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MASON TENDERS DIST. C. v. DELUCCIA ERECTORS & SCAFFOLDING

United States District Court, S.D. New York


January 29, 2004.

MASON TENDERS DISTRICT COUNCIL WELFARE FUND, PENSION FUND, ANNUITY FUND, TRAINING FUND, NEW YORK STATE LABORERS-EMPLOYERS COOPERATION AND EDUCATION TRUST FUND, NEW YORK LABORERS' HEALTH AND SAFETY TRUST FUND and BUILDING CONTRACTORS ASSOCIATION INDUSTRY ADVANCEMENT PROGRAM, and JOHN J. VIRGA, in his fiduciary capacity as Director, and ANTHONY SILVERI, as Business Manager of the MASON TENDERS DISTRICT COUNCIL OF GREATER NEW YORK AND LONG ISLAND, Plaintiffs, -against- DELUCCIA ERECTORS & SCAFFOLDING SUPPLY, INC. and EUGENE DELUCCIA, Defendants

The opinion of the court was delivered by: JAMES FRANCIS, Magistrate Judge

REPORT AND RECOMMENDATION

This is an action brought pursuant to Sections 502 and 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1132 and 1145, and Section 301 of the Labor-Management Relations Act of 1947 ("Taft-Hartley Act"), 29 U.S.C. § 185. The suit was commenced by the Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, Training Fund, New York State Laborers-Employers Cooperation and Education Trust Fund, New York Laborers' Health and Safety Trust Fund, Building Contractors Association Industry Advancement Program, and John J. Virga in his capacity as Director (collectively, the "Funds"), and by Anthony Page 2 Silveri as Business Manager of the Mason Tenders District Council of Greater New York and Long Island (the "Union"). The plaintiffs seek damages stemming from the failure of Deluccia Erectors & Scaffolding Supply, Inc. ("Deluccia") to pay contributions to the plaintiffs and to permit an audit of its books and records, as required under a collective bargaining agreement between Deluccia and the Union. The plaintiffs also seek to hold Deluccia's principal, Eugene Deluccia, individually liable.

Following entry of a default judgment, the case was referred to me for an inquest on damages, and a hearing was held on October 23, 2003. Despite being afforded notice of the hearing, the defendants did not appear. The following findings are based on the evidence presented at the hearing and on supplemental information submitted by the plaintiffs.

 Background

  Deluccia is a corporation that conducted business in New York City at all relevant times. (Amended Complaint ("Am. Compl."), ¶ 11). Deluccia entered into a collective bargaining agreement (the "Labor Contract") with the Union which, among other things, obligated Deluccia to pay fringe benefit contributions to the Funds based on work performed for Deluccia by Union members. (Am. Compl., ¶ 11). The Labor Contract also required Deluccia to remit to the Union dues checkoffs and Political Action Committee ("PAC") contributions that were based on the work performed by Union members and were deducted from the wages of those employees who authorized such deductions. (Am. Compl., ¶ 11). In furtherance of Page 3 this program, the Labor Contract obligated Deluccia to make available its books and records for periodic audits by the Funds. (Am. Compl., ¶ 11). Eugene Deluccia was the Vice President of Deluccia and executed the Labor Contract on the company's behalf. (Am. Compl., ¶ 12).

  Notwithstanding the Labor Contract, the defendants failed to pay fringe benefit contributions to the Funds, as well as dues checkoffs and PAC contributions to the Union, for the period June 1, 2000 to August 31, 2000. (Am Compl., ¶¶ 14-15, 22, 45-46, 50, 54-55, 59). The defendants also failed to permit the Funds to audit Deluccia's books for the period May 13, 1999, to the present. (Am. Compl., ¶¶ 1, 17, 39, 47, 56).

  The plaintiffs filed the instant action in 2001. When the defendants failed to answer, the Honorable Whitman Knapp, U.S.D.J., entered a default judgment and referred the case to me for an inquest on damages. (Order dated July 10, 2003).

 Discussion

  A. Jurisdiction

  As this case arises under ERISA, the Court has jurisdiction pursuant to 29 U.S.C. § 1132 (e)(1) and (f), as well as federal question jurisdiction under 28 U.S.C. § 1331. This Court also has jurisdiction under Section 301 of the Taft-Hartley Act, 29 U.S.C. § 185, and under 28 U.S.C. § 1337, as this is a civil action arising under an act of Congress regulating commerce. In addition, both defendants are subject to personal jurisdiction in this Court since they were doing business in New York at all relevant times. Page 4 See New York Civil Practice Law and Rules ("CPLR") § 301.

  B. Liability

  All of the plaintiffs' factual allegations, except those relating to damages, must be accepted as true where, as here, the defendants have defaulted. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997); Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Time Warner Cable of New York City v. Barnes, 13 F. Supp.2d 543, 547 (S.D.N.Y. 1998). In this case, the allegations of the Amended Complaint establish ERISA violations and breach of contract with respect to Deluccia.

  The Funds are employee benefit plans under ERISA, 29 U.S.C. § 1002(1), (2), (3) and 1132(d)(1) (Am. Compl., ¶¶ 4-8), while Deluccia was an employer under the terms of that statute, 29 U.S.C. § 1002(5), 1145. (Am. Compl., ¶ 11). Accordingly, Deluccia's obligations to the Funds under the Labor Contract are enforceable through ERISA. 29 U.S.C. § 1132 (a)(3).

  Deluccia was required by the Labor Contract to pay fringe benefit contributions to the Funds, and dues checkoffs and PAC contributions to the Union. It failed to comply with this requirement for the period June 1, 2000 to August 31, 2000. Deluccia was also required to permit an audit of its books and records, and it failed to comply for the period May 13, 1999 to the present. Consequently, Deluccia is liable to the Funds under ERISA and for breach of contract, and Deluccia is liable to the Union for breach of contract. Page 5 With respect to Eugene Deluccia, there must be "clear and explicit evidence of [an individual] defendant's intent to add personal liability to the liability of the entity." Mason Tenders District Council Welfare Fund v. Thomsen Construction Co., 301 F.3d 50, 53 (2d Cir. 2002) (internal quotation marks and citation omitted). The factors to be considered in determining such intent include "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. "[T]he mere presence of a personal liability clause in the signed agreement" is insufficient. Id. at 54; Mingoia v. Gamboi Brothers, Inc., No. 02 Civ. 6732, 2003 WL 22137987, at *2 (S.D.N.Y. Sept. 17, 2003).

  Other than quoting the identical personal liability clause that the Court in Thomsen deemed insufficient to hold a corporate president liable, the plaintiffs in this case have presented no evidence to demonstrate Mr. Deluccia's intent to accept liability for Deluccia's contractual obligations. Moreover, none of the Thomsen factors pertaining to contract language can be considered here, as the plaintiffs have not attached a copy of the Labor Contract to their pleadings or any other submissions. Accordingly, Eugene Deluccia should not be held liable for Deluccia's violations of the Labor Contract. Page 6

  C. Damages

  1. Principal

  Because the plaintiffs have been unable to obtain an audit, they have advanced a claim for unpaid contributions based on shop steward reports for the period of June 1, 2000 to August 31, 2000. The Funds are entitled to recover unpaid contributions as damages under the Labor Contract and ERISA, 29 U.S.C. § 1132 (g)(2)(A), while the Union is entitled to such damages under the Labor Contract.

  The plaintiffs have presented evidence that the Union's members performed 1,566 hours of work for Deluccia from June 1, 2000 to August 31, 2000. (Proposed Findings of Fact and Conclusions of Law ("Proposed Findings"), Exh. G). They have also conceded that payments were made to them on behalf of Deluccia during the pendency of this action; the plaintiffs have credited these payments to the amounts owed for August 2000. (Supplemental Affidavit of Dominick Giammona in Support of Plaintiffs' Motion for Default dated December 30, 2003 ("Giammona Supp. Aff."), ¶ 4). Accordingly, the remaining balance owed to the plaintiffs must be calculated based on the hours worked by Union members in June 2000 (332 hours) and July 2000 (268 hours). (Proposed Findings, Exh. G).

  With respect to fringe benefit contributions, Deluccia agreed to make payments at the rate of $13.04 per hour for June 2000 and $13.64 per hour for July 2000. (Giammona Supp. Aff., ¶ 5). Accordingly, the Funds are owed $4,329.28 for June 2000 and $3,655.52 for July 2000, or a total of $7,984.80. Page 7 With respect to the Union, Deluccia agreed to make contributions at the rate of $1.00 per hour for dues checkoffs and $0.10 per hour for PAC contributions. (Giammona Supp. Aff., ¶ 5). Accordingly, the Union is owed $600.00 in dues checkoffs and $60.00 in PAC contributions for June and July 2000.

  2. Interest

  The plaintiffs also seek an award of prejudgment interest on the above amounts. With respect to the Funds, section 1132 of ERISA specifies that double interest on unpaid contributions should be awarded as damages for a violation of ERISA. 29 U.S.C. § 1132(g)(2)(B), (C). Moreover, such interest "shall be determined by using the rate provided under the plan, or, if none, the rate prescribed under section 6621 of the Internal Revenue Code of 1986 [26 U.S.C. § 6621]." Id. at § 1132(g)(2).

  The Funds are entitled to recover from Deluccia double interest under ERISA on the amount of the unpaid contributions to them ($7,984.80). As to the rate of interest, the plan is silent, and the rate under 26 U.S.C. § 6621 should therefore apply. (Affidavit of Lawrence A. Kravitz in Support of Judgment by Default dated April 19, 2001 ("Kravitz Aff."), attached to Notice of Submission of Judgment by Default, ¶ 12). Accordingly, interest should be calculated from the date the damages accrued, or August 1, 2000, to the date of entry of judgment at the following annual rates, compounded daily:

6/1/00 — 3/31/01 9 percent
  4/1/01 — 6/30/01 8 percent Page 8

  7/1/01 — 12/31/01 7 percent

  1/1/02 — 12/31/01 6 percent

  1/1/03 — 7/30/03 5 percent

 See Revenue Rulings of the Internal Revenue Service, March 2000 — June 2003, 2000 WL 299021, 2000 WL 773743, 2000 WL 1268760, 2000 WL 1874229, 2001 WL 264433, 2001 WL 635494, 2001 WL 1047527, 2001 WL 1563674, 2002 WL 383014, 2002 WL 1265554, 2002 WL 2001131, 2002 WL 31685552, 2003 WL 1017773, 2003 WL 21310353. The interest so calculated should then be doubled as the statute requires.

  The Union is entitled to recover from Deluccia interest for breach of contract at the rate at the rate specified under state law. CPLR §§ 5001 and 5002 provide that "[i]nterest shall be recovered" on an action for breach of contract. Under CPLR § 5004, the rate of interest is set at nine percent per year. Accordingly, the Union is entitled to nine percent simple interest on the amount of unpaid contributions ($660.00) for the period August 1, 2000 to the date of entry of judgment.

  3. Audit Costs

  Under the Labor Contract, "[i]n 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." (Kravitz Aff., ¶ 14). Accordingly, the plaintiffs are entitled to an award of that amount.

  4. Attorneys' Fees and Costs

  The Labor Contract provides that "[i]n the event [the Funds] . . . bring an action to obtain an audit of the Employer's books Page 9 and records, the Employer shall be obligated to pay the reasonable costs and attorneys' fees incurred in bringing said action." (Kravitz Aff., ¶ 15). ERISA also mandates an award of "reasonable attorney's fees and costs of the action." 29 U.S.C. § 1132(g)(2)(D).

  Here, the plaintiffs seek a total of $3,142.00 in attorneys' fees. This application is based on 6.9 hours of work by two partners at the rate of $225.00 per hour, 8.7 hours of work by an associate at $125.00 per hour, 0.4 hours of work by another associate at $160.00 per hour, and 7.3 hours of work by two paralegals at $60.00 per hour. (Affidavit of Michael J. Vollbrecht dated Sept. 26, 2003; Affidavit of Tracy Martinell Henry dated Sept. 26, 2003, both attached to Proposed Findings). These requests were fully documented with contemporaneous time records. The time expended was reasonable, and the rates requested are commensurate with those generally charged for similar work in this district. Therefore, the request for fees should be granted in full.

  The plaintiffs also seek $230.00 in costs. This request is reasonable, as the Court's docket sheet indicates that $150.00 of this amount is attributable to the filing fee. The record also reflects that service was effected on both Deluccia and Eugene Deluccia using a licensed process server. (Affidavit of Service, attached as Exh. A to Kravitz Aff.). Accordingly, $230.00 should be awarded in costs. Page 10

  5. Order to Permit Audit and Post Bond

  The Labor Contract provides not only that Deluccia permit an audit of its books and records, but also that "[t]he Employer shall post and maintain a bond to ensure payment of contributions to the Fringe Benefit Funds . . . and remittance of dues checkoffs and NYLPAC contributions to the Union." (Am. Compl., ¶ 62).

  While the entry of judgment in this case holds Deluccia liable for unpaid contributions from June 1, 2000 to August 30, 2000, the total amount of Deluccia's liability is unknown, since it has not permitted an audit of its records for the period May 13, 1999 to the present. This Court should therefore issue an order directing Deluccia to permit and cooperate in an audit of its books and records for the period May 13, 1999, to the date on which Deluccia's obligations under the Labor Contract terminate.

  However, it is unnecessary to require the posting of a bond because the entry of judgment in this case will enable the plaintiffs to utilize the methods prescribed by statute to ensure Deluccia's payment of the amounts awarded. See CPLR §§ 5201 et seq. (enforcement of money judgments). Moreover, since it is unknown whether any additional contributions are owed for the period beginning May 13, 1999, posting a bond to "ensure payment" of such amounts would serve no purpose.

 Conclusion

  For the reasons set forth above, I recommend that judgment be entered against Deluccia in favor of the Funds in the amount of $7,984.80, and in favor of the Union in the amount of $660.00, plus Page 11 interest for the period August 1, 2000 to the date of entry of judgment at the rates specified above. I recommend that judgment be entered against Deluccia in favor of the plaintiffs in the amount of $3,772.00 for audit costs and attorneys' fees and costs. The plaintiffs are entitled to postjudgment interest under 28 U.S.C. § 1961 on all sums awarded. Finally, I recommend that this Court issue an order directing Deluccia to permit and cooperate in an audit of its books and records for the period May 13, 1999, to the date on which Deluccia's obligations under the Labor Contract terminate.

  Pursuant to 28 U.S.C. § 636 (b)(1) and Rules 72, 6(a), and 6(e) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from this date to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of the Court, with extra copies delivered to the chambers of the Honorable Whitman Knapp, Room 1201, 40 Foley Square, New York, New York 10007, and to the chambers of the undersigned, Room 1960, 500 Pearl Street, New York, New York 10007. Failure to file timely objections will preclude appellate review.

20040129

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