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Thomas Gesualdi and Joseph Ferrara, Sr., As Trustees and Fiduciaries of v. Trucking Co.

May 20, 2010

THOMAS GESUALDI AND JOSEPH FERRARA, SR., AS TRUSTEES AND FIDUCIARIES OF
THE LOCAL 282 WELFARE TRUST FUND, THE LOCAL 282, PENSION TRUST FUND,
THE LOCAL 282 ANNUITY TRUST FUND, THE LOCAL 282 JOB TRAINING TRUST FUND AND THE LOCAL 282 VACATION AND SICK LEAVE TRUST FUND, PLAINTIFFS,
v.
TRUCKING CO., LLC, DEFENDANT.



The opinion of the court was delivered by: E. Thomas Boyle United States Magistrate Judge

MEMORANDUM OPINION AND ORDER

Before the court is the plaintiffs' application for a determination of the damages due and owing by the defendant, RRZ Trucking Co., LLC, under a Supplemental Stipulation of Settlement entered into by the parties on August 3, 2006. An inquest was held on November 4, 2010, November 8, 2010, December 10, 2010 and January 14, 2011 to determine the amount of damages due. For the following reasons, the Court finds that plaintiffs are entitled to damages in the amount of $2,096,606.50, plus reasonable attorney's fees and costs, to be determined upon the Court's receipt of proper supporting documentation from plaintiffs.

FACTS

The underlying facts of this action are not in dispute. The plaintiffs are trustees and fiduciaries of the Local 282 Welfare, Pension, Annuity, Job Training and Vacation and Sick Leave Trust Funds (the "Funds"), as defined by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. (Pl. Proposed Findings of Fact ¶ 1; Def. Proposed Findings of Fact ¶ 1; Compl. ¶ 3.) The Funds are multi-employer benefit plans within the meaning of ERISA, whose purpose is to collect and receive fringe benefit contributions from employers providing health, retirement, job training and vacation and sick leave benefits to eligible employees. (Pl. Proposed Findings of Fact ¶¶ 2-3; Def. Proposed Findings of Fact ¶¶ 2-3; Compl. ¶¶ 4, 6.)

The defendant, RRZ Trucking Co., LLC ("RRZ Trucking"), is a limited liability company organized and existing under the laws of the state of New Jersey. (Def. Proposed Findings of Fact ¶ 4; Compl. ¶ 12.) RRZ Trucking is a participating employer under Local 282's Restated Agreement and Declaration of Trust (the "Trust Agreeement") and was a party to the 2002-2006 New York City Heavy Construction and Excavating Contract with Local 282 (the "CBA"). (Pl. Proposed Findings of Fact ¶¶ 4-5; Def. Proposed Findings of Fact ¶ 5; Compl. ¶ 17; Pl. Ex. 5.) Under both the Trust Agreement and the CBA, RRZ Trucking was required to remit certain fringe benefit contributions to the Funds in specified amounts corresponding to the amount of hours worked by its employees covered by the CBA ("covered work"). (Pl. Proposed Findings of Fact ¶ 5; Pl. Ex. 2, 5.) RRZ Trucking was also required to remit detailed written reports setting forth the hours worked by its employees each month (the "remittance reports"). (Id.)

The Funds commenced the within action on July 18, 2003, seeking to collect allegedly delinquent fringe benefit contributions and to compel an audit of RRZ Trucking's books and records to establish the amount of unpaid contributions. (Def. Proposed Findings of Fact ¶¶ 6-7; Compl. generally.) The parties entered into a Stipulation of Settlement on December 15, 2005, which was So Ordered by Judge Seybert, the district judge assigned to this action at that time,*fn1 on December 16, 2005. (Def. Proposed Findings of Fact ¶¶ 9-10; Stipulation of Settlement generally.) The Stipulation of Settlement resolved the Funds' claims against RRZ Trucking for unpaid contributions for the period September 1, 2001 to June 30, 2003. (Def. Proposed Findings of Fact ¶ 11; Stipulation of Settlement ¶ 2.) Under the Stipulation of Settlement, the Funds agreed to provide RRZ Trucking with revised audit findings and it further permitted the Funds to reopen the action within sixty days after RRZ Trucking's receipt of the revised audit findings in the event the parties were unable to resolve any disputes regarding those findings. (Def. Proposed Findings of Fact ¶¶ 12-13; Stipulation of Settlement ¶¶ 2, 5 .)

The Funds requested that the action be reopened on June 30, 2006. (Def. Proposed Findings of Fact ¶ 14; Letter from O'Leary, E. to Boyle, J., dated June 30, 2006.) On August 3, 2006, the parties entered into a Supplemental Stipulation of Settlement (the "Stipulation"), which amended the parties prior Stipulation of Settlement with respect to the fringe benefit contributions alleged to be due and owing by RRZ Trucking for the period September 1, 2001 through June 30, 2003, and provided for the Funds to audit RRZ Trucking's books and records for the period July 1, 2003 through June 30, 2006, in order to determine the amount of additional contributions due for that time period.*fn2 (Def. Proposed Findings of Fact ¶¶ 16-19; Pl. Ex. 1 ¶ 9.) The Stipulation again provided for the reopening of this matter within sixty days of RRZ Trucking's receipt of the Funds' audit findings in the event the parties disputed the amount of contributions found to be due and owing. (Def. Proposed Findings of Fact ¶ 20; Pl. Ex. 1 ¶ 10.)

Pursuant to the latter Stipulation, RRZ Trucking permitted the Funds to audit its books and records for the period July 1, 2003 through June 30, 2006. (Pl. Proposed Findings of Fact ¶ 10; Pl. Ex. 1 ¶ 9.) For that time period, RRZ Trucking had submitted remittance reports demonstrating a total of 456 hours of covered work under the CBA. (Pl. Proposed Findings of Fact ¶ 9; Pl. Ex. 3.) The Funds engaged the accounting firm of Abrams, Herde & Merkel LLP ("AHM") to conduct certain agreed-upon procedures and determine whether RRZ Trucking accurately reported all hours worked and paid all contributions due for the time period in dispute. (Pl. Proposed Findings of Fact ¶ 11; Def. Proposed Findings of Fact ¶ 47; 11/4/10 Tr. 37.)

Richard Bamberg, a payroll auditor at AHM reviewed the records provided by RRZ Trucking. (Pl. Proposed Findings of Fact ¶ 12; Def. Proposed Findings of Fact ¶ 49; 11/4/10 Tr. 37.) In conducting his review, Mr. Bamberg examined RRZ Trucking's quarterly federal tax returns, quarterly state wage reports, payroll journals, federal partnership income tax returns and its general ledger. (Pl. Proposed Findings of Fact ¶ 16; Def. Proposed Findings of Fact ¶ 51; Def. Ex. D n.1.) The payroll records indicated that although RRZ Trucking paid its employees each month from July 2003 through August 2005, as well as from December 2005 through January 2006 and March 2006 through May 2006, it had not made any of the required fringe benefit contributions to the Funds for those periods. (Pl. Proposed Findings of Fact ¶ 18; 11/4/10 Tr. 38; Def. Ex. D ¶ 16.)

AHM issued its original audit*fn3 (the "Original Audit") on November 3, 2008, indicating that, for the period July 1, 2003 through June 30, 2006, RRZ Trucking failed to pay $661,644.77 in fringe benefit contributions. (Pl. Proposed Findings of Fact ¶ 33; Def. Proposed Findings of Fact ¶ 50; Def Ex. D ¶8, Ex. K.) Of that amount, AHM determined that $408,008.33 represented delinquent contributions for employees on RRZ Trucking's payroll, while $251,999.75 represented delinquent contributions for subcontractors and/or outside truck hires.*fn4 (Def. Proposed Findings of Fact ¶ 50; Def. Ex. K.) AHM also determined that RRZ Trucking owed $479,542.18 in interest through September 30, 2008, as well as $5,567.50 in audit fees.*fn5 (Pl. Proposed Findings of Fact ¶ 33; Def. Ex. D ¶ 8, Ex. K.) The Original Audit was provided to RRZ Trucking by the Funds on November 8, 2008 and did not contain page number four, entitled "Notes to Fund Office."*fn6 (Pl. Proposed Findings of Fact ¶ 35; Def. Ex. K.)

On August 12, 2010, the Funds issued a revised audit (the "Revised Audit"), which reduced the number of shop steward hours and reduced the interest rate applicable from 18% to 16% for the period commencing November 2003. (Pl. Proposed Findings of Fact ¶ 38; Def. Proposed Findings of Fact ¶¶ 72-73; Pl. Ex. 6; Def. Ex. D ¶ 24.) The Revised Audit also updated the interest calculation from September 30, 2008 to September 20, 2010. (Pl. Proposed Findings of Fact ¶ 38; Pl. Ex. 6.) The Revised Audit was provided to RRZ Trucking on September 2, 2010 by the Funds and this time included page four, entitled "Notes to Fund Office." (Pl. Proposed Findings of Fact ¶ 39; Pl. Ex. 6.) The Revised Audit found that RRZ Trucking failed to report 28,592.25 hours of covered work to the Funds, resulting in an underpayment of $660,085.20 in fringe benefit contributions. (Pl. Proposed Findings of Fact ¶ 40; Pl. Ex. 6.) The Revised Audit further found that RRZ Trucking was liable for $645,454.20 in interest, as well as $645,454.20 in liquidated damages and $5,657.50 in audit fees. (Id.)

Pursuant to the Stipulation, the Funds requested that this action be reopened by letter dated July 28, 2010. (Letter from O'Leary, E. to Boyle, J., dated July 28, 2010.) On September 2, 2010, the Funds provided the Court with its Statement of Damages, seeking to recover the unpaid contributions, interest, liquidated damages and audit fees set forth in the Revised Report, as well as attorney's fees and costs. (Pl. Stmt. of Damages dated Sept. 2, 2010.) An inquest on damages was held on November 4, 2010, November 8, 2010, December 10, 2010 and January 14, 2011, during which the Funds offered the testimony of Theresa Cody, an employee in the Funds' collection department, Richard Bamberg, the accountant who conducted the audit for the Funds, and Phillip Vivirito, an expert on payroll auditing. RRZ Trucking presented no fact witnesses and only offered the testimony of one expert witness, William Murphy, a certified public accountant who was qualified by the Court as an expert in the field of accounting.*fn7

DISCUSSION

I. Legal Standard

Section 515 of ERISA ...


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