UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
November 15, 2005
CARMINE MINGOIA, ET AL., PLAINTIFFS,
AMERICAN LATH & PLASTER CO., INC., AND DOUGLAS SCHWARTZ, INDIVIDUALLY AND JOINTLY AND SEVERALLY, DEFENDANTS.
The opinion of the court was delivered by: James C. Francis IV United States Magistrate Judge
MEMORANDUM AND ORDER
The plaintiffs in this case are the trustees of the Operative Plasterers' and Cement Masons' International Association, Local 530 employee benefit funds ("Local 530" or "Funds"). The defendants are American Lath & Plaster Company, Incorporated ("American Lath") and its President, Douglas Schwartz. The plaintiffs previously obtained a stipulation and consent order against the defendants, and they now seek to hold the defendants in contempt of court for failure to abide by the terms of that order. The plaintiffs also seek an award of attorneys' fees and costs associated with this motion. For the reasons set forth below, the plaintiffs' motion is granted.
On January 7, 2005, pursuant to a settlement agreement between the parties, I issued a stipulation and consent order ("Order") that required the defendants to pay $38,021.08 to Local 530 for delinquent employee benefit fund contributions and union dues. (Order at 3). Including interest, the total amount due was $40,397.40. (Order at 3). Because the defendants represented that they were unable to pay the full amount, the Order provided that defendants would make a $12,000.00 payment on November 17, 2004 and pay the remaining $28,397.40 in four monthly installments.*fn1
(Order at 3). The defendants also agreed to submit to an audit for the period of July 23, 2003 to December 15, 2004 and pay all amounts due thereunder to the plaintiffs within sixty days of receipt of a copy of the audit. (Order at 4). Finally, the defendants were required to submit monthly remittance reports and pay their current monthly employee benefit fund payments to Local 530. (Order at 4).
The Order held American Lath and Mr. Schwartz jointly and severally liable (Order at 3), and defined default as a failure to make payments or the dishonoring of a check tendered by the defendants. (Order at 5). In the event of default, the Order provided that the plaintiffs could take any action to collect the outstanding delinquencies, including all measures to enforce the judgment. (Order at 5). Additionally, pursuant to 29 U.S.C. § 1132, the plaintiffs would be entitled to $10,000.00 in attorneys' fees and liquidated damages. (Order at 5).
The defendants submitted $8,673.70 to the plaintiffs on December 15, 2004 as the first scheduled payment under the Order. (Williams Decl., Exh. C; Pl. Statement at 6). Though the defendants' bank initially dishonored the check, it was re-deposited and accepted by the plaintiffs in early January.
(Williams Decl., Exh. C). The plaintiffs allege, and the defendants do not dispute, that no further payments were made on schedule.*fn2 (Williams Decl., ¶ 3; Declaration of Marc A. Pergament dated June 15, 2005 ("Pergament Decl."), ¶ 12). Nor did the defendants submit payment of $8,766.01 due under the December 2004 audit. (Williams Decl., ¶ 5; Transcript of Hearing dated July 25, 2005 ("H.") at 52). The defendants submitted a second payment of $3,028.12 in May 2005 (Pl. Statement at 6) and a third payment of $16,286.00 in June 2005 (H. at 12; Pl. Statement at 6).
The plaintiffs also allege, and the defendants again do not dispute, that the defendants made no contributions to the Fund from January 2005 to April 2005. (Williams Decl., ¶ 6; Pergament Decl., ¶¶ 16, 17). The defendants also did not submit remittance reports for the period between February 15, 2005 to April 26, 2005 until after the filing of this motion. (Reply Declaration of Raquel A. Williams dated June 22, 2005 ("Williams Reply Decl."), ¶ 13). No payments were sent with the reports.*fn3 (Williams Reply Decl., ¶ 13).
During his July 25, 2005 testimony, Mr. Schwartz testified that American Lath owed approximately $50,000.00 to the Internal Revenue Service (H. 26) and had not received payments from completed jobs. (H. 27-28, 30). From January 30, 2005 to June 30, 2005, the company did not take jobs for eight or ten weeks (H. 19), and Mr. Schwartz did not personally take a payroll check for twelve weeks. (H. 18). However, Mr. Schwartz testified that during the same period, American Lath had worked approximately six jobs (H. 20) and was making payments to both the Internal Revenue Service (H. 26) and Local 79.*fn4 (H. 29). American Lath also received $83,600.00 in April and May 2005, but used the money to pay business operating expenses. (H. 16-18). Regarding his personal finances, Mr. Schwartz stated in his affidavit that he also is "indebted to the taxing authorities." (Schwartz Aff., ¶ 14). During his testimony, however, he stated that he is a shareholder in five corporations in Florida, each of which is a holding company for specific property. (H. 21). Mr. Schwartz estimates his monthly compensation from these properties to be $11,500.00. (H. 22-25).
The plaintiffs sent several letters to the defendants, requesting that they bring the installment payments up to date. (Williams Decl., Exh. C). The plaintiffs' final letter, dated April 25, 2005, informed the defendants that full payment of $50,883.18*fn5 was to be remitted to the Funds' office by April 29, 2005. (Williams Decl. Exh. C). The defendants did not make this payment, and the plaintiffs then filed this motion.
A determination of contempt must be predicated on three findings: (1) that the order allegedly violated is clear and unambiguous; (2) that the proof of noncompliance is clear and convincing; and (3) that "the contemnor has not diligently attempted to comply in a reasonable manner." Paramedics Electromedicina Comercial, Ltda. v. GE Medical Systems Information Technologies, Inc., 369 F.3d 645, 655 (2d Cir. 2004) (quoting King v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995)). To be clear and unambiguous, the order must be "specific and definite enough to apprise those within its scope of the conduct that is being proscribed." Mingoia v. Crescent Wall Systems, No. 03 Civ. 7143, 2005 WL 991773, at *1 (S.D.N.Y. April 26, 2005) (quoting Panix Promotions, Ltd. v. Lewis, No. 01 Civ. 2709, 2004 WL 421937, at *2 (S.D.N.Y. March 5, 2004).
The defendants do not dispute that my order was clear and unambiguous. The Order set forth the defendants' obligation to pay their required contributions to the Funds as they became due and the past due contributions according to an installment schedule set by the Order. (Order at 4, 11).
The proof of the defendants' noncompliance is clear as well. Mr. Schwartz acknowledged during his July 25, 2005 testimony that neither he nor American Lath paid the monthly installments, the $8,766.01 due under the audit, or the monthly contributions to the Fund. Indeed, Mr. Schwartz testified that neither he nor American Lath made any payments after the December 31, 2004 payment until May 2005, when the defendants submitted the $3,028.12 check. Additionally, Mr. Schwartz testified that he did not submit any remittance reports to Local 530 for the period between signing the agreement and June 2005. The defendants do not deny their failure to comply with the Order.
The thrust of the defendants' argument is that contempt sanctions are inappropriate because their noncompliance is the result of their inability to pay.*fn6 The defendants argue that had the plaintiffs conducted an asset deposition, they would have learned that the defendants' failure to comply with the Order was due to financial difficulty. (Pergament Decl., ¶ 33). The defendants improperly place the burden on the plaintiffs to show the defendants' ability to pay. Although a party's complete inability to comply with a court order due to poverty or insolvency is a defense to a charge of civil contempt, "there is no requirement that the ability to pay be clearly established." Huber v. Marine Midland Bank, 51 F.3d 5, 10 (2d Cir. 1995). Rather, the burden is on the alleged contemnor to show clearly, plainly, and unmistakably his complete inability to comply. Id.
The alleged contemnor's burden is one of production, and is not easily met. A.V. by Versace, Inc. v. Gianni Versace, 279 F. Supp. 2d 341, 346 (S.D.N.Y. 2003) (stating that in order to meet this burden, defendant "must submit a full and complete picture of his finances" in an orderly fashion and with explanation). Indeed, the alleged contemnor must show that compliance is impossible. Huber, 51 F.3d at 10. The burden is not met if the alleged contemnor fails to offer evidence of his inability to comply with the order. See id. at 11 (contempt motion upheld because defendant presented no documents by which court could determine if defendant had assets and income); Donovan v. Sovereign Security, Ltd., 726 F.2d 55 (2d Cir. 1984) (lower court erred in accepting affidavit and counsel's claims as sufficient evidence of defendant's inability to pay). Conclusory statements are insufficient to meet this burden. Huber, 51 F.3d at 10. The defendants here rely on Mr. Schwartz's June 15, 2005 affidavit and July 25, 2005 testimony that American Lath's financial instability prevented it from making installment payments according to the Order, but they have not provided any documentary evidence by which I could verify these assertions. The defendants also have not provided the Court with any documentary evidence establishing Mr. Schwartz's inability to comply with the Order. During his July 25, 2005 testimony, Mr. Schwartz stated that he received approximately $11,500 per month from property located in Florida, yet he has not presented evidence as to why all or part of these funds could not be used to satisfy the defendants' obligations under the Order. The defendants therefore have not established that compliance with the Order was impossible.
Finally, the defendants have failed to exercise diligence in attempting to comply with the Order. A party unable to fully comply with an Order must pay what it can. See SEC v. Musella, 818 F. Supp. 600, 602 (S.D.N.Y. 1993) (contemnor could have paid small amounts to the Clerk of Court until matter was resolved). The defendants were obligated to pay whatever amount they could, and they failed to do so.
B. Attorneys' Fees
The Order provides that in the event of default by the defendants, they would be liable to the plaintiffs for $10,000, "representing attorneys' fees and liquidated damages." (Order, ¶ 5). This provision has clearly been triggered, and the plaintiffs are entitled to an award in that amount.
The plaintiffs, however, also seek fees in the amount of $2,112.50 for work performed in connection with the instant motion. Such an award would be duplicative of that provided for in the Order. By its terms, the $10,000 award is a "reasonable estimate" of damages that would result from default, including attorneys' fees. Therefore, no additional assessment of fees is warranted. Conclusion
For the reasons set forth above, the plaintiffs' motion to hold the defendants in contempt is granted, and judgment shall be entered in favor of plaintiffs and against the defendants, jointly and severally, in the amount of $10,000. Of course, the defendants also remain obligated to make all payments required under the Order.
JAMES C. FRANCIS IV UNITED STATES MAGISTRATE JUDGE