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Atlas Sanitation Co., Inc. v. Horowitz Law Group, LLC

United States District Court, E.D. New York

March 29, 2018

ATLAS SANITATION CO., INC. and MICHAEL MARCHINI, Plaintiffs,
v.
HOROWITZ LAW GROUP, LLC AND STEVEN B. HOROWITZ, Defendants.

          MEMORANDUM AND ORDER

          DORA L. IRIZARRY, CHIEF UNITED STATES DISTRICT JUDGE

         Plaintiff Atlas Sanitation Co. Inc. (“Atlas”) is a New York corporation and Plaintiff Michael Marchini (“Marchini”; together with Atlas, “Plaintiffs”) is the President and sole shareholder of Atlas. (Plaintiffs' Amended Complaint, hereinafter “Am. Compl., ” Dkt. Entry No. 13, ¶¶ 9, 10.) Defendant Steven B. Horowitz (“Horowitz”) is an attorney domiciled and licensed in New Jersey who has conducted business in New York, and is the sole member of Defendant Horowitz Law Group, LLC (“HLG”; together with Horowitz, “Defendants”), a limited liability company under the laws of New Jersey. Plaintiffs filed a legal malpractice action against Defendants requesting compensatory and punitive damages in the amount of no less than $500, 000. (See generally Am. Compl., Dkt. Entry No. 13.)

         Pursuant to Rule 12 of the Federal Rules of Civil Procedure, Defendants moved to dismiss the Amended Complaint for failure to state a claim for relief. (See Defs.' Mem. in Supp. of Mot. to Dismiss (“Defs.' Mot.”), Dkt. Entry No. 17.) Plaintiffs opposed the motion, (See Pl.'s Mem. in Opp'n to Mot. to Dismiss (“Pl.'s Opp'n.”), Dkt. Entry No. 18.), and Defendants replied. (See Defs.' Reply Mem. In Supp. Of Mot. To Dismiss (“Defs.' Reply”), Dkt. Entry No. 19.)

         Background

          Asset Purchase Agreement

          Atlas is a privately owned sanitation company. Boro-Wide, also a privately owned sanitation company, bought Atlas's assets on May 3, 2013, for $1.8 million pursuant to an Asset Purchase Agreement (“APA”). (Am. Compl. ¶¶ 24, 25.) Atlas and Boro-Wide had separate collective bargaining agreements with Teamsters Local 813 regarding the Pension Trust Fund (“Pension Fund”) and the Severance and Retirement Fund (“Severance Fund”; together with the Pension Fund, the “Funds”), where the Funds were third party beneficiaries to each agreement. Atlas and Boro-Wide “acknowledge[d] and agree[d] that [Atlas] ha[d] an affiliation and/or agreement with Teamsters Union Local 813 and that [Boro-Wide] d[id] not intend [and would not] enter into any type of agreement or contract with Teamsters Union Local 813[, making Atlas] fully responsible for any and all assessment and/or withdrawal liability emanat[ing] from [the] transaction or sale of the assets, customer accounts[, ] and Goodwill.” (Id. at ¶ 26.) Thus, all costs incurred by Boro-Wide were attributable to Atlas. (Id. at ¶¶ 27-29, 31.)

         Pension and Severance Fund Withdrawal Liability

         On December 1, 2013, Atlas withdrew from the Funds within the meaning of § 4203(a) of ERISA, and had no further obligation to contribute to each fund. (Am. Compl. ¶¶ 33, 50.) Atlas incurred $1, 494, 942.00 in withdrawal liability (Id. at ¶¶ 34-35, 51-52). It owed $1, 302, 252.00 to the Pension Fund and $192, 690.00 to the Severance Fund. (Id.) On March 3, 2014, Plaintiffs received a letter from the Pension Fund (“Pension Fund Demand Letter”), identifying the estimated assessment of withdrawal liability and including payment options. (Id. at ¶¶ 36, 53.) The Pension Fund Demand Letter stated that Plaintiffs could pay one lump sum of $1, 302, 252.00 or 240 monthly installments of $5, 922.00. (Id. at ¶ 37.) Also on March 3, 2014, Plaintiffs received a letter from the Severance Fund (“Severance Fund Demand Letter”). The Severance Fund Demand Letter stated that Plaintiffs could pay one lump sum payment of $192, 690.00 or 114 monthly installments of $2, 219.91, with a final payment of $1, 508.00. (Id. at ¶ 54.) Pursuant to § 4219(c)(2) of ERISA, Plaintiffs had 60 days to commence payment after the date of the letters or no later than May 3, 2014. (Id. at ¶¶ 38, 55.)

         Plaintiffs sought legal representation to resolve the withdrawal liability matter that resulted from selling their assets to Boro-Wide, pursuant to §§ 4201 through 4225, and § 4301 of ERISA. (Am. Compl. ¶¶ 2, 69, 75.) Plaintiffs retained Defendants on September 30, 2013 because of their “self-described” expertise in labor law, ERISA, and the Multiemployer Pension Plan Amendments Act of 1980 (“MPPA”). (Id. at ¶¶ 69, 70, 78, 99, 102.) Plaintiffs relied on Defendants' purported skill, knowledge, and ability to represent them. (Id. at ¶ 79.) Even though Defendants failed to provide Plaintiffs with a written retainer agreement, Defendants held themselves out as Plaintiffs' attorneys, appearing on their behalves in matters involving Locals 813 and 1034, and the Severance and Pension Funds (Id. at ¶ 72, 76.) Defendants advised Plaintiffs and sent invoices to Plaintiffs for legal services. (Id. at ¶ 71.) Plaintiffs paid about $15, 000 to Defendants in legal fees related to their withdrawal liability matters. (Id. at ¶¶ 89, 102.)

         Plaintiffs allege that, “[o]n the advice of Defendants, as [their] counsel, Atlas did not make any interim payments to the Funds.” (Am. Compl. ¶ 42.) Employers may contest a fund's assessment of withdrawal liability by filing a request for review. (Id. at ¶¶ 40, 57.) On March 20, 2014, on behalf of Plaintiffs, Defendants submitted a “Request for Review” letter to the Funds to contest the Funds' assessment and schedule of payments against Plaintiffs set forth in the March 3, 2014 letters. (Id. at ¶¶ 39, 56.) On April 1, 2014, the Funds' attorneys, Proskauer Rose LLP, responded to Defendants' Request for Review.[1] (Id. at ¶¶ 43, 60.) Plaintiffs allege that Defendants advised Plaintiffs not to make interim payments despite ERISA's § 4219(c)(2) requirement that payments be made within 60 days of the assessment, notwithstanding a request for review. (Id. at ¶ 59.)

         On May 7, 2014, the Funds issued two letters to Plaintiffs stating that Atlas would be in default if they did not make payments within 60 days, or by July 6, 2014. (Am. Compl. ¶¶ 46-47, 63-64.) The letters explained that a default would subject Plaintiffs' withdrawal liability to acceleration and immediate payment, in addition to accrued interest, liquidated damages, and attorneys' fees. (Id.) Defendants advised Plaintiffs that Atlas had more than 60 days to make payments to the Funds despite the letters' warning. (Id. at ¶¶ 48, 65.) Plaintiffs heeded Defendants' advice and did not cure their default. (Id.)

         The Funds sent two final letters on July 9, 2014 notifying Plaintiffs of their default and demanding immediate payment with accrued interest. (Id. at ¶¶ 49, 66.) Plaintiffs owed the Pension Fund $1, 320, 180.26, including the original assessment of $1, 302, 252.00 and $17, 928.26 in accrued interest. (Id. at ¶ 49.) Plaintiffs owed the Severance Fund $195, 342.79, including the original assessment of $192, 690.00 and $2, 652.79 in accrued interest. (Id. at ¶ 66.)

         Moreover, Plaintiffs had 60 days, after the Funds' response, to arbitrate against the Funds' determination of Atlas's withdrawal liability pursuant to § 4221(a)(1)(A) of ERISA. (Am. Compl. at ¶ 61.) Plaintiffs allege that Defendants “fail[ed] to properly advise Atlas and Marchini, or advise them at all, regarding their rights and obligations under ERISA and the MPPA, ” and, as a result, “Atlas also failed to initiate arbitration within sixty (60) days from its receipt of the Funds' Response to Request for Review on April 1, 2014” pursuant to § 4221(a)(1)(A) of ERISA, “to preserve its available defenses to the Funds' assessment, determination, and demand for payment of withdrawal liability against Atlas.” (Id. at ¶ 84-85.) Plaintiffs further allege that, “[o]n the advice of Defendants, as counsel, Atlas did not initiate arbitration.” (Id. at ¶ 45, 62.)

         Legal Action ...


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