The opinion of the court was delivered by: Gerard E. Lynch, District Judge
In this 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 (the "Taft-Hartley Act"), 29 U.S.C. § 185, plaintiffs New York City District Council of Carpenters Pension Fund et al. ("the Funds") seek damages stemming from the failure of Quantum Contracting Corp. ("Quantum") and its President, Noel Griffin, to pay periodic fringe benefit contributions to the Funds as required by the collective bargaining agreement ("CBA"). Following entry of a default judgment, the matter was referred to the to the Honorable James C. Francis IV, United States Magistrate Judge, for an inquest on damages. Following a hearing, at which defendants did not appear, Judge Francis issued his Report and Recommendation ("R&R") on September 4, 2008. The plaintiffs timely served objections on October 17, 2008. Having carefully considered de novo the issues presented by the R&R, the objections, and the evidence presented by plaintiffs, the Court sustains the objections in part and overrules them in part, and adopts the R&R as the opinion of the Court, except to the extent inconsistent with this opinion.
The underlying facts are carefully laid out in Judge Francis's characteristically thorough and thoughtful R&R, and will not be detailed here. In essence, the allegations in the complaint (which, given defendants' default, must be accepted as true, except with respect to the issue of damages), and the evidence presented by plaintiffs, supports the conclusion that the corporate defendant and its principal, Noel Griffin, not only violated the terms of the collective bargaining agreement by failing to pay fringe benefits due to their employees, but did so through a systematic fraud perpetrated by Griffin, in which employees were paid off the books out of a separate checking account whose existence was never disclosed to the plaintiff funds or their auditors. As explained by Judge Francis, Griffin's fraudulent actions as a controlling corporate officer rendered him personally liable for the payments due under the CBA. (R&R at 7-9.)
Moreover, as Judge Francis also detailed, the plaintiffs provided evidence that of the 152 individuals paid out of the secret account, there was evidence from which to conclude that 49 were engaged in work covered by the CBA (R&R at 14). Accordingly, Judge Francis recommended that the Court find all defendants jointly and severally liable for the principal amount of benefit fund contributions owed to the Funds as to those payees,*fn1 plus pre-judgment interest. He further recommended that the Court find the corporate defendant liable for liquidated damages, attorneys' fees, and costs. Plaintiffs do not object to the R&R to the extent that it finds the defendants liable for these amounts--except to the extent that they object to certain computations leading to the precise figure of the total contributions owed--and the Court, having reviewed these conclusions de novo, finds that defendants are indeed liable for these sums, and adopts the findings of the R&R as the opinion of the Court to that extent.
However, plaintiffs object to the R&R insofar as it limits their recovery in various ways. Two of these objections have merit, as described below.
Plaintiffs' principal objection concerns Judge Francis's recommendation that defendants not be found liable for benefit payments due to the remaining 103 individuals who were paid out of the secret account. Judge Francis concluded that the Funds did not present sufficient evidence to demonstrate that these payees were performing work covered by the CBA. (R&R at 14.) The Court agrees with Judge Francis.
The burden-shifting analysis governing the issue is well-settled,*fn2 and plaintiffs do not dispute Judge Francis's careful and accurate analysis. As the R&R correctly states,
In a default judgment, "the allegations in the complaint with respect to the amount of damages are not deemed true." Credit Lyonnais Securities (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999). Accordingly, "the court must ensure that there is a basis for the [plaintiff's] damages." Fustok v. ContiCommodity Services, Inc., 873 F.3d 38, 40 (2d Cir. 1989). Once the fact of damages has been established, the plaintiff must provide evidence "from which the amount of damages can be ascertained with reasonable certainty." Compania Pelineon De Navegacion, S.A. v. Texas Petroleum Co., 540 F.3d 53, 56 (2d Cir. 1976).... [However,] employers have an affirmative duty to "furnish to benefit plans the information needed for the plans' fulfillment of their reporting duties." Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 573 (1985).... Thus, once a plaintiff establishes his prima facie case by "produc[ing] evidence that raises genuine questions about the accuracy of the employer's records and the number of hours actually worked, the burden shifts to the employer to come forward with evidence" to counter the plaintiff's proffer regarding the precise amount of work performed. Local 282 Welfare Trust Fund v. A. Morrison Trucking, Inc., No. 92 Civ. 2076, 1993 WL 120081, at *1 (E.D.N.Y. Mar. 30 1993). The purpose of this rule is to prevent an employer from "escap[ing] liability for his failure to pay his employees the wages and benefits due to them under the law by hiding behind his failure to keep records as statutorily required." Brick Masons Pension Trust [v. Industrial Fence & Supply, Inc.], 839 F.3d [1333,]1338 [(9th Cir. 1988)]. (R&R at 13-16.) Plaintiffs object, however, to Judge Francis's application of the standard to the facts of this case. They argue that because they adduced evidence that some of the payees performed covered work, that defendants are liable for corresponding benefit contributions as to all of the fund's payees. This argument lacks merit for precisely the reason explained by Judge Francis.
The record reflects payments from the secret account to 152 individuals. Judge Francis awarded damages, however, only with respect to some of those payees--those who previously had either received benefit contributions from defendants, appeared on shop steward reports as having performed covered work, or were included in a prior audit as having performed covered work. (R&R at 14.)*fn3 As to the 103 remaining payees, Judge Francis found that he had no basis from which to find that these payees had performed covered work and accordingly he declined to apply the burden-shifting analysis because under the relevant precedent the "relaxed standard of proof" applies "only to proof of the amount of damages and not to the fact of damages." (Id. at 16, quoting Brick Masons Pension Trust, 839 F.2d at 1339 n.4.)
Plaintiffs object to this analysis, arguing that Judge Francis's recommendation requires them to "make an exact showing of proof as to the remaining 103 payees." (P. Mem. at 5). Judge Francis's recommendation, however, requires no such precision. As the R&R emphasized, the issue is whether plaintiffs' proof as to the 103 payees is "too speculative to support a finding" of damages in any amount. (R&R at 16, quoting Brick Masons Pension Trust, 839 F.2d at 1339 n.4.) Far from holding plaintiffs to any "exact" showing, on a thorough review of the record, this Court finds, as Judge Francis recommended, that there is no evidence--either direct or from which a reasonable inference could be drawn--that these payees were carpenters, performed covered work, or had any relationship to the plaintiff funds. (id. at 17). That 49 payees did have such a relationship simply does not establish the identity of 103 other payees, where the only characteristic the payees have in common is that they were all paid from the ...