Opinion
07 Civ. 6392 (LTS) (KNF).
May 29, 2009
REPORT and RECOMMENDATION
I. INTRODUCTION
The plaintiffs, Nephty Cruz and Michael Balletto, as trustees of the District 6 International Union of Industrial, Service, Transport and Health Employees Health and Pension Plans ("the Plans"), brought this action against US Health Clean, seeking monetary damages and equitable relief, based upon the defendant's failure to make contributions to the Plans, as required by: (1) a collective bargaining agreement ("the CBA"); (2) the District 6 Health Plan Contribution Collection and Payroll Audit Policy ("the Audit Policy"); and (3) the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001- 1461.
In May 2008, the defendant's former counsel, Epstein Becker Green, P.C., moved to withdraw as attorneys for the defendant. The Court granted the motion and ordered the defendant to obtain new counsel; however, the defendant failed to do so. The plaintiffs moved for judgment by default, and your Honor granted the motion. Thereafter, your Honor referred the matter to the undersigned to conduct an inquest and to report and recommend the amount of damages, if any, to be awarded to the plaintiffs against the defendant.
The Court directed the plaintiffs to serve and file proposed findings of fact and conclusions of law, and an inquest memorandum setting forth their proof of damages, costs of this action, and attorneys' fees. In support of their request for damages, the plaintiffs submitted: (1) the duly executed declaration of plaintiffs' counsel, Charles R. Virginia ("Virginia"); (2) the CBA made between the defendant and the District 6 International Union of Industrial, Service, Transport and Health Employees ("the Union"); (3) the Audit Policy adopted by the Independent Fiduciary and the District 6 Health Plan Board of Trustees; (4) a copy of the findings of an audit performed on the defendant's records of its contributions to the Plans, prepared by Marshall Moses Payroll Compliance Services, LLC, for the period January 1, 2006, through March 31, 2007 ("the Audit Report"); and (5) invoices submitted to the plaintiffs by their counsel ("the Billing Records"). The plaintiffs' submissions aver that they are entitled to recover from the defendant: (i) unpaid contributions, in the amount of $124,080.00; (ii) prejudgment interest, in the amount of $24,491.77; (iii) liquidated damages, in the amount of $24,816.00; (iv) audit fees, in the amount of $2,190.00; and (v) attorneys' fees and costs, in the amount of $14,037.57.
The defendant did not submit anything in connection with the inquest, although it was directed to do so, through an order of the Court dated December 3, 2008.
II. BACKGROUND
When a defendant defaults in an action, the plaintiff's well pleaded factual allegations are accepted as true, except for those relating to damages. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992) (stating "a party's default is deemed to constitute a concession of all well pleaded allegations of liability, [but] it is not considered an admission of damages"). In such a circumstance, the plaintiff is "entitled to all reasonable inferences from the evidence offered." Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). Based upon the submissions made by the plaintiffs, the complaint filed in the instant action, and the Court's review of the entire court file in this action, the following findings of fact are made:
The plaintiffs are the trustees of the Plans, which are multi-employer labor-management trust funds organized and operated pursuant to the CBA. The Plans provide health and pension benefits to employees in the Union. Pursuant to the CBA made between the defendant and the Union, of which the plaintiffs are third-party beneficiaries, the defendant was required to pay the Plans $220.00 monthly, for each Union member it employed during the given calendar month. Pursuant to the Audit Policy: (1) the plaintiffs had the right to perform an audit of the defendant's financial records and to require the defendant to pay for the audit; (2) the defendant was required to make contributions to the District 6 Health Plan on the twentieth day following the end of the calendar month for which the contribution(s) was made; (3) the defendant is liable for interest at the rate of 10 percent per annum, for any delinquent contribution payments; and (4) contribution delinquency exposes the defendant to paying liquidated damages in the amount of 20 percent of the unpaid contributions.
The CBA was executed in accordance with Section 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5). The CBA was valid for the period May 11, 2005, through May 10, 2008.
The plaintiffs assert that, from May 2005, through July 2007, the defendant failed to make contributions to the Plans totaling $124,080.00: (1) $49,720.00, from May 2005, through December 2005; (2) $49,500.00, from January 2006, through March 2007; and (3) $24,860.00, from April 2007, through July 2007.
In support of their contention, the plaintiffs have submitted the Audit Report. It covers the period from January 2006, through March 2007, and reveals that various monthly contribution delinquencies, ranging from $220.00 to $6,820.00, were uncovered through an analysis of the defendant's records. The delinquent contribution payments for the audited period are $49,500.00. The plaintiffs did not provide audit findings for any period before January 2006 ("the pre-audit period"), or after March 2007 ("the post-audit period") (collectively, "the unaudited periods"). Instead, the plaintiffs estimate the defendant's delinquent contributions for other periods by calculating the average number of Union employees the defendant used in 2006 (28.25), and reckoning the defendant failed to contribute to the Plans for any employee, resulting in an average monthly delinquency of $6,215.00. According to the plaintiffs, the total amount of delinquent contributions, for the unaudited periods, is $74,580.00.
This figure is the product of multiplying the defendant's monthly obligation per employee, $220.00, by the number of employees, 28.25.
Based on their assertion, that the delinquent contributions total $124,080.00, the plaintiffs request: (1) $16,227.57, liquidated damages, calculated at the rate of 20 percent of the principal amount owed, pursuant to the Audit Policy; and (2) $24,816.00, prejudgment interest, calculated at the rate of 10 percent per annum, pursuant to the Audit Policy. To support the amount of prejudgment interest demanded, the plaintiffs rely on the amount of prejudgment interest recited in the Audit Report ($9,394.00), and project that $15,097.77 in prejudgment interest has accrued on the principal amount of $74,580.00, the delinquent contributions they reckon the defendant owes for the unaudited period.
The plaintiffs also request attorneys' fees of $13,687.57, audit fees of $2,190.00, and costs incurred of $350. In support of the request for attorneys' fees, the plaintiffs provided the Billing Records, which identify: (1) the initials of the individuals who worked on this matter; (2) the dates on which work was performed; (3) the hours expended by each individual, which total 67.25 hours; (4) the nature of the work performed; and (5) the hourly rates charged for the work performed. The hourly rates charged range from $90.00, to $275.00. The plaintiffs did not provide the Court a legend identifying the names of attorneys or law firm staff members that correspond to the initials appearing in the Billing Records. Moreover, the Court was not supplied with information detailing the experience of the personnel who provided legal services to the plaintiffs, in connection with this action.
With respect to their request for audit fees, the plaintiffs submitted: (1) a declaration by Virginia, which states the plaintiffs were charged $2,190.00 for auditing services; and (2) a letter from a professional auditing company, Marshall Moss Payroll Compliance Services, LLC, addressed to the plaintiffs' counsel, which states the audit fees are $2,190.00. Neither information detailing the work performed by the auditor, nor billing records identifying the number of hours worked and the personnel engaged in that work, was provided to the Court to support the request.
III. CONCLUSIONS OF LAW
As discussed above, a default judgment in an action establishes liability, but is not a concession of damages. A plaintiff must establish the amount of damages in a post-default inquest, "unless the amount is liquidated or susceptible of mathematical computation." Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974). In conducting an inquest, a court need not hold a hearing "as long as it [has] ensured that there was a basis for the damages specified in the default judgment." Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (quoting Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 [2d Cir. 1989]). In evaluating the fairness of the sum requested, "[a] court may rely on detailed affidavits or documentary evidence." See Fustok, 873 F.2d at 40.Unpaid Benefit Contributions
ERISA provides that "[e]very employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement." 29 U.S.C. § 1145. ERISA also provides, in pertinent part, that "[i]n any action under this title by a fiduciary for or on behalf of a plan to enforce section 515 [ 29 U.S.C. § 1145] in which a judgment in favor of the plan is awarded, the court shall award the plan-(A) the unpaid contributions . . ." 29 U.S.C. § 1132(g)(2) (italics omitted). However, "[o]nce the fact of damages has been established, the plaintiff must provide evidence 'from which the amount of damages can be ascertained with reasonable certainty.'" New York City Dist. Council of Carpenters Pension Fund v. Quantum Constr., No. 06 Civ. 13150, 2008 WL 5159777, at *2 (S.D.N.Y. Dec. 9, 2008) (quoting Compania Pelineon De Navegacion, S.A. v. Texas Petroleum Co., 540 F.2d 53, 56 [2d Cir. 1976]).
Pursuant to 29 U.S.C. § 1059, an employer is required to "maintain records with respect to each of his employees sufficient to determine the benefits due or which may become due to such employees." ERISA provides further that "[a] civil action may be brought . . . by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3). The Second Circuit Court of Appeals has recognized that these provisions entitle trustees "to 'appropriate equitable relief if an employer violates ERISA's recordkeeping requirement." Jaspan v. Glover Bottled Gas Corp., 80 F.3d 38, 42 (2d Cir. 1996). The terms of collectively bargained agreements and other contracts, may also dictate what recourse is available, if an employer fails to maintain or provide records. See e.g. LaBarbera v. Central Design Systems, Inc., No. 06-CV-2709, 2006 WL 3422645, at *2 (E.D.N.Y. Nov. 28, 2006) (awarding unpaid contributions to the plaintiff-trustees based upon a provision in a Restated Agreement and Declaration of Trust, that specified the method for calculating unpaid contributions, in the absence of reports from the employer).
The plaintiffs contend the defendant owes the Plans unpaid contributions of $124,080.00. To support this figure, the plaintiffs rely on: (a) the Audit Report covering the period of January 1, 2006, through March 31, 2007, which shows $49,500 in unpaid contributions by the defendant; and (b) estimates they have made, based on assumptions about the size of the union work force the defendant employed during different months of various years.
With regard to their request for damages, for the unaudited periods, the plaintiffs do not contend either the Audit Policy or CBA prescribes the manner or amount of damages recoverable when the defendant fails to provide records to the trustees for periods during which contributions are unpaid. While the plaintiffs do not request "appropriate equitable relief," pursuant to 29 U.S.C § 1132(a)(3), it appears the plaintiffs' request for an award of $74,580.00, for the unaudited periods, would not be permitted under 29 U.S.C. § 1132(a)(3), since "[m]oney damages are generally unavailable under [this] section . . ., and instead relief under this section is limited to some form of equitable relief." Trustees of the Building Services 32B-J Pension, Health and Annuity Funds v. Linden Realty Assocs., No. CV-94-1358, 1995 WL 302454, at *5 (E.D.N.Y. May 8, 1995) (citing Lee v. Burkhart, 991 F.2d 1004, 1011 [2d Cir. 1993]). While equitable remedies such as restitution or specific performance may result in the recovery of moneys owed, "extra-contractual or compensatory damages beyond that which are owed as a proper contribution to the plan are not authorized."Id. In this case, the plaintiffs request $74,580.00, for the unaudited periods, based upon their estimate that the defendant used 28.25 Union employees and failed to contribute to the Plans for any employee. The calculation of damages in this manner may well result in the award of "extra-contractual or compensatory damages beyond that which are owed as a proper contribution to the plan," and, thus, would not be authorized under 29 U.S.C. § 1132(a)(3). See Jaspan, 80 F.3d at 42 (affirming the denial of the plaintiffs request for "50% above the amount of contributions reported" from an employer who did not produce records for an audit, and noting that "no request for any specific form of monetary equitable relief [was requested] other than the 50% penalty provided by the Trust Agreement").
The plaintiffs provide sufficient evidence of the defendant's unpaid contributions for January 2006, through March 2007. According to the Audit Report, and as displayed in the chart below, entitled "Interest Accumulation on Unpaid Contributions," the defendant made payments for some of its employees in the months January, March, April, May, July, August, September and October of 2006. In the other months within the audit period, the defendant failed to contribute to the Plans for any of its employees. After subtracting payments made by the defendant, the plaintiffs are entitled to $49,500.00, the total unpaid benefit contributions for the audited period.
Prejudgment Interest
"[I]nterest on unpaid contributions shall be determined by using the rate provided under the plan. . . ." 29 U.S.C. § 1132(g)(2). The Audit Policy provides that interest on delinquent contributions shall accrue at the rate of ten percent per annum. Interest on delinquent payments "should begin to accrue when the particular payment becomes delinquent and not sooner." Trustees of the Four Joint Boards Health and Welfare and Pension Funds v. Penn Plastics, Inc., 864 F. Supp. 342, 348 (S.D.N.Y. 1994).
Although the Audit Report provides a figure for compound interest, neither the CBA nor the Audit Policy — the only pertinent documents concerning this issue provided by the plaintiffs in support of their damages request — indicates that interest on delinquent contributions is to be compounded. Since the plaintiffs have not demonstrated that compound interest is warranted, the Court determined to consider simple interest only.
Prejudgment interest may be calculated by applying the daily interest rate, which is 0.02740 percent, to each of the defendant's monthly amount of delinquency. Applying the rate means multiplying the amount of delinquency by 0.02740 percent, and then multiplying the product by the number of days between the monthly contribution due date and entry of judgment. For example, the Audit Report indicates the defendant failed to make benefit contributions for seven employees, in January 2006. Since the Plans require the defendant to contribute $220.00 for each Plan-covered employee who worked full-time that month, the delinquent amount is $1,540.00. Multiplying of the daily rate (0.02740 percent) by this amount yields a daily interest amount of approximately $0.42. Since 1,035 days elapsed from the contributions' due date to entry of judgment, November 20, 2008, the total interest due, on the January 2006 payment, is $436.73. Employing this calculation method, yields prejudgment interest, for each month, as follows:
Since the contracted interest rate is 10 percent per annum, the daily interest, which is 1/365 of this amount, is 0.02740 percent.
Interest Accumulation on Unpaid Contributions During the Audited Period
Due Date No. of Employees Delinquent Daily Days Interest Due Unaccounted for by Amount Interest Owed the Defendant Jan. 20, 2006 7 $1,540.00 $0.42 1,035 $436.73 Feb. 20, 2006 28 $6,160.00 $1.69 1,004 $1,694.59 Mar. 20, 2006 8 $1,760.00 $0.48 976 $470.67 Apr. 20, 2006 6 $1,320.00 $0.36 945 $341.79 May 20, 2006 8 $1,760.00 $0.48 915 $441.25 Jun. 20, 2006 31 $6,820.00 $1.87 884 $1,651.91 Jul. 20, 2006 7 $1,540.00 $0.42 854 $360.35 Aug. 20, 2006 6 $1,320.00 $0.36 823 $297.66 Sept. 20, 2006 3 $660.00 $0.18 792 $143.23 Oct. 20, 2006 1 $220.00 $0.06 762 $45.93 Nov. 20, 2006 25 $5,500.00 $1.51 731 $1,101.62 Dec. 20, 2006 25 $5,500.00 $1.51 701 $1,056.41 Jan. 20, 2007 24 $5,280.00 $1.45 670 $969.30 Feb. 20, 2007 24 $5,280.00 $1.45 639 $924.45 Mar. 20, 2007 22 $4,840.00 $1.33 611 $810.28 TOTAL: $10,746.17 Accordingly, the plaintiffs are entitled to prejudgment interest, through November 20, 2008, of $10,746.17.
Statutory Damages
In addition to prejudgment interest, under 29 U.S.C. § 1132(g)(2)(B), the plaintiffs are entitled to statutory damages, in "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 [of unpaid contributions]." 29 U.S.C. § 1132(g)(2)(C). The "award of interest [, under 29 U.S.C. § 1132(g)(2)(C),] is in addition to the award of interest under § 1132(g)(2)(B) . . . if the interest to be awarded is greater than the liquidated damages, the result of these two separate provisions is the award of double interest on the unpaid contributions." Trustees of Local 807 Labor-Mgmt. Health Pension Funds v. River Trucking and Rigging, Inc., No. CV-03-3659, 2005 WL 3307080, at *1 n. 2 (E.D.N.Y. Dec. 2, 2005).
The plaintiffs request liquidated damages equal to 20 percent of the defendant's unpaid benefit contributions, as provided by the Audit Policy. The amount of interest on the unpaid contributions is $10,746.17 and the amount of liquidated damages provided for under the plan is $9,900.00. Since the plaintiffs are entitled to recover the greater of these amounts, pursuant to 29 U.S.C. § 1132(g)(2)(C), the Court finds that an award of $10,746.17, in liquidated damages, is appropriate.
Attorneys' Fees and Costs
In actions to recover unpaid benefit contributions, an award of reasonable attorneys' fees and costs to the prevailing party is mandatory. See 29 U.S.C. § 1132(g)(2)(D) (stating the prevailing party in an ERISA action is entitled to "reasonable attorney's fees and costs of the action").
a. Attorneys' Fees
In the Second Circuit, a party seeking an award of attorneys' fees must support that request with contemporaneous time records that show, "for each attorney, the date, the hours expended, and the nature of the work done." New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983). Attorney fee applications that do not contain such supporting data "should normally be disallowed." Id. at 1154. Disallowance of attorneys' fees is permitted notwithstanding the mandatory language found at 29 U.S.C. § 1132(g)(2)(D). See Plumbers Local No. 371 Joint Plumbing Indus. Bd. Pension Fund v. Frank Liquori Plumbing and Heating, Inc., No. 95-CV-2892, 1996 WL 445065, at *5 (E.D.N.Y. June 26, 1996).
When fixing an appropriate amount to be awarded for attorneys' fees, the Second Circuit Court of Appeals requires that the "presumptively reasonable fee" method be employed. Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 522 F.3d 182, 183-84 (2d Cir. 2008). In assessing the reasonableness of attorneys' fees under this standard, a court must analyze the party's evidence to determine whether the "requested rates are in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation." See Blum v. Stenson, 465 U.S. 886, 896 n. 11, 104 S. Ct. 1541, 1547 n. 11 (1984).
The plaintiffs seek $13,687.57 for the legal services rendered to them by the law firm Barnes, Iaccarino, Virginia, Ambinder Shepherd PLLC, located in New York, New York. In support of their request for attorneys' fees, the plaintiffs submitted Billing Records from their counsel for the period of July 5, 2007, through December 15, 2008. Though the Billing Records indicate the work performed and the time expended, they fail to: (a) provide the names of the personnel who performed the work, (b) distinguish the position held by each individual, e.g. partner, associate, paralegal, etc., and (c) describe the experience and qualifications of the individuals who worked on this matter. Without this information, the Court is unable to evaluate whether the hourly rates for the legal services rendered are reasonable.See Anschutz Petroleum Marketing Corp. v. E.W. Saybolt Co., Inc., 112 F.R.D. 355, 359 (S.D.N.Y. 1986) (stating "the [c]ourt must take into account the complexity of the litigation, the reputation and experience of counsel, his or her professional skill, the time involved, and the results achieved") (citing City of Detroit v. Grinnell Corp., 560 F.2d 1093 [2d Cir. 1977]). b. Audit fees
The plaintiffs have requested an award of audit fees totaling $2,190.00. In support of this request, the plaintiffs have provided the Court with a letter from Marshall Moss Payroll Compliance Services, LLC, which states, in passing, the audit fees amounted to $2,190.00. The plaintiffs have not provided an invoice or other billing records indicating and substantiating the work performed by the auditors.
Courts have discretionary authority to award auditor's fees under 29 U.S.C. § 1132(g)(2)(E). See, e.g., Virga v. Big Apple Constr. Restoration Inc., 590 F. Supp. 2d 467, 476 (S.D.N.Y. 2008) reconsideration granted, 590 F. Supp. 2d 474-77 (May 12, 2008). Though the defendants are liable for audit fees under the Audit Policy, the plaintiffs must submit records providing an adequate basis upon which such an award may be granted. See Penn Plastics, 864 F. Supp at 350-51 (refusing to award audit fees to the plaintiffs, despite a contractual provision imposing such liability on the defendant, because the plaintiffs' two-sentence description of the tasks performed was an insufficient basis for such an award); see also Teamsters Local 814 Welfare Fund v. Dahill Moving Storage Co., Inc., 545 F. Supp. 2d 260, 269 (E.D.N.Y. 2008) ("[r]equests for audit fees are 'generally determined by utilizing the same standards the court applies in awarding attorneys' fees"') (quoting King v. Unique Rigging Corp., No. 01-CV-3797, 2006 WL 3335011, at *5 [E.D.N.Y. Oct. 27, 2006]). As in Penn Plastics, the plaintiffs failed to provide an adequate explanation for the work performed by the auditor. The Court cannot assess the reasonableness of this fee when a dearth of necessary information exists. See id. at 350-51. c. Costs
The plaintiffs also request reimbursement for $350.00, which the plaintiffs paid to the Clerk of Court, for this judicial district, to commence this action. This cost is reasonable and recovering it from the defendant is appropriate.
IV. RECOMMENDATION
For the reasons set forth above, the Court recommends the plaintiffs be awarded: (1) $74,360.00, for unpaid contributions to the Plans; (2) $10,746.17, for prejudgment interest on the unpaid contributions; (3) $10,746.17, for statutory damages; and (4) $350.00, for costs. The plaintiffs' request for attorneys' fees and audit fees should be denied.
V. FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Laura Taylor Swain, United States District Judge, 500 Pearl Street, Room 755, New York, New York 10007, and to the chambers of the undersigned, 40 Foley Square, Room 540, New York, New York 10007. Any requests for an extension of time for filing objections must be directed to Judge Swain. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466 (1985);IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 58-59 (2d Cir. 1998); McCarthy v. Manson, 714 F.2d 234, 237 (2d Cir. 1983).