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Trustees of Pavers and Road Builders District Council Welfare, Pension, Annuity and Apprenticeship, Skill Improvement and Safety Funds v. Genrus Corp.

United States District Court, E.D. New York

September 6, 2019

TRUSTEES OF THE PAVERS AND ROAD BUILDERS DISTRICT COUNCIL WELFARE, PENSION, ANNUITY AND APPRENTICESHIP, SKILL IMPROVEMENT AND SAFETY FUNDS And THE HIGHWAY, ROAD AND STREET CONSTRUCTION LABORERS LOCAL UNION 1010, Plaintiffs,
v.
GENRUS CORP., Defendant.

          REPORT AND RECOMMENDATION

          Cheryl L. Pollak, United States Magistrate Judge

         On July 26, 2018, plaintiffs, Trustees of the Pavers and Road Builders District Council Welfare, Pension, Annuity and Apprenticeship, Skill Improvement and Safety Funds and the Highway, Road and Street Construction Laborers Local Union 1010 ("Trustees" or "plaintiffs") commenced this action against Genrus Corp. ("Genrus" or "defendant"), under Sections 502 and 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1132 and 1145; Section 301 of the Labor Management Relations Act of 1947 ("LMRA"), as amended, 29 U.S.C. § 185, seeking to collect delinquent employer contributions owed to a group of employee benefit plans. (Compl.[1] ¶ 1).

         Despite proper service on the New York Secretary of State on July 27, 2018, defendant Genrus failed to answer or otherwise respond to the Complaint. (Marimon Decl.[2] ¶ 4, Ex. Q). On September 27, 2018, plaintiffs requested a Certificate of Default and on September 28, 2018, the Clerk of Court entered a notation of default. (Id. ¶ 3). Thereafter, on October 31, 2018, plaintiffs filed a motion for default judgment. Plaintiffs' motion was referred to the undersigned to determine liability and damages and to issue a Report and Recommendation. Defendant has failed to submit any paperwork to the Court, despite the Court's Order requesting such paperwork on February 14, 2019.

         For the reasons set forth below, the Court respectfully recommends that plaintiffs' motion for default judgment be granted, and that damages be awarded in the amount of $15, 999.28. Further, the Court respectfully recommends an Order be granted directing defendant to submit to an audit of its books and records from December 1, 2014 through the present.

         FACTUAL BACKGROUND

         The Trustees of the Pavers and Road Builders District Council Welfare, Pension, Annuity and Apprenticeship, Skill Improvement and Safety Funds (collectively, the "Funds") are employer and employee trustees of multi-employer labor-management trust funds organized and operated in accordance with Section 302 of the LMRA. (Compl. ¶ 4). The Funds are established pursuant to a Collective Bargaining Agreement between the Highway, Road and Street Construction Laborers Local Union (the "Union") and defendant Genrus. (Id., ¶¶ 5, 6). The Funds are "employee benefit plans," as defined in Section 3(1) of ERISA. (Id. ¶ 3). The Funds have their principal place of business in Whitestone, N.Y. (14 ¶ 4). Defendant Genrus is located at 200-31 Linden Boulevard, St. Albans, N.Y. (Id. ¶ 6).

         According to the Complaint, the CBA requires Genrus to make monthly contributions to the Funds and pay dues check-offs for every hour of Covered Work on behalf of certain employees within the trade and geographical jurisdiction of the Union. (Id. ¶¶ 8, 9). Under the CBA, Genrus is required to submit periodic reports to the Funds, detailing the number of hours of Covered Work performed, and, when requested, furnish its books and records to the Funds for audit purposes. (Id., ¶ 12). The CBA provides that if an employer fails to pay contributions when due, the Funds may collect interest at an annual rate of 10% on the amount of unpaid interest, liquidated damages, and any attorney's fees required to collect the contributions. (Id., ¶¶ 10, 11). Under the Trust Agreements that are incorporated by reference in the CBA, the Trustees have promulgated a policy that provides that if Genrus fails to make contributions when due, the Funds are entitled to collect interest on the delinquent contributions at an annual rate of 10% and liquidated damages of 10% as well. (Id., ¶¶ 13, 14, 16).

         Plaintiffs allege that Genrus failed to pay appropriate contributions and make payments for dues check-offs for Covered Work performed during the periods of March and April 2016, June and July 2016, [3] and October 2017. (Id., ¶ 19). Genrus has also refused to comply with the Funds' request to submit to an audit covering the period December 1, 2014 through the date of the Complaint. (Id. ¶ 20). Plaintiffs seek an award of delinquent contributions, interest, liquidated damages, and attorney's fees and costs. In addition, the Trustees seek an order requiring Genrus to furnish its books and records and submit to an audit to determine if Genrus has complied with its obligation to remit contributions and dues to the Funds and the Union. (Id. ¶ 37). Plaintiffs allege that despite their demand, Genrus has failed to comply with the Funds' efforts to conduct an audit. (Id. ¶ 38).

         DISCUSSION

         I- Default Judgment

         Plaintiffs move for default judgment pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure. Prior to the district court's grant of default judgment, the Clerk of the Court entered a default because defendant "failed to plead or otherwise defend [against the instant Complaint]." Fed.R.Civ.P. 55(a). A clerk's entry of default is not the same as a default judgment granted by the court. Rather, Rule 55 sets forth a two-step process in which first a default, and then a default judgment, is entered. See Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). After a default has been entered against a party, if that party fails to appear or otherwise move to set aside the default pursuant to Rule 55(c), a default judgment may be entered. See Fed.R.Civ.P. 55(b). In this case, the Clerk of the Court entered a default against defendant on September 28, 2018, and the motion for default judgment was filed on October 31, 2018.

         The Second Circuit has warned that default judgment is an extreme remedy that should be used only when the need to move a case forward expeditiously trumps a party's right to be heard before a court of law. See Meehan v. Snow, 652 F.2d 274, 277 (2d Cir. 1981). When evaluating whether to grant a default judgment, the Court must weigh the costs of prolonged litigation against offering "litigants a reasonable chance to be heard." Enron Oil Corp. v. Diakuhara, 10 F.3d at 95-96; see also Meehan v. Snow, 652 F.2d at 277. It is well-settled that defaults are "generally disfavored" and "doubts should be resolved in favor of the defaulting party." Enron Oil Corp. v. Diakuhara, 10 F.3d at 95-96. As such, courts should take great care in entering default judgment, ensuring if at all possible that both parties may have their cases judged on the merits. Id.

         A court possesses significant discretion and may consider a number of factors in deciding whether or not to grant a default judgment, including "whether the grounds for default are clearly established," "the amount of money potentially involved," and the record of attempts to involve the defaulting party in the proceedings. See Hirsch v. Innovation Int'l. Inc., No. 91 CV 4130, 1992 WL 316143, at *2 (S.D.N.Y. Oct. 19, 1992) (citations omitted). Additionally, a court may consider whether material issues of fact remain, whether the facts alleged in the complaint state a valid cause of action, whether plaintiff has been substantially prejudiced by the delay involved, and how harsh an effect a default judgment might have on the defendant. See Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure, §§ 2685, 2688 (3d ed. 1998).

         II. Entry of Default Judgment

         The benefit plans operated by plaintiffs fall under the purview of ERISA in that the Funds are run by an organization of employees with the goal of providing health and retirement benefits to members of the employee organization, in accordance with 29 U.S.C. § 1002. ERISA specifies the types of damages to be awarded when judgments are entered in favor of benefit plans. See 29 U.S.C. § 1132(g)(2). These include the following:

1. the unpaid contributions,
2. interest on the unpaid contributions,
3. an amount equal to the greater of-
i. interest on the unpaid contributions, or
ii. liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A),
4. reasonable attorney's fees and costs of the action, to be paid by the defendant, and
5. such other legal or equitable relief as the court deems appropriate.

Id. Plaintiffs have also alleged a claim under 29 U.S.C. ยง 1145, which ...


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