Opinion
CV 11-5937 (JS)(ARL)
05-28-2014
THOMAS GESUALDI, et al., Plaintiffs, v. SPECIALTY FLOORING SYSTEMS, INC., Defendant.
REPORT AND
RECOMMENDATION
LINDSAY, Magistrate Judge:
This matter has been referred to the undersigned by District Judge Seybert for the purpose of issuing a report and recommendation for a calculation of damages based on plaintiffs' supplemental documentation regarding: (1) delinquent contributions, interest, liquidated damages and audit fees for Audit #08-0425-RI, Audit # 09-403, and Audit #09-404; and (2) interest and liquidated damages for Audit # 07-0775. The plaintiffs have submitted a supplemental letter motion for damages and rely on the previously submitted (a) declarations of Joseph Puccio, Theresa Cody, Ken Jones, Angelos Poulos, and Noelia Hurtado, (b) a supplemental statement of amounts due, and (c) supplemental declarations of Noelia Hurtado and Joseph Puccio in support of their motion. The defendant has not submitted papers in opposition to the motion. Based on the evidence submitted, the undersigned respectfully reports and recommends that the plaintiffs be awarded damages in the amount of $26,488.05, comprising of $7,709.39 in unpaid contributions, $7,270.58 in interest on the unpaid contributions (plus accrued interest until the date of payment), $7,270.58 in liquidated damages (plus accrued liquidated damages until date of judgment), and $4,237.50 in audit fees.
BACKGROUND
Familiarity with the underlying Report and Recommendations dated October 9, 2012 and June 6, 2013 as well as the Memorandum and Orders dated January 7, 2013 and September 27, 2013 is presumed. The plaintiffs, the trustees and fiduciaries of the Local 282 Welfare, Pension, Annuity, Job Training Trust, Vacation and Sick Leave Trust Funds ("the Funds" or "plaintiffs") commenced this lawsuit by filing the summons and complaint on December 6, 2011. The defendant, Specialty Flooring Systems, Inc. ("defendant"), was served with a copy of the summons and complaint by personal service upon Michelle Velardi, the managing agent of the defendant, on December 8, 2011. The defendant failed to answer or otherwise respond to the complaint. On January 11, 2012, the Clerk of the Court certified the defendant's default based upon its failure to answer or otherwise appear in this action.
On April 4, 2012, the plaintiffs moved for a default judgment, and on January 7, 2013, the district court granted plaintiffs motion for a default judgment and gave plaintiffs leave to refile a motion for damages and attorneys' fees. The district court directed defendant to submit remittance reports from January 2011 through January 2012, and stated that should defendant fail to do so, plaintiffs were to calculate damages pursuant to the Trust Agreement and include such amounts in their renewed motion. Defendant failed to submit the remittance reports, and plaintiffs refiled a motion for damages. On September 27, 2013, the district court granted plaintiffs' motion for damages in the following respects: (1) delinquent contributions, liquidated damages, and audit fees as to Audit #08-0424 for a total of $1,378.73 as well as interest of $110.45 through March 12, 2008 plus accrued interest until payment; (2) delinquent contributions and audit fees as to Audit #07-0775 for a total of $2,540.38; (3) interest on late paid contributions for the months of July 2008, May 2009, and June 2009 for a total of $1,088.95; (4) an order directing Defendant to submit to an audit for the period of January 2011 through January 2012; and (5) attorneys' fees and costs in the total amount of $17,254.83. The district court deferred ruling on a calculation of damages regarding (1) delinquent contributions, interest, liquidated damages and audit fees as to Audit #08-0425-RI, Audit # 09-403, and Audit #09-404; and (2) interest and liquidated damages as to Audit # 09-404, and referred the matter to the undersigned.
DISCUSSION
A default constitutes an admission of all well-pleaded factual allegations in the complaint, except those relating to damages. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.1993). A default also "effectively constitutes an admission that the damages were proximately caused by the defaulting party's conduct: that is, the acts pleaded in a complaint violated the laws upon which a claim is based and caused injuries as alleged." Cablevision Sys. New York City Corp. v. Lokshin, 980 F. Supp. 107, 111 (E.D.N.Y. 1997). "If the defaulted complaint suffices to establish liability, the court must conduct an inquiry sufficient to establish damages to a reasonable certainty." Finkel v. GB Legend Elec. Contractors Corp., No. 10-CV-1559 (RRM)(JO), 2011 WL 1153678, at *3 (E.D.N.Y. Mar. 11, 2011) (internal quotation marks and citations omitted). The movant need only prove that the "compensation sought relate[s] to the damages that naturally flow from the injuries pleaded." Greyhound, 973 F.2d at 159. An evidentiary hearing is not required so long as there is a basis for the damages awarded. Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (citations omitted). Moreover, Fed. R. Civ. P. 54(c) "limits the damages recoverable by the plaintiff following a default judgment to the type and quantity of damages demanded in the complaint." Ames v. STAT Fire Suppression, Inc., 227 F.R.D. 361, 362 (E.D.N.Y. 2005); see Fed. R. Civ. P. 54(c) ("A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings"). Here, the documentary evidence submitted by the plaintiffs provide the basis for an award. Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991).
The complaint in this action seeks damages for breach of contract in violation of the Employees Retirement Income Security Act of 1974, 29 U.S.C. §1001, et seq. ("ERISA") and the Labor Management Relations Act of 1947, 29 U.S.C. § 141, et seq. ("LMRA"). The Funds are employee benefit plans and multi-employer employee benefit plans as defined by ERISA, 29 U.S.C. § 1002(3) and (37). Compl. at ¶ 4. The plaintiffs are trustees and fiduciaries of the Funds within the meaning of 29 U.S.C. § 1021(21). Id. at ¶ 3. The defendant was an employer within the meaning of 29 U.S.C. § 1002(5) and a party to a Collective Bargaining Agreement and Trust Agreement (the "Agreements"). Id. at ¶¶ 6-8. Pursuant to the Agreements, the defendant is required to make benefit contributions to the Funds for eligible employees. Id. at ¶ 9. The defendant is also required to submit remittance reports setting forth the employees who performed work covered by the Agreements and the number of hours each such employee worked in covered employment. Id. at ¶ 11. Pursuant to the Agreements, the defendant is also required to permit and cooperate in the conduct of audits of its books, payroll records and reports to ensure compliance with the terms of the Agreements and to ascertain the amount of benefit contributions to the Funds. Puccio Supplemental Decl., dated June 4, 2012, Ex. A.
The defendant did not sign the Collective Bargaining Agreement governing the period between July 1, 2008 and June 30, 2011, but is deemed to be a party by virtue of the fact that it made "contributions at the rates stated in the . . . agreement applicable to the industry." Puccio Supplemental Decl., dated June 4, 2012, Ex. A, Trust Agreement, Art. 1X, Sec. 1(a). It is worth noting that the remittance reports submitted by the defendant during that time period also contain the following statement above the signature line; "BY SIGNING THIS REPORT YOU AGREE TO ACCEPT THE TERMS OF THE CURRENT LOCAL 282 INDUSTRY COLLECTIVE BARGAINING AGREEMENT COVERING THE WORK PERFORMED BY YOUR EMPLOYEE."
According to the complaint, an audit of the defendant's books for the period September 26, 2005 through October 31, 2006, Audit # 07-0775, determined that the defendant had failed to make payments owed to the plaintiffs totaling $1,524.78. Compl. at ¶ 17. An audit of the defendant's books for the period November 1, 2006 through June 30, 2007, Audit # 08-0425-R1, determined that the defendant had failed to make payments owed to the plaintiffs totaling $1,447.24. Id. at ¶ 19. An audit of the defendant's books for the period July 1, 2007 through June 30, 2008, Audit # 09-0404, determined that the defendant had failed to make payments owed to the plaintiffs totaling $5,293.50. Id. at ¶ 23. Another audit of that same period, Audit # 09-403 reflected that the defendant owed $338.65 in contributions. Id. at ¶ 25. On November 8, 2011, the plaintiffs sent the defendant a letter requesting payment of the audited deficiency and unpaid interest, liquidated damages, attorneys' fees and costs on the late contributions. Id. at ¶¶ 18, 24, 26, 30.
Although it is not specified in the Complaint, separate audits were conducted for Tier 1 and Tier 2 employees.
On May 11, 2009, the plaintiffs had also requested payment of the audited deficiencies for the period from November 1, 2006 through June 30, 2007 and July 1, 2007 through June 30, 2008. Id. at ¶¶ 20, 24.
Plaintiffs seek (a) an award of $7,709.39 for the audited unpaid contributions for the time periods of November 1, 2006 through June 30, 2007 (Audit #08-0425-RI), and July 1, 2007 through June 30, 2008 (Audit # 09-0403 and Audit #09-0404); (b) an award of $7,270.58 in interest on the unpaid contributions, plus accrued interest until payment, for Audit #08-0425-RI, Audit # 09-0403, Audit #09-0404 and Audit #07-0775; (c) an award of $7,270.58 for liquidated damages, plus accrued liquidated damages through the date of judgment for Audit #08-0425-RI, Audit # 09-0403, Audit #09-0404 and Audit #07-0775; and (d) an award of $4,237.50 in audit fees for Audit #08-0425-RI, Audit # 09-0403 and Audit #09-0404. See Bardavid Letter, dated January 28, 2013, at 2. The court will examine each of the plaintiffs' requests by the type of award sought.
(A) Unpaid Contributions
ERISA section 502(g)(2)(A), 29 U.S.C. § 1132(g)(2)(A), provides for an award of unpaid contributions. The Agreement does likewise. See Hurtado Supplemental Decl., dated June 4, 2012, ¶ 8. Plaintiffs have provided the payroll audit reports to the court for the following time periods. See Hurtado Supplemental Decl., dated June 4, 2012, ¶¶ 18-19; Jones Decl., dated Mar. 29, 2011, Exs. A-C; Poulos Decl., dated Mar. 28, 2012, Exs. A-B; Cody Decl., dated Mar. 30, 2012, ¶ 26, Ex. A-D. Plaintiffs seek $7,709.39 in unpaid contributions for Audit #08-0425-RI, Audit # 09-0403 and Audit #09-0404.
(1) Time Period of November 1, 2006 through June 30, 2007 (Audit #08-0425-RI)
For the period November 1, 2006 through June 30, 2007, the payroll audit report for Audit # 08-0425-RI that is attached as Exhibit C to the Cody Declaration dated April 4, 2012, reflects that $1,447.24 is due and owing. See Cody Decl., dated Mar. 30, 2012, ¶ 26, Ex. C. Accordingly, the undersigned recommends that plaintiffs be awarded delinquent contributions in the amount of $1,447.24 for this time period for Audit #08-0425-RI.
(2) Time Period of July 1, 2007 through June 30, 2008 (Audit #09-403)
For the period July 1, 2007 through June 30, 2008, two audits were conducted. With respect to the first audit (for Tier 1 employees), for the period July 1, 2007 through June 30, 2008, the payroll audit report for Audit #09-403 reflects that $4,675.68 is due and owing. See Poulos Decl., dated Mar. 28, 2012, ¶¶ 13-20, Ex. A; see also Cody Decl., dated Mar. 30, 2012, ¶ 26, Ex. B. On July 23, 2009, the Funds Office reviewed the examination report for Audit #090403 and adjusted the examination report issued by the auditors after their issuance in order to apply a credit of $4,337.03. See Cody Decl., dated Mar. 30, 2012, ¶¶ 20-21, 24-25, Ex. B. Thus, the Fund Office deducted $4,337.03 from the audited deficiency of contributions due, resulting in an adjusted delinquency amount of $338.65. Id. at ¶¶ 24-25, Ex. B. Accordingly, the undersigned recommends that plaintiffs be awarded delinquent contributions in the amount of $338.65 for this time period for Audit #09-403.
Pursuant to the Trust Agreement, in addition to auditing pertinent books and records, the Trustees are authorized to use any independent evidence to calculate the amount of contributions due from any employer and calculations based on such independent evidence is held presumptively correct. See Cody Decl., dated Mar. 30, 2012, ¶ 20. Specifically, the Trust Agreement allows the Funds to adjust the amounts due for audited deficiencies based on records of an employer's account balance with the Funds. See id.; see Puccio Decl., Ex. A (Trust Agreement), Art. IX, Sec. 2, at 30.
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(3) Time Period of July 1, 2007 through June 30, 2008 (Audit #09-404)
With respect to the second audit (for Tier 2 employees), for the period July 1, 2007 through June 30, 2008, the payroll audit report for Audit #09-404 reflects that $23,700.18 is due and owing. See Poulos Decl., dated Mar. 28, 2012, ¶¶ 27-30, Ex. B; see also Cody Decl., dated Mar. 30, 2012, ¶ 22, Ex. B. On July 17, 2009, the Funds Office reviewed the examination report for Audit #09-0404 and adjusted the examination report issued by the auditors after their issuance in order to apply a credit of $18,406.68. See Cody Decl., dated Mar. 30, 2012, ¶¶ 20-23, Ex. A. Thus, the Fund Office deducted $18,406.68 from the audited deficiency of contributions due, resulting in an adjusted delinquency amount of $5,293.50. Id. at ¶¶ 22-23, Ex. A. Accordingly, the undersigned recommends that plaintiffs be awarded delinquent contributions in the amount of $5,293.50 for this time period for Audit #09-403.
(B) Interest
ERISA section 502(g)(2)(B), 29 U.S.C. § 1132(g)(2)(B) mandates an award of interest on unpaid contributions. In addition, pursuant to LMRA, the Funds are entitled to interest on contributions paid late, but made prior to the commencement of the action. See Finkel, 2011 WL 1153678, at *6. Here the plaintiffs have based their interest calculation on Article IX, Section 3 of the Agreement, as amended on October 28, 2003, which provides in pertinent part that the Employer "shall be obligated to pay interest "at the rate of 1½% per month of each monthly amount due for each month." Puccio Supplemental Decl., dated June 4, 2012, Ex. A and Amendment (unnumbered ninth page after page 51). The interest rate, calculated at the rate of 1½% per month, is 18% per year. Interest is calculated from "the first day of the month when the payment was due to the date when payment was made." Id., Ex. A at 30. Based on this provision, the plaintiffs seek $7,270.58, plus accrued interest until the date of payment, for interest on the unpaid contributions pursuant to Audit #08-0425-RI, Audit # 09-403, Audit #09-404 and Audit # 07-0775. See Bardavid Letter, dated January 28, 2013, at ¶ 2.
(1) Audit #08-0425-RI
With respect to Audit #08-0425-RI, the plaintiffs seek an amount of interest due on the delinquencies identified in this audit pursuant to Article IX, Section 3 of the Agreement, as amended on October 28, 2003. See Cody Decl., dated March 30, 2012, ¶¶ 26-27, 31, Ex. C. Based on this provision, the plaintiffs seek $96.27 in interest through March 12, 2008, plus accrued interest until the date of payment. Id. The attached Exhibit reflects this amount in interest. The Employer has not paid any amounts towards this audit, and interest continues to accrue from March 13, 2008 through March 31, 2012, in the additional amount of $1,055.57. Id. at ¶ 31. Thus, the total interest due equals $1,151.84. Id. Accordingly, the undersigned recommends that plaintiffs be awarded interest on the unpaid contributions pursuant to Audit #08-0425-RI in the amount of $1,151.84 in interest through March 12, 2012, plus accrued interest until the date of payment.
(2) Audit #09-0403
With respect to Audit #09-0403, as adjusted, the plaintiffs seek an amount of interest due on the delinquencies identified in this audit pursuant to Article IX, Section 3 of the Agreement, as amended on October 28, 2003. See Cody Decl., dated March 30, 2012, ¶¶ 24, 32, Ex. B. Based on this provision, the plaintiffs seek $118.28 in interest as calculated through July 17, 2009, plus accrued interest until the date of payment. Id. The attached Exhibit reflects this amount in interest. The Employer has not paid any amounts towards this audit, and interest continues to accrue from July 18, 2009 through March 31, 2012, in the additional amount of $164.83. Id. at ¶ 32. Thus, the total interest due equals $283.11. Id. Accordingly, the undersigned recommends that plaintiffs be awarded interest on the unpaid contributions pursuant to Audit #09-0403 in the amount of $283.11 in interest through March 12, 2012, plus accrued interest until the date of payment.
(3) Audit #09-0404
With respect to Audit #09-0404, as adjusted, the plaintiffs seek an amount of interest due on the delinquencies identified in this audit pursuant to Article IX, Section 3 of the Agreement, as amended on October 28, 2003. See Cody Decl., dated March 30, 2012, ¶¶ 22, 33, Ex. A. Based on this provision, the plaintiffs seek $1,599.96 in interest as calculated through July 17, 2009, plus accrued interest until the date of payment. Id. The attached Exhibit reflects this amount in interest. The Employer has not paid any amounts towards this audit, and interest continues to accrue from July 18, 2009 through March 31, 2012, in the additional amount of $2,576.56. Id. at ¶ 33. Thus, the total interest due equals $4,176.52. Id. Accordingly, the undersigned recommends that plaintiffs be awarded interest on the unpaid contributions pursuant to Audit #09-0404 in the amount of $4,176.52 in interest through March 12, 2012, plus accrued interest until the date of payment.
(4) Audit #07-0775
With respect to Audit #07-0775, the plaintiffs seek an amount of interest due on the delinquencies identified in this audit pursuant to Article IX, Section 3 of the Agreement, as amended on October 28, 2003. See Cody Decl., dated March 30, 2012, ¶ 29, Ex. D; Jones Decl., dated March 29, 2012, ¶¶ 22-24, Ex. A. Based on this provision, the plaintiffs seek $533.27 in interest through March 12, 2008, plus accrued interest until the date of payment. Id. The attached Exhibit reflects this amount in interest. The Employer has not paid any amounts towards this audit, and interest continues to accrue from March 13, 2008 through March 31, 2012, in the additional amount of $1,125.84. Id. at ¶ 31. Thus, the total interest due equals $1,659.11. Id. Accordingly, the undersigned recommends that plaintiffs be awarded interest on the unpaid contributions pursuant to Audit #07-0775 in the amount of $1,659.11 in interest through March 12, 2012, plus accrued interest until the date of payment.
(C) Liquidated Damages
ERISA section 502(g)(2)(C), 29 U.S.C. § 1132(g)(2)(C) provides for an award of statutory damages equal to the greater of interest on unpaid contributions or liquidated damages provided for in the plan not to exceed 20 percent of the unpaid contributions. The Agreement does likewise. See Hurtado Supplemental Decl., dated June 4, 2012, ¶ 36. Plaintiffs seek $7,270.58 in liquidated damages for Audit #08-0425-RI, Audit # 09-0403, Audit #09-0404 and Audit #07-0775.
With respect to Audit #08-0425-RI, interest for $1,447.24 in audited deficiency of contributions equals $1,151.84. Twenty percent of $1,447.24 equals $289.45 (rounded to the nearest cent). Accordingly, the undersigned recommends that plaintiffs be awarded $1,151.84 in liquidated damages, plus accrued liquidated damages until the date of judgment.
With respect to Audit #09-0403, interest for $338.65 in audited deficiency of contributions equals $283.11. Twenty percent of $338.65 equals $67.73. Accordingly, the undersigned recommends that plaintiffs be awarded $283.11 in liquidated damages, plus accrued liquidated damages until the date of judgment.
With respect to Audit #09-0404, interest for $5,293.50 in audited deficiency of contributions equals $4,176.52. Twenty percent of $5,293.50 equals $1,058.70. Accordingly, the undersigned recommends that plaintiffs be awarded $4,176.52 in liquidated damages, plus accrued liquidated damages until the date of judgment.
(D) Audit Fees
Section 1132(g)(2)(E) allows the court to award "such other legal or equitable relief as the court deems appropriate." 29 U.S.C. § 1132(g)(2)(E). Courts in this district have previously invoked the discretionary authority under § 1132 in order to award auditor's fees. See Trustees of Empire State Carpenters Welfare, Pension Annuity, Apprenticeship, Charitable Trust, Labor Management Co-op, and Scholarship Funds v. Protac Constr., Inc., No. CV 11-2288 (ADS)(GRB), 2013 WL 991616, at *7 (E.D.N.Y. Feb. 10, 2013); see also George v. ECDO, Inc., No. 10 Civ. 1762 (DAB) (JFC), 2012 WL 3822230, at *3 (S.D.N.Y. July 30, 2012) (collecting cases). In addition, the Trust Agreement required the defendant to remit audit fees incurred. See Puccio Supplemental Decl., dated June 4, 2012, Ex. A at 30-31; Hurtado Supplemental Decl., dated June 4, 2012, ¶ 43. Plaintiffs seek $4,237.50 in audit fees for Audit #08-0425-RI, Audit # 09-0403 and Audit #09-0404.
With respect to Audit #08-0425-RI the payroll audit reports for these audits reflect that Wagner & Zwerman LLP charged the Funds $817.50 in fees for Audit #08-0425-RI. See Jones Decl., dated March 29, 2012, ¶ 53; Cody Decl., dated March 30, 2012, Exs. C, D. Accordingly, the undersigned recommends that plaintiffs be awarded audit fees in the amount of $817.50.
With respect to Audit #09-0403 and Audit #09-404, the payroll audit reports for these audits reflect that Schultheis & Panettieri, LLP charged the Funds $1,740.00 in fees for Audit #09-0403 and $1,680.00 in fees for Audit #09-404. See Poulous Decl., dated March 28, 2012, ¶¶ 26, 40, Exs. A, B. Accordingly, the undersigned recommends that plaintiffs be awarded audit fees in the amount of $3,420.00.
OBJECTIONS
A copy of this Report and Recommendation is being electronically filed on the date below. Counsel for plaintiffs shall serve a copy of it on the defendant upon receipt and shall file proof of service with the court. Any objections to this Report and Recommendation must be filed with the Clerk of the Court with a courtesy copy to the undersigned within 14 days of service. Failure to file objections within this period waives the right to appeal the District Court's Order. See 28 U.S.C. §636 (b) (1); Fed. R. Civ. P. 72; Beverly v. Walker, 118 F.3d 900, 902 (2d Cir. 1997); Savoie v. Merchants Bank, 84 F.3d 52, 60 (2d Cir. 1996). Dated: Central Islip, New York
May 28, 2014
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ARLENE R. LINDSAY
United States Magistrate Judge