United States District Court, S.D. New York
June 9, 2005.
CARMINE MINGOIA, JOSEPH OLIVIERI and GEORGE NICKOLETOS, as TRUSTEES of the OPERATIVE PLASTERERS' AND THE CEMENT MASONS' INTERNATIONAL ASSOCIATION, LOCAL 530 WELFARE FUND, INSURANCE FUND, ANNUITY FUND, VACATION FUND, TRAINING FUND AND APPRENTICESHIP FUND, and the OPERATIVE PLASTERERS' AND THE CEMENT MASONS' INTERNATIONAL ASSOCIATION, LOCAL 530, AFL-CIO, Plaintiffs,
SANTA FE DRYWALL CORP. and XERCHES FRECHIANI, individually and jointly and severally, Defendants.
The opinion of the court was delivered by: RICHARD BERMAN, District Judge
DECISION AND ORDER
On March 2, 2004, the Operative Plasterers' and the Cement
Masons' International Association, Local 530 Welfare Fund,
Insurance Fund, Annuity Fund, Vacation Fund, Training Fund and
Apprenticeship Fund (the "Funds"), and the Operative Plasterers'
and the Cement Masons' International Association, Local 530,
AFL-CIO (the "Union") (collectively, "Plaintiffs") filed a
complaint ("Complaint") against Santa Fe Drywall Corp. ("Santa
Fe"), an employer with whom the Union had entered into a
collective bargaining agreement, dated February 2, 2000,
governing the rates of pay and working conditions of individuals
employed by Santa Fe, and Santa Fe's principal, Xerches Frechiani
("Frechiani") (collectively, "Defendants"), pursuant to Section
301 of the Labor Management Relations Act ("LMRA"),
29 U.S.C. § 185, and Sections 515 and 502(a)(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1145 and 1132(a)(3). (See "Collective Bargaining Agreement"
dated Feb. 2, 2000, Ex. A to Plaintiffs' Statement of Undisputed
Material Facts pursuant to Local Civil Rule 56.1 dated Dec. 3,
2004 ("Pl. 56.1 Stmt.") ("CBA" or "Agreement").) Plaintiffs
allege that, among other things, Defendants breached the
collective bargaining agreement by failing to "produce to the
Fund's auditors all books and records to conduct a payroll audit"
for the period July 1, 2001 through June 30, 2003 and, as a
result, is required to pay (the amount calculated by the Funds'
auditor to be delinquent) no less than $369,784.94 in outstanding
fund contributions and no less than $37,601.04 in outstanding
union dues. (Complaint ¶¶ 13, 18, 22-23, 25.)*fn1 Plaintiffs
also seek liquidated and statutory damages, interest, attorneys'
fees and costs. (Id. at 6-7.)
On December 3, 2004, Plaintiffs moved for summary judgment
("Pl. Mot.") pursuant to Federal Rule of Civil Procedure ("
Fed.R.Civ.P.") 56. In support of their motion, Plaintiffs submitted
a Rule 56.1 Statement and several affidavits. On or around
February 15, 2005, Defendants opposed Plaintiffs' Motion ("Def.
Opp'n") and submitted supporting affidavits, but did not respond
to Plaintiffs' Rule 56.1 Statement, or submit its own Rule 56.1
Statement. Plaintiffs filed a Reply Memorandum of Law in Further
Support of the Plaintiffs' Motion for Summary Judgment, with
supporting affidavits, on March 1, 2005 ("Pl. Reply"). The
parties waived oral argument at a conference before the Court on
January 27, 2005. For the reasons below, Plaintiffs' motion for
summary judgment is granted in part and denied in part.
The following facts are undisputed, except where noted: Santa Fe was incorporated in the State of New York and engaged
in the business of drywalling, skim-coating and finishing walls.
(Pl. 56.1 Stmt. ¶ 10; Def. Opp'n at 1.) Frechiani is the
president and principal of Santa Fe. (Frechiani Aff. ¶ 2; Pl.
56.1 Stmt. ¶ 11; CBA at 45.) Since on or about February 2, 2000,
Santa Fe and the Union have been parties to the CBA which, among
other things, provides for "jointly administered labor-management
trust funds" whose purpose is "to receive and collect required
fringe benefit contributions and to provide various fringe
benefits to eligible employees on whose behalf employers
contribute to the Funds pursuant to Collective Bargaining
Agreements." (See CBA at 1; Pl. 56.1 Stmt. ¶¶ 5, 7.) Pursuant
to the CBA, Defendants "are required to remit monthly
contributions to the Funds in agreed amounts per hour of the
wages of [Santa Fe] employees engaged in covered employment
within the jurisdiction of the Union." (Pl. 56.1 Stmt. ¶ 14.) The
Agreement also states, among other things:
The Employer shall retain, for a minimum period of
six (6) years, payroll and related records for the
conduct of a proper audit in order that a duly
designated representative of the Trustees may make
periodic review to confirm that contributions owed
pursuant to this Agreement are paid in full. In the
event, after the Trustees have made a reasonable
request, the Employer fails to produce its books and
records necessary for a proper audit, the Trustees,
in their sole discretion, may determine that the
Employer's monthly hours subject to contributions for
each month of the requested audit period are the
highest number of employee hours for any month during
the twelve preceding months audited, or during the
last twelve (12) months for which reports were filed,
whichever monthly number of hours is greater.
(CBA, Art. X, § 7 (emphasis added).) The Agreement also states:
"The person signing on behalf of the Employer also agrees to be
personally bound by and to assume all obligations of the Employer
provided in the Agreement . . ." (CBA, Art. XX.) Frechiani, as
President, signed the CBA on behalf of Santa Fe. (Pl. 56.1 Stmt.
¶ 11; CBA at 45.) The Agreement expired on February 4, 2003. (CBA, Art. XIX.)
Defendants claim that in or around the Spring of 2002, after
experiencing financial difficulty, Frechiani determined that he
"could no longer maintain Santa Fe" and made plans to "shut it
down by the summer." (Affidavit of Xerches Frechiani dated Feb.
4, 2005 ("Frechiani Aff."), ¶ 19.) According to Defendants, Santa
Fe "was effectively out of business by July 2002." (Id. ¶ 22.)
Plaintiffs dispute that Santa Fe ceased business operations in
July 2002. (See Affidavit of Charles Farinella dated March 1,
2005 ("Farinella Reply Aff."), ¶¶ 31-47.)
"In or around October, 2003 the Funds performed an audit of the
defendants' payroll records for the period of July 1, 2001
through to September 30, 2003." (Pl. 56.1 Stmt. ¶ 15; Affidavit
of Charles Farinella dated Dec. 2, 2004 ("Farinella Aff."), ¶
10.) Plaintiffs' auditor determined a delinquency "in fringe
benefit funds . . . in the aggregate amount of $371,658.04 and
$37,193.87 in dues owed to [the Union]." (Farinella Aff. ¶ 10;
"Local 530 Payroll Audit" dated Dec. 3, 2004, Ex. B to Farinella
Reply Aff. ("Plaintiffs' Audit").) Because Santa Fe did not
provide "to the Plaintiffs, to Plaintiffs' counsel or to
[Plaintiffs' auditor], the required documentation . . . to
complete the payroll audit" for the period August, 2002 to
September, 2003, the "$371,658.04 audit amount . . . includes an
assessment made by the auditors for [that period]" pursuant to
Article X, Section 7 of the CBA. (Farinella Aff. ¶¶ 14-15; CBA,
Art. X, § 7.)
Defendants maintain that "all the documents, payroll records,
tax returns and canceled checks made payable to the union
demonstrates Santa Fe did not continue operations after July 2002
and the monies it received [after July 2002] was for work
previously performed." (Affidavit in Opposition of Pablo F.
Sanchez dated Feb. 4, 2005 ("Sanchez Aff."), ¶ 24; see also
Frechiani Aff. ¶ 31 ("The plaintiffs' contention that Santa Fe
continued in business into 2003 is incorrect and not true.").) According to the calculations of Defendants'
auditor, for the period of July 1, 2001 to June 30, 2003, "the
amount due to Local 530, Welfare Fund and other benefits [was]
$198,633.18." (Sanchez Aff. ¶¶ 9-11.) The amount "paid to Local
530 or [the] General Benefits Fund Local 530 for the period
February 6, 2001 to July 1, 2002" was $197,039.50, and thus, the
amount currently outstanding and owed to "Local 530, Welfare Fund
and other benefits" is $1,593.68. (Id. ¶¶ 11, 14.) Plaintiffs
dispute that they were provided with "documents proving that this
money was retainage and not for actual work performed by Santa Fe
after the defendant alleges that Santa Fe ceased business
operations." (Farinella Reply Aff. ¶¶ 36-37.)
III. Legal Standard
Federal Rule of Civil Procedure 56(c) provides that summary
judgment "shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material issue of fact and that the
moving party is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(c); see Sharkey v. Ultramar Energy Ltd.,
70 F.3d 226, 228 (2d Cir. 1995). A district judge "must view the evidence
in the light most favorable to the non-moving party and draw all
reasonable inferences in its favor." Cement & Concrete Workers
Dist. Council Welfare Fund, Pension Fund, Legal Servs. Fund &
Annuity Fund v. Lollo, 35 F.3d 29, 32 (2d Cir. 1994) (internal
quotations omitted) ("Lollo").
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.
Tri-State Employment Servs., Inc. v. Mountbatten Sur. Co.,
295 F.3d 256, 260 (2d Cir. 2002). A genuine issue of material fact
exists if "a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986); see also Converse v. Gen. 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." Brown
v. Dominic Prisco Transp., Inc., No. 95 Civ. 1121, 1997 WL
1093463, at *2 (E.D.N.Y. Aug. 16, 1997); see Rattner v.
Netburn, 930 F.2d 204, 209 (2d Cir. 1991).
Rule 56.1 of the Local Rules of the United States District
Courts for the Southern and Eastern Districts of New York ("Rule
56.1") requires that any motion for summary judgment be
accompanied by "a separate, short and concise statement . . . of
the material facts as to which the moving party contends there is
no genuine issue to be tried," Rule 56.1(a), and that "papers
opposing a motion for summary judgment shall include a
correspondingly numbered paragraph responding to each numbered
paragraph in the statement of the moving party, and if necessary,
additional paragraphs containing a separate, short and concise
statement of the material facts as to which it is contended that
there exists a genuine issue to be tried," Rule 56.1(b). "If the
opposing party ? fails to controvert a fact so set forth in the
moving party's Rule 56.1 statement, that fact will be deemed
admitted. However, . . . `the local rule does not absolve the
party seeking summary judgment of the burden of showing that it
is entitled to judgment as a matter of law . . .'" Giannullo v.
City of New York, 322 F.3d 139, 140 (2d Cir. 2003) (internal
Section 301 of the LMRA ("Section 301") governs labor disputes
and states, in relevant part:
Suits for violation of contracts between an employer
and a labor organization . . . may be brought in any
district court of the United States having
jurisdiction of the parties, without respect to the amount in controversy or without regard to the
citizenship of the parties.
29 U.S.C. § 185. Section 515 of ERISA applies to this action and
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
the law, make such contributions in accordance with
the terms and conditions of such plan or such
29 U.S.C. § 1145.
Defendants do not appear to dispute that Santa Fe is liable to
Plaintiffs for a certain amount of delinquent contributions
and/or dues. (See Sanchez Aff. ¶ 23 ("[B]ased on the work
performed by myself and my colleagues, we calculated the arrears
to be $1593.68."); see also Frechiani Aff. ¶¶ 13, 29 ("It was
only in 2002 that I began to realize that Mr. Alvarez [Santa Fe's
accountant] was not properly handling my work . . . Throughout
the entire life of Santa Fe I always tried to properly credit and
pay the union all the sums to which it was entitled.").) Thus,
the principal issues in dispute are: (A) whether Frechiani should
be held individually liable for Santa Fe's delinquent
contributions, Pl. Mot. at 4, 16; and (B) the amount of damages
owed to Plaintiffs, Pl. Mot. at 8-15; Def. Opp'n at 6-11. These
issues are addressed below.
(A) Frechiani Liability
Plaintiffs argue that "[t]he individual Defendant is personally
liable for the [delinquent] contributions based on the express
language on the signature page of the collective bargaining
agreement where the individual Defendant, Frechiani[,] consents
to being individually liable for the amounts owed to the
Plaintiff by Santa Fe." (Pl. Mot. at 16; see also CBA, Art.
XX.) Defendants did not address this argument in their Opposition.
While federal law generally governs disputes arising under
Section 301, "state law, if compatible with the purpose of § 301,
may be resorted to in order to find the rule that will best
effectuate the federal policy." Lerner v. Amalgamated Clothing &
Textile Workers Union, 938 F.2d 2, 5 (2d Cir. 1991) (applying
New York law to resolve whether collective bargaining agreement
imposed personal liability on the signatory) (internal citations
omitted); see also Lollo, 35 F.3d at 35 (same). Under New
York law, there must be "`clear and explicit evidence' of the
defendant's intent to add personal liability to the liability of
the entity, where entity liability is established under the
agreement." Mason Tenders Dist. Council Welfare Fund v. Thomsen
Constr. Co., 301 F.3d 50, 53 (2d Cir. 2002) (citation omitted)
("Thomsen Constr."). To determine whether there is sufficient
evidence of intent, New York courts consider certain factors,
including "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. (quoting Lollo, 35 F.3d at 35); see
also Lerner, 938 F.2d at 4-5. Individual liability has been
found "only in rare cases" because there must be "overwhelming
evidence of the signatory's intention to assume personal
liability." Lerner, 938 F.2d at 5.
Upon consideration of the Agreement and the factors above, the
Court concludes that personal liability is not established for
the following reasons. First, the "mere presence of a personal
liability clause in the signed agreement," without more, does not
meet "the high degree of intention" required by New York law.
Thomsen Constr., 301 F.3d at 54; see CBA at 45. Second,
Frechiani signed the Agreement only once and did so in his
capacity as "President." (CBA at 45.) "[W]here individual responsibility is demanded the
nearly universal practice is that the officer signs twice once as
an officer and again as an individual." Salzman Sign Co. v.
Beck, 176 N.E.2d 74, 76 (N.Y. 1961); see also Mason Tenders
Dist. Council Welfare Fund v. JNG Constr. Ltd., No. 00 Civ.
1032, 2003 WL 22999453, at *5 (S.D.N.Y. Dec. 19, 2003) (while two
signatures are not required, the "appearance of only one
signature further supports a finding that the signatory did not
intend to be bound"). Finally, Frechiani's name appears nowhere
in the printed text of the 45 page Agreement, and Plaintiffs have
presented no evidence of "the nature of the negotiations leading
to the contract" indicating an intention on Frechiani's part to
be personally bound. See Thomsen Constr., 301 F.3d at 53.
Plaintiffs contend that where, as here, an employer fails to
comply with the record-keeping requirements of ERISA, "district
courts routinely shift the burden to the defendant to disprove
the proof of damages." (Pl. Mot. at 8.) Plaintiffs state that
"[i]n the voluminous number of documents submitted by the
defendants . . . there is not one shred of evidence proving that
the amount owed is indeed $1,593.60." (Pl. Reply at 8.) Since
Defendants have failed to disprove Plaintiffs' damages, "the
Court should adopt the audit report and grant the Funds summary
judgment . . . for the audit amount, plus contractual and
statutory amounts . . ." (Pl. Mot. at 8.)
Defendants respond that the "presumption of burden shifting in
an ERISA litigation . . . on a motion for summary judgment . . .
is not the rule in the Southern District, and is also a gross
mischaracterization of the presumption rule as applied in other
districts." (Def. Opp'n at 6.) Defendants further respond that
even if burden shifting were to apply, "there are significant
issues of fact that would preclude use of the presumption of
burden shifting," including (i) that "Santa Fe stopped operating in July 2002" and "Plaintiffs are demanding
that Defendants pay for benefits for work not performed in 2003;"
and (ii) that Plaintiffs' audit is based on the assumption that
"Defendants did not produce `sufficient' records to establish
that no work had been performed since July of 2002" and
Plaintiffs "ignore that the Defendants have since produced the
records and a full audit was conducted." (Id. at 6-11.)
Santa Fe has raised genuine issues of material fact as to the
amount of damages owed to Plaintiffs, including (i) whether Santa
Fe was effectively out of business by July 2002 (or at some other
time during the audit period), see Sanchez Aff. ¶¶ 11, 15,
25-26; Frechiani Aff. ¶¶ 20-22, 31; Farinella Reply Aff. ¶¶
31-47; Plaintiffs' Audit; Letter from Pablo F. Sanchez to Milton
H. Florez dated Oct. 23, 2004, Ex. C to Farinella Reply Aff.
("Defendants' Audit"); "Employer's Remittance Agreement and
Report" dated Aug. 26, 2002, Ex. Q to Farinella Reply Aff.; (ii)
whether payments received by Santa Fe until the end of October
2002 were for work previously performed, see id.; "Component
Assembly Systems, Inc. Subcontract" dated Aug. 28, 2002, Ex. K to
Farinella Reply Aff.; and (iii) whether Santa Fe provided
Plaintiffs' auditor with sufficient documentation to perform a
complete audit, see Sanchez Aff. ¶ 11; Frechiani Aff. ¶¶ 27-28;
Farinella Reply Aff. ¶¶ 31-47; "Facsimile Transmittal Sheet"
dated Oct. 27, 2004, Ex. E to Farinella Reply Aff. See also
Demolition Workers Union v. Mackroyce Contracting Corp., No. 97
Civ. 4094, 2000 WL 297244, at *8 (S.D.N.Y. Mar. 22, 2000)
("Because further inquiry into the propriety of the auditors'
calculations and the adequacy of [defendant's] employee records
is needed, this Court must deny the Funds' motion for summary
judgment as to the amounts remaining in dispute."); Central
Pension Fund of the Int'l Union of Operating Engineers &
Participating Employers v. Murphy's Tire, Inc., No. 97 Civ. 814,
1998 WL 865594, at *9 (N.D.N.Y. Dec. 9, 1998) ("`Although the defendant has not
presented precise documentation regarding the number of hours
actually worked by employees of sub-contractors and would need
to do so at trial it has presented evidence which puts the
funds calculation into question' and summary judgment is
improper.") (quoting Chicago Dist. Council of Carpenters Pension
Fund v. S & M Exteriors, Inc., No. 95 C 4456, 1996 WL 327989, at
*1-2 (N.D. Ill. June 12, 1996)) ("Murphy's Tire"); Illinois
Conference of Teamsters & Employers Welfare Fund v. Steve Gilbert
Trucking, 71 F.3d 1361, 1367 (7th Cir. 1995) ("[Defendant's]
affidavit and deposition testimony asserted several facts that
would cast doubt upon the accuracy of the Fund's calculations,
and thus raised a genuine issue of material fact sufficient to
withstand summary judgment as to the amount of damages.")
("Steve Gilbert Trucking").
Moreover, Plaintiffs' burden-shifting argument is unpersuasive.
Plaintiffs rely on cases from other circuits that were not
decided in the same procedural posture as this case. See
Michigan Laborers' Health Care Fund v. Grimaldi Concrete, Inc.,
30 F.3d 692 (6th Cir. 1994); see also Brick Masons Pension
Trust v. Indus. Fence & Supply, Inc., 839 F.2d 1333 (9th Cir.
1988); Combs v. King, 764 F.2d 818 (11th Cir. 1985). While the
United States Court of Appeals for the Second Circuit has not
addressed burden shifting under ERISA for an employer's failure
to maintain sufficient records, courts within (and outside) the
Second Circuit have rejected the burden-shifting analysis when
applied on summary judgment against the employer. See
Demolition Workers, 2000 WL 297244, at *7 ("This Court,
however, will not employ the burden-shifting analysis . . . at
the summary judgment stage. . . . It should be emphasized that,
at trial, the burden-shifting analysis . . . will be utilized.");
Murphy's Tire, 1998 WL 865594, at *8 ("an employer's failure to
come forward with documentary evidence in opposing summary
judgment is not fatal"); Brown, 1997 WL 1093463, at *10; see also Steve
Gilbert Trucking, 71 F.3d at 1367 (noting that not one of the
cases applying the burden-shifting approach has ever held that
"an employer's failure to maintain adequate records compels
summary judgment against it") (emphasis in original). Inquiries
into the "reasonableness of [the Funds'] audit or the adequacy of
[defendants'] employee records . . . are properly left for
trial," Demolition Workers, 2000 WL 297244, at *7, and "the
proper question in deciding the Fund's motion for summary
judgment is whether defendant has submitted evidence that raises
a factual dispute as to the amount of damages owing the Fund,"
Murphy's Tire, 1998 WL 865594, at *8.
And, the parties appear to disagree as to the appropriate audit
period, see Williams Reply Aff. ¶ 11 ("The audit period for
this Compl[ai]nt is the period July 1, 2001 through to September
30, 2003 [and] not the February 1, 2001 through to July 1, 2002;
July 1, 2001 to June 30, 2003[;] and July 1, 2001 through to
December 31, 2002 periods for which Mr. Sanchez [Defendants'
auditor] claimed he was retained . . ."), as well as the
implications of the CBA expiring on February 4, 2003, see CBA,
Art. XIX; see also Baldwin v. Motor Components, L.L.C., No.
03 Civ. 6228T, 2004 WL 1698600, at *4 (W.D.N.Y. Jan. 20, 2004)
("In each CBA between plaintiffs and defendants, an exact time
for expiration was established, and accordingly, defendants'
obligations under the CBA would expire at that exact time.");
Gorodkin v. Q-Co. Indus., Inc., No. 89 Civ. 8033, 1992 WL
122769, at *2 (S.D.N.Y. May 27, 1992) ("We hold that collective
bargaining agreements expire according to their own terms and
neither employers nor unions have any implied obligation to enter
into a new agreement."). V. Conclusion and Order
For the foregoing reasons, Plaintiffs' motion for summary
judgment  is granted in part and denied in part as follows:
(i) Summary judgment as to Santa Fe's liability is
(ii) Summary judgment as to the individual liability
of Xerches Frechiani is DENIED;
(iii) Summary judgment as to undisputed damages in
the amount of $1,593.68 is GRANTED; and
(iv) Summary judgment as to additional damages
claimed by Plaintiffs is DENIED.
The parties are requested to appear at a settlement/status
conference with the Court on July 1, 2005, at 10:30 a.m., in
Courtroom 706 of the Thurgood Marshall Courthouse, 40 Centre
Street, New York, New York. The parties are directed to engage
in good faith settlement negotiations prior to the conference.