nicosia Decl. Ex. E (Dkt. No. 56).
The Demand Letter contains a typographical error. In the letter, Plaintiffs represent to Defendants that Defendants withdrew for the year ended March 31, 2020. See Id. This error was replicated in both Plaintiffs' Complaint and a Declaration in Support of Motion for a Default Judgment. See Compl. ¶ 14; Decl. of Daniel Treiman in Support of Order to Show Cause for Default Judgment ¶ 12, dated Dec. 8, 2021 (Dkt. No. 17). The defect in the Complaint appears to have not been raised thus far in the litigation.
Plaintiffs' subsequent representations make sufficiently clear that the withdrawal occurred during the year ended March 31, 2021. First, Plaintiffs themselves have corrected this representation to the court in their June 2022 filings, noting that the withdrawal occurred in the year ended 2021. See Carroll Decl. ¶ 12; Nicosia Decl. ¶ 13; Plaintiffs' Proposed Findings at 13; Inquest Memorandum at 3. Further, the Plaintiffs have shown a chronology that supports the true withdrawal date as March 2021. On February 15, 2021, Plaintiffs' actuarial firm sent them a letter which contained the figure of Defendant's total withdrawal liability. See Nicosia Decl. Ex. D. This letter informs Plaintiffs that withdrawal occurred in the year ended March 2021. See Id. The firm's actuarial report confirms that the figure provided to Plaintiffs on February 15 was calculated for the fiscal year ending in March 2021. See Nicosia Decl. Ex. G. Relying on this letter, on February 16, 2021, Plaintiffs sent the Demand Letter to Defendant which transferred the liability figure calculated by the actuaries, but misstated the withdrawal date. See Nicosia Decl. Ex. E. Considering all of the above, I am satisfied that the true withdrawal date is for the year ended March 31, 2021, and that the withdrawal date stated in the Complaint and Demand Letter were typographical errors.
The mistaken representations of dates are insufficient to defeat Plaintiffs' ability to recover. ERISA does not require that the withdrawing employer be made aware of the period in which they have withdrawn. See 29 U.S.C. § 1399(b); cf. Lane v. Compass Group USA, Inc., No. 02-cv-579, 2007 WL 9754735, at *4 (D. Conn. Oct. 23, 2007) (finding that a typographical error did not make a notice pursuant to COBRA, a subchapter of ERISA, ineffective, and further supporting this finding by noting that the governing statute did not require the notice to indicate the date of the qualifying event). This statutory scheme is logical; the employer should be aware of their own actions or inactions, but may not necessarily have an immediate actuarial capacity to assess their liability.
In any event, ERISA establishes a “pay now, fight later” regime in which a withdrawn employer must make installment payments as demanded while they contest the demand in arbitration. See Amalgamated Lithographers, 670 F.Supp.2d at 221-222 (S.D.N.Y. 2009). The employer has a statutorily defined period after the demand is made in which they are able to arbitrate the demand. See 29 U.S.C. § 1401(a)(1) . Upon Defendant's receipt of the Demand Letter, they neither paid the money demanded nor did they initiate arbitration within the statutorily permitted time. Indeed, they have not even appeared in this action. To prevent Plaintiffs from recovering on the basis of a relatively minor typographical error, which has since been addressed and rectified in Plaintiffs' June 2022 filings, would be contrary to the non-disruptive “pay now, fight later” scheme. See Amalgamated Lithographers, 670 F.Supp. at 224-25 (“[The statute] requires only that the plan sponsor ‘notify' the employer of [the amount of liability, the schedule for payment, and a demand]... All that is required is that the plan gives the employer the necessary information.”); see also Bowers v. Transportacion Maritima Mexicana, S.A., 901 F.2d 258, 265 (2d Cir. 1990) (“The [ERISA] statutory scheme has been characterized as a ‘pay-first-question-later system'. Congress intended that disputes over withdrawal liability would be resolved quickly, and established a procedural bar for employers who fail to arbitrate disputes over withdrawal liability in a timely manner.” (internal citation omitted)); Kane v. Nat'l Farm Wholesale Fruit & Vegetable Corp., No. 17-cv-9487 (VSB), 2022 WL 137875, at *2 (S.D.N.Y. Jan. 14, 2022) (“Employers are subject to a pay-first-question-later system.” (quotations omitted)).
D. Applicable Legal Standards for an Inquest on Damages
A “default is an admission of all well-pleaded allegations against the defaulting party.” Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004). “There is no question that a default judgment establishes liability.” Bambu Sales, Inc. v. Ozark Trading, Inc., 58 F.3d 849, 854 (2d Cir. 1995). A default judgment does not, however, address the question of damages. Instead, the court must determine the amount of statutory or actual damages to be assessed. See Ayala v. P&N Cuisine Inc., No. 20-cv-3619 (RA) (JW), 2022 WL 3327544, at *2 (S.D.N.Y. 2022) (quoting Santillan v. Henao, 822 F.Supp.2d 284, 290 (E.D.N.Y. 2011)). The court must also confirm that there is a reasonable basis for the damages. See id.
In order to support a claim for damages, “[a] plaintiff must therefore substantiate a claim with evidence to prove the extent of damages.” Almanzar v. 1342 St. Nicholas Avenue Restaurant Corp., No. 14-cv-07850 (VEC) (DF), 2016 WL 8650464, at *4 (S.D.N.Y.) (Dkt. No. 76) (citing Trehan v. Von Tarkanyi, 63 B.R. 1001, 1008 n.12 (S.D.N.Y. 1986)). The plaintiff “must introduce sufficient evidence to establish the amount of damages with reasonable certainty.” U.S. ex rel. Nat. Dev. & Const. Corp. v. U.S. Envtl. Universal Servs. Inc., No. 11-cv-00730 (CS) (PED), 2014 WL 4652712, at *3 (S.D.N.Y. Sept. 2, 2014). “The plaintiff is entitled to all reasonable inferences from the evidence it presents.” Id.
Where there is no submission from a defaulting defendant, the Court must assess whether the plaintiff has provided a sufficient basis for determining damages. See Transatl. Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (noting “the court's obligation to ensure that the damages were appropriate”). The plaintiffs' submitted proofs may serve as the sole basis for the Court's evaluation of plaintiffs' damages claim. See, e.g., Garden City Boxing Club, Inc. v. Hernandez, No. 04-cv-02081 (LAP) (DF), 2008 WL 4974583, at *2 (S.D.N.Y. Nov. 24, 2008) (Dkt. No. 15) (“[A] hearing is not required where the plaintiff provides the court with evidence sufficient to permit a damages calculation.”). While a hearing may be held on the issue of damages, the Federal Rules of Civil Procedure “leave[] the decision of whether a hearing is necessary to the discretion of the district court.” Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989); accord Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991); Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir. 1993).
The applicable statute of limitations for claims of employer withdrawal liability default is three years after the earliest date on which the plaintiff acquired actual knowledge of the default, or six years after the default occurred See 29 U.S.C. § 1451 .
E. Determination of Damages
1. Withdrawal Liability
Under ERISA, an employer that completely withdraws from a multiemployer pension plan incurs withdrawal liability to the plan. See 29 U.S.C. 1381(a) . An employer has completely withdrawn when it permanently ceases to have an obligation to contribute under the plan. See 29 U.S.C. 1383(a) . After the notice requirements have been met, an employer is in default if it fails to make any payment as scheduled, and if this failure is not cured within 60 days. See 29 U.S.C. 1399(c)(5) . A plan sponsor may demand of a defaulting employer an immediate payment of the outstanding amount of their withdrawal liability. See Id. Additionally, they may demand the accrued interest on the total outstanding liability from the due date of the first missed payment. See id.
Plaintiffs calculate Defendant's withdrawal liability at $2,631,595,00. See Inquest Memorandum at 3. This represents the present value of the 80 quarterly payments of $43,410.20 demanded by plaintiffs on February 26, 2021. See id. at 2. An employer's withdrawal liability is its pro rata share of the pension plan's unfunded vested benefits. See 29 U.S.C. 1381(b)(1) . This amount is calculated as the plan's present value of non-forfeitable benefits less the current value of the plan's assets. See Nat'l Ret. Fund v. Metz Culinary Mgmt., Inc., 946 F.3d 146, 147 (2d Cir. 2020) (quoting Pension Benefit Guard Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984)).
In accordance with Judge Broderick's Order dated February 16, 2022, Dkt. No. 30, Plaintiffs have provided support as to how they calculated defendant's withdrawal liability. Namely, Plaintiffs' February 15, 2021 memo provides the interest rate (which the parties agreed upon in the Trust Agreement) used to calculate the present value of Defendant's withdrawal liability. See Carroll Decl. Ex. 2. Further, Plaintiffs' actuary report shows in detail how the demanded monthly payments were calculated. See Carroll Aff. Ex. 1. As shown by Plaintiffs, their actuary calculated the figure based on a withdrawal in the correct year ended March 2021, not the mistaken 2020 year. See id.
2. Statutory Damages
Plaintiffs are entitled to all required statutory damages pursuant to 29 U.S.C. 1132(g)(2), which provides that, in addition to the employer's unpaid withdrawal liability, a plaintiff shall be awarded the interest on the unpaid contributions (here, using the rate provided under the plan) and an amount equal to the greater of the interest on the unpaid contributions or the liquidated damages provided in the plan not in excess of twenty (20) percent of the amount of unpaid contributions.
The parties agreed in 2015 to an interest rate of 1.5 percent per month in the event of employer withdrawal default. See Agreement and Declaration of Trust, Nicosia Decl. Ex. A at p. 25 (Dkt. No. 56). Where Defendant's withdrawal liability is $2,631,595.00, total interest calculated from April 1 2021, the date of the first missed withdrawal liability payment, to May 31, 2022 is $552,634.95. Per diem interest, calculated at eighteen percent (18%) per annum, is $1,297.77 per day.
29 U.S.C. 1132(g)(2) entitles the plaintiff in an action for withdrawal liability default the greater of the additional interest on the unpaid withdrawal liability or agreed upon liquidated damages not in excess of twenty percent (20%) of the unpaid withdrawal liability. The Parties reproduced this stipulation in an Amendment to the Fund Agreement. See Nicosia Decl. Ex. A. Twenty percent of the unpaid withdrawal liability is $526,319.00, which is less than the interest on Defendant's unpaid withdrawal liability. Therefore, 1132(g)(2) entitles Plaintiffs to an additional award of interest on the unpaid withdrawal liability in the amount of $526,319.00 plus $1,297.77 per day until judgment is entered.
3. Attorney's Fees and Costs
Where, as here, an employer fails to make any withdrawal liability payment, the court shall award plaintiffs reasonable attorney's fees and costs of the action. See 29 U.S.C. § 1132(g)(2), 1145. Courts in this Circuit use a “presumptively reasonable fee” standard to determine the reasonableness of attorney's fees sought in an action. Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cnty. of Albany, 522 F.3d 182, 190 (2d Cir. 2008). This ‘lodestar' is “the product of a reasonable hourly rate and the reasonable number of hours required by the case.” Millea v. Metro-North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011). A reasonable hourly rate is “the rate prevailing in the [relevant] community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Farbotko v. Clinton Cty. of N.Y., 433 F.3d 204, 208 (2d Cir. 2005).
Two timekeepers were identified in this matter: Daniel Treiman and Anshua Rasalingam. See Proposed Findings ¶¶ 26-27. As an associate and partner, respectively, of Friedman & Anspach, Mr. Treiman's and Ms. Rasalingam's hourly rates are both listed at $505.00 See Id. Plaintiffs assert that this rate is reasonable as it represents a blended rate that encompasses work performed by both partners and associates of the firm. See Treiman Decl. at 2. Mr, Treiman has been practicing employee benefits law since 2019, and Ms. Rasalingam since 2003. See id. at 3. Ms. Rasalingham billed 0.25 hours on this matter, while Mr, Treiman billed 39 hours. See id. at 2.
A blended rate “is the firm's total time charges, derived by applying each individual time keeper's hourly rate to his or her hours, divided by the firm's total hours”. In re Auction Houses Antitrust Litig., No. 00-cv-0648, 2001 WL 210697, at *1 n.2 (S.D.N.Y. Feb. 26, 2001). It is true that this Court has previously sanctioned the use of blended rates when awarding attorney's fees. See In re Citigroup Inc. Sec. Litig., 965 F.Supp.2d 369, 396 (S.D.N.Y. 2013). However, blended rates are not free of scrutiny. “[A] blended rate might cause concern if the majority of the work had been performed by associates or junior partners (i.e., attorneys who would customarily bill at a rate lower than the blended rate).” Pig Newton, Inc. v. The Boards of Directors of The Motion Picture Industry Pension Plan, No. 13-cv-7312 (KPF), 2016 WL 796840 at *5 (S.D.N.Y. Feb. 24, 2016). This exact concern is reflected in this case, where the partner billed only 0.25 hours, and all the rest of the work was performed by the associate. See Treiman Decl. at 2. Furthermore, the Court is not aware of what this firm's standard rates are for partners and associates, and thus it is not clear what has been blended to reach an hourly rate of $505.00. See id.
However, as noted in the Declaration the fees were “agreed upon by the firm and the client.” Trieman Decl. at 2. As such, while the Court is inclined to reduce the hourly rate in some part to reflect that the majority of the work was carried out by an associate, the reduction will be more minimal than might be done otherwise. The Court finds that a blended hourly rate of $450.00 is appropriate.
A total of 39.25 hours of legal work was billed to this matter. See Inquest Memorandum at 9. Thus, the amount awarded in fees is $17,662.50. As well, Plaintiffs' counsel incurred a total of $1,358.60 in fees for filing, service of process, and research. See Treiman Decl. Ex. BB. The Court finds that $1,358.60 is a reasonable amount of costs incurred in connection with this action.
Altogether, the Court finds that the reasonable amount of attorney's fees and costs is $18,981.10.
RECOMMENDATION
For the reasons stated above, the notice provided to Plaintiffs is found to be sufficient. As a result, this Court recommends that Plaintiffs be granted default judgment and awarded damages as follows: (1) unpaid withdrawal liability in the amount of $2,631,595.00; (2) interest on the unpaid withdrawal liability in the amount of $552,634.95 as calculated through May 31, 2022; (3) per diem interest of $1,297.77 from June 1, 2022 until the date judgment is issued; (4) additional statutory damages in the amount of $526,319.00; and (5) attorney's fees and costs in the amount of $18,981.10. In total, Plaintiffs are awarded $3,729,530.05 plus additional interest accrued since June 1, 2022.
As Plaintiffs have provided the interest calculation through May 31, 2022, any further interest calculation should begin after that date.
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 shall have fourteen days from service of this 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 and on ECF. Any requests for an extension of time for filing objections must be directed to Judge Cote. Failure to file objections within fourteen days will result in a waiver of objections and will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Cephas v. Nash, 328 F.3d 98, 107 (2d Cir. 2003).