1996, and that any response would be served by December 9, 1996. Although the document request was served, in violation of Judge Pohorelsky's order, the defendants never responded.
On January 9, 1997, this Court directed that Defillipis appear for her deposition which was noticed for January 13, 1997. Defillipis failed to appear in violation of the Court order. On January 13, 1997 Defillipis's attorney advised the Court that she was ill and would provide medical documentation to the Court. On April 15, 1997, defense counsel advised the Court that he had obtained "information" to the contrary and requested that his January 13, 1997 letter be withdrawn.
A. Summary judgment standard
A court may grant summary judgment "only if the evidence, viewed in the light most favorable to the party opposing the motion, presents no genuine issue of material fact," Terminate Control Corporation v. Horowitz, 28 F.3d 1335, 1352 (2d Cir. 1994) (quoting Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990)), and the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); see also Fed. R. Civ. P. 56(c). The Court must, however, resolve all ambiguities and draw all reasonable inferences in the light most favorable to the party opposing the motion. See Institute for Shipboard Education v. Cigna Worldwide Insurance Co., 22 F.3d 414, 418 (2d Cir. 1994); Twin Laboratories, Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990).
Once a party moves for summary judgment, in order to avoid the granting of the motion, the non-movant must come forward with specific facts showing that a genuine issue for trial exists. Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990)(quoting Fed. R. Civ. P. 56(e)); National Union Fire Ins. Co. v. Turtur, 892 F.2d 199, 203 (2d Cir. 1989). A genuine issue of material fact exists if "a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby, 477 U.S. at 248; Converse v. General Motors Corp., 893 F.2d 513, 514 [2d Cir. 1990]). If there is evidence in the record as to any material fact from which an inference could be drawn in favor of the non-movant, summary judgment is unavailable. Lane v. New York State Electric & Gas Corp., 18 F.3d 172, 176 (2d Cir. 1994); Rattner v. Netburn, 930 F.2d 204 (2d Cir. 1991).
However, mere conclusory allegations, speculation or conjecture will not avail a party resisting summary judgment. Western World, 922 F.2d at 121. Although the non-moving party need not produce evidence in a form that would be admissible at trial in order to avoid summary judgment, Fed. R. Civ. P. 56(c) and (e) provide that the non-moving party cannot rest on the pleadings but must set forth specific facts in the affidavits, depositions, answers to interrogatories, or admissions on file showing there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); United States v. Rem, 38 F.3d 634 (2d Cir. 1994).
Finally, when determining a motion for summary judgment, the Court is charged with the function of "issue finding", not "issue resolution." Gallo v. Prudential Residential Servs. Ltd. Partnership, 22 F.3d 1219, 1224 (2d Cir. 1994); Eye Assocs., P.C. v. IncomRx Sys. Ltd. Partnership, 912 F.2d 23, 27 (2d Cir. 1990).
B. The plaintiffs' motion
1. Recovery of delinquent benefits contributions
As a preliminary matter, the Court again notes that the defendants Dana-Sal, Industries and Ferraioli do not oppose the plaintiffs' motion. Accordingly, the Court's analysis applies only to the defendants Robco and Defilippis.
ERISA section 515 requires that employers who are signatories to collective bargaining agreements providing for qualified multiemployer benefit plans make the specified contributions. See 29 U.S.C. § 1145; Greenblatt v. Delta Plumbing & Heating Corp., 68 F.3d 561, 568 (2d Cir. 1995). ERISA section 502(f) provides federal jurisdiction over claims brought to enforce an employer's obligation to make the required contributions. See 29 U.S.C. § 1132(f); Greenblatt, 68 F.3d at 568.
In this case, the defendants do not contest that they are liable for contributions pursuant to the terms of the collective bargaining agreement. They do not raise any defenses to the validity of the Agreement or claim that the Funds are seeking contributions for work that is not covered. Rather, Robco and Defilippis present affidavit evidence that the corporate defendants are not alter egos of one another and do not constitute a single employer so as to create joint and several liability. Further, the individual defendants assert that they have not defrauded the Funds by knowingly manipulating and underreporting employees' hours to avoid contributions.
2. The defendants' affidavits
At the outset, the Court addresses the plaintiffs' argument that the defendants should not be permitted to submit affidavits in opposition to the motion for summary judgment based on their consistent abuse of the discovery process and manipulation of their Fifth Amendment privileges in order to avoid resolution of this litigation. As set forth above, the defendants have avoided producing almost any evidence during discovery by obstructing discovery in general and by invoking the Fifth Amendment privilege against self incrimination. After Defillipis was granted leave to withdraw her invocation of the privilege and continue with her deposition, she failed to appear in direct violation of this Court's order. In addition, the defendants have disobeyed several discovery orders of Judges Orenstein and Pohorelsky. The plaintiffs argue that as a result of this practice the defendants should be precluded from presenting evidence regarding these questions in opposition to their summary judgment motion.
In United States v. 4003-4005 5th Ave., Brooklyn, N.Y. ("4003-4005"), 55 F.3d 78 (2d Cir. 1995), the appellant in a civil forfeiture case sought reversal of a district court order preventing him from withdrawing his invocation of his Fifth Amendment privilege so that he could file an affidavit in opposition to the Government's motion for summary judgment. On appeal, the Second Circuit recognized that
those who invoke the Fifth Amendment and those who oppose them--should be afforded every reasonable opportunity to litigate a civil case fully and because exercise of Fifth Amendment rights should not be made unnecessarily costly, . . . courts, upon an appropriate motion, should seek out those ways that further the goal of permitting as much testimony as possible to be presented in the civil litigation, despite the assertion of the privilege.
Id. at 83-84 (footnote and citation omitted). Factors to consider in arriving at the appropriate balance include the nature of the proceeding, how and when the privilege was invoked, and the potential for harm or prejudice to the opposing parties. The district court should generally "take a liberal view" toward applications to withdraw the privilege and testify so that a case may be adjudicated on its merits. Id. However, withdrawal of the privilege should not be permitted "carelessly." Id. Because invocation of the Fifth Amendment may be used to hinder discovery and obstruct litigation, "trial courts must be especially alert to the danger that the litigant might have invoked the privilege primarily to abuse, manipulate or gain an unfair advantage over opposing parties." Id. If "the litigant's request to waive comes only at the 'eleventh hour' and appears to be part of a manipulative, 'cat-and-mouse approach' to the litigation, a trial court may be fully entitled, for example, to bar a litigant from testifying later about matters previously hidden from discovery through an invocation of the privilege." Id. at 85, citing, In re Edmond, 934 F.2d 1304, 1308-09 (4th Cir. 1991); United States v. Parcels of Land, 903 F.2d 36, 42-46 (1st Cir. 1990); Gutierrez-Rodriguez v. Cartagena, 882 F.2d 553, 576-77 (1st Cir. 1989); United States v. Talco Contractors Inc., 153 F.R.D. 501, 505-12 (W.D.N.Y. 1994); United States v. Sixty Thousand Dollars, 763 F. Supp. 909, 913-14 (E.D. Mich. 1991).
Applying these standards, the Second Circuit affirmed the decision of the district court to bar withdrawal of the privilege so that the appellant could submit an affidavit in opposition to the Government's motion for summary judgment. In reaching this conclusion, the court relied on the fact that the appellant had "stonewalled" discovery by failing to answer interrogatories for over a year. When ordered to answer by the Magistrate Judge he did so in a limited fashion invoking the Fifth Amendment. When directed to supplement his answers, the appellant continued to invoke the privilege. Six months after the Government moved for summary judgment, the appellant indicated his desire to withdraw the privilege and submit to discovery. Based on these events, the Second Circuit determined that "the District Court appears to have been acting well within its discretion when it ruled that [the appellant] was to be prevented from submitting 'any material previously claimed to be [covered by his] Fifth Amendment privilege against self incrimination.'" 55 F.3d at 86, quoting, United States v. 4003-4005 5th Ave., Brooklyn, N.Y., 840 F. Supp. 6, 7-8 (E.D.N.Y. 1993).
Similarly, in United States v. Incorporated Village of Island Park, 888 F. Supp. 419 (E.D.N.Y. 1995), the defendants invoked their Fifth Amendment privileges during their depositions, but sought to submit affidavits in opposition to the Government's motion for summary judgment. In response to the Government's motion to strike the affidavits, Judge Glasser held:
in view of [the defendants] repeated invocation of their Fifth Amendment privilege at deposition, their "eleventh hour" attempt to avoid the consequences of asserting that privilege by submitting affidavits in opposition to the government's summary judgment motion constitutes an abuse of the discovery procedure which should not be permitted.
Id. at 431.
Consistent with these decisions, the Court now bars the defendants from creating issues of fact by submitting affidavits in support of their opposition to the Funds' motion for summary judgment. In an effort to reach the merits of this case, the Court has been more lenient with the defendants than the district court in 4003-4005. In this case, rather than prevent the defendants from withdrawing their Fifth Amendment privilege at the eleventh hour, after the plaintiffs filed their first summary judgment motion, the Court permitted withdrawal of the privilege and ordered Defillipis to appear and continue her deposition. Nevertheless, in direct contravention of this Court's order, she failed to appear and offered no valid excuse for her absence. In the Court's view, such conduct constitutes not only an abuse of the discovery process, but a disregard for the efforts of this Court to give the defendants an opportunity to present the merits of their case. As a result, the Court will not consider the affidavits of defendants Ferraioli and Defillipis in ruling on the Funds' motion for summary judgment.
The Court now turns to the merits of the Funds' motion.
3. Single employer and alter ego doctrines
The Funds attempt to hold all three corporate defendants liable for Robco's alleged delinquent benefits contributions under the single employer and alter ego doctrines. Determinations of both single employer and alter ego status constitute questions of fact. Lihli Fashions Corp., Inc. v. NLRB, 80 F.3d 743, 747 (2d Cir. 1996); Goodman Piping Prods, Inc. v. NLRB, 741 F.2d 10, 11 (2d Cir. 1984). A single employer situation exists where nominally separate entities are actually part of a "single integrated enterprise." Lihli Fashion Corp., 80 F.3d at 747; Clinton's Ditch Coop Co., Inc. v. NLRB, 778 F.2d 132, 137 (2d Cir. 1985), cert. denied, 479 U.S. 814, 93 L. Ed. 2d 25, 107 S. Ct. 67 (1986) (internal citations and quotations omitted); Mason Tenders Dist. Council Welfare Fund v. Kan Klean Indus., Inc., 1996 U.S. Dist. LEXIS 11295; 20 E.B.C. 1894 at *17, 1996 WL 447751, at *6 (S.D.N.Y. 1996) (applying the single employer standard in a case seeking recovery of delinquent benefit contributions). "The single employer standard is relevant when 'separate corporations are not what they appear to be, that in truth they are but divisions or departments of a single enterprise.'" Clinton's Ditch Coop., 778 F.2d at 137, quoting, NLRB v. Deena Artware, Inc., 361 U.S. 398, 402, 4 L. Ed. 2d 400, 80 S. Ct. 441 (1960). The factors to review when considering whether two entities constitute a single employer are inter-relation of operations, common management, centralized control of labor relations and common ownership. Radio & Television Broadcast Technicians Local Union 1264 v. Broadcast Serv. of Mobile, Inc., 380 U.S. 255, 256, 13 L. Ed. 2d 789, 85 S. Ct. 876 (1965); Lihli Fashions Corp., 80 F.3d at 747; Kan Klean Indus., at *6. No one factor is controlling and not every factor need be present. Lihli, 80 F.3d at 747. Further, in order to bind a non signatory to the terms of a collective bargaining agreement, together both such entities must constitute part of an appropriate bargaining unit. Id.
"The alter ego doctrine is designed to defeat attempts to avoid a company's union obligations through a sham transaction or technical change in operations." Local 1. Amalgamated Lithographers v. Stearns & Beale, Inc., 812 F.2d 763, 772 (2d Cir. 1987). The key factors to consider when making an alter ego determination are whether the enterprises under review have "substantially identical management, business purpose, operation, equipment, customers, supervision, and ownership." Lihli Fashions Corp., 80 F.3d at 748, citing, Truck Drivers Local Union No. 807 v. Regional Import & Export Trucking Co., 944 F.2d 1037, 1046 (2d Cir. 1991); Goodman Piping Prods., Inc. v. NLRB, 741 F.2d 10, 11 (2d Cir. 1984). The test for the alter ego doctrine is conceptually distinct from the single employer doctrine, focusing on "the existence of a disguised continuance or an attempt to avoid obligations of a collective bargaining agreement through a sham transaction or technical change in operations." Lihli Fashions Corp., 80 F.3d at 748; Truck Drivers, 944 F.2d at 1046.
The Funds have produced sufficient evidence to establish that the corporate defendants constitute both a single employer and alter egos, as a matter of law. Although these tests generally warrant separate analysis, the evidence presented by the Funds is sufficient to satisfy both tests. With respect to common ownership, management and supervision, the Funds show that Defilippis is the president of Robco, but Ferraioli, Defilippis's husband controls the "day-to-day operations of Robco." In addition, Ferraioli owns and operates Dana-Sal and Industries and makes employment decisions for all three companies. Further, Ralph Montchal and Tom Tenza have acted as dispatchers for all three companies.
The Funds have also established that the corporate defendants share common facilities and equipment. For example, on the 14th Street Reconstruction Project, trucks bearing the name "Ferraioli Industries" and "Dana-Sal" were chased off the site, only to reappear redesignated with the name "Robco" with some of the same drivers. This is significant circumstantial evidence of both single employer and alter ego status. In addition, Dana-Sal rented trucks from Robco. Both Dana-Sal and Industries had the same address, 23 Ash Street in Brooklyn. Robco was also located at 23 Ash Street, until some time in 1991 or 1992 when it relocated to College Point, New York.
The corporate defendants also shared at least some of the same customers. For example Robco, Dana-Sal and Industries all provided their services to companies known as "Perez Interboro Asphalt," "Cousins-Civetta," and "New York Paving."
In addition, with respect to the single employer standards, the Court finds that the Funds have demonstrated the existence of an appropriate bargaining unit. The contributions sought are for the same job classification--truck driver--and for the same type of work--driving a dump truck to transport excavated material.
Finally, the Funds provide evidence of centralized labor relations. According to the plaintiffs' supporting papers, Ferraioli made the employment decisions, such as disciplining employees and granting promotions, for all three companies. Moreover, the corporate defendants employed the same truck drivers. Considering all of this evidence in its totality, the Court finds that the Funds have established that the corporate defendants are jointly and severally liable for the allegedly delinquent benefits contributions as a single employer and alter egos. Accordingly, the plaintiffs' motion for summary judgment as to this issue is granted.
In reaching this conclusion, the Court notes that the defendants have produced some evidence in the form of affidavits that would tend to contradict the Funds' evidence regarding the applicability of single employer and alter ego doctrines. However, as set forth above, the Court declines to consider these affidavits as a result of the defendants dilatory tactics throughout this litigation. In addition, the Court notes that in their opposing memorandum of law, the defendants argue that an arbitrator has already determined that the corporate defendants do not constitute a single employer. However, the defendants did not annex a copy of the arbitrator's decision. Accordingly, the Court will not consider this alleged decision.
4. Individual liability
The Funds also move for summary judgment against the individual defendants arguing that as officials and principals of the corporate defendants, Ferraioli and Defilippis "defrauded the benefit funds through the submission of knowingly false remittance reports. . . ." When considering whether corporate officers should be held personally liable for failure to make contributions based on fraudulent conduct, the court must make a two step inquiry. See Cement & Concrete Workers Dist. Council Welfare Fund v. Lollo, 35 F.3d 29, 33 (2d Cir. 1994); Trustees of the Building Serv. 32 B-J Pension, Health & Annuity Funds v. Hudson Serv. Corp., 871 F. Supp. 631, 638 (S.D.N.Y. 1994). First, the court must consider whether the individuals are "controlling corporate official[s]." Lollo, 35 F.3d at 33. When making this determination, the court must "examine the officer's actual role in the company's affairs and relationship to the company's wrongdoing." Id. Second, the plaintiffs must establish the elements of fraud: (1) a material false representation or omission of existing fact; (2) knowledge of the falsity; (3) intent to defraud; (4) reasonable reliance; and (5) damages. Id., citing, Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 276 (2d Cir. 1992).
Applying this standard, the Court grants the Funds motion with respect to the liability of the individual defendants. Ferraioli and Defilippis are clearly controlling corporate officials. Defillipis was responsible for completing the remittance reports and Ferraioli was responsible for managing labor relations for all three companies. Accordingly, in the Court's view, the first requirement for individual liability is satisfied.
The Funds have also presented sufficient evidence of fraud on the part of the individual defendants. According to the plaintiffs, Defillipis upon the advice of her husband Ferraioli, knowingly underreported hours worked by employees in covered employment in order to avoid paying the contractually required benefits contributions. Further, the Funds have shown that the same employees were paid by all three companies in an effort to disguise the amount of money due. In the Court's view, this evidence is sufficient to demonstrate fraud as a matter of law.
In reaching this conclusion, the Court again notes that a question of fact as to this issue may have been raised by affidavits submitted in opposition to the Funds' motion as to who Defillipis relied upon in filling out the remittance reports. However, the use of affidavits by Ferraioli and Defillipis to create an issue of fact has been precluded because of their lengthy and deliberate abuse of the discovery process. Accordingly, the Court grants the plaintiffs' motion for summary judgment with regard to the liability of the individual defendants.
Having found that all of the defendants are liable for the payment of contributions under the collective bargaining and trust agreements, and that the corporate defendants are jointly and severally liable, the Court now turns to the Funds' request for damages and attorneys' fees. The Funds' base their application on estimates they assert are reasonable in accordance with the standards set forth by the Eleventh Circuit in Combs v. King, 764 F.2d 818 (11th Cir. 1985). Combs provides for a burden shifting approach requiring that where the Funds demonstrate a reasonable inference as to the extent of work performed and the amount owed in terms of delinquent contributions, the burden shifts to the employer to come forward with record evidence to refute the inference. Id. at 825-27. The reasoning set forth in Combs has been adopted by the Sixth and Ninth Circuits. See Michigan Laborers' Health Care Fund v. Grimaldi Concrete, Inc., 30 F.3d 692, 695-96 (6th Cir. 1994) (adopting burden shifting approach during trial); Brick Masons Pension Trust v. Industrial Fence & Supply, 839 F.2d 1333, 1337-38 (9th Cir. 1988) (same). However, at least one Circuit Court has been reluctant to apply this standard in a summary judgment context. See Illinois Conference of Teamsters v. Steve Gilbert Trucking, 71 F.3d 1361, 1367 (7th Cir. 1995). Although the Second Circuit has recently cited Combs with approval, see Jaspan v. Glover Bottled Gas Corp., 80 F.3d 38, 41 n.3 (2d Cir. 1996), the issue presented in this case has not yet been addressed by the Second Circuit.
Ferraioli and Defilippis contest the amount of the damages. Even if the Court were willing to apply the burden shifting approach set forth in Combs, the Court is unable to fix the amount of damages at this time. See Gilbert Trucking, 71 F.3d at 1367. Rather, the Court finds that the better approach is, with the consent of the parties, to refer the matter of damages to United States Magistrate Judge Viktor V. Pohorelsky to hold a hearing, at which time the defendants can fully contest the amount, and issue a report and recommendation as to the proper amount of the damages and attorney's fees.
Having reviewed the parties' submissions, as well as the Court file, it is hereby
ORDERED, that the plaintiffs' motion for summary judgment is granted with respect to the issue of liability against the corporate defendants and the individual defendants, and such liability is determined; it is further
ORDERED, that the plaintiffs' motion for summary judgment with respect to damages and attorney's fees is referred to United States Magistrate Judge Viktor V. Pohorelsky to issue a report and recommendation, with the consent of the parties, as to the proper amount of damages and attorneys' fees.
Dated: Uniondale, New York
June 27, 1997
Hon. Arthur D. Spatt
United States District Court
© 1992-2004 VersusLaw Inc.