Opinion
No. 03 Civ. 1238 (RLC) (KNF).
April 29, 2005
REPORT AND RECOMMENDATION
TO THE HONORABLE ROBERT L. CARTER, UNITED STATES DISTRICT JUDGE
I. INTRODUCTION
In this action, the Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, and Training Fund (collectively, "Funds"), New York State Laborers-Employers Cooperation and Education Trust Fund ("LECET"), New York Laborers' Health and Safety Trust Fund ("NYLHST"), Building Contractors Association Industry Advancement Program ("IAP"), John J. Virga, in his fiduciary capacity as Director of the Funds, and Anthony Silveri ("Silveri"), in his capacity as Business Manager of the Mason Tenders District Council of Greater New York and Long Island ("Union"), allege that defendants A.G.I., Inc. ("AGI") and James Vitta ("Vitta") failed to permit and cooperate in the conduct of an audit of defendant AGI's books and records, and failed to make monetary contributions to the plaintiffs as required by a collective bargaining agreement ("Agreement") and the Employee Retirement Insurance Security Act ("ERISA"), 29 U.S.C. § 1001, et. seq.
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.
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 attorney fees. The defendants were directed to serve and file opposing memoranda, affidavits and exhibits, as well as any alternative findings of fact and conclusions of law they deemed appropriate. The defendants did not do so.
In support of their request for damages, the plaintiffs served and filed proposed findings of fact and conclusions of law; the affidavit of Dominick Giammona ("Giammona 'Affidavit"); the affidavit of Michael J. Vollbrecht, with exhibits attached thereto ("Vollbrecht Affidavit"); the affidavit of Tracy Martinell Henry, with an exhibit attached thereto ("Henry Affidavit"); the affidavit of Michelle Stein Berman, with an exhibit attached thereto ("Berman Affidavit"); and the affidavit of Marcos Chaljub with an exhibit attached thereto ("Chaljub Affidavit"). Giammona is the Deficiency Coordinator of the Funds. Vollbrecht and Henry are counsel to the plaintiffs in this action. Berman, Chaljub and Morales are paralegals who assisted the plaintiffs' counsel in the prosecution of 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 AGI for the period May 16, 2000, to the present; (2) payment of all contributions found to be due and owing subsequent to the audit; (3) prejudgment interest on all such contributions; (4) reasonable attorney fees and costs; (5) a contractual penalty of $400 for failure to permit an audit; (6) an order requiring the defendants to post a bond in the amount of $6,000, as required by the Agreement, to guarantee payment of all required contributions; and (7) an order permanently enjoining the defendants from failing to make the required monetary contributions.
For the reasons set forth below, I recommend that: (a) AGI be ordered to permit and cooperate in the conduct of an audit; (b) the plaintiffs be awarded $3,020 against AGI, representing liquidated damages and the plaintiffs' attorney fees and costs in prosecuting this action; and (c) AGI be directed to post a $6,000 bond as called for by the Agreement. I recommend further that the plaintiffs' application for legal and equitable relief be denied in all other respects, with leave to renew certain components of their application following the completion of an audit.
II. BACKGROUND AND FACTS
Based on submissions made by the plaintiffs, the complaint filed in the instant action — the factual allegations of which, perforce of the defendants' default, must be accepted as true, except as they relate 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) — and the Court's review of the entire court file maintained in this action, the following findings of fact are made:
The plaintiffs are jointly-administered, multi-employer, labor-management trust funds. They maintain business offices in New York, New York. Plaintiffs LECET and NYHLST are joint labor-management cooperation organizations. They maintain their business offices in Union, New Jersey. Plaintiff IPA is a corporation organized and operated under § 402 of the Not-for-Profit Corporation Law of the State of New York and § 501(c)(6) of the Internal Revenue Code, 26 U.S.C. § 501(c)(6). It maintains a business office in New York, New York. Plaintiff John J. Virga is the Director of the Funds and is a fiduciary of the Funds within the meaning of §§ 3(21) and 502 of ERISA, 29 U.S.C. §§ 1002(21) and 1132. He brings this action in his fiduciary capacity as Director of the Funds. Plaintiff Union is a labor organization within the meaning of § 301 of the Taft-Hartley Act, 29 U.S.C. § 185, which represents employees in an industry affecting commerce as defined in § 501 of the Taft-Hartley Act, 29 U.S.C. § 142, and § 3(4) of ERISA, 29 U.S.C. § 1002(4). It maintains a business office in New York, New York. Plaintiff Anthony Silveri is the Business Manager of the Union and brings this action in his representative capacity, pursuant to § 12 of the General Associations Law of the state of New York. At the time the instant complaint was filed, AGI was a for-profit corporation doing business in the city and state of New York. At the time the instant complaint was filed, Vitta was an officer of AGI and was acting on AGI's behalf. As such, Vitta is an employer, within the meaning of §§ 3(5) and 515 of ERISA, 29 U.S.C. §§ 1002(5) and 1145, and is an employer in an industry affecting commerce, within the meaning of § 301 of the Taft-Hartley Act, 29 U.S.C. § 185.
The funds are established and maintained pursuant to various collective bargaining agreements in accordance with § 302(c)(5) and (c)(6) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5), (c)(6). The funds are employee-benefit plans within the meaning of §§ 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 §§ 3(37) and 515 of ERISA, 29 U.S.C. §§ 1002(37) and 1145. The funds are authorized to maintain suit as independent legal entities under § 502(d)(1) of ERISA, 29 U.S.C. § 1132(d)(1).
LECET and NYHLST are established and maintained pursuant to various collective bargaining agreements pursuant to the Labor Management Cooperation Act of 1978, Public Law 95-524 § 6, and § 302(c)(9) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(9). LECET and NYHLST are employee-benefit plans within the meaning of §§ 3(1), 3(3) and 502(d)(1) of ERISA, 29 U.S.C. §§ 1002(1), (3), and 1132(d)(1), and multi-employer plans within the meaning of §§ 3(37) and 515 of ERISA, 29 U.S.C. §§ 1002(37) and 1145. LECET and NYHLST are authorized to maintain suit as independent legal entities under § 502(d)(1)(B) of ERISA, 29 U.S.C. § 1132(d)(1)(B).
IAP is established pursuant to § 302(c)(9) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(9), and is authorized to maintain suit as an independent legal entity under § 502(d)(1)(B) of ERISA, 29 U.S.C. § 1132(d)(1)(B).
At the time the instant complaint was filed, AGI was an employer within the meaning of §§ 3(5) and 515 of ERISA, 29 U.S.C. §§ 1002(5) and 1145, and an employer in an industry affecting commerce within the meaning of § 301 of the Taft-Hartley Act, 29 U.S.C. § 185.
The purpose of the Funds is to provide various fringe benefits to eligible employees, on whose behalf employers contribute to the plaintiffs, pursuant to collective bargaining agreements between the employers and the Union. The purposes of LECET and NYHLST are, inter alia, to improve communications and engender cooperative and harmonious relations between and among representatives of labor and management. The purposes of IAP are,inter alia, to create, manage and administer an industry advancement fund program for the advancement of the common business interests of the construction industry. The Union is the representative of its constituent locals, each local being a labor organization operating as a labor union with more than seven members within the city and state of New York.
AGI entered into the Agreement with the Union and, thereby, became obligated to pay and/or submit the required monetary contributions and/or reports to the plaintiffs and remit dues checkoffs and PAC contributions deducted from certain wages paid to employees who authorized such deductions. The Agreement permitted the plaintiffs and/or their designated representatives to conduct audits of the books and records of AGI. Vitta signed the Agreement, which contains a provision purporting to make him personally liable for all of AGI's obligations under the Agreement.
Pursuant to the terms of the Agreement, AGI was required to file certain employer contribution reports with the plaintiffs and, further, was required to permit and cooperate in the conduct of audits by the plaintiffs of the records of AGI.
III. CONCLUSIONS OF LAW
Personal Liability of VittaThe plaintiffs claim that Vitta should be held personally liable for AGI's obligations under the Agreement. 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.
The Agreement contains a clause purporting to impose personal liability upon Vitta. 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 Vitta's signature line indicated that he was signing in both an individual capacity and in his capacity as an officer of AGI. In the absence of such information, Vitta should not be held personally liable for violations of the Agreement. Audit
The plaintiffs contend that, pursuant to the Agreement, they are entitled to conduct an audit of AGI's books and records. 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. Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 573, 105 S. Ct. 2833, 2841-2842 (1985);see also Mason Tenders District Council Welfare Fund v. Asturias, Inc., No. 01 Civ. 0856, 2003 U.S. Dist. LEXIS 1003, at *3-5 (S.D.N.Y. Jan. 23, 2003) (ordering the defendants to cooperate in the conduct of an audit).
In this action, AGI has not permitted the plaintiffs to conduct an audit of its records as required by the Agreement. Accordingly, in order to enable the plaintiffs to determine the amount of unpaid contributions owed to them, AGI should be ordered to permit the plaintiffs to conduct an audit, as required by the Agreement.
Unpaid Contributions
The plaintiffs contend that they are entitled to the unpaid contributions that AGI was required to make to the plaintiffs under the Agreement, as well as prejudgment interest on those amounts. ERISA provides, in pertinent part:
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).
However, 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 U.S. Dist. LEXIS 20635, at *9 (S.D.N.Y. October 14, 2004) (quoting Schonfeld v. Hilliard, 218 F.3d 164, 172 [2d Cir. 2000]). "A party cannot recover damages for breach of a contract for loss beyond the amount that the evidence permits to be established with reasonable certainty." Restat. 2d of Contracts, § 352.
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 the employer has not met these requirements, the results of an audit 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, prejudgment interest cannot be awarded at this time.
Within 30 days of the completion of an audit, the plaintiffs should be permitted to adduce proof of the amount of unpaid contributions owed to them by AGI and petition the court to amend the judgment to reflect any additional award of damages and prejudgment interest that might be appropriate.
Costs and Attorney Fees
An award of costs and reasonable attorney fees, in an action such as this, to recover unpaid union fringe 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 attorney 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. 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 attorney 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 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 Gorlick, Kravitz Listhaus, P.C. Michael J. Vollbrecht, Esq., Tracy Martinell Henry, Esq., and paralegals Michelle Stein Bernman and Marcos Chaljub, all employees of the firm, each submitted an affidavit to the Court that included contemporaneous time records and stated the hourly rate charged by the firm for his or her services. Additionally, Mr. Vollbrecht provided similar information in his affidavit regarding the services rendered by paralegal Jose Morales in connection with this action.
The plaintiffs' submissions indicate that they incurred fees for work performed by the law firm's personnel as follows: Michael J. Vollbrecht (1.2 hours, at $225 per hour); Tracy Martinell Henry (12.4 hours, at $160 per hour); Michelle Stein Bernman (2.8 hours, at $60 per hour); Marcos Chaljub (0.3 hours, at $60 per hour); and Jose Morales (0.5 hours, at $60 per hour). The Court finds that, based on the work performed by them in connection with this action, the rates requested and the time expended by the plaintiffs' counsel are reasonable.
The plaintiffs have not identified any costs incurred in the prosecution of this action or submitted any evidence that would permit the Court to assess the reasonableness of their costs. However, the Court takes judicial notice of the fact that the plaintiffs paid a filing fee in the amount of $150 to the Clerk of Court in order to commence this action.
Accordingly, the Court finds that $2,470 in attorney fees and $150 in costs have been reasonably incurred by the plaintiffs in the course of prosecuting this action against the defendants. Accordingly, the plaintiffs should be awarded $2,620 in attorney fees and costs. Liquidated Damages
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 . . ., the Employer agrees to pay a penalty of $400.00." As noted above, the defendants have not provided the plaintiffs access to their records for an audit.
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 21, 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 damages and actual 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).
Here, actual damages are not readily ascertainable. Given the number of hours worked by AGI's covered employees during the prior year, the Agreement calls for AGI to post a bond of $6000 in order to guarantee contributions due to the plaintiffs. In light of this, the Court finds that $400 is not plainly or grossly disproportionate to the potential damages caused by nonpayment of those contributions. Accordingly, the plaintiffs should be awarded liquidated damages against AGI in the amount of $400. However, following the completion of an audit, should the plaintiffs petition this court with evidence sufficient to determine actual damages stemming from unpaid contributions, the judgment should be amended to reflect those actual damages and to eliminate the award of liquidated damages.
Bond
The plaintiffs request that AGI be directed to post a bond to guarantee contributions due to the plaintiffs. As noted above, the Agreement requires that AGI post such a bond in an amount that is determined by the number of hours worked by the defendants' covered employees during the prior year. If that number of hours is between zero and 1,999, as the complaint alleges, the Agreement requires AGI to post a bond in the amount of $6,000. In light of AGI's failure to comply with the contribution requirements of the Agreement, the Court finds that it would be appropriate to direct AGI to post a bond in that amount.
IV. RECOMMENDATION
For the reasons set forth above, I recommend that: (i) the plaintiffs be awarded $3,020, representing costs, attorney fees and liquidated damages; (ii) AGI be directed to post and maintain, within 30 days of the entry of judgment, a bond in the amount of $6,000 to guarantee payments to the plaintiffs of all contributions that AGI is obligated to make under the Agreement; and (iii) AGI be directed to cooperate in and permit, within 30 days of the entry of judgment, the conduct of an audit of AGI's books and records for the period of May 16, 2000, to the date upon which the complaint was filed, February 21, 2003. I recommend further that the plaintiffs' request for legal and equitable relief be denied in all other respects, with leave to renew, within 30 days of the completion of an audit, their applications for actual damages and prejudgment interest against AGI.
* * *
The plaintiffs shall serve a copy of this Report and Recommendation upon the defendants and submit to the Court proof of such service.
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 shall have ten (10) 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, with courtesy copies delivered to the chambers of the Honorable Robert L. Carter, 500 Pearl Street, Room 2220, New York, New York, 10007, and to the chambers of the undersigned, 40 Foley Square, Room 540, New York, New York, 10007. Any requests for an extension of time for filing objections must be directed to Judge Carter. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140 (1985); IUE AFL-CIO Pension Fund v. Hermann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).