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Trustees of Mosaic and Terrazzo Welfare, Pension, Annuity and Vacation Funds v. High Performance Floors, Inc.

United States District Court, E.D. New York

January 8, 2018

TRUSTEES OF THE MOSAIC AND TERRAZZO WELFARE, PENSION, ANNUITY AND VACATION FUNDS, and TRUSTEES OF THE BRICKLAYERS & TROWEL TRADES INTERNATIONAL PENSION FUND, Plaintiffs,
v.
HIGH PERFORMANCE FLOORS, INC., a New York Corporation, HIGH PERFORMANCE FLOORS, INC., a New Jersey Corporation, HPF, INC., 2 MAIN STREET, L.L.C, and 40 PARK PLACE LLC, Defendants.

          MEMORANDUM & ORDER

          STEVEN M. GOLD United States Magistrate Judge

         Introduction Plaintiffs, Trustees of the Mosaic and Terrazzo Welfare, Pension, Annuity and Vacation Funds and Trustees of the Bricklayers & Trowel Trades International Pension Fund (the “Funds”), bring this action pursuant to Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended 29 U.S.C. § 1132(a)(3), and Section 301 of the Labor Management Relations Act of 1947 (“LMRA”), as amended 29 U.S.C. § 185. Plaintiffs seek to collect fund contributions which they contend are owed for covered work performed by employees of defendant HPF, Inc. (“HPF”). Defendants High Performance Floors, Inc., a New Jersey corporation, and High Performance Floors, Inc., a New York corporation (collectively “High Performance”), are signatories to a collective bargaining agreement with Local 7 of the New York, New Jersey and Vicinity International Union of Bricklayers and Allied Craftworkers (the “CBA”) that requires contributions to the Funds.

         After a three day non-jury trial on liability, the Court concluded that High Performance and HPF were alter egos and that they constituted a single employer. See Memorandum and Order dated February 9, 2017 (“Phase I Decision”), Docket Entry 54, at 27. As a consequence, the Court held defendants jointly and severally liable for contributions to the Funds for covered work performed by HPF. Id. at 28.

         On July 31, 2017, defendants moved for reconsideration of the Court's decision on liability. Defs.' Brief in Support of Motion for Reconsideration of Phase I Decision (“Motion for Reconsideration”), Docket Entry 71-1. For the reasons stated in a separate Memorandum and Order issued today, that motion is denied.

         A bench trial on damages was held on July 5, 2017. See Transcript of July 5, 2017 (“Dmg. Tr.”), Docket Entry 69. After the trial, both plaintiffs and defendants submitted additional briefing. Plaintiffs submitted alternative calculations of damages, responding to issues raised at trial. Plaintiffs' Letter dated July 19, 2017, Docket Entry 66; Declaration of Michael Sarosy (“Sarosy Decl.”), Docket Entry 67. Defendants submitted a post-trial brief in which they too proposed an alternative means of determining damages. Phase II Brief on Behalf of Defendants (“Defs.' Phase II Brief”), Docket Entry 70. The Court's findings of fact and conclusions of law with respect to damages pursuant to Federal Rule of Civil Procedure 52 are set forth in narrative form below. See 9 Moore's Federal Practice § 52.13[1].

         For the reasons described herein, I conclude that the hours of covered work performed by HPF employees are best approximated by discounting the total hours worked by the percentage of HPF's gross revenues attributable to Pennsylvania Stonhard work. I therefore award damages based upon the audit submitted by plaintiffs that assumes that 69% of the total hours worked by HPF employees was covered work. See Sarosy Decl. ¶ 10 and Ex. B (“69% Audit”), Docket Entries 67 and 67-2. I further award plaintiffs attorneys' fees and costs.

         Facts

          The underlying facts are set forth in detail in the Court's Phase I Decision and accordingly are reviewed only briefly here. Plaintiffs are trustees of the Mosaic and Terrazzo Welfare, Pension, Annuity and Vacation Funds and the Bricklayers and Trowel Trades International Pension Fund. Compl. ¶¶ 4-5, Docket Entry 1. Guy Balzano, the principal of High Performance, founded the floor installation company in December 1991. Phase I Tr. 361:5-9.[1]High Performance's primary contract is with Stonhard, Inc. (“Stonhard”), a resinous floor vendor that engages companies like High Performance to install its products. Phase I Tr. 361:10-362:13. High Performance is a signatory to the CBA, which requires contributions to the Funds for covered work.

         The principal of defendant HPF, at least in name, is Harold Sofield, who founded the company in May of 2012. Phase I Tr. 233:8-16. HPF is not a signatory to the CBA. After the trail on liability, in light of all the evidence presented, the Court concluded as a matter of law that High Performance and HPF were alter egos and that they constituted a single employer. Phase I Decision at 27. Further, the Court found that employees of High Performance and HPF were a single bargaining unit. Id. Consequently, the Phase I Decision established that defendants are jointly and severally liable for contributions to the Funds as required by the CBA for covered work performed by HPF. Id. at 28.

         Plaintiffs called two witnesses at the damages phase of the trial. Patrick Bonici, a business agent for Local 7, the union local associated with the Funds, described the benefit fund contribution requirements of the CBA. Dmg. Tr. 12-26. Michael Sarosy, an employee of an independent CPA firm, testified about payroll audits his firm performed of High Performance Floors and HPF. Sarosy testified that his firm's audit of High Performance Floors revealed a deficiency of $12, 308.31 in contributions due and owing, as well as $3, 961.96 in interest, $2, 170.50 in liquidated damages, and audit costs of $3.160, for a total amount due of $21, 600.77. Dmg. Tr. 62. Sarosy then described his firm's payroll audit of HPF. Sarosy testified that his firm reviewed HPF's payroll records, cash disbursements, and tax returns and related documents. Dmg. Tr. 65. The auditors calculated that HPF owed $1, 176, 912.83 in contributions, as well as interest in the amount of $302, 144.44, liquidated damages totaling $209, 091.64, and audit costs of $5, 640, for a total amount due of $1, 693, 788.91. Dmg. Tr. 68-69.

         The amounts attributed to HPF in this original calculation by plaintiffs' auditors assumes that all of the work performed by HPF employees was covered work, or labor for which the CBA requires contributions to the funds. However, the CBA applies only to certain types of work, such as cutting and shaping marble, glass, enamel and ceramics; mosaic and terrazzo work; and installations of epoxy resinous flooring. CBA, Pl's. Ex. V, art. IV. The territorial scope of the CBA is limited as well; only work performed in New Jersey and parts of New York State is covered. CBA art. III. Defendants contend that much of the work performed by HPF was not covered by the CBA, either because it involved demolition and general construction work and not the sort of tile and epoxy flooring work described in the CBA, or because it was done in Pennsylvania, beyond the geographic scope of the CBA. The evidence presented at trial did in fact establish that some HPF work occurred in Pennsylvania. Two aspects of the trial record are particularly salient in this regard. First, Cesar Albuquerque, a former employee of High Performance and HPF, testified that about 80 percent of his work for High Performance and HPF was performed within the CBA's geographical scope, but also indicated that this figure was approximate and that he had difficulty remembering specific jobs. Phase I Tr. 114:23-115:9. Second, the vast majority of HPF's Stonhard Work Orders, which were received in evidence at trial, were for work to be performed in Pennsylvania. Def's Exs. 12-15 (collectively, “Stonhard Work Orders”). Some of the Stonhard Work Orders are marked both “submitted” and “accepted, ” but others are marked only “submitted.”

         Discussion

         The primary issue to be determined is the amount of contributions owed for labor performed by employees of HPF. The Court must also determine the amount of any contributions due and owing as a result of labor performed by employees of High Performance. Finally, the Court must calculate interest, liquidated damages, audit fees, attorneys' fees, and costs.

         I. Contributions, Liquidated Damages, Interest, and Audit Fees

         A. Contributions Due from HPF

          As noted above, plaintiffs' auditors originally calculated the amount of contributions due from HPF after reviewing HPF's payroll records, tax documents, and cash disbursements journal, and by assuming that all of the work performed by HPF employees was covered work. Plaintiffs acknowledge, though, that Cesar Albuquerque, a former employee of High Performance and HPF, testified that, while all of the work he performed for defendants was within the trade jurisdiction of the CBA, only about 80 percent of his work for defendants was performed within the CBA's geographical limits. Plaintiffs' Letter dated July 19, 2017.

         After the damages trial was completed, plaintiffs submitted three revised audit reports. Sorosy Decl. Exs. A, B, C. The first revised audit report is similar to the one introduced at the damages trial as Plaintiffs' Exhibit W. The report received at trial as Exhibit W combines the amounts claimed by plaintiffs as due and owing based upon the deficiency found with respect to High Performance and the labor performed by employees of HPF, but includes only 80% of the hours of labor performed by any employee who worked exclusively for HPF or who worked some hours for HPF and some hours for High Performance. Dmg. Tr. 72. The first revised audit report submitted by plaintiffs after the damages trial differs from Exhibit W only in that it excludes certain charges that plaintiffs no longer press, such as contributions they originally sought for union dues, a political action committee, and defense and building funds. Plaintiffs' Letter dated July 19, 2017; Sarosy Decl. ¶¶ 7-8, Ex. A (the “80% Audit”). Plaintiffs contend that the most reliable evidence of the percentage of HPF's work that is covered by the CBA is Albuquerque's testimony that 80% of the work he performed for High Performance and HPF was covered work within the trade and territorial jurisdiction of Local 7. Plaintiffs accordingly urge the Court to award damages based upon the 80% Audit. Plaintiffs' Letter dated July 19, 2017.

         Defendants contend that, with the exception of a small No. of Stonhard jobs performed in New York and New Jersey, the remaining work performed by HPF was not covered work. Defendants support this contention by citing excerpts of the testimony given by Harold Sofield during the liability phase of the trial. Def's' Phase II Brief at 6-7. For example, defendants point to Sofield's testimony at trial that HPF didn't do much flooring work, and that most of its work involved demolition and Sheetrock installation. Phase I Tr. 310:9-12. Yet Sofield also acknowledged testifying at his deposition that HPF “did primarily grinding floors, cleaning floors, and installing Epoxy floors, ” and that some of the floor installation work HPF performed did not involve Stonhard. Phase I Tr. 310:20-23; 311:1-5. Defendants also rely upon Sofield's testimony that HPF had employees working in the Philadelphia area whose work involved knocking down and installing Sheetrock and doing other odd jobs; in the cited testimony, however, Sofield was apparently describing the type of work HPF was doing when the company was first formed. Phase I Tr. 318:22-319:6. In the remaining testimony cited by defendants, Sofield also seems to be describing only the first few months of HPF's operations. Phase I Tr. 327:20-328:11.

         For the reasons explained above, Sofield's testimony provides little if any meaningful information about the percentage of HPF's work that was within the subject matter or territorial jurisdiction of Local 7. Even if Sofield had testified more clearly and precisely about the nature of the work performed by HPF over time, I would not rely upon it because, for reasons explained ...


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