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Trustees of The New York City District Council of Carpenters Pension Fund v. Formula 1 Builders, LLC

United States District Court, S.D. New York

April 24, 2017

TRUSTEES OF THE NEW YORK CITY DISTRICT COUNCIL OF CARPENTERS PENSION FUND, WELFARE FUND, ANNUITY FUND, AND APPRENTICESHIP, JOURNEYMAN RETRAINING, EDUCATIONAL AND INDUSTRY FUND, et al., Petitioners,
v.
FORMULA 1 BUILDERS, LLC, Respondent.

          MEMORANDUM OPINION AND ORDER

          GREGORY H. WOODS UNITED STATES DISTRICT JUDGE.

         The Trustees of the New York City District Council of Carpenters Pension Fund, Welfare Fund, Annuity Fund, and Apprenticeship, Journeyman Retraining, Educational and Industry Fund; the Trustees of the New York City Carpenters Relief and Charity Fund; the New York City and Vicinity Carpenters Labor Management Corporation (together, the “Funds”); and the New York City District Council of Carpenters (the “Union, ” and collectively with the Funds, the “Petitioners”) seek to confirm an arbitration award obtained against Formula 1 Builders, LLC (“Formula 1” or “Respondent”) pursuant to Section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185.[1] For the following reasons, the award is confirmed.

         I. BACKGROUND

         Pursuant to a collective bargaining agreement entitled Independent Building Construction Agreement (the “CBA”) entered into between Formula 1 and the Union, Formula 1 was required to pay hourly benefit contributions to the Funds at certain specified rates for all employees covered by the CBA. ECF No. 12, Decl. of Brian Spencer (“Spencer Decl.”), ¶¶ 3-4, 9 & Ex. C, Independent Building Construction Agreement (“CBA”) at 35-40 (art. XV).[2] The CBA also required Formula 1 to furnish its books and payroll records when requested by the Funds for the purpose of completing an audit to ensure that Formula 1 had complied with its benefit contribution obligations. Id. art. XV § 1; see also Ozard Decl., Ex. D (Revised Statement of Policy for Collection of Employer Contributions) § IV, ¶ 1.

         With respect to dispute resolution, the CBA provided that “[s]hould any dispute or disagreement arise between the parties hereto, or between the Union and any employer-member signatory hereto, concerning any claim arising from payments to the Fund[s] of principal and/or interest which is allegedly due, either party may seek arbitration of the dispute before the impartial arbitrator designated hereunder.” CBA, art. XV, § 7. The CBA also provided that “[t]he arbitrator shall have full and complete authority to decide any and all issues raised by the submission and to fashion an appropriate remedy including, but not limited to, monetary damages” and that “[t]he arbitrator's award . . . shall be final and binding upon the parties hereto and the individual Employer, if any, and shall be wholly enforceable in any court of competent jurisdiction.” Id. It also provided that “[t]he cost of the arbitration, including the fees to be paid to the arbitrator, shall be included in the award and shall be borne by the losing party.” Id.

         As was their right under the CBA, the Funds attempted to conduct an audit of Formula 1's books and payroll records covering the period of October 30, 2013 through February 3, 2016 to determine whether Formula 1 had complied with its contribution requirements. Ozard Decl. ¶ 11. However, a dispute arose when Formula 1 refused to submit to the audit. Id. As a result, the Funds conducted an estimated audit pursuant to the Revised Statement of Policy for Collection of Employer Contributions (the “Collection Policy”), [3] which provides:

In the event that an employer refuses to permit a payroll review and/or audit upon request by the Fund Office or the Outside Accounting Firms, or if the employer refuses the Outside Accounting Firms access to pertinent records, . . . the Fund Office shall determine the estimated amount of the employer's delinquent contributions based on the assumption that the employer's weekly hours subject to contributions for each week of the requested audit period are the highest number of average hours reported per week for any period of four consecutive weeks during the audit period.

Ozard Decl., Ex. D, § IV ¶ 12. In accordance with the Collection Policy, when Formula 1 refused to submit to the requested audit, the Funds determined that the highest average hours reported by Formula 1 in a consecutive four-week period during the requested audit period had occurred during the weeks ending March 26, 2014 through April 16, 2014 (the “Estimated Audit Period”). Ozard Decl. ¶ 14. The Funds calculated the average of the weekly contributions owed during that four-week period as $24, 812.14. See Ozard Decl., Ex. E (Formula 1 Builders Estimated Audit (Oct. 30, 2016-Feb. 3, 2016)), columns A-D. The Funds applied that estimated weekly contribution to the number of weeks in the Estimated Audit Period and subtracted all contributions actually paid by Formula 1 during that period, arriving at a total delinquency of $2, 562, 364.56. Id. Ex. E, column E.

         The Collection Policy also provided that “[i]nterest owed by a delinquent employer shall be calculated at the prime lending rate of Citibank plus 200 basis points, compounded daily, on a declining principal basis. Interest shall accrue from the date the contributions were due to the date when payment of the contributions is received.” Ozard Decl. ¶ 15; Collection Policy, § V, ¶ 1 (emphasis omitted). The Collection Policy explicitly stated that an estimated audit determination “shall constitute presumptive evidence of delinquency.” Collection Policy, § IV, ¶ 12.

         Pursuant to the CBA, the Funds initiated arbitration. After providing notice to both parties, the arbitrator held a hearing on June 2, 2016. Ozard Decl., Ex. F. At the hearing, Petitioners appeared through counsel and submitted testimony and other evidence in support of their claims. Ozard Decl., Ex. G (Award) at 2. No representative appeared at hearing on behalf of Formula 1; because Petitioners had provided proof that Formula 1 had legally sufficient notice of the hearing and the claims against it, the arbitrator held Formula 1 in default and proceeded in its absence. Id. On June 6, 2016, the arbitrator issued his award, finding that the “uncontroverted testimony and evidence” established that Formula 1 was bound to the CBA and was thus required to comply with the Funds' requested audits. Id. The arbitrator determined that, based on the “substantial and credible evidence of the case as a whole, ” Formula 1 had violated the CBA and owed the Funds $2, 562, 364.56 in estimated principal benefit contributions; $180, 317.37 in interest; $512, 472.91 in liquidated damages; $400.00 in “court costs;” $1, 500 in attorneys' fees; and $500 for the arbitrator's fee, for a total award of $3, 257, 554.84. Id. at 2-3. The arbitrator also awarded interest, to accrue at the rate of 5.5% from the date of issuance of the award. Id. at 3.

         On February 17, 2017, Petitioners commenced the instant confirmation action, asserting that Formula 1 had not satisfied any portion of the arbitral award. See ECF No. 1. The Court directed Petitioners to file any declarations and affidavits with which it intended to support its petition by March 17, 2017 and directed Formula 1 to file any opposition by March 31, 2017. ECF No. 8. Petitioners filed their motion for summary judgment and supporting documents on March 17, 2017. ECF Nos. 11-16.

         Petitioners served their petition and summons on Formula 1 on February 23, 2017. ECF No. 10. They also served the Court's scheduling order on February 23, 2017, ECF No. 9, and they served their motion for summary judgment on March 17, 2017. ECF. No. 17. Despite being properly served with the petition and summons, Petitioners' motion for summary judgment, and the Court's order establishing deadlines for opposing that motion, Formula 1 has not appeared in this action.

         II. DISCUSSION

         A. The ...


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