United States District Court, E.D. New York
For Board of Trustees of the UFCW Local 50 Pension Fund, Plaintiff: Anthony S. Cacace, LEAD ATTORNEY, Proskauer Rose LLP, New York, NY.
REPORT AND RECOMMENDATION
STEVEN I. LOCKE, United States Magistrate Judge.
Before the Court on referral from the Honorable Joanna Seybert for Report and Recommendation in this action brought pursuant to the Employee Retirement Income Security Act (" ERISA"), 29 U.S.C. § 1001 et seq., is Plaintiff's motion for a default judgment. By Complaint filed on April 5, 2013 (" Compl."), DE , Plaintiff Board of Trustees of the Local 50 Pension Fund (" Plaintiff" or the " Fund") commenced this action against Defendant Baker Hill Packing Inc. (" Defendant" or " Baker Hill") to recover withdrawal liability and related relief. Baker Hill failed to answer or otherwise respond, and on August 8, 2014 Plaintiff filed its motion for a default judgment, DE , seeking: (i) payment of $394, 482 for withdrawal liability; (ii) $49, 054.78 for accrued prejudgment interest at a rate of 6.00% from August 14, 2012 to August 1, 2014; (iii) $78, 896.40 for liquidated damages; (iv) $650 for costs of the action; and (v) $4, 818.75 for attorneys' fees. See Declaration of Anthony S. Cacace, sworn to on August 8, 2014 (the " Cacace Decl.") at ¶ 24. By order dated August 22, 2014, DE , Judge Seybert referred the motion to the undersigned for a Report and Recommendation " on whether the pending motion should be granted and, if necessary, to determine the appropriate amount of damages, costs and/or fees to be awarded."
For the reasons set forth below, my recommendation is that the motion be granted and damages awarded as follows: $394, 482 for outstanding withdrawal liability, $46, 494.84 for prejudgment interest on the outstanding withdrawal liability, $78, 896.40 for liquidated damages, $4, 736.25 for attorneys' fees, and $650 for costs of the action.
The following facts are taken from the Complaint and accepted as true for purposes of this motion. The Fund is a jointly administered, multiemployer, labor-management trust fund established and maintained pursuant to Collective Bargaining Agreements in accordance with Section 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5). See Compl. ¶ 2. The Fund is also an employee pension benefit plan, as defined by ERISA. See id. By virtue of a Collective Bargaining Agreement (" CBA") that Baker Hill executed with UCFW Local 342 (a labor organization that collectively bargained on Plaintiff's behalf), Baker Hill was obligated to contribute to the Fund in accordance with the terms of the CBA and the applicable Agreement and Declaration of Trust (" Trust Agreement") governing the Fund. See id. ¶ 5. Plaintiff did not provide a copy of the CBA or Trust Agreement with its Complaint or motion papers.
As of November 25, 2008, the Fund experienced a mass withdrawal by contributing employers, as defined in Section 4041(a) of ERISA, 29 U.S.C. § 1341a. See Compl. ¶ 6. As required under the statute, the Fund sent a letter to Baker Hill on January 26, 2009 (the " Notice Letter") notifying it of the mass withdrawal and informing it that contributing employers were no longer required to make monthly contributions to the Fund on or after November 25, 2008. See id.; see also Affidavit of George Leventis, sworn to on August 5, 2014 (the " Leventis Aff."), at ¶ 9; Compl. Ex. A, Letter Dated January 26, 2009.
The Notice Letter outlined a three-step process by which Defendant's withdrawal liability would be determined: (1) first, the Fund would demand, in writing, " initial withdrawal liability" from Baker Hill, the amount of which is calculated pursuant to 29 C.F.R. § 4041A.23, together with a payment schedule. Baker Hill would be required to make payments in accordance with that schedule until; (2) the Fund determined and gave notice of " redetermination liability, " calculated pursuant to 29 C.F.R. § 4219.11(b)(2). Upon such notice, Baker Hill would continue making payments, but in accordance with an amended redetermination schedule until; (3) the Fund finally determined its " reallocation liability" under 29 C.F.R. § 4219.11(b)(3). Upon receiving notice of its final liability amount and payment schedule, Baker Hill would make payments in satisfaction of that amount. See generally Compl. Ex. A.
Accordingly, the Fund sent a letter on August 14, 2009 (the " Initial Withdrawal Letter") notifying Baker Hill of its " initial withdrawal liability" in the amount of $204, 252, payable in one lump sum or 80 quarterly installments of $1, 512. See Compl. ¶ 7; Leventis Aff. ¶ ¶ 10-11; Compl. Ex. B, Letter Dated August 14, 2009. The Initial Withdrawal Letter indicated that Defendant's first payment would be due on October 13, 2009. See id.
Plaintiff also sent another letter, dated March 7, 2011 (the " Reallocation Letter"), notifying Baker Hill that its final " reallocation liability" was $414, 138 and providing an updated payment schedule. See Compl. ¶ 8; Leventis Aff. ¶ 13; Compl. Ex. C.
At this point, the Court notes that, according to the three-step procedure outlined in the Notice Letter, the Fund was required to send Defendant a notice of its " redetermination liability" after the Initial Withdrawal Letter, but before the Reallocation Letter. The Complaint does not allege this was ever done, and no such notice is provided with the instant motion papers. However, the Reallocation Letter specifically states as follows:
Please note, however, that because your company is currently delinquent on its quarterly payments, your company's withdrawal liability is due to be accelerated on November 18, 2010, as set forth in the letter sent to you by the Fund on September 18, 2010.
In accordance with that letter, please cure your company's delinquency by sending payment of $3, 024.00 made directly to the order of 'UCFW Local 50 Pension Trust Fund' and forward to the undersigned [George Leventis] at the address below.
Please be advised that if the Company's failure is not cured by the date noted above, the Company will be deemed in default of its withdrawal liability as provided by Section 4219(c)(5) of ERISA. The Fund will then be entitled to require immediate payment of the outstanding amount of the Company's withdrawal liability, plus accelerated interest. . . .
Compl. Ex. C.
Thus, it appears the Fund warned Defendant on March 7, 2011 that it was required to cure alleged delinquencies by November 18, 2010. The impossibility of Defendant's compliance with this demand is self-evident. Moreover, Plaintiff does not provide the referenced September 18, 2010 letter, or allege whether, save for the alleged $3, 024 arrears, Baker Hill made the required payments toward its initial withdrawal liability between August 14, 2009, when it received notice of that amount, and March 7, 2011, the date of the Reallocation Letter.
The Fund then sent another letter on August 17, 2012 (the " Default Letter"). The Default Letter referenced the Reallocation Letter as follows: " [The Reallocation Letter] stated that the Company's payment of withdrawal liability to the Fund was required to commence no later than sixty (60) days after the date of such letter . . . The initial payment was due on or before August 11, 2012." See Compl. Ex. D, Letter Dated August 17, 2012. Based on my review of the Reallocation Letter, these statements by the Fund are untrue. Specifically, the Reallocation Letter did not indicate that payment was due 60 days thereafter; to the contrary, it alleged that Baker Hill was behind on its payments and was required to cure its delinquencies by November 18, 2010, a date that had passed more than three months earlier. The Reallocation Letter also does not state that Defendant's payment of any delinquent sums became due on August 11, 2012. In addition, the Default Letter states that Defendant owes $1, 513.49, despite its prior Reallocation Letter, which stated that Defendant owed $3, 024.00. Plaintiff fails to reconcile these inconsistencies in its motion papers.
The Default Letter does, however, provide notice that if Defendant's delinquencies persist for 60 additional days, it would be deemed in default under Section 4219(c)(5) of ERISA and the Fund would be entitled to accelerate payment of the outstanding amount of withdrawal liability, plus accrued interest, penalties, costs and attorneys' fees. See id.; Compl. ¶ 9; Leventis Aff. ¶ 14.
Finally, approximately one year and four months later, on October 18, 2012, the Fund sent a letter (the " Acceleration Letter") notifying Defendant that it had failed to make payment as required, despite its prior demand, and therefore the outstanding amount of $414, 138 was immediately due, together with applicable interest and liquidated damages, less a credit of $19, 656 representing payments previously made by Defendant. See Compl. Ex. E; Compl. ¶ 10; Leventis Aff. ¶ 15.
According to Plaintiff, Baker Hill never cured its default and did not seek review of any part of the Fund's liability determination. Based on these events, the Fund brought claims against Defendant for violations of the CBA and ERISA. As set forth above, Baker Hill never responded or otherwise moved with respect to the Complaint. Baker Hill's default was noted by the Clerk of the Court on April 30, 2014, DE , and the Fund moved for a default judgment on August 8, 2014, DE .
II. Legal Standards
A. Standard of Review
Motions for default judgments are governed by Rule 55 of the Federal Rules of Civil Procedure (" Fed. R. Civ. P."), which provides for a two-step process. See Fed.R.Civ.P. 55; Priestley v. Headminder, Inc., 647 F.3d 497, 504-05 (2d Cir. 2011); Gesualdi v. Ava Shypula Testing & Inspection, Inc., CV 13-01873, at *6-*7 (E.D.N.Y. Feb. 28, 2014) (Report and Recommendation), adopted by (E.D.N.Y. Apr. 10, 2014). Initially, the moving party must obtain a certificate of default from the Clerk of the Court. See Fed.R.Civ.P. 55(a). Once the certificate of default is issued, the moving party may apply for entry of a default judgment. See id. Rule 55(b).
Where a default occurs, the well-pleaded factual allegations set forth in a complaint relating to liability are deemed true. See Greyhound Exhibitgroup, Inc. v. E.L. U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Ferrara v. PJF Trucking LLC, 13-CV-7191, at *9-*10 (E.D.N.Y. Aug. 14, 2014) (Report and Recommendation), adopted by (E.D.N.Y. Sept. 22, 2014); Ava Shypula, at *7; Gesualdi v. Magnolia Pro Trucking Inc., CV 11-14082, at *5 (E.D.N.Y. Aug. 20, 2012) (Report and Recommendation), adopted by (E.D.N.Y. Sept. 11, 2012); Joe Hand Promotions, Inc. v. El Norteno Rest. Corp., CV-06-1878, at *4 (E.D.N.Y. Sept. 11, 2007) (Report and Recommendation), adopted by; see also Fed.R.Civ.P. 8(b)(6) (" An allegation--other than one relating to the amount of damages--is admitted if a responsive pleading is required and the allegation is not denied").
However, " just because a party is in default, the plaintiff is not entitled to a default judgment as a matter of right." Profi-Parlkiet Sp. Zoo v. Seneca Hardwoods LLC, 13 CV 4358, at *11 (E.D.N.Y. May 23, 2014) (Report and Recommendation), adopted by (E.D.N.Y. Jun. 18, 2014) (internal quotation omitted); see Bravado Int'l Grp. Merchandising Servs., Inc. v. Ninna, Inc., 655 F.Supp.2d 177, 186 (E.D.N.Y. 2009). Liability is not established simply because the complaint remains unanswered. See PJF Trucking, at *10. This is because a default does not establish those allegations which are conclusory and it does not excuse defects in the pleadings. See id.; see also Gunawan v. Sake Sushi Rest., 897 F.Supp.2d 76, 83 (E.D.N.Y. 2012); Said v. SBS Elecs., Inc., CV 08-3067, at *6-*7 (E.D.N.Y. Feb. 24, 2010), adopted as modified, (E.D.N.Y. Mar. 30, 2010). Accordingly, the ...