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The Annuity, Welfare & Apprenticeship Skill Improvement & Safety Funds v. Integrated Structures Corp.

United States District Court, Second Circuit

June 13, 2013

THE ANNUITY, WELFARE and APPRENTICESHIP SKILL IMPROVEMENT & SAFETY FUNDS of the INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 15, 15A, 15C and 15D, AFL-CIO, by its TRUSTEES JAMES T. CALLAHAN, FRANCIS P. DIMENNA, ROBERT SHAW and JOHN BRUNETTI, Plaintiffs,
v.
INTEGRATED STRUCTURES CORPORATION, Defendant.

AMENDED REPORT AND RECOMMENDATION[1]

KEVIN NATHANIEL FOX, Magistrate Judge.

TO THE HONORABLE LORNA G. SCHOFIELD, UNITED STATES DISTRICT JUDGE.

Plaintiffs James T. Callahan, Francis P. Dimenna, Robert Shaw and John Brunetti, as trustees ("trustees") of the Annuity, Welfare and Apprenticeship Skill Improvement & Safety Funds of the International Union of Operating Engineers, Local 15, 15A, 15C and 15D, AFL-CIO ("trust funds"), brought this action against Integrated Structures Corporation ("ISC"), seeking monetary damages, based on ISC's failure to make fringe benefit contributions to the trust funds, as required by: (1) a collective bargaining agreement ("CBA"); (2) the Local 15 Trust Agreement ("trust agreement"); and (3) the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461.

On January 19, 2012, the plaintiffs commenced this action by filing a complaint with the Clerk of Court. On May 3, 2012, the Honorable Paul A. Engelmayer issued an Order "that defendant[, ISC, ] communicate forthwith to the Court explaining, in writing, why it has failed to answer or otherwise respond to the complaint in this action." ISC never responded to the May 3, 2012 Order. Accordingly, on June 8, 2012, Judge Engelmayer issued an Order entering a judgment, by default, against ISC. Thereafter, Judge Engelmayer referred the matter to the undersigned for an inquest, to determine the amount of damages, if any, that should be awarded to the plaintiffs.

The Court directed the trustees to serve and file proposed findings of fact and conclusions of law, and an inquest memorandum setting forth their proof of damages. In support of their request for damages, the trustees submitted: (1) their proposed findings of fact and conclusions of law; (2) a document styled "Memorandum of Law in Support of An Award of Monetary Damages Against Defendant Integrated Structures Corporation"; (3) the declaration of their counsel, Matthew G. McGuire, Esq. ("McGuire"); (4) a copy of the CBA executed by the International Union of Operating Engineers Local 15, 15A, 15C & 15D, AFL-CIO ("union") and ISC; (5) a copy of the trust agreement; (6) a copy of the February 13, 2012 audit report prepared by Armao Costa & Ricciardi Certified Public Accountants, P.C. ("Armao Costa"), the accounting firm employed by the trustees to audit ISC's records for the period relevant to the instant action; (7) a copy of the "Wage Scale Schedule[s]" effective during the periods July 1, 2007, through June 30, 2008, July 1, 2008, through June 30, 2009, and July 1, 2009, through June 30, 2010; (8) a copy of the trust funds' "Collection and Audit Procedures"; (9) a "synopsis" of the hours expended by counsel to the trustees in prosecuting this action; and (10) documents identifying the fees Armao Costa charged the trustees, the fee the trustees incurred to file this action with the Clerk of Court and the trustees' process server's fees.

The defendant made no submission in connection with the inquest, although it was directed to do so via the Court's June 27, 2012 Order.

BACKGROUND

Based upon the Court's review of the record, the following findings of fact are made:

The trust funds are multi-employer labor management trust funds, organized and operated pursuant to the CBA reached between the union and ISC. The trust funds are also employee benefit plans, within the meaning of ERISA § 1002(3), (37). The trust funds provide fringe benefits to eligible participants, such as: (a) health insurance; (b) a defined contribution retirement plan; and (c) industry-related skill-improvement courses. The trust funds also serve as the collection agent for "union assessment (dues checkoff)" and political action committee payments, which are remitted from contributing employers on behalf of those union members who have authorized such payments. In addition, the trust funds are the administrative representative for the International Union of Operating Engineers, Central Pension Fund ("Central Pension Fund"), and are responsible for collecting and forwarding to the Central Pension Fund, the contributions which finance the defined benefit retirement plan for eligible union members.

Pursuant to the CBA between ISC and the union, of which the trust funds are third-party beneficiaries, ISC was required to make fringe benefit contributions for each hour of work performed by eligible members it employed. These contributions were made through fringe benefit stamps ISC purchased from the trust funds. Each benefit stamp contains an amount allocatable to specific fringe benefit categories, such as the above-referenced retirement plan. At the end of each week, ISC was required to provide each employee stamps commensurate with the number of hours the employee worked. Thereafter, the employee would redeem the stamps - no less than three times per year - at the trust funds' office, to receive credit towards his or her various fringe benefit fund accounts.

Pursuant to the trust agreement, the trustees are authorized to examine the payroll records of contributing employers, such as ISC, to ensure that each employer is making the required fringe benefit contributions. At the trustees' request, ISC produced employment records for an audit spanning the period July 1, 2007, through June 30, 2010. Armao Costa audited those records and reported its findings to the trustees. Armao Costa calculated the number of hours worked by each employee covered by the CBA and multiplied that number by the appropriate fringe benefit rate(s) to determine the amount of fringe benefit contributions ISC was required to make. Armao Costa compared the fringe benefit contributions reflected in ISC's records to the amount of contributions it determined should have been made by ISC, to ascertain whether a deficiency existed. The fringe benefit rates, upon which Armao Costa relied when making its calculations, were derived from the Local 15 & 15A Wage Scale Schedules in effect during the period audited; the relevant rates are noted below:

For the period of July 1, 2007 through June 30, 2008, the applicable fringe benefit rates... were $24.07 for each regular hour of work performed and $42.99 for each overtime hour of work performed. For the period of July 1, 2008 through June 30, 2009, the applicable fringe benefit rates... were $25.48 for each regular hour of work performed and $45.56 for each overtime hour of work performed. For the period of July 1, 2009 through June 30, 2010, the applicable fringe benefit rates... were $26.89 for each regular hour of work performed and $48.13 for each overtime hour of work performed.

Armao Costa produced an audit report dated February 13, 2012, based on its review of ISC's records. The report indicates that fringe benefit contributions of $2, 734.00[2] are owed to the trust funds, for the period July 1, 2007, through June 30, 2010, as indicated in the report's chart entitled:

Unpaid Contributions During the Audited Period, Exact Figures

Audited Unpaid Unpaid Unpaid Unpaid Total amount Period Regular Double Time Regular hour Double Time Owed Hours Hours rates rates July 1, 0.00 4.00 $24.07 $42.99 $ 171.96 2007- June 30, 2008 July 1, 28.00 19.50 $25.48 $45.56 $1, 601.86 2008- June 30, 2009 July 1, 16.00 11.00 $26.89 $48.13 $ 959.67 2009- June 30, 2010 Total $2, 733.49

In accordance with the CBA, if an employer fails to make the appropriate fringe benefit contributions, it may be required to pay interest on the outstanding contributions. The trust funds' Collection and Audit Procedures state the following:

Employers shall make fringe benefit contributions by the purchase of a consolidate stamp from the Fund Office. Said stamps shall be placed in the employees' weekly pay envelopes, and shall be remitted to the Fund Office three (3) times per year: March and April, July and August, November and December. Further, pursuant to the terms of the applicable CBA, each Employer is required to submit a report of hours worked by its employees, along with the names and social security numbers of said employees. In the event a member/employee informs the Fund Office, Trust or Union Representative that he has not received his stamps in his weekly pay envelope, or the information contained on the Employers [sic] hours worked report disclose a deficiency, then the Local 15 Funds shall consider the Employer to be delinquent and the Fund Administrator shall cause a delinquency notice to be sent via first class mail to the delinquent Employer. The notice shall advise the Employer that the contributions must be received within ten (10) days of the date of the notices so as to avoid interest, legal fees and penalties... [i]nterest ...

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