The opinion of the court was delivered by: Sand, J.
Plaintiffs Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, and Training Program Fund, and John J. Vigra in his fiduciary capacity as Director (collectively "Plaintiffs") sue Defendants M.A. Angeliades, Inc., Merkourious Angeliades ("Merkourious"), and Irena Angeliades ("Irena") (collectively "Defendants") under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., and the Labor Management Relations Act of 1947 ("LMRA"), 29 U.S.C. § 152 et seq., for unpaid fringe benefit contributions, tier violations, interest, statutory damages, audit costs, attorneys' fees, and costs incurred in this action. Plaintiffs also seek to recover dues checkoffs, PAC contributions, and interest on behalf of non-party Mason Tenders District Council of Great New York ("Union"). A bench trial was conducted on July 10, 2007. Based on the record presented by the parties, and in accordance with Rule 52(a) of the Federal Rules of Civil Procedure, the following constitutes this Court's findings of facts and conclusions of law.
Plaintiff Funds are jointly-administered, multi-employer, labor-management trust funds established and maintained pursuant to various collective bargaining agreements in accordance with sections 302(c)(5) and (c)(6) of the Labor-Management Relations Act of 1947 ("Taft-Hartley Act") (29 U.S.C. §§ 186(c)(5) and (c)(6)), and/or are employee benefit plans within the meaning of sections 3(1), 3(2), 3(3), and 502(d)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA") (29 U.S.C. §§ 1002(1),
(2), (3), and 1132(d)(1)), and/or are multi-employer plans within the meaning of sections 3(37) and 515 of ERISA (29 U.S.C. §§ 1002(37) and 1145). Plaintiff Funds are authorized to maintain suit as independent legal entities under section 502(d)(1) of ERISA (29 U.S.C. § 1132(d)(1)).
Non-party Union is a labor organization within the meaning of section 301 of the Taft-Hartley Act (29 U.S.C. § 185), representing employees in an industry affecting commerce as defined in section 501 of the Taft-Hartley Act (29 U.S.C. § 142) and section 3(4) of ERISA (29 U.S.C. § 1002(4)). The Union is the representative of its constituent locals, each local being an organization operating as a labor union with more than seven members within the City and State of New York.
Defendant M.A. Angeliades is a for-profit corporation doing business in the City and State of New York as an employer within the meaning of section 3(5) and 515 of ERISA (29 U.S.C. §§ 1002(5) and 1145), and is an employer in an industry affecting commerce within the meaning of section 301 of the Taft-Hartley Act (29 U.S.C. § 185). Defendant Angeliades executed a series of collective bargaining agreements for the periods July 1, 1999, through June 30, 2002 (Pl. Ex. 1), July 1, 2000, through June 30, 2003 (Pl. Ex. 2), July 1, 2002, through June 30, 2005 (Pl. Ex. 3), and July 1, 2004, through June 30, 2005 (Pl. Ex. 4). Defendant Merkourious stipulated that he executed Exhibits 1 and 2 (Joint Pre-Trial Order, § VII, ¶¶ A and B), and defendant Irena stipulated that she executed Exhibits 3 and 4 (Joint Pre-Trial Order § VII, ¶¶ C and D).
After the commencement of this litigation, payroll audits of the books and records of M.A. Angeliades were conducted by auditors retained by the Funds, and on August 1, 2006, audit reports were issued for the periods October 1, 2000, through December 27, 2002 (Pl. Ex. 5) and December 28, 2002, through November 26, 2004 (Pl. Ex. 6). The audit included a claim for payment of fringe benefits for individuals that the Funds believe were performing work covered under the collective bargaining agreements (hereinafter "covered work"). Plaintiffs' Exhibit 5 sets forth a deficiency in the payment of fringe benefit contributions to the Funds in the amount of $382,405.02 and in the payment of dues checkoffs and PAC contributions to the Union in the amount of $42,289.00. Plaintiffs' Exhibit 6 sets forth a deficiency in the payment of fringe benefit contributions to the Funds in the amount of $45,358.15 and in the payment of dues checkoffs and PAC contributions to the Union in the amount of $3,696.15.
Pursuant to Article VI, § 17(d) of Plaintiff's Exhibit 1, p. 38, the employer is liable for the imputed cost of the audit if they are found to be substantially delinquent in the payment of fringe benefit contributions. The auditors found defendants to be substantially delinquent for the audit period set forth in Plaintiff' Exhibit 5 and imposed the imputed costs of the audit in the amount of $68,832.90 (Pl. Ex. 5, p. 11).
Plaintiffs' Exhibits 2 and 4 cover interior demolition work and establish a two-tier system of wages, with Tier A at the full scale and Tier B at a lower wage and fringe benefit rate. (Pl. Ex. 2, sched. A). Employers are permitted to hire no more than 50 percent Tier B Workers (Pl. Ex. 2, Article III, §2(d), p. 4). The Union and the Funds were authorized to conduct quarterly audits of M.A. Angeliades and, if M.A. Angeliades hired more than 55 percent Tier B workers in any quarter, the employer is held to be substantially delinquent and is required to contribute to the Funds "the total differential in wages and benefits that the Employer should have paid had it complied with the 1:1 ratio, but did not pay." (Id. at §2(e)). The auditors found that defendants were substantially delinquent, and assessed Tier violation penalties of $436,769.41 for the period of October 1, 2000, through December 27, 2002 (Pl. Ex. 9) and $25,066.24 for the period December 28, 2002 through November 26, 2004 (Pl. Ex. 10).
The parties have stipulated that the hours of employment set forth in Plaintiffs' Exhibits 5 and 6 were actually worked by the employees listed therein (Joint Pre-Trial Order § VII, ¶¶ E and F) and that the work was performed within the geographical jurisdiction of the Union as set forth in Plaintiffs' Exhibits 1, 2, 3, and 4 (Id. § VII, G). The parties stipulated that one of the employees in the audit, Steve Malafos, did not perform covered work (Id. § VII, H), and Plaintiffs stipulated at trial that they were dropping their claim seeking recovery for 152 hours of work by Segundo Ochoa for the month of June 2004 (Tr. 35).
With regard to the type of work performed by the 19 employees at issue in this case, the audits divided the work into three categories designated by separate numbers. Group 650 is Independent Work under Plaintiffs' Exhibits 1 and 3 (Tr. 44; Pl. Ex. 5, p. 10), Group 780 is Independent Demolition Tier A (Id.), Group 790 is Independent Demolition Tier B (Id.), and Group 72 is Apprentice Work (Id.). The auditor testified, for purposes of the audit, that an employee's classification under this three-tiered system was based on consideration of a number of factors, including, inter alia, their (1) wage rate, (2) remittance reports submitted by Angeliades to the Funds, (3) shop steward reports, and (4) union membership.
This Court must decide two primary issues. First, whether the 19 employees for whom the Funds are seeking to recover fringe benefit contributions, dues checkoffs, and PAC contributions were performing work within the trade jurisdiction of the Union. Second, whether defendants are liable to the Funds for a substantial violation of the Tier A/Tier B ratio set for in Plaintiffs' Exhibits 2 and 4.
A. Plaintiffs Are Not Entitled to a Shift of the Burden of Proof
The Sixth, Ninth, and Eleventh Circuits have held that a fund's or trustee's production of evidence raising genuine questions concerning an employer's failure to maintain adequate records shifts to the employer the burden of coming forward with evidence either of the precise number of hours worked or to negate the reasonableness of the inferences to be drawn from the employee representative's evidence. See Michigan Laborers' Health Fund v. Grimaldi Concrete, Inc., 30 F.3d 692, 696-697 (6th Cir. 1994); Brick Masons Pension Trust v. Industrial Fence & Supply, Inc., 839 F.2d 1333, 1338 (9th Cir. 1988); Combs. v. King, 764 F.2d 818, 825-826 (11th Cir. 1985). While the Second Circuit has not yet decided the applicable standard in these cases, it has both favorably discussed this burden shifting analysis, see, e.g., New York State Teamsters Council Health and Hospital Fund v. Estate of DePerno, 18 F.3d 179, 183 (2d Cir. 1994); Jaspan v. Glover Bottled Glass Corp., 80 F.3d 38, 41 n.3 (2d Cir. 1996), and declined to apply it, see Mastrandrea v. Nassau Land Improvement Co., Inc., 182 F.3d 900 (2d Cir. 1999).
The District Courts of New York have applied the burden-shifting analysis adopted by the Sixth, Ninth, and Eleventh Circuits. See, e.g., Barbera v. A. Morrison Trucking, Inc., 2004 WL 3741664 (E.D.N.Y. Mar. 8, 2004); Grabois v. Action Acoustics, Inc., 1995 WL 662127 (S.D.N.Y. Nov. 9, 1995). However, before the burden is shifted to the employer, the employee representative must first "raise genuine questions about the accuracy of the employer's records and [about] the number of hours actually worked." A. Morrison, supra at *10. The burden-shifting is not triggered when the employer maintains adequate records. Moreover, to successfully shift the burden, the employee representative must "have produced sufficient evidence to show the amount and extent of the work for which [employees] were not properly compensated as a matter of just and reasonable inference." Mastrandrea, supra (quoting Combs, 764 F.2d at 826). The Mastrandrea court went on to explain that although this approach involves a "'relaxed standard of proof,' it is possible for plaintiffs' proof to be 'too speculative to support a finding' of damages." Id. (quoting Brick Masons, 839 F.2d at 1339 n. 4).
Angeliades provided the auditor with all books and records requested, including payroll forms, tax filings, journals and ledgers. (Tr. 39-40, 90). Moreover, the Plaintiffs acknowledged that Angeliades' records were accurate. First, Mr. Giammona, the manager of the "contributions and deficiency [sic] department," (Tr.22), acknowledged that his office found no discrepancies between what Angeliades reported to the union and what the shop stewards -- the individuals who are assigned by the union to keep track of individuals performing mason tenders work -- reported. (Tr. 27). Second, upon cross- examination, auditor William Austin conceded that to the best of his knowledge, there was nothing inaccurate about Angeliades' records. (Tr. 71).
Despite having an opportunity to conduct an audit, depose the Merkourious and Irena Angeliades, present witnesses, and cross-examine defendants' witnesses during trial, the Plaintiffs did not demonstrate that Angeliades failed to maintain adequate books and records nor did they raise any genuine issue about the accuracy of those records. Therefore, plaintiffs are not entitled to a burden shift.
B. Plaintiffs Failed To Meet Their Burden of Proof as the Audit Was Based On Unreasonable Assumptions and Speculation
Plaintiffs' audit of Defendants' books and records revealed delinquencies in fringe benefit contributions, dues checkoffs, and PAC contributions for a number of M.A. Angeliades employees. However, the Court must examine whether the assumptions and techniques relied upon by the auditors were reasonable, or rather rendered the Plaintiffs' audit simply "'too speculative to support a finding' of damages." Mastrandrea v. Nassau Land Improvement Co., Inc., 182 F.3d 900 (2d Cir. 1999) (citation omitted).
As is apparent from the evidence presented at trial, the audit was the sole basis for Plaintiffs' action. Mr. Bianco, a field representative for the Plaintiffs testified that he was responsible for the enforcement of the collective bargaining agreements. (Tr. 2). Yet, he obtained no written complaints from a worker, a shop steward, or business agent (Tr. 16-17, 19); kept no written notes (Tr. 16); never filed a grievance against M.A. Angeliades in accordance with collective bargaining agreements (Tr. 17); and never even reviewed the audit that is the entire basis for this action (Tr. 21). Likewise, Mr. Giammona, the manager of the contributions and deficiency department (Tr. 22), never received a complaint from any worker regarding their compensation (Tr. 33) nor from any shop steward report regarding either "the worker's compensation or the nature of work they're performing at a project site" (Tr. 34). Significantly, Mr. Giammona did not recall there being any discrepancy between the remittance reports submitted by Angeliades and the shop steward reports prepared by the union's representatives. (Tr. 27)*fn1
The auditor, William Austin, had no personal knowledge of the work performed by the alleged individuals (Tr. 53); he never received a written complaint from any worker or shop steward (Tr. 54); he did not visit a job site (Tr.54); and his firm did not interview any workers or shop stewards (Tr. 52, 54). As Mr. Austin explained, the factors the auditors considered in determining how to categorize an employee were:
Their wage rate; if they've been reported; if they appeared on shop steward reports; if they're a member in the union; if they reported to another jurisdiction where the work was actually done; based on some member complaints; if they were on the company's health plan or on the company's retirement plan; if they were on their auto insurance plan. Anything, any information to the contrary that they weren't doing covered work, we would factor in. (Tr. 40). He expanded upon his answer by stating that an employee's category was based upon their wage rate, and in this particular audit, it was a combination of factors and it was based on their wage rate and their reportage history, how they were reported both prior to the audit period, during their time with M.A. Angeliades and after the audit period, and we tried to place the individuals where we believed they were, what they were doing. (Tr.42) (emphasis added).
Plaintiffs explained in their Supplemental Memorandum that "[t]he inclusion of an employee in a remittance report, shop steward report, or union roster led to a rebuttable presumption that the employee was performing covered work." (Pl. Supp. Mem. at 9) (emphasis added). "[I]t is also clear that once a determination was made that an employee was performing covered work, all of that employee's hours during the audit period were included in the audit." (Id. at 10). Thus, the Plaintiffs' auditor apparently made three assumptions:
(1) if an individual earned at a rate even remotely close to a mason tenders' rate, all of his hours were included; (2) if an individual was listed on even one shop steward report during the entire four-year period covered by the audit, all of his hours worked for the company were included, regardless of what that individual was doing on the days in which he is not found on any shop steward report; and (3) if an individual became a member of the union at any point in time, all of his hours were to be included regardless of what duties the employee performed prior to joining the union.
Each of these assumptions is unrealistic and patently unreasonable.
First, according to the defendants, "Mason Tenders earn a basic rate similar to most construction employees: $15-25 per hour. A Mason Tender is not such a skilled laborer such as an operator, electrician, or carpenter so as to command rates such as $40, $50, and up to $100 per hour. They perform simpler tasks, such as cleaning up at project sites and demolishing walls. The rates such workers command is virtually the same as an individual who drives a truck to deliver materials to a project site, a warehouse worker, or project manager's assistant." (Def. Supp. Mem. at 10). Thus, the plaintiffs' assumption that a person earning a rate similar to a mason tender must be performing mason tenders work rather than miscellaneous tasks -- such as picking up materials, assisting project managers, driving a truck, or working in a warehouse or yard -- is unreasonable.
Second, the shop stewards*fn2 did not generally report the individuals alleged to have unreported hours as having performed covered work during the periods in question. For example, Plaintiffs' audit alleges that Mr. Gustavo Chimbo and Mr. Jose Chiugansea were performing covered work from February 2001 through December 2001. (Tr. 57-58; Pl. Ex. 5). For that entire time period, however, Messrs. Chimbo and Chiugansea are reported on only one shop steward report and only for one day. (Tr. 58; Def. Ex. A (1 of
2)). The same is true for virtually all of the individuals that have been identified in the audit as having unreported hours. (Tr. 58-59) (Def. Ex. A). A ...