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Trustees of Empire State Carpenters Annuity v. Rodrigue

United States District Court, E.D. New York

March 29, 2017

TRUSTEES OF EMPIRE STATE CARPENTERS ANNUITY, APPRENTICESHIP, LABOR-MANAGEMENT COOPERATION, PENSION AND WELFARE FUNDS, Plaintiff,
v.
CLAUDE RODRIGUE doing business as Mr Drywall, Inc., C.R. DRYWALL CO., INC., C.R. DRYWALL RESIDENTIAL, INC., and MR DRYWALL, INC., Defendants.

          For Plaintiff: Charles R. Virginia, Esq. Richard B. Epstein, Esq. Elina Burke, Esq. Todd Dickerson, Esq. Virginia & Ambinder LLP.

          For Defendants: Claude Rodrigue, William F. Ryan, Jr., Esq. C.R. Drywall Tabner, Ryan, and Keniry, LLP Residential, C.R. Drywall Co. David Brickman, Esq.

          MEMORANDUM & ORDER

          JOANNA SEYBERT, U.S.D.J.

         Currently pending before the Court is Magistrate Judge Steven I. Locke's Report and Recommendation dated January 25, 2017 (the “R&R”) with respect to plaintiffs Trustees of Empire State Carpenters Annuity, Apprenticeship, Labor-Management Cooperation, Pension and Welfare Funds' (“Plaintiffs” or the “Funds”) motion for partial summary judgment, which requests confirmation of the subject arbitration award and an award of summary judgment against defendant Claude Rodrigue d/b/a Mr Drywall Inc. (“Rodrigue”). (Docket Entries 58 and 72.) Judge Locke recommends that Plaintiffs' motion be granted. (R&R, Docket Entry 72.) Defendants Rodrigue, C.R. Drywall Residential, Inc., and Mr Drywall, Inc. (collectively, “Defendants”)[1] have filed objections that are also pending before the Court. (Defs.' Obj., Docket Entry 73.) For the reasons set forth below, Defendants' Objections are OVERRULED and the R&R is ADOPTED in its entirety.

         BACKGROUND

         The Court assumes familiarity with the factual background of this matter, which is set forth in detail in the R&R. Briefly, the Funds are employer and employee trustees of multiemployer labor-management trust funds and a labor management cooperation committee. (Compl. ¶ 5.) The Funds allege that Rodrigue was the owner and operator of Mr Drywall, Inc., an unincorporated entity. (Compl. ¶ 6.)

         On June 27, 2002, Mr Drywall, Inc. executed a Memorandum of Understanding with respect to a collective bargaining agreement with the Northeast Regional Council of Carpenters f/k/a Empire State Regional Council of Carpenters (the “Union”) for the period from June 1, 2002 through May 31, 2006. (Craven Decl., Docket Entry 60, ¶¶ 1, 5; Craven Decl. Ex. C, Docket Entry 60-3.) On May 31, 2006, Rodrigue, as authorized representative of M.R. Drywall Distributors, Inc., [2] executed a Memorandum of Agreement between Eastern Contractors Association, Inc. and the Union providing that the Master Agreement for the period from June 1, 2002 through May 31, 2006, shall remain in full force and effect from June 1, 2006, through May 31, 2011 (the “2006 Memorandum of Agreement”). (2006 Mem. of Agmt., Craven Decl. Ex. D, Docket Entry 60-4.) The collective bargaining agreement governing the period from June 1, 2006 through May 31, 2011 (the “CBA”) requires that employers make specified contributions to the Funds and “‘comply with the agreements, declarations of trust, plans and/or rules, policies and regulations of the applicable Funds so designated[.]'” (Craven Decl. ¶ 9 (quoting CBA, Craven Decl. Ex. E, Docket Entry 60-5, at 11).)

         The Funds established a Joint Policy for Collection of Delinquent Contributions (the “Collection Policy”) that requires employers to provide their books and payroll records to enable the Funds to conduct an audit. (Collection Policy, Craven Suppl. Decl. Ex. A, Docket Entry 70-1, at 5-6.)[3] In the event an employer fails to contribute to the Funds, the matter is referred to arbitration. (Craven Decl. ¶ 12.)

         The Funds allege that they conducted an audit of MR Drywall's books and records for January 1, 2008, through June 30, 2011 (the “Audit”), and discovered that MR Drywall failed to remit contributions in the principal amount of $438, 717.24. (Craven Decl. ¶¶ 13-14.) The Funds allege that they initiated arbitration and a representative of MR Drywall failed to appear at the hearing. (Craven Decl. ¶ 16.) The Arbitrator ultimately determined that MR Drywall violated the CBA and awarded $641, 009.32 to the Funds (the “Arbitration Award”). (Craven Decl. ¶ 17; see also Arb. Award, Craven Decl. Ex. H, Docket Entry 60-8.)

         On October 21, 2013, the Funds commenced this action to confirm and enforce the Arbitration Award pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), Section 301 of the Labor Management Relations Act of 1947 (“LMRA”), and Section 9 of the Federal Arbitration Act (“FAA”). (See generally Compl.)

         I. Plaintiffs' Motion for Partial Summary Judgment

         On August 25, 2016, Plaintiffs filed their motion for partial summary judgment seeking confirmation of the Arbitration Award and summary judgment against Rodrigue. (Pls.' Mot., Docket Entry 58.) Plaintiffs argued that the arbitrator acted within the scope of his authority and the Arbitration Award was consistent with the CBA and Collection Policy. (Pls.' Br., Docket Entry 63, at 6.) Plaintiffs also argued that Rodrigue failed to raise any genuine issues of material fact with respect to his personal liability for any judgment issued against MR Drywall. (Pls.' Br. at 7.) Finally, Plaintiffs argued that they are entitled to attorneys' fees and costs. (Pls.' Br. at 9-12.)

         In opposition, Defendants argued that issues of fact preclude the confirmation of the Arbitration Award and alleged, inter alia, that: (1) Plaintiffs have not established that the Collection Policy was binding on MR Drywall and Rodrigue, as (a) the Collection Policy does not contain an agreement to arbitrate or authorize the arbitrator to enter a default award, (b) MR Drywall's failure to appear at the arbitration constituted a “clear objection, ” and (c) the Collection Policy is inconsistent with the CBA; (2) the CBA is unsigned, and the provision allegedly binding MR Drywall to the Funds' agreements and policies does not define the terms “agreements” or “policies” or state that the provision is to be applied prospectively, and (3) there is no arbitration, choice of forum or attorneys' fees provision in the CBA. (Defs.' Br., Docket Entry 65, at 3-5.) Additionally, Defendants argued that Plaintiffs did not demonstrate the reliability of the Audit and the arbitration failed to name Rodrigue as a party and was conducted by an arbitrator selected by the Funds at a location outside of Defendants' county of residence. (Defs.' Br. at 8-9.) Defendants also contended that Rodrigue should not be held personally liable for the Arbitration Award, as: (1) he was not served with notice of arbitration, (2) MR Drywall is a de facto corporation, and (3) Plaintiffs are estopped from asserting claims against Rodrigue based on their failure to name him as a party to the arbitration and treatment of MR Drywall as a “legally independent entity” in connection with the arbitration. (Defs.' Br. at 10-13.) Finally, Rodrigue argued that Plaintiffs' ERISA claim should be dismissed, and Plaintiffs' request for attorneys' fees should be denied. (Defs.' Br. at 14.)

         II. The R&R

         On January 25, 2017, Judge Locke issued his R&R. Judge Locke recommended that the Court confirm the Arbitration Award, and concluded that the arbitrator reasonably relied on the Audit in rendering his award, and pursuant to the Collection Policy, the Funds were entitled to interest, liquidated damages, attorneys' fees, audit costs, and the arbitrator's fee. (R&R at 7-9.) Judge Locke also found that MR Drywall waived its right to challenge the arbitration proceeding and/or Audit by failing to attend the arbitration. (R&R at 9.)

         Judge Locke similarly rejected Defendants' argument that the arbitrator lacked jurisdiction over MR Drywall. (R&R at 11.) Judge Locke found that MR Drywall was bound by the Collection Policy through the CBA, which incorporated the Collection Policy as the CBA's terms “anticipate the Funds' subsequent imposition of a collection policy through the Union's relationship with various employer associations.” (R&R at 13.) Judge Locke also noted that: (1) Rodrigue testified at his deposition that his businesses were union employers, he was aware that MR Drywall was required to remit fringe benefit contributions to the Funds, and he signed the CBA for MR Drywall, and (2) documentary evidence indicated that MR Drywall had previously made benefit contributions and submitted to the Audit. (R&R at 13-15.) Additionally, Judge Locke found that the 2006 Memorandum of Agreement and the CBA “extended past their expiration dates unless and until an employer issues an explicit notice of withdrawal or a demand of some other modification.” (R&R at 14-15.) Further, Judge Locke found that pursuant to the CBA, Rodrigue “explictly agreed to be represented by various employer associations” and “to be bound by their agreements with the Union, ” and “authorized representatives from both the Union and the [employer] associations signed the Collection Policy.” (R&R at 14.)

         Judge Locke declined to credit Defendants' contention that the arbitrator exceeded his authority by conducting the arbitration hearing in MR Drywall's absence and determined that this failure to appear did not constitute the requisite “forceful objection.” (R&R at 16-17 (internal quotation marks and citation omitted).) Judge Locke also found that Plaintiffs properly served notice of arbitration, and the arbitrator considered the issues of notice and Defendants' absence in deciding to proceed with the arbitration. (R&R at 17-19.)

         Judge Locke also recommended that Rodrigue be held personally liable for the Arbitration Award. (R&R at 19-24.) Judge Locke noted that there were no issues of fact as to Rodrigue's status as the sole proprietor of MR Drywall in light of his testimony that he was the sole owner, shareholder, officer, and director of MR Drywall, he was responsible for MR Drywall's “labor relations, ” and he signed the CBA. (R&R at 20.) Judge Locke also determined that Defendants failed to establish that MR Drywall should be treated as a de facto corporation based on the absence of evidence “suggesting that Rodrigue ever attempted to achieve legal corporate status for MR Drywall.” (R&R at 21.) Additionally, Judge Locke rejected Defendants' argument that the Funds were constrained from attacking MR Drywall's corporate status because they previously sued MR Drywall as a corporation, and concluded that “MR Drywall's de facto corporate status is not a factual assertion subject to the doctrine of admission. . . [r]ather it is a statement of law.” (R&R at 22.) Judge Locke also rejected Defendants' affirmative defenses of estoppel, laches, and waiver. (R&R at 23-24.)

         Finally, Judge Locke recommended that Plaintiffs be granted leave to file a motion for attorneys' fees and costs. (R&R at 24.) Judge Locke found that the terms of the Collection Policy as well as MR Drywall's refusal to comply with the Arbitration Award provide a basis for an award of fees. (R&R at 24-26.)

         III. Defendants' Objections

         On February 8, 2017, Defendants filed Objections to the R&R. (See, Defs.' Obj.) Defendants argue that Judge Locke erred in recommending that the Arbitration Award be confirmed because there are issues of fact as to whether they “consented to arbitration and/or agreed to be bound by the subject arbitration provision.” (Defs.' Obj. at 7.) Particularly, Defendants allege that: (1) there are issues of fact as to “what the parties agreed upon regarding the terms of the CBA, ” (2) there is no evidence that Defendants signed the Collection Policy, or that the Collection Policy was in existence during the relevant time period, (3) Judge Locke's conclusion that the Collection Policy applied retroactively and the CBA extended into 2012 constitutes speculation, and (4) the Collection Policy is inconsistent with the CBA because the CBA does not contain any arbitration, choice of forum, or attorneys' fees provisions. (Defs.' Obj. at 7-10, 14-17.)

         Similarly, Defendants argue that Judge Locke's interpretation of the Collection Policy rendered it illusory and unenforceable insofar as he “erroneously assumed that Plaintiffs had the unrestrained discretion to create any Collection Policy they desired, regardless of whether or not the terms changed the CBA” and failed to consider the lack of any evidence demonstrating that Defendants had notice of the arbitration provision. (Defs.' Obj. at 10-12.) Defendants also argue that Judge Locke “speculated that Defendant(s) consented to the arbitration clause by making benefit contributions and submitting to the audit” notwithstanding the absence of any evidence that Defendants made contributions to the Funds after the CBA expired in 2011. (Defs.' Obj. at 14-17.)

         Additionally, Defendants aver that the arbitrator was not authorized to conduct the arbitration in Defendants' absence, and Defendants' failure to appear constituted an objection, (Defs.' Obj. at 12-13), and the Audit and arbitration proceeding were deficient, (Defs.' Obj. at 17-19).

         Defendants also argue that Judge Locke erred in recommending that Rodrigue be held personally liable for the Arbitration Award because: (1) Rodrigue was deprived of due process based on Plaintiffs' failure to serve him with notice of the arbitration, (Defs.' Obj. at 5-7); (2) MR Drywall was a de facto corporation, (Defs.' Obj. at 19-22); (3) Plaintiffs have made judicial admissions that MR Drywall was a corporation in this matter and prior proceedings, (Defs.' Obj. at 19-22); and (4) Defendants are not precluded from asserting the defenses of estoppel, laches, and waiver, (Defs.' Obj. at 23-24).

         Defendants allege that Judge Locke erred by failing to address the impropriety of Plaintiffs' ERISA claim and by determining that Plaintiffs were entitled to request counsel fees and costs. (Defs.' Obj. at 24-25.) Finally, Defendants argue that Judge Locke erred to the extent he made findings and recommendations against defendants C.R. Drywall Co., Inc. and C.R. Drywall Residential, Inc., as Plaintiffs' motion did not address their claims against these defendants. (Defs.' Obj. at 4-5.)

         On February 21, 2017, Plaintiffs filed a response arguing that the Court should adopt Judge Locke's well-reasoned R&R. (See generally Pls.' Resp., Docket Entry 74.)

         DISCUSSION

         “When evaluating the report and recommendation of a magistrate judge, the district court may adopt those portions of the report to which no objections have been made and which are not facially erroneous.” Walker v. Vaughan, 216 F.Supp.2d 290, 291 (S.D.N.Y. 2002). A party may serve and file specific, written objections to a magistrate judge's report and recommendation within fourteen days of being served with the recommended disposition. See Fed.R.Civ.P. 72(b)(2). Upon receiving any timely objections to the magistrate judge's recommendation, the district court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1)(C); see also Fed.R.Civ.P. 72(b)(3). A party that objects to ...


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