01 Civ. 1922 (LMM) (RLE).
July 1, 2003.
Roger H. Madon, Counsel for Plaintiff.
REPORT AND RECOMMENDATION
This matter was referred to the undersigned for an inquest on damages following an entry of default judgment by The Honorable Lawrence M. McKenna against defendant on January 11, 2002. On March 7, 2001, Perishable Foods Industry Pension Fund ("the Fund") filed the instant action against defendant employer, American Banana Company, Inc. ("American"), for failure to contribute five out of forty-eight monthly payments and reports as established in a collective bargaining agreement ("CBA"). The Fund seeks damages pursuant to the Employee Retirement Income Security Act ("ERISA") of 1974, as amended, 29 U.S.C. § 1145 and § 1132(g)(2), including attorney's fees and costs. Based on the following facts presented to the Court by way of affidavits and a memorandum of law from the Fund, the Court recommends as follows:
(1) American pay to the Fund $3,611.40 for the five missed contribution payments under the CBA;
(2) American pay $541.95 in interest on the total amount of unpaid contributions as of June 30, 2003. Interest shall continue to accrue at the quarterly underpayment rate, as determined by the Internal Revenue Service under 26 U.S.C. § 6621, until American pays the amount of contributions owed in full. Determination of Interest Rate, 26 C.F.R. § 301.6621-1 (2003). The interest rate for the July 1, 2003-September 30, 2003 period is five percent (5%). IRS News Release IR-2003-75 (June 9, 2003).
(3) American pay $541.95 to the Fund as liquidated damages;
(4) American pay the Fund's attorney fees in the amount of $9,250, plus costs in the amount of $200, a total of $9,450.
The Perishable Food Industry Pension Fund is an "employee pension benefit fund" within the meaning of 29 U.S.C. § 1002(2). It was established as a result of the CBA formed pursuant to 29 U.S.C. § 186(c)(5), between the Office Employees International Union, Local 153 and certain employers, including American. See Complaint ("Compl.") at ¶ 2. American is engaged in the business of produce distribution, an industry affecting commerce, and is therefore an employer within the meaning of 29 U.S.C. § 152. Id.
On March 7, 2001, the Fund filed a complaint against American alleging failure to contribute monthly payments to the Fund as required by 29 U.S.C. § 1145. The claim is based on the CBA entered into by the parties, which was effective for the period of March 1, 1998, through February 28, 2001. Id.
The CBA establishes the Fund and specifies the rates at which monthly contributions are determined. See Plaintiffs Brief ("Pl. Br.") at ¶ 1. The Fund claims that the formula for the rate is found in its Restated Agreement and Declaration of Trust ("Trust Agreement"), Compl. at ¶ 3, but did not provide the Court with a copy of the agreement. The CBA also established that monthly reports accompany payments. Pl. Br. at ¶ 1. These reports contain the names of employee participants of the Fund, the hours worked by such employees, and the rate of contribution. Id. The Fund has submitted an affidavit by Vera Mariano ("Mariano Aff."), the bookkeeper for Basil Castrovinci Associates, Inc., the Fund's accountants and auditors. The affidavit includes the last monthly report from American, dated September 2000, which the Fund submits to support its method of calculating the unpaid contributions and interest. See Mariano Aff. at ¶ 1. It claims that American owes $13,633.80 for the unpaid contributions, corresponding to four covered employees from October 2000 through February 2002. Id. at ¶¶ 1-2.
American was served with a summons and complaint on March 23, 2001. Proof of service was entered on March 26, 2001. American failed to respond or appear. On January 11, 2002, Judge McKenna entered a default judgment against American pursuant to Federal Rule of Civil Procedure 55. This Court held an inquest hearing on March 11, 2002, and American again failed to appear. On March 26, 2002, the Fund submitted materials supporting its claim for damages, including the Mariano affidavit and affidavits from attorneys Roger H. Madon ("Madon") and James Kane McMahon ("McMahon"), setting forth their experience and expertise as counsel. On August 19, 2002, the Fund submitted an amended statement of damages, an affidavit on the calculation of interest, and a supplemental affidavit of legal services.
A. Statutory Framework
Section 1145 of Title 29 of the United States Code, Delinquent Contributions, provides that:
Every 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.29 U.S.C. § 1145.
An employer which fails to pay under this statute is subject to suit under 29 U.S.C. § 1132, which provides a civil right of action for certain parties, including fiduciaries, involved in specified employment benefits plans such as pension plans. 29 U.S.C. § 1132. Section (g)(2) describes the penalties awardable in § 1145 delinquent contribution actions:
(2) In any action under this subchapter by a fiduciary for or on behalf of a plan to enforce § 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),
(D) reasonable attorney's 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.
For purposes of this paragraph, interest on unpaid contributions shall be determined by using the rate provided under the plan, or, if none, the rate prescribed under section 6621 of Title 26.Id.
The purpose of § 1132(g) is to enforce and encourage employer payment in benefit plans by permitting "trustees of plans to recover delinquent contributions efficaciously . . ." and "assist plans in recovering the costs incurred in connection with delinquencies." Iron Workers Dist. Council v. Hudson Steel Fabricators Erectors, 68 F.3d 1502, 1506 (2d Cir. 1995). The mandatory penalty provisions promote the return of the pension plan to the value it would have been if contributions had been properly made at the time judgment is entered and to defray the costs of litigation and collection. Id.
Pursuant to 29 U.S.C. § 1132(g)(2), a plaintiff is entitled to an award representing the amount of unpaid contributions. In the instant case, American's liability for unpaid contributions has been established by the entry of a default judgment against it. See Bambu Sales, Inc. v. Ozak Trading, Inc., 58 F.3d 849, 854 (2d Cir. 1995) ( quoting Trans World Airlines, Inc. v. Hughes, 449 F.2d 51, 69 (2d Cir. 1971), rev'd on other grounds, 409 U.S. 363 (1973)). In light of a general default judgment, the complaint's factual allegations are taken as true. See Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981); accord Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993). Further, a plaintiff is entitled to all reasonable inferences from the evidence offered. See Cotton, 4 F.3d at 181.
"[O]nce there is a favorable judgment, the plaintiff is entitled to all the measures of relief not already obtained." Iron Workers, 68 F.3d at 1507. Although a defendant's liability is established by a default judgment, a finding of damages must have evidentiary support. See Greyhound Exhibitgroup, Inc, v. E.L.U.L Realty, 973 F.2d 155, 158 (2d Cir. 1992) (finding that a party's default is not considered an admission of damages); Kaleidoscope Media Group, Inc. v. Entertainment Solutions, Inc., 2001 WL 849532, at *3-*4 (S.D.N.Y. 2001). A court cannot rely on an unsupported statement of damages by plaintiff to determine the amount of damages due. Transatlantic Marine Claims Agency, 109 F.3d 105, 111 (2d Cir. 1997). See Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir. 1993) (finding estimates of union payroll in form of one affidavit containing parts of a payroll review prepared by an accountant are at best undocumented and at worst a speculative basis for damages). But see Plumbers Local No. 371 v. Frank Liquori Plumbing and Heating, 1996 WL 445065, at *4 (E.D.N.Y. 1996) (court relied upon documentation of accountant who determined unpaid fees by referring to defendant's own records and union members' time cards, but characterized as speculative similar claims based on vague reference to hiring practices).
1. Unpaid Contributions
In the absence of documentation confirming the amount due, the Fund requests that this Court adopt its method for calculating delinquent contributions by interpolating from the amount in American's last monthly report. Pl. Br. at 4. The Fund claims it is impossible to obtain necessary documents from American to calculate damages and that their proposed method would promote judicial efficiency. Id. at 3-4. It asserts that American owes $13,633.80 for unpaid contributions for four employees from October 2000, through February 2002. Mariano Aff. at ¶¶ 1-2. The Fund indicates that the rate for October 2000, through and including February 2001, was $180.57 per employee per month and $208.80 per employee per month for the period of March 2001, through and including February 2002. Id. at ¶ 1.
The Fund has not provided the Court with a copy of the CBA or the Trust Agreement referred to in the original complaint. It has not submitted any evidence that the CBA was extended from March 2001, to February 2002, or that American agreed to renew the CBA for the period March 2001, through February 2002. See Brown v. C. Volante Corp., 194 F.3d 351, 355 (2d Cir. 1999) (finding that the intent of an employer to renew a CBA, even though they did not sign a new agreement, can be established if they continue to contribute to the fund after the original CBA expired.)
The Fund submitted a copy of the September 2000, report prepared by its accountant, indicating the amount paid by American for each of four covered employees. Based on this evidence, the Court finds that the amount of $180.57 per employee per month, for a total of $722.28 per month, was paid to the Fund as per its CBA with American. Therefore, it is entitled to $3,611.40 for the five missing payments. The Fund's request for unpaid contributions from March 2001, through February 2002, lacks evidentiary support to substantiate an award and therefore, should be denied.
An award of interest to the Fund is mandatory once the Court has determined American failed to make contributions as per the CBA. See Mason Tenders Dist. Council v. Envirowaste and Transcontractors, Inc., 1999 WL 370667, at *2 (S.D.N.Y. 1999); accord Carney v. Prompt Maintenance Services Inc., 2002 WL 122934, at *6 (S.D.N.Y. 2002). Under 29 U.S.C. § 1132(g)(2), interest shall be awarded based on the rate prescribed under 26 U.S.C. § 6621. See Carney, 2002 WL 122934, at *6. Prejudgment interest will accrue from the due date of each respective installment. Carriers Container Council v. Mobile S.S. Assoc., 948 F.2d 1219, 1225-1226 (11th Cir. 1991). According to the Internal Revenue Service, under 26 U.S.C. § 6621, the underpayment rate for the relevant periods is:
Period Interest Rate
October 1, 2000 through March 31, 2001 9% April 1, 2001 through June 30, 2001 8% July 1, 2001 and December 31, 2001 7% January 1, 2002 and December 31, 2002 6% January 1, 2003 through June 30, 2003 5%
IRS News Release IR-2002-131 (December 2, 2002) and IRS News Release IR-2003-30 (March 11, 2003). Therefore, the interest on the missing payments is calculated as follows:
Calculation of Interest October 1, 2000 — June 30, 2003
Month Total Time Applicable Interest Owed Total Interest (in months) Interest Rates Per Period Owed Per Period $119.22 $113.81 $108.39 $102.97 $97.56 Total Interest Owed $541.95October 2000 32 9% for 5 months $27.08 8% for 3 months $14.45 7% for 6 months $16.26 6% for 12 months $43.37 5% for 6 months $18.06 November 2000 31 9% for 4 months $21.67 8% for 3 months $14.45 7% for 6 months $16.26 6% for 12 months $43.37 5% for 6 months $18.06 December 2000 30 9% for 3 months $16.25 8% for 3 months $14.45 7% for 6 months $16.26 6% for 12 months $43.37 5% for 6 months $18.06 January 2001 29 9% for 2 months $10.83 8% for 3 months $14.45 7% for 6 months $16.26 6% for 12 months $43.37 5% for 6 months $18.06 February 2001 28 9% for 1 month $5.42 8% for 3 months $14.45 7% for 6 months $16.26 6% for 12 months $43.37 5% for 6 months $18.06 Based on these calculations, American must pay $541.95 in interest to the Fund. Interest shall continue to accrue at the quarterly underpayment rate as determined by the Internal Revenue Service until American pays the amount of contributions owed in full. Determination of Interest Rate, 26 C.F.R. § 301.6621-1 (2003). The rate for period of July 1, 2003 — September 30, 2003, is five percent (5%). IRS News Release IR-2003-75 (June 9, 2003).
3. Liquidated Damages
Under 29 U.S.C. § 1132(g)(2)(C)(ii), a double interest payment or alternative liquidated damages are provided for in order to compensate a plaintiff for costs incurred with delinquencies. O'Hare v. General Marine Transport Corp., 740 F.2d 160, 171 (2d Cir. 1984); accord Devito v. Hempstead China Shop Inc., 831 F. Supp. 1037, 1040 (E.D.N.Y. 1993). Therefore, American must pay to the Fund the amount of $541.95 in liquidated damages.
4. Attorney's fees
ERISA provides that an employee benefit plan is entitled to reasonable attorney's fees on entry of a judgment in favor of the plan. See 29 U.S.C. § 1132(g)(2)(D). An award of attorney's fees is mandatory; however, the reasonableness of the fees is at the discretion of the court. Terminite Control Group v. Horowitz, 28 F.3d 1335, 1342 (2d Cir. 1994); Carney, 2002 WL 122934, at *7. "An award of attorney's fees and costs is necessary both to relieve [claimant] of the financial burden undertaken to pursue this action, and to deter other employers from similarly denying an applicant a fair consideration of his or her claim." Sansevera v. E.I. du Pont de Nemours Co. Inc., 859 F. Supp. 106, 117 (S.D.N.Y. 1994).
In an ERISA action, attorney's fees are calculated using the lodestar method. Mason Tenders Dist. Council v. Envirowaste, 1999 WL 370667, at *2. This involves multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate. Luciano v. Olsten Corp., 109 F.3d 111, 115 (2d Cir. 1997). Proper documentation to support an award of attorney's fees includes reports on the work accomplished, the amount of hours worked, and the positions of the persons who performed the work. New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983). In this matter, the Fund has submitted a supplemental affidavit of legal services outlining the time expended by each attorney and a description of the task performed. Carney, 2002 WL 122934, at *8. The total amount claimed by the Fund is $13,583.50 for 40.10 hours of work at a rate of $335 per hour, plus a charge of $2,250 for preparation and service of the summons and complaint and a charge of $150 for the preparation of a collection letter.
The Court can take judicial notice of the rates being charged by attorneys in the geographic area in which it sits. Id. at *7-*8 (rates from $160 to $175 per hour held reasonable); see Ward v. Stadium Hotel Corp., 1998 WL 23558, at *1 (S.D.N.Y. 1998) ($225 an hour held reasonable); Ginsberg v. Valhalla Anesthesia Associates P.C., 1998 WL 19997, at *2-*3 (S.D.N.Y. 1998) (rates from $175 to $300 held reasonable); O'Rourke v. Pitnev Bowes Inc., 1997 WL 716117, at *4 (S.D.N.Y. 1997) ($225 an hour held reasonable).
Given counsels' extensive experience and the range of reasonable rates in this district, the amount of $275 per hour will be set as the appropriate rate for Madon and $250 per hour will be set as the appropriate rate for McMahon. Madon earned his LLM in Labor Law from New York University in 1978, and of his thirty years of experience as an attorney, twenty-five have been spent practicing labor and employment law in New York. Before starting his current practice, he was a partner at Sturm Perl LLP for fifteen years. McMahon was admitted to practice in 1975 and specializes in civil litigation. Prior to joining his current firm, he worked for several large law firms and corporations.
The Fund's counsel billed for over forty hours of work in this case. Based on a review of the time records and materials submitted by the Fund, the Court finds that the attorneys' hours should be reduced to twenty hours for Madon and to ten hours for McMahon. "Counsel . . . should make a good faith effort to exclude from fee requests hours that are excessive, redundant or otherwise unnecessary." Hensley v. Eckerhart, 461 U.S. 424, 434 (1983); accord Carney, 2002 WL 122934, at *8. Counsel billed almost fifteen hours between April 26, 2001, and February 16, 2002, for their work on the Statement of Damages and Affidavit in Support of Judgment of Default. Between March 18, 2002, and March 23, 2002, approximately ten additional hours were billed for the Memorandum in Support of Motion for Default Judgment. The text of these documents are identical, except for minor changes in format. Therefore, those hours have been excluded as unnecessary.
Counsel also charged $2,250 for the preparation of the filing and service of summons and complaint. However, they did not indicate the number of hours spent on this work and the rate at which the time was charged. Hensley, at 433 (the court may reduce the award accordingly when the documentation of hours is inadequate); New York State Association for Retarded Children, 711 F.2d at 1148. Accordingly, that portion of the fees will be reduced to $1,250, which accounts for five hours of work at a rate of $250 per hour. In addition, a court may not award fees under ERISA for legal services performed during the administrative process. The award is limited to the period after the court has assumed jurisdiction of the case. Peterson v. Continental Casualty Co., 282 F.3d 112, 119 (2d Cir. 2002). Therefore, the fee charged for the preparation of the February 5, 2001 collection letter will not be included in the award. Based on the modifications outlined above, the total award of attorney's fees will be $9,250.
Under the ERISA statute, reasonable costs are to be paid by defendant. See 29 U.S.C. § 1132(g)(2). Therefore, American should pay the Fund $200 for the filing fee and process server fee.
For the reasons stated above, I respectfully recommend that the Fund be awarded a total of $14,145.30. The award includes unpaid contributions of $3,611.40, plus $541.95 in interest on the unpaid contributions as of June 30, 2003, liquidated damages in the amount of $541.95, attorney's fees in the amount of $9,250 and $200 in costs. Interest shall continue to accrue at the quarterly underpayment rate determined by the Internal Revenue Service under 26 U.S.C. § 6621 until American pays the amount of contributions owed in full.
Pursuant to Rule 72, Federal Rules of Civil Procedure, the parties shall have ten (10) days after being served with a copy of the recommended disposition to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of the Court and served on all adversaries, with extra copies delivered to the chambers of the Honorable Lawrence M. McKenna, 500 Pearl Street, Room 1640, and to the chambers of the undersigned, Room 1970. Failure to file timely objections shall constitute a waiver of those objections both in the District Court and on later appeal to the United States Court of Appeals. See Thomas v. Arn, 474 U.S. 140, 150 (1985); Small v. Sec'y of Health and Human Services, 892 F.2d 15, 16 (2d Cir. 1989) (per curiam); 28 U.S.C. § 636(b)(1) (West Supp. 1995); Fed.R.Civ.P. 72, 6(a), 6(e).