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Labarbera v. Specialty Flooring Systems

March 10, 2009

GARY LABARBERA AND FRANK FINKEL, AS TRUSTEES OF LOCAL 282 INTERNATIONAL BROTHERHOOD OF TEAMSTERS WELFARE, PENSION, ANNUITY, JOB TRAINING AND VACATION SICK LEAVE TRUST FUNDS, PLAINTIFFS,
v.
SPECIALTY FLOORING SYSTEMS, INC., DEFENDANT.



The opinion of the court was delivered by: Gold, S., United States Magistrate Judge

REPORT & RECOMMENDATION

Plaintiffs bring this action pursuant to the Employer Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1132 and 1145, and the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, to recover delinquent contributions for 2007 through 2008. Upon plaintiffs' application and in light of defendant's failure to appear in or otherwise defend this action, the Clerk of the Court noted the default of the defendant on August 15, 2008. The Honorable Charles P. Sifton then referred the matter to me to conduct an inquest and to report and recommend on the amount of damages, if any, to be awarded.

DISCUSSION

1. Liability

Once found to be in default, a defendant is deemed to have admitted all of the well-pleaded allegations in the complaint pertaining to liability. See Greyhound Exhibitgroup, Inc., v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992), cert. denied, 506 U.S. 1080, 113 S.Ct. 1049 (1993); Montcalm Pub. Corp. v. Ryan, 807 F. Supp. 975, 977 (S.D.N.Y. 1992). Even after a defendant has defaulted, "[a] plaintiff must... establish that on the law it is entitled to the relief it seeks, given the facts as established by the default." U.S. v. Ponte, 246 F. Supp. 2d 74, 76 (D. Me. 2003) (citation omitted). See also Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981).

Plaintiffs have established the elements of liability required to state a claim pursuant to 29 U.S.C. § 1145. Defendant signed a CBA effective July 1, 2005 through June 30, 2008 with Local 282. Schreiber Aff. Ex. B. Pursuant to the CBA, Specialty Flooring was required to make contributions on behalf of its employees to the plaintiff ERISA Funds. Compl. ¶ 8. In their complaint, plaintiffs allege that Specialty Flooring failed to make contributions to the Funds for several months in 2007 and 2008. Id. ¶¶ 9-10. Defendant's failure to make contributions as required by the CBA thus constitutes a violation of ERISA and its liability has been established.

Plaintiffs also seek additional amounts that became due and owing during the pendency of this action. Federal Rule of Civil Procedure 54(c) generally limits recovery on a default judgment to the relief sought in the complaint. FED. R. CIV. P. 54(c) ("A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings."). Rule 54(c) is not violated, however, where a court awards damages that accrued during the pendency of the litigation so long as a defendant was put on notice in the complaint that plaintiff might seek additional unpaid contributions that become due and owing. See King v. STL Consulting, LLC, 2006 WL 3335115, at *4-5 (E.D.N.Y. Oct. 3, 2006); Ames v. Stat Fire Suppression, Inc., 227 F.R.D. 361, 362 (E.D.N.Y. 2005). Here, plaintiffs specifically included a request for unpaid contributions that became due and owing during this litigation. Compl. ¶ 21. Defendant had sufficient notice that it could be held liable for these monies, and I therefore respectfully recommend that defendant be held liable for any unpaid contributions, and any damages related to those unpaid contributions, that accrued during this litigation.*fn1

2. Damages

Although the allegations of a complaint pertaining to liability are deemed admitted upon entry of a default judgment, allegations relating to damages are not. See Greyhound Exhibitgroup, 973 F.2d at 158. Rather, claims for damages generally must be established in an evidentiary proceeding at which the defendant is afforded the opportunity to contest the amount claimed. Id. A court must ensure that there is a basis for the damages sought by a plaintiff before entering judgment in the amount demanded. See Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 (2d Cir. 1989). A court may make this determination based upon evidence presented at a hearing or upon a review of detailed affidavits and documentary evidence. See FED. R. CIV. P. 55(b)(2); Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 508 (2d Cir. 1991); Fustok, 873 F.2d at 40. Defendant has not submitted any opposition to plaintiffs' motion. Accordingly, a hearing on the issue of damages is not warranted.

When plaintiffs originally filed this action on June 18, 2008, they sought unpaid contributions to ERISA Funds alleged to be owed for the following months: March, June, and October of 2007, and January through March of 2008. Compl. ¶¶ 9, 10. The contributions due for March and June, 2007 and January 2008 were paid before the complaint was filed, but were not paid timely, and delinquency charges remain outstanding. Schreiber Aff. ¶¶ 16, 17, 26. While this action was pending, Specialty Flooring paid the contributions due for February through June, 2008. Schreiber Supp. Aff. ¶ 4. Accordingly, the only outstanding principal contributions are those due for October, 2007.

With respect to months other than October, 2007, plaintiffs seek interest and liquidated damages on contributions that were paid, but were paid late. Some of the contributions were paid before the lawsuit was filed and some accrued, and were paid, after the lawsuit was filed. See Schreiber Aff. ¶¶ 16, 17, 26; Schreiber Supp. Aff. ¶¶ 8-24. ERISA does not provide a statutory basis for damages on delinquent contributions that were paid prior to filing suit. The damages outlined in 29 U.S.C. § 1132(g)(2) specifically refer to interest and liquidated damages as percentages of the unpaid contributions. See 29 U.S.C. §§ 1132(g)(2)(B) ("interest on the unpaid contributions"), (g)(2)(C)(ii) ("liquidated damages... in an amount not in excess of 20 percent... of the amount determined by the court under subparagraph (A)"); see also Iron Workers Dist. Council of W. N.Y. & Vicinity Welfare & Pension Funds v. Hudson Steel Fabricators & Erectors, Inc., 68 F.3d 1502, 1507 (2d Cir. 1995) (explaining that to obtain one or all of the measures of relief set forth in 29 U.S.C. § 1132(g)(2), "the action must be one to enforce the obligation to pay contributions under § 1145, and therefore no such suit can be commenced in the absence of unpaid contributions"); Huff v. Cruz Contracting Corp., 2009 WL 305933, at *3-4 (S.D.N.Y. Jan. 29, 2009) (collecting cases for the proposition that ERISA's damages provisions are applicable only to contributions unpaid at the time suit is filed). The same reasoning may be applied to late-paid contributions that accrued after the suit was filed.

The CBA, however, provides a contractual basis for the assessment of interest, liquidated damages, and attorney's fees in the event of untimely contributions. See Finkel v. INS Elec. Servs. Inc., 2008 WL 941482, at *5 (E.D.N.Y. Apr. 4, 2008); LaBarbera v. T&M Specialties, Ltd.,2007 WL 2874819, at *2 (E.D.N.Y. Sept. 27, 2007). The Trust Agreement, incorporated by reference in the CBA, provides for interest at the rate of 18% per annum and the CBA provides for liquidated damages in the amount of 20% of the delinquent contributions. Schreiber Aff. ¶ 15 and Exs. C, D. In addition, the Trust Agreement provides that plaintiffs are entitled to an award of attorney's fees in any collection action. Id. Ex. C.

I now calculate the amounts due under § 1132(g) and the CBA. First, I recommend that plaintiffs be awarded $4,880.55 in principal for the October, 2007 contribution, the only contribution that remains outstanding. Plaintiffs have explained how this amount was determined, Schreiber Aff. ¶¶ 19-23, and the calculation appears to be correct. In addition, plaintiffs are entitled to interest at the rate of 18% per annum beginning from August 15, 2008, to be calculated by the Clerk of the Court at the time of judgment.*fn2 Plaintiffs' calculations of interest and liquidated damages appear correct and I recommend that they be awarded interest and liquidated damages at the rates cited above. Accordingly, I calculate that plaintiffs are entitled to $2,074.63 in interest and $6,012.28 in liquidated damages. Finally, plaintiffs seek reimbursement for $5,725.40 in attorney's fees and costs.*fn3 Plaintiffs complied with New York State Association for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983), which requires that contemporaneous time records be submitted with all fee applications.

Schreiber Aff. Ex. J; Schreiber Supp. Aff. Ex. L. The hourly rates and time expended appear ...


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