The opinion of the court was delivered by: Joseph F. Bianco, District Judge
Plaintiff Larry Jacobson as Chairman of the Joint Industry Board of Electrical Industry ("Joint Board") filed the instant action for delinquent employee benefit plan contributions under Section 515 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1145, against defendant Metropolitan Switchboard Company, Inc. ("Metropolitan Switchboard"). Plaintiff now moves for summary judgment on its claims for contribution, together with interest, liquidated damages and attorneys' fees. For the reasons that follow plaintiff's motion is granted as to defendant's liability. However, because there are issues of fact regarding damages, a trial will be held to determine damages owed.
The facts described below are taken from the parties' deposition, declarations, affidavits, exhibits and respective Local Rule 56.1 statements of facts.*fn1 Upon consideration of a motion for summary judgment, the Court shall construe the facts in the light most favorable to the non-moving party. See Capobianco v. City of New York, 422 F.3d 47, 50 (2d Cir. 2001).
The Joint Board is the administrator of various employee benefit plans established and maintained pursuant to collective bargaining agreements between Local Union No. 3 of the International Brotherhood of Electrical Works, AFL-CIO ("Local 3" or "the Union"), and employers in the electrical, elevator, sign, television, burglar alarm and other related industries. (Plaintiff's Statement Pursuant to Local Civil Rule 56.1 (hereinafter "Pl.'s 56.1 Stmt") ¶ 1.)*fn2 The Joint Board is the administrator and fiduciary within the meaning of Sections 3(16)(A)(I) and 2(21)(A) of ERISA, 29 U.S.C. §§ 1002(16)(A)(I) and 1002(21)(A), of each of the following employee benefit plans: the Employee Security Fund Pension Plan, the Employee Security Fund Health and Welfare Plan (collectively, the "Pension and Welfare Plan"), the Educational and Cultural Trust Fund of the Electrical Industry, the Annuity Plan of the Electrical Industry, the Additional Security Benefit Fund of the Electrical Industry (the "ASBF") and the Health Reimbursement Account Fund of the Electrical Industry (the "HRA") and the Deferred Salary Fund of the Electrical Industry (the "401(k) Plan") (collectively, the "Plans"). (Id. ¶ 2.) Each of the above Plans is an employee benefit plan within the meaning of 29 U.S.C. § 1002(3), and is a multiemployer plan within the meaning of 29 U.S.C. § 1002(37). (Id. ¶ 3.)
The Joint Board and the trust agreements of the employee benefit plans it administers require contributing employers to submit written forms, referred to as "payroll reports," that include the contributing employer's statement of the number of hours worked by its employees in covered employment each week, along with the required contribution payments to the Joint Board. (Id. ¶ 7.) The Joint Board also requires contributing employers to submit periodic audits of their books and records to verify that the correct amount of contributions have been made and to identify all individuals who may be eligible for benefits from the Joint Board. (Id. ¶ 8.) Pursuant to the collective bargaining agreements and the trust agreements for the employee benefit plans, the Joint Board is the administrator and fiduciary of the employee benefit plans. (Id. ¶ 10.) The collective bargaining agreements and the trust agreements require employers to remit contributions directly to the Joint Board and the Joint Board is empowered to enforce the contribution obligation. (Id. ¶ 10.) Contributions for employee benefit plans are calculated as a percentage of employee gross wages, inclusive of regular or straight time and overtime hours, plus vacation time, jury duty, sick pay, bereavement pay and commissions. (Id. ¶ 10(a)). The Joint Board calculates interest in accordance with either the collective bargaining agreement and trust agreements of the plans, or Section 6621 of the Internal Revenue Code of 1986, as amended, as permitted by 29 U.S.C. § 1132(g)(2). (Id. ¶ 11.)
Metropolitan Electric Manufacturing Co., Inc. ("MEMCO") was a New York corporation located at 200 Dixon Avenue in Amityville, New York. (Id. ¶ 12.) It was engaged in the electrical manufacturing business, including the manufacture of panel boards, switchboards, CT cabinets, bus way, streetlighting cabinets and transit panels. (Id. ¶ 12.) MEMCO was owned equally by the families of two brothers, Joseph and James Shelley. (Id. ¶ 13.) Members of the James Shelley side of the family who were owners of MEMCO included Sheryn Silvestri, who is James Shelley's daughter and Louis Silvestri's wife; Mike Shelley, who is Sheryn Silvestri's brother; James Shelley, Jr., who is another brother of Sheryn Silvestri; and the elder James Shelley. (Id. ¶ 14.) James Shelley was the president of MEMCO until his death in 1995, at which time Louis Silvestri ("Silvestri") became acting president of MEMCO. (Id. ¶ 15.) Prior to taking over as acting president of MEMCO, Silvestri was the company's controller. (Id. ¶ 16.)
MEMCO signed a series of collective bargaining agreements with Local 3, including for the periods of October 1, 1997 to September 20, 2000 (the "1997-2000 CBA") and October 1, 2000 to September 30, 2003 (the "2000-2003 CBA") (collectively, the "MEMCO CBAs"). (Id. ¶ 18.) Pursuant to the MEMCO CBAs, MEMCO was required to remit contributions to the Joint Board for the Plans. (Id. ¶19.)
On November 2, 2001, MEMCO filed for Chapter 11 bankruptcy protection. (Id. ¶ 20.) In its schedule of debts dated November 14, 2001, MEMCO listed a debt to the Joint Board in the amount of $5,331.44 and that amount was verified by Silvestri. (Id. ¶ 21-22.) On November 25, 2002, the Joint Board conducted an audit of MEMCO's books and records covering the period of January 1, 1998 through December 31, 2001, at MEMCO's offices. (Id. ¶ 23-24.) When the Joint Board's auditor, Ronald Flitt, arrived at MEMCO's office, he met with Silvestri. (Id. ¶ 25.) Silvestri provided Flitt with the W-2 forms for MEMCO's employees, copies of MEMCO's federal and state tax returns, disbursement journals, and the check register and general ledger. (Id.)
The Joint Board argues, however, that the check register that was provided to Flitt was flawed in that there were large gaps in the listed check numbers and that "outside" purchases were listed that did not identify payees. (Flitt Decl. ¶ 14 and Ex. D.) Charles Shields, a forensic accountant, who had been retained by a co-owner of MEMCO to conduct a forensic audit of MEMCO in connection with a dispute between MEMCO's various owners, also found that the check register was not properly maintained.*fn3 (Flitt Decl. ¶ 15-16a.)
In Flitt's review of MEMCO's records, Flitt also discovered that MEMCO had not reported any overtime work for covered employees. (Flitt Decl. ¶ 20.) Flitt concluded that the checks that were listed as "outside" services and purchases, and that did not have payees, were for income for covered employees that was not reported to the Joint Board. (Flitt Decl. ¶ 21.) According to Flitt's audit report, MEMCO owed $109,907.53 in contributions to the Joint Board, $92,577.40 of which represented contributions based on unreported income. (Flitt Decl. ¶¶ 22-23.)
The audit report was sent to MEMCO on January 14, 2003. (Pl.'s 56.1 Stmt. ¶ 34.) Flitt asked MEMCO to contact him to arrange for payment of the audit deficiency or to provide an explanation for the deficiency within thirty-days. (Flitt Decl. ¶ 24 and Ex. 4.) According to the Joint Board, MEMCO only contested the audit with respect to its inclusion of "cap" deductions, which limited the amount of certain contributions an employer was required to pay once a previously agreed upon cap had been reached. (Flitt Decl. ¶ 25.) However, Silvestri contests the findings of Flitt's audit report - specifically, he calls into question Flitt's reliance on Shields' audit, attributes any problems with the records to the fiscal agent or bankruptcy trustee, asserts that there was no overtime in the industry, that the unidentified checks were not for wages, that he provided Flitt with all of the documents that were requested and that were in possession of Metropolitan Switchboard, and that he has always disputed Flitt's findings. (Silvestri Aff. 8-11.)
In mid- to late-2003, the Joint Board agreed not to seek payment of the cap deduction MEMCO had taken and the audit report findings were subsequently adjusted to remove the cap deduction from the audit deficiency. (Pl's 56.1 Stmt. ¶ 36.) In August 2003, the Joint Board filed a proof of claim in MEMCO's bankruptcy proceeding. (Id. ¶ 37.) In January 2004, the Joint Board produced a revised audit report based on copies of checks that filled in a portion of the gaps in MEMCO's check register, which found that $101,953.38 was owed to the Joint Board. (Id. ¶ 38.) In addition, the Joint Board calculated interest due in the amount of $80,545.52. (Id. ¶ 38.) In April 2004, the Joint Board and MEMCO's bankruptcy estate reached a settlement agreement, pursuant to which the estate agreed to pay the Joint Board $68,908.12 towards the audit deficiency and the agreed upon payments were made by the estate. (Id. ¶ 39.)
Metropolitan Switchboard was incorporated in New York on October 1, 2001, but did not start doing business until July 1, 2002. (Id. ¶ 41.) Metropolitan Switchboard is in the electrical switchboard and panel manufacturing business and is considered an "employer" within the meaning of 29 U.S.C. § 1002(5). (Id. ¶¶ 6, 47.) Its principal place of business, since it began operations in July 2002, is located at 200 Dixon Avenue, Amityville, New York. (Id. ¶¶ 5, 44.) At the time of incorporation, Metropolitan Switchboard was owned by Louis Silvestri, his wife, Sheryn Silvestri, and her two brothers, Mike Shelley and James Shelley Jr. (Id. ¶ 42.) As of June 26, 2006, the owners of Metropolitan Switchboard were Louis and Sheryn Silvestri and James Shelley, Jr. (Id.) Louis Silvestri has also been ...