United States District Court, E.D. New York
TRUSTEES OF THE LEATHER GOODS, HANDBAGS, AND NOVELTY WORKERS' UNION LOCAL 1 JOINT RETIREMENT FUND, Plaintiff,
NEW YORK SEWING MACHINE, INC.; JOHN AND JANE DOES (1-10); and XYZ CORPORATION (1-10), Defendants.
REPORT & RECOMMENDATION
BLOOM, UNITED STATES MAGISTRATE JUDGE.
the Trustees of the Leather Goods, Handbags, and Novelty
Workers' Union Local 1 Joint Retirement Fund (the
“Fund”), brings this civil action against
defendants New York Sewing Machine, Inc. (“New York
Sewing”), John and Jane Does (1-10), and XYZ
Corporations (1-10)under the Employee Retirement Income
Security Act (“ERISA”) as amended to recover
withdrawal liability arising out of a mass withdrawal
termination of the Fund. Complaint (“Compl.”)
¶ 1, ECF No. 1. Pursuant to Rule 55(b)(2) of the Federal
Rules of Civil Procedure, plaintiff moves for entry of a
default judgment solely against defendant New York Sewing for
a total amount of $949, 972.79, including withdrawal
liability, accrued interest, liquidated damages,
attorneys' fees, and costs. Mot. Default J. 1, ECF No. 8.
The Honorable Margo K. Brodie referred plaintiff's
default judgment motion to me for a Report and Recommendation
in accordance with 28 U.S.C. § 636(b). Electronic Order
5/3/2019; Electronic Order 6/25/2019. For the reasons set
forth below, it is respectfully recommended that
plaintiff's motion for a default judgment should be
granted in part and denied in part, and that plaintiff should
be awarded $782, 948 in outstanding withdrawal liability, $4,
765 in fees, $70, 658.38 in interest accrued through April
30, 2019, plus pre-judgment interest at a rate of $64.35 per
day, as well as liquidated damages in an amount equal to the
final interest calculation. To the extent that plaintiff
wishes to supplement the record as described in Sections II.
D and E, plaintiff shall file any additional information to
further support the requested fees and costs within fourteen
(14) days of this Report and Recommendation.
is a comprehensive statutory regime that regulates employee
retirement plans, Trs. of Local 138 Pension Tr. Fund v.
F.W. Honerkamp Co. Inc., 692 F.3d 127, 128-29 (2d Cir.
2012) (citing ERISA § 2 et seq., 29 U.S.C.
§ 1001 et seq.), including the retirement plan
at issue in this case. ERISA was designed, inter
alia, to “ensure that employees and their
beneficiaries would not be deprived of anticipated retirement
benefits by the termination of pension plans before
sufficient funds have been accumulated in the plans.”
Id. at 129. Multiemployer pension plans are one type
of plan regulated by ERISA where several employers
“pool contributions into a single fund that pays
benefits to covered retirees… for one or more
contributing employers.” Id. To address risks
related to widespread employer withdrawals from these
multiemployer plans, Congress passed the Multiemployer
Pension Plan Amendments Act of 1980 (the
“MPPAA”), which amended ERISA to “force
withdrawing employers to internalize the costs associated
with their withdrawal” and to “require[e] an
employer that withdraws from a multiemployer plan to pay its
‘proportionate share of the pension plan's unfunded
vested benefits,' known as ‘withdrawal
liability.'” UFCW Local 174 Pension Fund v.
5600 Mkt. Corp., No. 17-CV-5789 (CBA)(CLP), 2018 WL
4403394, at *5 (E.D.N.Y. Aug. 16, 2018), report and
recommendation adopted as modified, 2018 WL 4388452
(E.D.N.Y. Sept. 14, 2018) (citations omitted); see also
Trs. of Local 138 Pension Tr. Fund, 692 F.3d at 129-30.
A plan may experience a “mass withdrawal”
resulting in mass withdrawal liability. A mass withdrawal
means: “‘(1) [t]he withdrawal of every employer
from the plan, (2) [t]he cessation of the obligation of all
employers to contribute under the plan, or (3) [t]he
withdrawal of substantially all employers pursuant to an
agreement or arrangement to withdraw.'” UFCW
Local 174 Pension Fund, 2018 WL 4403394, at *2 n.5
(quoting 29 C.F.R. § 4001.2). Mass. withdrawal liability
is “simply an extension of withdrawal liability,
” but entails additional procedures and a modified
method for calculating an employer's liability.
Id. at *6.
the Fund is a multiemployer benefit plan within the meaning
of ERISA that is administered in Mineola, New York, within
the Eastern District of New York. Compl. ¶¶
5-6.The Leather Goods, Handbags, and Novelty
Workers' Union Local 1 and New York Sewing, a for-profit
corporation with its principal place of business in North
Bergen, New Jersey, were parties to a collective bargaining
agreement (the “CBA”), under which plaintiff was
a third-party beneficiary and which required New York Sewing
to remit contributions to the Fund on behalf of employees
covered by the CBA. Compl. ¶¶ 12, 8. As of December
31, 2013, the Fund experienced a mass withdrawal termination
within the meaning of ERISA and its accompanying regulations.
Compl. ¶ 13 (citing 29 U.S.C. § 1341A(a)(2) and 29
C.F.R. § 4001.2). As a result, New York Sewing and all
contributing employers ceased to have an obligation to
contribute to the Fund and became obligated to pay withdrawal
liability. Compl. ¶ 14 (citing 29 U.S.C. § 1383(a)
and 29 C.F.R. §§ 4219.11, 4219.12).
certified letters dated May 28, 2014, and January 29, 2016,
the Fund notified New York Sewing of its withdrawal liability
obligations, providing the Fund's calculations and a
quarterly payment schedule. Compl. ¶¶ 15-16;
see also Compl. Ex. A, ECF No. 1-1; Compl. Ex. B,
ECF No. 1-2. Having not received the quarterly payments that
were due, the Fund notified New York Sewing, by certified
letter dated December 7, 2018, that defendant was in default
of its withdrawal liability obligations and offered defendant
an opportunity to cure the default. Compl. ¶¶
17-18; see also Compl. Ex. C, ECF No. 1-3. Having
still not received payment, the Fund notified New York
Sewing, by certified letter dated February 22, 2019, that it
remained in default and demanded immediate payment of the
outstanding withdrawal liability amount plus accrued
interest. Compl. ¶ 19; see also Compl. Ex. D,
ECF No. 1-4. New York Sewing did not remit the withdrawal
liability assessed by the Fund and failed to initiate
arbitration proceedings to contest its liability. Compl.
commenced this action on March 26, 2019, ECF No. 1, and
served the summons and complaint on New York Sewing the next
day. Aff. of Service, ECF No. 5. After New York Sewing failed
to appear or otherwise defend this action, plaintiff
requested a certificate of default, which was entered by the
Clerk of Court on April 24, 2019. Request for Certificate of
Default, ECF No. 6; Certificate of Default, ECF No. 7;
see also Fed.R.Civ.P. 55(a). Plaintiff filed the
instant motion for a default judgment on April 30, 2019, and
simultaneously filed proof of service of the motion and all
supporting papers upon New York Sewing's last known
business address pursuant to Local Civil Rule 55.2.
Certificate of Service, ECF No. 8-15. Despite proper service of
the summons and complaint,  defendant has failed to plead or
otherwise defend this action.
obtain a default judgment under Rule 55 of the Federal Rules
of Civil Procedure, a party must complete a two-step process.
Rodriguez v. Almighty Cleaning, Inc., 784 F.Supp.2d
114, 123 (E.D.N.Y. 2011). First, “[w]hen a party
against whom a judgment for affirmative relief is sought has
failed to plead or otherwise defend, and that failure is
shown by affidavit or otherwise, the clerk must enter the
party's default.” Fed.R.Civ.P. 55(a). Second, after
the Clerk's entry of default, the movant “may then
make an application for entry of default judgment, pursuant
to Fed.R.Civ.P. 55(b).” Rodriguez, 784
F.Supp.2d at 123. If the defendant fails to appear, or move
to set aside the default under Rule 55(c), the Court may
enter a default judgment. Rose v. Chin, No.
09-CV-4645 (NGG)(LB), 2010 WL 3909350, at *1 (E.D.N.Y. Oct.
Second Circuit has an “oft-stated preference for
resolving disputes on the merits, ” making default
judgments “generally disfavored.” Enron Oil
Corp. v. Diakuhara, 10 F.3d 90, 95-96 (2d Cir. 1993).
“Accordingly, just because a party is in default, the
plaintiff is not entitled to a default judgment as a matter
of right.” Mktg. Devs., Ltd. v. Genesis Imp. &
Exp., Inc., No. 08-CV-3168 (CBA)(CLP), 2009 WL 4929419,
at *2 (E.D.N.Y. Dec. 21, 2009) (citation omitted). Although
all well-pleaded allegations in the complaint are deemed
admitted on a motion for default judgment, the Court
nonetheless retains a “responsibility to ensure that
the factual allegations, accepted as true, provide a proper
basis for liability and relief.” Rolls-Royce PLC v.
Rolls-Royce USA, Inc., 688 F.Supp.2d 150, 153 (E.D.N.Y.
2010) (citing Au Bon Pain Corp. v. Artect, Inc., 653
F.2d 61, 65 (2d Cir. 1981)). If the unchallenged allegations
establish defendant's liability, the Court then
determines the amount of damages due. See Credit Lyonnais
Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d
employer's withdrawal liability is subject to regulations
issued by the Pension Benefit Guaranty Corporation
(“PBGC”), the agency charged with implementing
ERISA's withdrawal-liability provisions. Trs. of
Local 138 Pension Tr. Fund, 692 F.3d at 134-35; see
also 29 U.S.C. § 1399(c)(1)(D)(ii). When a
multiemployer plan experiences a mass withdrawal, the plan
sponsor must notify withdrawing employers that a mass
withdrawal has occurred, determine the initial withdrawal
liability of each withdrawing employer without regard to the
occurrence of a mass withdrawal, notify the employer of the
amount of the initial withdrawal liability, and attempt to
collect the initial withdrawal liability from the employer.
29 U.S.C. § 1382; 29 C.F.R. § 4219.11(a); 29 C.F.R.
§ 4219.16(a); 29 C.F.R. § 4219.2(b). In addition, the
plan sponsor must determine each employer's “mass
withdrawal liability, ” which includes both
redetermination liability and reallocation liability. 29
C.F.R. § 4219.2(b); 29 C.F.R. §
4219.11(b). The plan sponsor must also provide notice
of such liability, a payment schedule, and a payment demand.
29 C.F.R. § 4219.16(b)-(c). If an employer defaults on
any payment and the failure to pay is not cured within sixty
(60) days after notice of such failure, a plan sponsor may
demand immediate payment of the outstanding amount of an
employer's withdrawal liability, plus accrued interest.
29 U.S.C. § 1399(c)(5); 29 C.F.R. § 4219.31.
Interest is charged “at rates based on prevailing
market rates for comparable obligations, in accordance with
regulations prescribed by the corporation.” 29 U.S.C.
employer may request review of the plan sponsor's
withdrawal liability determination; however, any dispute
regarding the liability determination must be resolved
through arbitration. Trs. of the Local 813 Pension Tr.
Fund v. Frank Miceli Jr. Contracting, Inc., No.
13-CV-0198 (MKB)(JO), 2016 WL 5879612, at *2 (E.D.N.Y. Mar.
9, 2016), report and recommendation adopted, 2016 WL
1275041 (E.D.N.Y. Mar. 31, 2016) (citing 29 U.S.C.
§§ 1399(b)(2)(A), 1401(a)(1)); see also 29
C.F.R. § 4219.16(g). If the employer fails to initiate
arbitration within the statutorily prescribed timeframe, then
the plan's withdrawal liability determination becomes
“final and binding.” Id. The plan is not
required to supply the Court with underlying calculations to
support a finding of withdrawal liability if the defendant
employer does not initiate arbitration. Id.
(collecting cases); see also Vacca v. Bridge Chrysler
Jeep Dodge, Inc., No. 06-CV-3543 (ERK)(AKT), 2008 WL
4426875, at *7 (E.D.N.Y. Sept. 4, 2008) (“It is
well-established that when a defendant fails to initiate
arbitration under ERISA's provisions, the defendant's
withdrawal liability becomes fixed and all defenses to that
withdrawal liability are waived.”). If the parties do
not initiate arbitration, the plan sponsor may bring an
action in federal court to collect the amounts demanded,
which are “due and owing on the schedule set forth by
the plan sponsor.” 29 U.S.C. § 1401(b)(1).
prevail on a withdrawal liability payment claim, the plan
sponsor generally “must show only that it complied with
statutory procedural requirements. Thus, [t]he plan sponsor
must: (1) determine that an employer has partially or
completely withdrawn from a multiemployer plan; (2) determine
the amount of the employer's withdrawal liability; (3)
notify the employer of the amount of liability and the
payment schedule; and (4) demand payment according to the
schedule.” Div. 1181 Amalgamated Transit Union-N.Y.
Emps. Pension Fund v. D & A Bus Co., Inc., 270
F.Supp.3d 593, 608-09 (E.D.N.Y. 2017) (internal citations and
quotations marks omitted).
the Fund notified New York Sewing that the Fund experienced a
mass withdrawal as of December 31, 2013, when all
contributing employers ceased to have an obligation to make
contributions to the Fund, and as a result, New York Sewing
was subject to mass withdrawal liability under ERISA. Compl.
Ex A. By letters dated May 28, 2014, and January 29, 2016,
the Fund notified New York Sewing of its initial withdrawal
liability, redetermination liability, and reallocation
liability, and demanded payment according to corresponding
payment schedules. Compl. Ex. A, Ex. B. The Fund repeatedly
warned New York Sewing of the consequences of defaulting on
its payments and potential liability for interest and
penalties under ERISA. Compl. Ex. A, Ex. B, Ex. C, Ex. D.
Nonetheless, New York Sewing failed to make any of its
quarterly payments for its withdrawal liability. Compl.
¶ 17; see also Leventis Decl. ¶ 11, ECF
No. 8-7. On December 7, 2018, the Fund notified New York
Sewing of its failure to make payments according to the
schedule and warned that, if the failure was not cured within
sixty (60) days, the Fund would be entitled to the full
withdrawal liability amount plus potential penalties. Compl.
Ex. C. After New York Sewing did not make the required
payments, the Fund notified New York Sewing on February 22,
2019, that it was in default, the Fund had elected to
accelerate the outstanding withdrawal liability, and
accordingly the Fund demanded immediate payment plus accrued
interest. Compl. Ex D. Further, New York Sewing failed to
initiate arbitration proceedings to contest its liability.
Compl. ¶ 22. As plan fiduciaries, the Trustees are
entitled to bring this federal action to collect the
withdrawal liability. Compl. ¶ 7; 29 U.S.C. §§
on the foregoing, plaintiff has alleged sufficient facts to
establish defendant New York Sewing's liability.
Moreover, because New York Sewing did not initiate
arbitration proceedings to dispute its withdrawal liability
or the Fund's liability calculations, and the deadline to
do so has long since expired, see 29 U.S.C. §
1401(a)(1), 29 C.F.R. § 4219.16(g), the plan's
withdrawal liability determination is final and binding.
is well established that [w]hile a party's default is
deemed to constitute a concession of all well pleaded
allegations of liability, it is not considered an admission
of damages.” Cement & Concrete Workers Dist.
Council Welfare Fund v. Metro Found. Contractors, Inc.,
699 F.3d 230, 234 (2d Cir. 2012) (citation and internal
quotations marks omitted); see also Credit Lyonnais Sec.
(USA), Inc., 183 F.3d at 155 (“Even when a default
judgment is warranted based on a party's failure to
defend, the allegations in the complaint with respect to the
amount of the damages are not deemed true.”). On a
motion for a default judgment, the Court must “conduct
an inquiry in order to ascertain the amount of damages with
reasonable certainty.” Credit Lyonnais Secs. (USA),
Inc., 183 F.3d at 155 (citation omitted). While the
Court must ensure there is an evidentiary basis for the
damages requested, the Court has discretion in deciding
whether to make a determination based on evidence presented
at a hearing or based on review of documentary evidence alone
without a hearing. Metro Found. Contractors Inc.,
699 F.3d at 234; United Food & Commercial
Workers Local 348 Pension Fund v. Franklin Poly
Corp., No. 12-CV-5837 (MKB)(VMS), 2013 WL 4525658, at *6
(E.D.N.Y. Aug. 27, 2013).
ERISA, when a judgment in favor of the plan is awarded to
compel payment of fund contributions, the Court must award
the unpaid contributions, as well as interest on the unpaid
contributions, “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 of the [unpaid contributions], ”
and reasonable attorneys' fees and costs. 32BJ N.
Pension Fund v. Nutrition Mgmt. Servs. Co., No.
18-0857-CV(L), 2019 WL 3917567, at *4 (2d Cir. Aug. 20, 2019)
(quoting 29 U.S.C. § 1132(g)(2)).
plaintiff requests a total amount of $949, 972.79, which
includes: (1) $782, 948 for outstanding withdrawal liability;
(2) $78, 998.43 for interest accrued; (3) $78, 998.43 for
liquidated damages; (4) $8, 443.75 for attorneys' fees;
and (5) $584.18 for costs. Pl.'s Mem. Law Supp. Mot.
Default J. 2, ECF No. 8-1. As proof of damages, plaintiff
i) The declaration of George Leventis, Executive Director of
the Fund, Leventis Decl., ECF No. 8-7, which appends copies
a. the May 28, 2014, demand letter, which provides the
Fund's calculation of defendant's initial withdrawal
liability and redetermination liability, Leventis Decl. Ex.
1, ECF No. 8-8;
b. the January 29, 2016, demand letter, which provides the
Fund's calculation of defendant's reallocation
liability and total outstanding withdrawal liability,
Leventis Decl. Ex. 2, ECF No. 8-9;
c. the December 7, 2018, letter, notifying defendant of its
missed payments and the 60-day window to cure its default,
Leventis Decl. Ex. 3, ECF No. 8-10; d. the February 22, 2019,
letter, notifying defendant of its default and the Fund's