United States District Court, S.D. New York
LOCAL UNION NO. 40 of the INT'L ASS'N OF BRIDGE, STRUCTURAL AND ORNAMENTAL IRON WORKERS, et al., Plaintiffs,
CAR-WIN CONSTR., INC. and CRV PRECAST CONSTR., LLC, Defendants
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
For Local Union No. 40 of the International Association of Bridge, Structural and Ornamental Iron Workers, Local Union No. 361 of the International Association of Bridge, Structural and Ornamental Iron Workers, Iron Workers Locals 40, 361 & 417 Health Fund, Iron Workers Locals 40, 361 & 417 Pension Fund, Iron Workers Locals 40, 361 & 417 Vacation Fund, Locals 40 and 361 Apprenticeship and Training Fund, Iron Workers Locals 40, 361 & 417 Annuity Fund, Iron Workers Locals 40, 361 & 417 Topping Out Fund, Iron and Steel Industry Promotion Fund of New York, collectively known as, Iron Workers Locals 40, 361 & 417 Union Security Funds, Plaintiffs: Alicia Margaret Shotwell, Colleran, O'hara & Mills LLP, Woodbury, NY; John Stackpole Groarke, Colleran, O'hara & Mills LLP, Garden City, NY; Robin Young Tyrrell, Colleran, O'Hara & Mills, Garden City, NY.
For Car-Win Construction, Inc., CRV Precast Construction, LLC, Defendants: George Christopoulos, Dreifuss Bonacci & Parker, LLP, Florham Park, NJ.
MICHAEL H. DOLINGER,
UNITED STATES MAGISTRATE JUDGE. HONORABLE LAURA T. SWAIN, UNITED STATES DISTRICT JUDGE.
REPORT & RECOMMENDATION
MICHAEL H. DOLINGER,
UNITED STATES MAGISTRATE JUDGE.
On June 21, 2012, plaintiffs -- which consist of a number of local unions and related benefit funds -- filed an action in this court against two allegedly related construction companies, Car-Win Construction, Inc. (" Car-Win" ) and CRV Precast Construction, LLC (" CRV" ). Plaintiffs allege, inter alia, that defendants violated provisions of the governing collective bargaining agreement (" CBA" ) that mandate contributions to the funds, payment of certain wages, and access to records necessary to ensure compliance with the CBA, and that plaintiffs are owed the balance due under a judgment entered against Car-Win in both New York and New Jersey state courts.
Plaintiffs now seek a default judgment against defendants for failing to comply with discovery obligations and related orders by this court. They also seek injunctive relief in the form of an order requiring defendants to submit to an audit of their financial records from January 1, 2008 through the present. Separately, plaintiffs seek an award of fees associated with an earlier motion for a default judgment.
For the reasons that follow, we recommend that plaintiffs' motion for a default judgment be granted, that a post-default inquest be conducted, and that plaintiffs' request for an audit be granted subject to the temporal qualifications that will be described. We also recommend that plaintiffs' application for fees be granted in its entirety.
I. Plaintiffs' Complaint
We begin by detailing plaintiffs' allegations and the relief they seek. Plaintiffs include Local Union Nos. 40 and 361 of the International Association of Bridge, Structural and Ornamental Iron Workers, both of which represent " individuals who perform structural iron work." (Compl. ¶ ¶ 4-5). Local Union No. 40 represents workers in a " geographical jurisdiction, including but not limited to the Counties of New York and the Bronx." (Id. at ¶ 4). Local Union No. 361 represents a " geographical jurisdiction, including but not limited to the County of Brooklyn." (Id. at ¶ 5). The remaining plaintiffs are benefit funds related to these two unions, which include, inter alia, a health fund, a pension fund, a vacation fund, and an annuity fund (the " Funds" ). (Id. at ¶ 6).
Car-Win entered into a CBA with the unions beginning on July 1, 1996. (Compl. ¶ 10; see also Ex. 2 to Decl. of Alicia M. Shotwell dated Feb. 14, 2014 (hereinafter " 4th Shotwell Decl." ) [docket no. 51]). Among Car-Win's obligations under the CBA, it agreed to make various contributions to the plaintiff benefit funds. (Compl. ¶ 10). The precise terms of those arrangements are delineated in the CBA and various Agreements and Deelarations of Trusts incorporated into the CBA by reference. (Compl. ¶ ¶ 11-12; see also Ex. 2 to 4th Shotwell Decl. at § § 16-24 of the attached CBA).
Broadly, Car-Win committed itself to contributing to these funds based on the hours worked by its employees and hourly rates set by the CBA. (Compl. ¶ 12; see, e.g. CBA § 16 (a)). Additionally, while these sections of the CBA frame the requirement of benefit contributions in terms of hours worked by union employees, the agreement elsewhere states as follows:
The Employer agrees not to sell or assign, subcontract or sublet any work covered by this Agreement to any person, firm or corporation which is not in contractual relationship with the Union. Any Employer who violates this section shall be liable to the Joint Funds for the fringe benefit contributions due on work performed by his subcontractor.
(CBA § 39; see also Compl. ¶ 12).
As will be discussed later, see infra p. 66, defendants assert that Car-Win ceased operations in September 2009. (See, e.g., Ex. 6 at ¶ 3(1) to 4th Shotwell Decl.). Plaintiffs allege, however, that CRV is merely an alter-ego of Car-Win, that CRV and Car-Win are a single employer, and that CRV is a " disguised continuance" of Car-Win, an arrangement designed to " avoid  [Car-Win's] contractual and Trust Fund obligations." (Compl. ¶ ¶ 13-17). Plaintiffs ultimately assert that CRV was and is as bound by the CBA as Car-Win (id. at ¶ 17) and that Car-Win and CRV are " jointly and severally liable for each other's debts and obligations." (See, e.g., id. at ¶ 56).
Plaintiffs go on to allege that CRV engaged in covered work in the craft and geographic jurisdiction of Local Union No. 361 and failed to comply with the requirements of the CBA. (Id. at ¶ 25). Specifically, plaintiffs allege that CRV did not pay the required wages for this work, in the sum of $263,250.00. (Id.). Plaintiffs further allege that CRV neglected to make the related contributions to the benefit funds, in the sum of $357,223.00. (Id. at ¶ 26). Plaintiffs also seek additional damages pursuant to the CBA, including interest ($28,242.00), attorneys' fees ($89,305.75), and liquidated damages ($71,44.60). (Id. at ¶ 27).
With respect to Local Union No. 40, plaintiffs allege that CRV failed to pay $65,710.00 in required wages. (Id. at ¶ 31). Plaintiffs also assert that CRV neglected to make $87,722.40 in benefit contributions, and they seek additional damages for this violation as well, including interest ($8,610.91), attorneys' fees ($21,930.60), and liquidated damages ($17,544.48). (Id. at ¶ ¶ 32-33).
Turning from CRV's violations of the CBA -- as an alleged alter-ego of Car-Win -- the complaint then delineates several allegations against Car-Win itself. (See id. at ¶ ¶ 34-48). First, plaintiffs explain that " [p]ursuant to the terms and conditions of the applicable C.B.A. and Trust Agreements, CARWIN, is required to provide access to the records necessary for the Trust Funds to determine whether CARWIN complied with the obligation to contribute to the Trust Funds." (Id. at ¶ 35; see also CBA § 24 (a), (d)). According to plaintiffs, Car-Win " fail[ed] to allow Plaintiffs to schedule and complete an audit of CARWIN's books and records for the period May 24, 2010 through May 31, 2011 after demand for an audit was made upon CARWIN." (Compl. ¶ 36).
Plaintiffs thus seek access to Car-Win's financial records for this period for purposes of an audit, on the basis of which they will seek whatever benefit contributions the audit reveals to be due. (Id. at ¶ 40). Plaintiffs are also asking for a slew of related remedies, including attorney and auditor fees, court costs, interest, and liquidated damages. (Id. at ¶ ¶ 37-40).
Finally, plaintiffs explain, based on an audit that they did perform of Car-Win's financial records, that defendant failed to make benefit contributions for the period of August 1, 2008 through July 26, 2009, in addition to related interest and liquidated damages payments. (Compl. ¶ 42). The parties eventually agreed to settle these claims on June 24, 2010 for $72,509.62, of which $36,991.49 represented the unpaid contributions. (Id. at ¶ 43). To secure plaintiffs against the possibility of Car-Win's default on this agreement, Car-Win also executed a Confession of Judgment for the full amount allegedly due, which was $118,749.41. (Id. at ¶ ¶ 43-44).
Plaintiffs state that Car-Win did indeed default on settlement payments, after having paid only the $36,991.49 representing the past-due contributions. (Id. at ¶ 45). Subsequently, plaintiffs filed the Confession of Judgment in the Nassau County Supreme Court on November 10, 2011, in which a judgment was entered for $82,017.92 presumably, the total amount due under the Confession of Judgment, less what was paid toward the settlement amount. (Id. at ¶ ¶ 45-46). Plaintiffs also docketed this judgment in the Superior Court of New Jersey, Bergen County on February 7, 2012. (Id. at ¶ 47). They now seek the amount due under this judgment, " together with additional contractual damages pursuant to the C.B.A." (Id. at ¶ 48).
II. Early Procedural History
We have recounted a portion of the protracted procedural history of this case before.
(See Order dated Jan. 2, 2014 [docket no. 42] pp. 2-6). We reiterate much of that history again here -- elaborating on it in some detail -- both because of what has transpired since we last visited the possibility of a default judgment and because of the particular importance of detailing such history in motions of this sort.
Plaintiffs filed their complaint against Car-Win and CRV on June 21, 2012. (Docket no. 1). On June 27, 2012, plaintiffs served defendants' current attorney, Mr. George Christopoulos, with a copy of the summons and complaint. (Decl. of Alicia M. Shotwell dated Apr. 29, 2013 (hereinafter " 1st Shotwell Decl." ) [docket no. 28] at ¶ 6 & Ex. C) Through the New York Secretary of State, Car-Win itself was served on August 13, 2012 (see docket no. 8) and filed its answer on September 4, 2012. (Docket no. 9).
CRV -- through Frank Valentino, a designated recipient -- was served on July 2, 2012. (Docket no. 5; see also 1st Shotwell Decl. at ¶ 7 & Ex. F) Shortly before then, the District Court had scheduled an initial conference for September 28, 2012. (See Order dated June 28, 2012 [docket no. 2]). This order required that a joint " Preliminary Pre-Trial Statement" be filed by no later than seven days before the initial conference. (Id.).
On September 25, 2012, plaintiffs' counsel wrote to the District Court -- with the consent of Mr. Christopoulos (at the time, seemingly only representing Car-Win) -- asking for an adjournment of this conference " as we at tempt to obtain the information necessary to prepare the pre-trial statement." (Letter dated Sept. 24, 2012 [docket no. 10]) This letter did not describe the reasons for the delay, although a later declaration explained that " [b]oth Plaintiffs and DEFENDANTS were [initially] unaware of [the] requirement" of the pre-trial statement. (1st Shotwell Decl. at ¶ 8). However, the letter did note that, in attempts to obtain the consent of CRV to the requested adjournment, counsel had reached out to Mr. Valentino, " who informed us that he was unfamiliar with the lawsuit ... [even though] our Affidavit of Service [see docket no. 5] indicates that Mr. Valentino was served with our papers on July 2, 2012." (Letter dated Sept. 24, 2012).
The initial conference was thus adjourned to October 26, 2012. (Id.). By letter dated October 18, 2012, however, Mr. Christopoulos (now nominally representing both Car-Win and CRV) asked for another adjournment, with plaintiffs' consent. (Letter dated October 18, 2012 [docket no. 11]). While plaintiffs had prepared their portion of the pre-trial statement, Mr. Christopoulos " require[d] additional time to gather the information necessary to prepare the pre-trial statement." (Id.). The District Court thus rescheduled the initial conference to December 7, 2012. (Id.).
The pre-trial statement was eventually filed on December 3, 2012. (See docket no. 12). In that document, Mr. Christopoulos pointed out that -- while he was attorney of record for Car-Win and had advised plaintiffs that he would be representing CRV as well -- he had not yet submitted an answer on behalf of CRV and " [a]s a result, the details of CRV's involvement in this action were not discussed at the time the Parties met and conferred to prepare this Statement." (Id. at p. 1 n.1).
Having held the initial conference on December 7, 2012 -- by which time CRV had still not responded to the complaint -- the District Court ordered that defendant do so by December 21, 2012. (See Pre-trial scheduling order dated [docket no. 14] at ¶ 12). This date came and went, but CRV did not file its answer (dated January 21, 2013) until January 25, 2013. (Docket no. 17).
Additionally, in the District Court's December 7, 2012 scheduling order, all parties were instructed to serve their Rule 26 (a) (1) disclosures by December 21, 2012. (Pre-trial scheduling order at ¶ 12). While plaintiffs served their initial disclosures by this date, neither Car-Win nor CRV did so -- nor did defendants produce anything in the several months thereafter, as we are about to describe. (See 1st Shotwell Decl. at ¶ ¶ 12-13).
On February 20, 2013, plaintiffs served document requests on both defendants. (1st Shotwell Decl. at ¶ 17 & Ex. R). As defendants did not respond to these requests within the required thirty days, plaintiffs sent a letter to defendants' counsel insisting on responses by March 28, 2013. (1st Shotwell Decl. at ¶ 17 & Ex. U).
By letter dated March 28, 2013, plaintiffs sought a pre-motion discovery conference, which we scheduled for April 17, 2O13. (See Ex. X to 1st Shotwell Decl.; Order dated April 1, 2013 [docket no. 20]).
III. First Motion for a Default Judgment
At the April 17, 2013 conference, plaintiffs' counsel summarized the state of the case: Aside from the two answers and the various adjournment requests, she had received nothing from defendants. (Apr. 17, 2013 Tr. 2). They had neither responded nor objected to plaintiffs' discovery requests, and they had not propounded any discovery requests of their own. (Id.).
We then turned to defendants' counsel and asked, " Your client is ready to default in this case? You're on the edge of a default." (Id.) Counsel responded as follows: " I advised them this morning, Judge, as I was on my way to see you, I told them it probably won't be a very pleasant experience. I have advised them that they have had the discovery demand for a period of time." (Id.).
We then directed defendants to provide full and complete discovery responses to all requests by April 24, 2013 and explicitly warned counsel that failure to do so would likely result in a motion for default. (Id. at 3). We also advised defendants' counsel that " for the sake of giving your clients a real taste of reality," he should acquire a copy of the conference transcript and show it to his clients -- a suggestion with which counsel agreed. (Id. at 4-5).
On April 24, 2013, defendants predictably asked for two more weeks to produce documents, an application that we denied in an endorsed order that gave them two more days to comply. (See Endorsed letter dated Apr. 24, 2013 [docket no. 23]). This order, too, was violated (see 1st Shotwell Decl. at ¶ 20), and plaintiffs therefore filed their motion for sanctions on or about April 29, 2013, seeking entry of a default against both defendants. (See docket nos. 26-28). We then set May 10, 2013 as the date by which defendants were to respond to this motion. (Endorsed order dated May 1, 2013 [docket no. 29]).
Defendants did indeed respond to the motion on May 10. (Docket nos. 32-33). This also happened to be the date on which defendants began delivering discovery responses to plaintiffs. (See Decl. of Alicia M. Shotwell dated May 15, 2013 (hereinafter " 2d Shotwell Decl." ) [docket no. 35] at ¶ 4 & Ex. C). Defendants claimed that their delivery of such documents on the day their response to the motion was due was the coincidental result of the logistics of production, copying, and mailing. (See Decl. of George Christopoulos dated May 10, 2013 [docket no. 32] at ¶ ¶ 3-5) Still, we noted in a subsequent order -- and we reiterate here -- that this production was " [i]n obvious response to the threat of sanctions." (See Order dated Jan. 2, 2014 p. 4).
Ultimately, by May 16, 2013 or thereabout, defendants had provided plaintiffs with fifteen boxes of documents -- much of it apparently irrelevant -- not labeled, indexed, or organized in any discernable order. (See Decl. of Alicia M. Shotwell dated June 25, 2013 (hereinafter " 3d Shotwell Decl." ) [docket no. 38] at ¶ ¶ 6, 16). In light of this vast and bewildering production, plaintiffs wrote to the court requesting that we hold our decision on their motion in abeyance, pending the results of an in-person meeting with defendants' counsel that was intended to assist in sorting out the nature of the provided material. (See Endorsed letter dated May 28, 2013 [docket no. 36]).
The parties' counsel apparently met at least three times over subsequent days (3d Shotwell Decl. at ¶ 7), yet were unable to come to an agreement about the sufficiency of defendants' production. (See Endorsed letter dated June 18, 2013 [docket no. 37]). We therefore authorized plaintiffs to supplement their motion with an explanation of the remaining outstanding deficiencies in defendants' production. (Id.).
The supplementary papers submitted after that order included lists of essential corporate and financial documents still sought by plaintiffs from both defendants, as well as responsive lists by defendants of items either produced or unable to be produced. (See, e.g., Decl. of George Christopoulos dated July 2, 2013 [docket no. 39] at ¶ 3 & Ex. A). Fundamentally, what remained
was a familiar type of discovery dispute: Plaintiffs sought certain items and defendants generally asserted that they had provided whatever they had, explaining that the unproduced items were either non-existent or not locatable. (Id.).
With plaintiffs still seeking a default judgment, we then employed an equally familiar solution, finding the harsh remedy of a default judgment to be premature. (See Order dated Jan. 2, 2014 pp. 10-12). By order dated January 2, 2014, we instructed both defendants
to provide to plaintiffs' counsel, within one week from the issuance of this memorandum and order, an affidavit or a declaration under penalty of perjury by individuals with personal knowledge specifying in detail (1) the document retention and storage policies ... pertaining to the categories of documents that [they] claim to be unable to locate and (2) specifying the nature and extent of the search that this defendant made for the categories of documents that it claims to be unable to find.
(Id. at p. 10; see also id. at p. 11). We further directed that, within one week of the receipt of those affidavits or declarations, plaintiffs were authorized to depose " any affidavits or declarants concerning document retention and storage and the searches made for those documents." (Id. at 10-11). We also ruled that plaintiffs were entitled to reimbursement for " the reasonable expense of their motion practice" and allowed them to serve and file an affidavit or declaration, with contemporaneous time records, within two weeks. (Id. at 12). Defendants were to respond within one week thereafter. (Id. at 13).
IV. Second Motion for Default Judgment
On January 10, 2014, plaintiffs alerted us to defendants' non-compliance with our January 2 order and requested a conference on the matter. (Letter dated Jan. 10, 2014 [docket no. 43]). We then met with the parties at an in-person conference on January 31, 2014. (See Jan. 31, 2014 Tr. [docket no. 63]). Even by that date, defendants had still not sent to plaintiffs the required affidavits or declarations. (Id. at 2, 5).
At that point, we advised plaintiffs that, in light of defendants " endless default in this case," they were authorized to file another " default motion or other sanctions motion." (Id. at 5). We set a briefing schedule and informed defendants that " unless something has dramatically changed by then the hammer will fall." (Id.). Accordingly, plaintiffs filed their motion for sanctions on February 14, 2014, and defendants filed their opposition on February 21, 2014. (See docket nos. 49-53).
Plaintiffs seek a default judgment against defendants under Rule 37(b) (2) (A) (vi) of the Federal Rules of Civil Procedure. (See Pls.' Mem. 5 [docket no. 50]). Plaintiffs frame their arguments around an oft-cited set of relevant factors, see, e.g., World Wide Polymers, Inc. v. Shinkong Synthetic Fibers Corp., 694 F.3d 155, 159 (2d Cir. 2012), contending (1) that defendants' non-compliance with discovery has been willful (Pls.' Mem. 7-9), (2) that lesser sanctions will be ineffective (id. at 9-10), (3) that the length of non-compliance militates in favor of default (id. at 10-11), (4) that defendants' had been duly
warned of the potential consequences of continued non-compliance (id. at 11-12) I and (5) that defendants' repeated discovery failures have prejudiced plaintiffs. (Id. at 12-14).
Apart from an entry of a default, plaintiffs seek equitable relief in the form of an order requiring defendants to submit to an audit of their financial records. (Id. at 14-16).
Defendants' opposition is less cleanly structured and somewhat difficult to follow. However, as we will detail below, they are generally asserting (1) that the above-stated factors are not met in this case, (2) that plaintiffs are, in any event, specifically at fault with respect to the current dispute, (3) that plaintiffs' own conduct during the course of discovery has been so deficient as to excuse defendants' own failures, and (4) that, even if imperfectly, defendants have partially fulfilled their obligations under our last order and that default is therefore too harsh a sanction here. (See Opp. Mem. 1-4).
Finally, defendants counter plaintiffs' request for equitable relief by suggesting that this application is not permissible under either relevant case-law or our instructions to the parties. (Id. at 4-5).
I. Motion for Default Judgment Under Rule ...