Opinion
20-CV-6894 (LJL) (KHP)
05-13-2021
TRUSTEES OF THE NEW YORK CITY DISTRICT COUNCIL OF CARPENTERS PENSION FUND, WELFARE FUND, ANNUITY FUND, APPRENTICESHIP, JOURNEYMAN RETRAINING, EDUCATIONAL AND INDUSTRY FUND, et al., Plaintiffs, v. INNISS CONSTRUCTION, INC., et al, Defendants.
THE HON. LEWIS J. LIMAN, UNITED STATES DISTRICT JUDGE
REPORT AND RECOMMENDATION
KATHARINE H. PARKER United States Magistrate Judge
This is an action brought pursuant to Sections 502(a)(3) and 515 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. §§ 1132(a)(3) and 1145, Section 301 of the Labor Management Relations Act of 1947 (“LMRA”), 29 U.S.C. § 185(a), and section 220-g of the New York Labor Law (“NYLL”). Plaintiff Trustees, The Carpenter Contractor Alliance of Metropolitan New York, Trustees Of The New York City Carpenters Relief and Charity Fund, Trustees of the New York City District Council of Carpenters Pension Fund, Welfare Fund, Annuity Fund, Apprenticeship, Journeyman Retraining, Educational and Industry Fund (hereafter, the “Funds”), commenced this action to recover delinquent employer contributions to a group of employee benefit plans and to recover delinquent contributions pursuant to a payment bond from the Defendant, Inniss Construction, Inc., (hereafter “Inniss”). Complaint ¶ 1. (ECF No. 1.)
BACKGROUND
Plaintiff trustees are employer and employee trustees of a “multiemployer fund” and “charity fund” within the meaning of Sections 3(21) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. §§ 1002(21) and section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3). (Compl. ¶¶ 4-5.) Defendant Inniss Construction, Inc. (“Inniss”) is a New York corporation. (Compl. ¶ 7.) Defendant Hudson Insurance Company (“Hudson”) is also a New York corporation.
Inniss entered into a collective bargaining agreement (“CBA”) with the New York City District Council of Carpenters f/k/a District Council of New York City and Vicinity of the United Brotherhood of Carpenters and Joiners of America (the “Union”) and agreed to remit contributions to the Funds for all work performed within the trade and geographic jurisdiction of the Union (“Covered Work”).
Pursuant to the CBA, Inniss was required to make specified hourly contributions to the Funds in connection with all work performed in the trade and geographical jurisdiction of the Union. (Compl. ¶ 11.) In addition, pursuant to the CBA, Inniss was also required to furnish all pertinent books and payroll records when requested by the Funds for the purpose of conducting an audit to ensure compliance with required benefit fund contributions. (Compl. ¶ 12.) The Funds conducted an audit of Inniss covering the period June 25, 2018 through December 22, 2019 (the “Audit”). Pursuant to the audit, Inniss failed to remit all required contributions to the Funds in connection with the work it performed on a Department of Sanitation project known as Whitehead Hall Window Replacement and Associated Asbestos Abatement at Brooklyn College (the “Project”), for the period of at least June 25, 2018 through at least September 1, 2019 (the “Relevant Audit Period”). The Audit found a principal deficiency of $17,334.19 for work performed by Inniss on the Project during the Relevant Audit Period. The Funds and Hudson entered into a settlement, whereby Hudson paid the principal deficiency amount. As articulated further below, the Funds are filing this motion for default judgment against Defendant Inniss only for the remaining amount of $8,007.37 as determined by the Audit, excluding attorneys' fees and other additional costs.
On August 26, 2020, Plaintiff commenced this action against Defendant by filing a Complaint, which was served on Defendant on September 4, 2020. (ECF No. 7.) Defendant failed to file an answer or otherwise move with respect to the Complaint, and the Clerk of the Court entered a default with respect to this action on October 29, 2020. (ECF No. 13.) The Honorable Lewis J. Liman then referred the matter to the undersigned for inquest after default for a damages hearing. (ECF No. 31.) On January 20, 2021, Plaintiff submitted a request to enter default and a statement of damages with supporting declaration (ECF No. 32.), which were served on Defendant on January 29, 2021. (ECF No. 34.) On May 11, 2021, this Court held a telephonic conference and despite being afford notice of the hearing, Defendant did not appear or file any submissions. The following recommendations are based on the evidence presented at the hearing and the information submitted by Plaintiff.
DISCUSSION
A. Default Judgment
Federal Rule of Civil Procedure (“Rule”) 55 governs judgments against a party that has failed to plead or otherwise defend itself in an action. Gesualdi v. Reid, 198 F.Supp.3d 211, 217 (E.D.N.Y. 2016). Rule 55 requires the Clerk of the Court, upon notification from the moving party, to note the default of the party failing to defend. Priestley v. Headminder, Inc., 647 F.3d 497, 505 (2d Cir. 2011) (citing Fed.R.Civ.P. 55(a)). Once the Clerk issues a certificate of default, the moving party may apply for entry of default judgment, pursuant to Rule 55(b). Id. A default constitutes an admission of all well-pleaded factual allegations in the complaint, and the allegations as they pertain to liability are deemed true. Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). However, Plaintiff is not entitled to default as a matter of right. Trustees of Empire State Carpenters Annuity, Apprenticeship, Labor Mgmt. Coop., Pension & Welfare Funds v. Flooring Experts, Inc., No. 12-cv-6317 (ADS) (AKT), 2013 WL 4042357, at *2 (E.D.N.Y. Aug. 8, 2013), adopted by, 2013 WL 4761151 (E.D.N.Y. Sept. 3, 2013). Plaintiff bears the burden to demonstrate that its uncontroverted allegations, without more, establish the defendant's liability on each asserted cause of action. Id.
In determining whether to grant a motion for default judgment, courts within this district first consider three factors: “(1) whether the defendant's default was willful; (2) whether defendant has a meritorious defense to plaintiff's claims; and (3) the level of prejudice the non-defaulting party would suffer as a result of the denial of the motion for default judgment.” Indymac Bank, F.S.B. v. National Settlement Agency, Inc., No. 07-cv-6865 (LTS) (GWG), 2007 WL 4468652, at *1 (S.D.N.Y. Dec. 20, 2007) (internal citation omitted); see also Guggenheim Capital, LLC v. Birnbaum, 722 F.3d 444, 455 (2d Cir. 2013) (applying these factors in review of lower court's grant of a default judgment).
Here, Plaintiff has satisfied the procedural requirements of Rule 55 by submitting a request for both entry of default and default judgment. (See ECF. Nos. 13, 23-26.) Further, all three of the foregoing factors weigh in Plaintiff's favor. First, the Defendant's failure to make an appearance and to respond to either Plaintiff's Complaint or Motion for Default Judgment are indicative of willful conduct. See Indymac Bank, F.S.B., 2007 WL 4468652, at *1 (holding that non-appearance and failure to respond to a complaint or motion for default judgment indicate willful conduct). Second, there is no information before the Court regarding any meritorious defenses to Plaintiff's claims because Defendant has failed to make any appearance and therefore has not provided any information to this Court. Third, Plaintiff will be prejudiced if it is denied the ability to seek judgment by default because the Plaintiff will have no alternative legal redress to recover the amounts due to the Funds. See Flooring Experts, Inc., 2013 WL 4042357, at *5 (stating that Defendant has no security such as an escrow deposit, bond or otherwise, posted with the joint board)).
Finally, the Complaint sets forth facts establishing a claim that the Defendant violated CBA and ERISA Sections 502(a)(3), 502(g)(2), and 515, 29 U.S.C. §§ 1132(a)(3), (g)(2) and 29 U.S.C. § 1145, as well as New York Labor Law § 220-g. Section 515 of ERISA requires employers to pay contributions in accordance with the terms and conditions of such plan or agreements. 29 U.S.C. § 1145. Section 502 of ERISA provides that upon a finding of an employer violation of Section 515 of ERISA, the Court shall award payment to a plaintiff of the unpaid fringe benefit contributions, plus statutory damages and interest on the unpaid principal amount, reasonable attorneys' fees, costs, and disbursements incurred in the action. 29 U.S.C. § 1132. Further, New York Labor Law § 220-g provides that an employee who furnished labor to either the contractor or subcontractor may bring an action to recover unpaid wages and supplements, including interest, against the contractor, subcontractor-employer or bonding company. Plaintiff has alleged that Defendant was obligated under the CBA to remit all required contributions to the Funds. When the Funds conducted an audit of the Defendant, the Defendant failed to remit all required contributions to the Funds in connection with Covered Work it performed on a Department of Sanitation project and to furnish all pertinent books and payrolls records when requested by the Funds. (Compl. ¶¶ 12, 14.) Thus, Plaintiff pleaded facts that Defendant has failed to comply with its contractual obligations and with the statutory requirements of ERISA, which are sufficient to state claims on which relief is warranted. Accordingly, this Court respectfully recommends that default judgment be granted against Defendant.
B. Statement of Damages and Audit Findings
a. Damages Legal Standard
Though a party's default is considered a concession of all well pleaded allegations of liability, it is not considered an admission of damages and there must be an evidentiary basis for the damages sought. International Association Of Heat And Frost Insulators And Allied Workers Local Union No. 12a & Trustees Of The Asbestos Workers Local 12a Health And Annuity Funds, v. Affiliated Environmental Services NJ, Inc., No. 15-cv-6909 (LTS), 2017 WL 5153565, at *5 (S.D.N.Y. Nov. 6, 2017) (internal quotations omitted). Courts can conduct an inquest hearing to determine the appropriate awarded damages. Here, this court held an inquest hearing on May 11, 2021 at 2:00 pm. and while the plaintiffs appeared, the defendants did not. Therefore, the Court has relied solely on the papers proffered by plaintiff.
In an ERISA action brought by a fiduciary for or on behalf of a benefit plan to enforce rights under Sections 515 of ERISA, the statute specifies the damages to be awarded when judgment is entered in favor of the plaintiff. See 29 U.S.C. § 1132(g)(2). These include:
(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),
(D) reasonable attorneys' fees and costs of the action, to be paid by the defendant, and
(E) such other legal or equitable relief as the court deems appropriate.29 U.S.C. § 1132(g)(2); see also Iron Workers Dist. Council of W. N.Y. & Vicinity Welfare & Pension Funds v. Hudson Steel Fabricators & Erectors, Inc., 68 F.3d 1502, 1505-08 (2d Cir.1995).
b. The Audit
Plaintiff seeks judgment against the Defendant for any monies found due after the audit, including interests, liquidated damages, attorneys' fees, and the cost of the audit. Mason Tenders Dist. Council Welfare Fund v. A.G.I., Inc., 2005 WL 1565831, at *5 (S.D.N.Y. June 8, 2005). The Trustees have a fiduciary obligation under ERISA to collect delinquent contributions owed to the Fund by employers. See Central States, Southeast and Southwest Areas Pension Fund v. Central Transp., Inc., 472 U.S. 559, 571-72 (1985) (“ERISA clearly assumes that trustees will act to ensure that a plan receives all funds to which it is entitled, so that those funds can be used on behalf of participants and beneficiaries, and that trustees will take steps to identify all participants and beneficiaries, so that the trustees can make them aware of their status rights under the trust's terms.”). The audit report is entitled to a presumption of correctness, which allows the Fund to determine the uncompensated work covered by the CBA to calculate the damages.
Courts award ERISA benefit plans contributions based on their audit unless the employer can raise a genuine issue of material fact as to the accuracy of the calculations made by the plan, and if there are inaccuracies in an audit due to the employer's records, the plan's audit is accepted. See Duffy v. E. Port Excavation & Utils. Contractors, Inc., 07-CV-217 (DRH) (ARL), 2013 WL 5309758, at *4 (E.D.N.Y. Sept. 19, 2013); Grabois v. Action Acoustics, Inc., 94-CIV-7386 (NRB), 1995 WL 662127, at *3 (S.D.N.Y. Nov. 9, 1995) (finding that if the employer fails to produce such evidence, the court may award damages to the trustee even where the damages are an approximate amount).
As further set out in the Declaration of George Pahhas (ECF No. 25. (“Pahhas Decl.”)), the Funds, pursuant to the CBA, conducted a payroll compliance Audit of Inniss' books and records on behalf of the Funds covering June 25, 2018 through December 22, 2019 to determine whether the Defendant complied with its collectively bargained obligations to make contributions and related payments to the Funds. The Funds policy provided that if the Defendant fails to make contributions when due, the Defendant is liable to the Funds for: (1) interest on the delinquent contributions calculated at the prime lending rate of Citibank plus 200 basis points; (2) a delinquency assessment equal to the greater of (a) interest on the delinquent contributions or (b) liquidated damages on the amount of unpaid contributions at a rate of 20%; plus (3) reasonable audit and accounting expenses, and attorneys' fees. (ECF No. 24. (“Davidian Decl.”))
In conducting the Audit, the auditors reviewed contribution reports, shop steward reports, individual earning records, tax returns, cash disbursement journals, bank statements and cancelled checks, internal payroll records, certified payroll records, and W-2 forms in connection with work performed by individuals who were paid by the Defendant from June 25, 2018 through December 22, 2019. The Audit found that the Defendant did not remit contributions to the Funds for 371.50 hours paid/worked by its employees on the Project. Ultimately, the Audit found that there was a principal deficiency attributable to the Project of $17,334.19. (ECF No. 25). As set forth in the Declaration of William Davidian, the Funds and Hudson recently reached a settlement whereby Hudson paid the principal deficiency, promotional fund contributions, and a portion of the interest contained in the Audit and attributable to the Project. (“Davidian Decl.” ¶ 20). This amount, however, did not resolve Inniss' liability for the balance of the Audit, consisting of (1) interest of $1,642.20; (2) audit costs of $2,898.33; and (3) liquidated damages of $3,466.84 for a total of $8,007.37. (ECF No. 25. (“Pahhas Decl.”)).
This Court finds that the Audit is based on substantial evidence and Defendant has failed to present any evidence contradicting its findings. Therefore, I recommend that $8,007.37 be granted in full.
c. Additional Damages
In an action brought to enforce ERISA Section 515, a court may grant “such . . . legal or equitable relief as the court deems appropriate.” 29 U.S.C. § 1132(g)(2)(E). Plaintiff is seeking costs and disbursements costs in connection with the filing of this action. When a plaintiff prevails in an action under ERISA for unpaid contributions, ERISA mandates an award of “reasonable attorneys' fees and costs of the action, to be paid by the defendant.” 29 U.S.C. § 1132(g)(2)(D).
Section 502(g)(2)(D) of ERISA, 29 U.S.C. §1132(g)(2)(D), requires an award of attorneys' fees and costs upon a determination that an employee benefit plan is entitled to judgment for unpaid contributions. See, e.g., LaBarbera v. Clestra Hauserman, Inc., 369 F.3d 224, 226 (2d Cir. 2004) (noting that award of attorneys' fees and costs is mandatory under 29 U.S.C. § 1132(g)(2)); Mason Tenders Dist. Council v. Envirowaste & Transcontractors, Inc., 98-CV-4040 (DC), 1999 WL 370667, at *2 (S.D.N.Y. June 7, 1999) (“Although the amount of any such award rests within the Court's discretion, the award itself is mandatory” in an action to collect delinquent contributions under ERISA Section 515). To calculate attorneys' fees, courts in the Second Circuit determine the reasonable hourly rate, defined as “the rate a paying client would be willing to pay, ” and multiply that rate by the number of hours reasonably expended in prosecuting an action. See Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 493 F.3d 110, 117-18 (2d Cir. 2007) amended by 522 F.3d 182 (2d Cir. 2008) (same).
The fees charged in this matter ($350 per hour for partner time, $275 per hour for associate time, and $120 per hour for legal assistants' time) are in line with or less than those charged by other firms performing similar work within the Southern District of New York, are the rates that the Trustees have agreed to pay their counsel, and are therefore reasonable. See, e.g., Trs. of the Mason Tenders Dist. Council Welfare Fund v. Stevenson Contracting Corp., 05-CV-5546, 2008 WL 3155122, at *11 (S.D.N.Y. June 19, 2008) (awarding rates of $350/hr for partners' time in an ERISA delinquent contribution case wherein default judgment was entered); NYC Dist. Council of Carpenters Pension Fund v. Quantum Constr., 06-CV-13150 (GEL)(JCF), 2008 WL 5159777, at *13 (S.D.N.Y. Dec. 9, 2008) (awarding $425 per hour for partner time and $300 per hour for associate time in an ERISA delinquent contribution case wherein de-fault judgment was entered).
To be awarded attorneys' fees and costs, plaintiffs must present contemporaneous time records that indicate “for each attorney, the date, the hours expended, and the nature of the work done.” N.Y. Ass'n for Retarded Children v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983). In this case, Plaintiffs proffered documents showing that they have incurred expenses totaling $12,955.00, including: $12,481.00 for attorneys' fees, $400.00 for a filing fee, $73.00 for a process service fee and $1.00 for postage. Specifically, the attorneys' fees relate to time spent prior to the lawsuit trying to obtain an audit and collect amounts due without the need for litigation; preparing and drafting the complaint and arranging for service of process; calculating the amounts owed; preparing and filing the motion for default judgment; and preparing for the default motion hearing. Attorneys and paralegals at the Firm maintain contemporaneous time records. The bills provide the date legal services were performed, and the contemporaneously-kept record of legal services performed (using the initials to identify the attorney or paralegal who performed the services), along with the amount of time spent (in hour increments) in performance of these services and a statement of the actual amount of fees and expenses billed to the Funds in the instant matter. (Blaise Decl. ¶¶ 17-21.) (ECF No. 26.)
For all these reasons, the fees charged in this matter are reasonable insofar as they reflect the expertise of the attorneys representing the Plaintiffs and necessary expenditure of time.
CONCLUSION
For the reasons set forth above, I recommend that default judgment be granted against Defendant and judgment be entered against Defendant and in favor of Plaintiff for the total amount of $20,962.37.
SO ORDERED
Respectfully submitted, NOTICE
The Defendant shall have seventeen days from the service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure (i.e., until February 5, 2017). See also Fed. R. Civ. P. 6(a), (d) (adding three additional days only when service is made under Fed.R.Civ.P. 5(b)(2)(C) (mail), (D) (leaving with the clerk), or (F) (other means consented to by the parties)). Plaintiff shall have fourteen days from the service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure (i.e., until February 2, 2017).
If the Defendant files written objections to this Report and Recommendation, the Plaintiff may respond to the Petitioner's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Alternatively, if Plaintiff files written objections, the Defendant may respond to such objections within seventeen days after being served with a copy. Fed.R.Civ.P. 72(b)(2); see also Fed. R. Civ. P. 6(a), (d). Such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Lewis J. Liman at the United States Courthouse, 500 Pearl Street, New York, New York 10007, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Koeltl. The failure to file these timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).