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Frank S. Bail and John Tyzbir As v. Dover Hospitality Services

July 23, 2012

FRANK S. BAIL AND JOHN TYZBIR AS TRUSTEES OF THE LOCAL 1102 HEALTH AND BENEFIT FUND AND FRANK S. BAIL AND FRAN BURKE AS TRUSTEES OF THE LOCAL 1102 RETIREMENT SAVINGS FUND,
PLAINTIFFS,
v.
DOVER HOSPITALITY SERVICES, INC. A/K/A DOVER COLLEGE SERVICES, DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

The Trustees of the Local 1102 Health and Benefit Fund and Local 1102 Retirement Savings Fund ("the Funds" or "the Plaintiffs") commenced this suit, pursuant to Sections 502 and 515 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. §§ 1132, 1145, against Dover Hospital Services, Inc. a/k/a Dover College Services ("Dover" or "the Defendant) to compel an audit of Dover's books and records from January 1, 2007 through the present and to collect unpaid contributions.

Presently before the Court is the Plaintiffs' motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 seeking: (1) to compel the Defendant to provide certain records to conduct an audit of its books and records for the February 1, 2007 to December 31, 2008 audit period and for reasonable attorneys' fees; (2) to collect unpaid contributions that accrued between September of 2010 and November of 2011, as well as interest, liquidated damages, reasonable attorneys' fees and costs; and (3) to compel the Defendant to submit to an audit of its books and records for 2009 and 2010. For the reasons set forth below, the Court grants in part and denies in part the Plaintiffs' motion.

I. BACKGROUND

A. The Parties and the Relevant Agreements

The Funds are multiemployer plans as defined in the Employee Retirement Income Security Act, 29 U.S.C. § 1002(37)(A), and were established "to provide health, welfare and related benefits" to members of Local 1102 of the Retail Wholesale Department Store Union, United Food and Commercial Workers ("Union") who are eligible for the benefits pursuant to collective bargaining agreements with their employers. The Funds are governed by the Restated Agreement and Declaration of Trust of the Local 1102 Health and Benefit Fund and the Local 1102 Retirement Savings Fund ("the Trust Agreement"), and are managed by a Board of Trustees, composed of an equal number of employer and employee representatives ("the Trustees"). Plaintiffs Frank Bail, John Tyzbir and Fran Burke are members of each of the plaintiff Boards of Trustees. Under the Trust Agreement, each employer is required to make prompt contributions or payments to the Funds consistent with the terms of their collective bargaining agreements with the Union. In order "to ensure diligent and systematic efforts to collect all contributions", the Trustees enacted the Restated and Amended Collections procedures ("the Collections Policies"). (Pls.' 56.1 Stmt., ¶ 11).

Defendant Dover Hospitality Services, Inc. is a New York corporation that provides food and vending services at the Ammerman and Grant campuses of Suffolk County Community College. Pursuant to a collective bargaining agreement between Dover and the Union ("the CBA"), Dover is obligated to contribute to the Funds on behalf of its eligible employees, the amount and terms of which are set forth in the CBA ("the contribution obligation"). (See CBA at Art. 18, pg. 9; id. at Art. 19, pg. 10.) In addition, pursuant to Article 18 of the CBA, Dover is bound by all the terms and conditions of the Trust Agreement and all the rules, regulations, and procedures promulgated by the Trustees of the Funds pursuant thereto, including the Collections Policies.

B. The Funds Right to Conduct an Audit of Dover's Books and Records

The CBA, Trust Agreement and Collections Policies authorize the Funds to periodically examine and audit Dover's books and records. (See CBA, at Art. 18(b), pg. 9 ("Fund shall have the right to examine the Employer's payroll and other records for the purpose of determining whether the Employer has complied with [the contribution obligation]."); Trust Agreement at Art. 4, pg. 17 ("The Trustees . . . shall have the right to enter upon the premises of the Employers and to examine, audit and copy such of the books, records, papers and reports of said Employers relating to the employment and payroll records of each Employer as may be necessary to permit the Trustees to determine whether said Employers are making full payment to the Trustees of the amounts required by [the CBA]"); Collection Policies at ¶ 2, pg. 5 ("Each Employer is required to make available to the Fund's accountants or other representatives (referred to hereinafter as the "Auditors") all of its accounts, books and records . . . that are deemed necessary by the Auditors, at all reasonable times at the Employer's place of business").)

It is undisputed that "[t]he purpose of the audits is to determine whether Employers are fully, accurate and timely complying with their obligation to make contributions to the Funds and to uncover any unpaid contributions which the Fund may thereafter collect." (Pls.' 56.1 Stmt., ¶ 13.) To perform the audits, the Funds employ Kimberly Frost, a "Payroll Compliance Auditor" ("Frost" or "the Auditor"). Although the frequency of the audits is within the discretion of the Trustees, "as a general practice, the Funds try to audit each employer at least once every three (3) years". (Frost Decl. ¶ 16.)

The procedures for conducting an audit and the consequences for failing to comply are set forth in the Collection Policies. (Collection Policies at ¶ 3, pg. 5.) Relevant to this case are the following provisions:

a. Employer Notices:

The Auditors or the Fund shall send advance notice to the Employer advising it that an audit is to be conducted, the date on which the audit is to be conducted, the period to be covered by the audit, and listing the books and records of the Employer required to be made available. . . .

c. Uncooperative Employers:

In the event notice of an audit has been sent to the Employer, and the Employer (i) refuses to permit an audit of its books and records (as defined herein), (ii) refuses to cooperate with the specific requests of the Auditors, or (iii) has failed to maintain (or no longer has) possession of the books and records necessary for an audit, the Fund Administrator shall refer the matter to Counsel for legal action. . .

f. Assumption of Amounts Owed by Uncooperative Employers:

In the event that, after a reasonable request by the Fund and proper and timely notice has been given, an Employer fails to produce all books and records necessary to enable the Fund's Auditors to conduct the audit, or is otherwise uncooperative, the Fund Administrator, in his/her sole and absolute discretion may make, in his discretion, a reasonable estimate of amounts due based upon such empirical data as may be available. Such determination shall be binding ...


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