Opinion
Docket No. 14–295.
2015-01-12
BRICKLAYERS AND ALLIED CRAFTWORKERS LOCAL 2, ALBANY, NEW YORK PENSION FUND, by its Administrator, Stephen J. O'Sick; Bricklayers and Allied Craftworkers Local 2, Albany, New York Health Benefit Fund, by its Administrator, Stephen J. O'Sick; Bricklayers and Allied Craftworkers Local 2 Annuity Fund, by its Administrator, Stephen J. O'Sick; Bricklayers and Allied Craftworkers Local 2, Albany, New York Education & Training Fund, by its Trustees, Robert Mantello, Pasquale Tirino, Luke Renna, Michael Suprenant, J.D. Gilbert, Thomas Marinello, Todd Helfrich and Laura Regan; Bricklayers and Trowel Trades International Pension Fund, by David Stupar, Executive Director; Bricklayers and Allied Craftworkers Local 2, Albany, New York; Aflcio, by Robert Mantello, President, Plaintiffs–Appellees, v. MOULTON MASONRY & CONSTRUCTION, LLC and Duane E. Moulton, Individually and as an Officer of Moulton Masonry & Construction, LLC, Defendants–Appellants.
Jennifer A. Clark (Daniel Kornfeld, on the brief), Blitman & King LLP, Syracuse, NY, for Plaintiffs–Appellees. Brian M. Quinn, Tabner, Ryan and Keniry, LLP, Albany, NY, for Defendants–Appellants.
Decided: Feb. 26, 2015.
Affirmed in part, vacated in part, and remanded.
Jennifer A. Clark (Daniel Kornfeld, on the brief), Blitman & King LLP, Syracuse, NY, for Plaintiffs–Appellees. Brian M. Quinn, Tabner, Ryan and Keniry, LLP, Albany, NY, for Defendants–Appellants.
Defendants–Appellants Moulton Masonry & Construction, LLC (“the corporate defendant”), and Duane E. Moulton (“the individual defendant”), appeal from an amended judgment entered on January 16, 2014 by the United States District Court for the Northern District of New York (Hurd, J.). In that order, the district court denied defendants' cross-motion to vacate the default entered on April 24, 2013, and granted plaintiffs' motion for a default judgment against both defendants for $662,135.21. This amount—for which the defendants were held jointly and severally liable—accounts for $451,300.52 in withheld fringe benefit contributions and deductions, $104,628.81 in prejudgment interest through October 21, 2013, $99,203.93 in liquidated damages, and $7,001.95 in attorney's fees and costs. We AFFIRM the denial of the defendants' motion to vacate the entry of default. We further AFFIRM the entry of a default judgment for $662,135.21 against the corporate defendant. Because the district court erred in calculating the damages entered against the individual defendant, however, we VACATE the default judgment entered against the individual defendant and REMAND for further proceedings in accordance with this Opinion.
A court's decision to enter a default against defendants does not by definition entitle plaintiffs to an entry of a default judgment. Rather, the court may, on plaintiffs' motion, enter a default judgment if liability is established as a matter of law when the factual allegations of the complaint are taken as true. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir.2011). We review the district court's decision for abuse of discretion. Id. at 131. Under this rubric, the district court concluded that the defendants were liable as a matter of law. We agree.
Although plaintiffs contend that the defendants waived any argument that they were not liable as a matter of law by failing to present any such argument below, we need not decide that issue because defendants' arguments on the point are wholly without merit. Under Section 515 of ERISA, 29 U.S.C. § 1145, any “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.” If such an employer fails to make the required contributions, the court “shall award the plan”: “unpaid contributions,” “interest,” “liquidated damages provided for under the plan,” “attorney's fees and costs,” and “such other legal or equitable relief the court deems appropriate.” Id. at § 1132(g)(2).
The allegations in the complaint when accepted as true, as we are required to do in deciding whether a default judgment is appropriate, establish the following facts: (1) the corporate defendant was bound to a Collective Bargaining Agreement with the Union; (2) it was obligated to remit contributions and deductions to the Funds and Union for hours worked by bricklayers, masons and plasterers in the Union's jurisdiction; and (3) it was bound by the Funds' Agreements and Declarations of Trust and Collections Policy. In addition, documentary evidence submitted by the plaintiffs, which the defendants did not contest, establishes that the corporate defendant failed to remit at least some contributions. These facts are sufficient to render the corporate defendant liable under ERISA. See 29 U.S.C. § 1145; Finkel v. Romanowicz, 577 F.3d 79, 85 (2d Cir.2009).
The corporate defendant argues that it cannot be found liable as a matter of law under sections 1132 and 1145, because “[t]here was ... no evidence that [it] received any monies from any union labor.” Yet, a well-pleaded factual allegation in the complaint belies this claim. Plaintiffs alleged that the corporate defendant did, in fact, receive payment for union labor, and that allegation is accepted as true. See J.A. 16.
The district court never expressly articulated the legal theory under which it found Duane Moulton liable in his individual capacity. See generally Sasso v. Cervoni, 985 F.2d 49, 50 (2d Cir.1993) (holding that an individual cannot be held “liable for corporate ERISA obligations solely by virtue of his role as officer, shareholder, or manager”); Leddy v. Standard Drywall, Inc., 875 F.2d 383, 387 (2d Cir.1989). Here, because Moulton never entered into a collective bargaining agreement with the union, and because no other evidence suggested that the individual and corporate defendants are alter egos, Moulton could not have been found to be an “employer” under Section 515 of ERISA.
But Section 409 of ERISA, 29 U.S.C. § 1109, provides an independent basis for Moulton's liability in his individual capacity as a “fiduciary.” A fiduciary, under ERISA is “someone who ‘exercises any discretionary authority or discretionary control respecting management of [an ERISA benefit] plan or exercises any authority or control respecting management or disposition of its assets.’ ” Finkel, 577 F.3d at 85 (alteration and emphasis in the original) (quoting 29 U.S.C. § 1002(21)(A)(i)). A fiduciary that unlawfully withholds plan assets is “personally liable to make good to such plan any losses to the plan.” 29 U.S.C. § 1109(a). Though not all corporate officers are fiduciaries under ERISA's expansive definition of the term, the Finkel court indicated that where a complaint alleges that an individual is “responsibil[e] for determining which of the company's creditors would be paid or in what order' ... or otherwise enjoyed authority or control over [ ] management,” the individual is a fiduciary. Finkel, 577 F.3d at 86 (alteration in the original) (emphasis and internal citation omitted); see also LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir.1997) (noting that “Congress intended ERISA's definition of fiduciary ‘to be broadly construed,’ ” and concluding that an individual who signed checks and decided when creditors were paid was a fiduciary).
Here, the factual allegations in the complaint, combined with uncontroverted documentary evidence submitted by plaintiffs, establish that Moulton was a fiduciary under ERISA and breached his fiduciary duty. See Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir.1981) (explaining that plaintiff “is entitled to all reasonable inferences from the evidence offered” against the defaulting party). First, the complaint alleges that “Moulton ... determined which creditors the [corporate defendant] would pay” and “exercised control over money due and owing to the Plaintiff Funds.” J.A. 16. Second, the complaint and the evidence establish that Moulton failed to remit employer contributions under his control, see J.A. 17, 19, 404, 421–23, which contributions were designated as plan assets under the trust documents, see J.A. 190, 257, 313; see also In re Halpin, 566 F.3d 286, 290 (2d Cir.2009). These facts constitute a sufficient basis to affirm the district court's holding that the individual defendant was liable as an ERISA fiduciary.
“ ‘[W]hile a party's default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages.’ ” Cement & Concrete Workers Dist. Council Welfare Fund v. Metro Found. Contractors, Inc., 699 F.3d 230, 234 (2nd Cir.2012) (quoting Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.1992)). “Rule 55(b)(2) of the Federal Rules of Civil Procedure provides that on the matter of damages ‘the court may conduct such hearings or order such references as it deems necessary and proper....’ That rule allows but does not require the district judge to conduct a hearing.” Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir.1991) (emphasis omitted). The district court here did not hold a hearing on damages. Instead, it relied on plaintiffs' thorough submissions (including briefs, audits, and affidavits) and defendants' limited evidence in opposition to conclude that “plaintiffs have established their entitlement to a judgment in the total amount requested.” Special App. 5. We review this decision for abuse of discretion. Cement & Concrete Workers Dist. Council Welfare Fund, 699 F.3d at 233.
The defendants first challenge the damages entered against them for failing to account for “out of trade hours”—that is, hours worked for which contributions were not required. Though defendants assert that the contract envisions the possibility of “out of trade hours,” their analysis ends there. The defendants' submissions fail to identify even a single piece of documentary evidence that out of trade hours were worked and, if so, how many and by whom. Absent such documentary evidence (or even an allegation that such evidence exists), there is no justification for reversing the district court, nor is there any justification for requiring a hearing on this issue.
The individual defendant also contends that the district court erroneously awarded liquidated damages, excessive interest, and attorney's fees against him. On this point, we agree with the individual defendant. While it is clear that under 29 U.S.C. § 1132, the corporate defendant is liable for unpaid contributions, interest, liquidated damages provided under the plan, attorney's fees and costs, and any other legal or equitable relief the court deems appropriate, the same is not true for the individual defendant. As a fiduciary, the individual defendant can only be required under ERISA to “make good to [the] plan any losses to the plan resulting from [his] breach, and ... [provide] such other equitable or remedial relief as the court may deem appropriate.” 29 U.S.C. § 1109(a). The fiduciary's liability would certainly include the $451,300.52 in withheld fringe benefit contributions and deductions. Whether it would also include liquidated damages, prejudgment interest, and attorney's fees, however, is a different matter.
As we have previously explained, liquidated damages do not serve to make good to the plan any losses and do not “constitute ‘appropriate equitable relief’ as recognized by the common law of trusts.” Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 285 (2d Cir.1992), abrogated on other grounds by Gerosa v. Savasta & Co., Inc., 329 F.3d 317 (2d Cir.2003). Accordingly, the district court erred by awarding liquidated damages against the individual defendant.
Prejudgment interest, on the other hand, can constitute appropriate equitable or remedial relief under 29 U.S.C. § 1109(a). Yet, in order for the district court to grant such relief against a fiduciary in his individual capacity, it is required to articulate the reasons justifying such an award and the interest rate chosen. See Henry v. Champlain Enters., Inc., 445 F.3d 610, 622–23 (2d Cir.2006); Diduck, 974 F.2d at 286 (“One must look to the return on investments held by the plan to determine the appropriate interest rate to be applied under § 409.”). As then-Judge Sotomayor explained in Henry, “[t]he issue of ‘whether or not to award prejudgment interest [in ERISA cases] is ordinarily left to the discretion of the district court.’ The court must, however, explain and articulate its reasons for any decision regarding prejudgment interest.” 445 F.3d at 622–23 (internal citation omitted). Absent such findings, “ ‘meaningful review is forestalled.’ ” Id. at 623 (quoting Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 140 (2d Cir.2000)). Because the district court failed to engage in this analysis, we have no choice but to vacate and remand.
Similarly, while the district court may award attorney's fees, see 29 U.S.C. 1132(g)(1), absent any specific analysis from the district court explaining why attorney's fees are justified against the individual defendant in this case, a meaningful review is forestalled. See Henry, 445 F.3d at 622. On remand, therefore, the district court is also directed to analyze whether attorney's fees are justified in this case.
Accordingly, the district court's order denying defendants' motion to vacate the default entered against them is The district court's entry of a default judgment against the corporate defendant for $662,135.21 is also The default judgment against Moulton in his individual capacity is and the case is to the district court for further proceedings in accordance with this Opinion.