Div. 1181 Amalgamated Transit Union—New York Emps. Pension Fund v. Canal Escorts, Inc.

DIVISION 1181 AMALGAMATED TRANSIT UNION—NEW YORK EMPLOYEES PENSION FUNDand its Trustees MICHAEL CORDIELLO and STANLEY BRETTSCHNEIDER, Plaintiffs, v. CANAL ESCORTS, INC., LASALLE BUS SERVICE INC., MAJOR BUSES INC.,MINOR BUSES INC., YELLOW BUS, INC., STANDARD BUS MAINTENANCE, INC.,TALULLA REALTY INC. and MAGOO ENTERPRISES, INC., Defendants.

14-CV-4575 (SMG)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

March 26, 2020

MEMORANDUM & ORDER

GOLD, STEVEN M., U.S. Magistrate Judge:

INTRODUCTION

Plaintiffs Division 1181 Amalgamated Transit Union (the "Union")—New York Employees Pension Fund (the "Fund"), and its Trustees Michael Cordiello and Stanley Brettschneider (collectively with the Fund, "plaintiffs"), bring this action against defendants Canal Escorts, Inc. ("Canal"), LaSalle Bus Service Inc., Major Buses Inc., Minor Buses Inc., Yellow Bus, Inc., Standard Bus Maintenance, Inc., Talulla Realty Inc., and Magoo Enterprises, Inc. (collectively, except for Canal, "the Control Group Defendants")¹ pursuant to the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1381 et seq.

Plaintiffs now move for summary judgment against defendants, seeking an award of withdrawal liability, together with interest, liquidated damages, and reasonable attorneys' fees and costs under ERISA. Plaintiffs alternatively move for delinquent interim withdrawal liability payments and attendant damages. The case has been assigned to me for all purposes with consent of the parties, Dkt. 87, and I therefore rule on plaintiffs' motion by Memorandum and Order rather than by issuing a Report and Recommendation. For the reasons stated below, plaintiffs' motion for summary judgment is granted in its entirety. The Court finds defendants jointly and severally liable for the withdrawal liability sought by plaintiffs, together with interest, liquidated damages, and reasonable attorneys' fees and costs.

BACKGROUND

I. FACTS²

The New York City Department of Education ("DOE") operates the city's public school system and, for decades, has contracted with private bus companies to provide transportation services to students. Defs.' Rule 56.1 Statement ("Defs.' 56.1 Stmt.") ¶¶ 51, 56, Dkt. 96; Pls.' Rule 56.1 Reply ("Pls.' 56.1 Reply") ¶¶ 51, 56, Dkt. 100. The private bus companies, in turn, have hired escorts to assist with transporting special education students or subcontracted with escort companies, such as Canal, to provide that assistance. Defs.' 56.1 Stmt. ¶ 56; Pls.' 56.1 Reply ¶ 56.

In 1979, following a labor dispute, the DOE reached a negotiated agreement, known as the "Mollen³ Agreement," with certain local transit unions. Defs.' 56.1 Stmt. ¶ 59; Pls.' 56.1 Reply ¶ 59. This agreement provided for a number of employee protection provisions (EPPs),such as requiring each contractor to fill vacancies from a pool of union members on a seniority list and contribute to the Fund on behalf of its employees. Defs.' 56.1 Stmt. ¶¶ 60-61; Pls.' 56.1 Reply ¶¶ 60-61.

The Fund "is a multiemployer pension plan within the meaning of Sections 3(37) and 4001(a)(3) of [ERISA], 29 U.S.C. §§ 1002(37) and 1301(a)(3), that provides retirement benefits to eligible participants." Pls.' Rule 56.1 Statement ("Pls.' 56.1 Stmt.") ¶ 1, Dkt. 92; Defs.' 56.1 Stmt. ¶ 1. The Fund was established and is maintained pursuant to a Trust Agreement. Pls.' 56.1 Stmt. ¶ 11; Defs.' 56.1 Stmt. ¶ 11; see Trust Agreement, Dkt. 93-2. The Trustees, pursuant to the authority vested in them by the Trust Agreement, adopted the Fund's Policy for Collection of Delinquent Contributions (the "Delinquency Policy") and the Fund's Withdrawal Liability Rules. Pl.'s 56.1 Stmt. ¶¶ 13, 17; Defs.' 56.1 Stmt. ¶¶ 13, 17; see Delinquency Policy, Dkt. 93-3; Withdrawal Liability Rules, Dkt. 93-4. Section 10.1 of the Withdrawal Liability Rules provides that any disputes between an employer and the Fund concerning a determination made under those rules is subject to compulsory arbitration. Of particular relevance here, section 10.2 of the Withdrawal Liability Rules provides that "arbitration shall be initiated and conducted in accordance with regulations promulgated by the Pension Benefit Guaranty Corporation ["PBGC"] at 29 § CFR 4221.1 et seq." Withdrawal Liability Rules at 14-15.

In or about the same year as the Mollen Agreement, nonparty Joseph Fazzia successfully bid on a contract to provide bus services for DOE routes. Defs.' 56.1 Stmt. ¶¶ 54, 63; Pls.' 56.1 Reply ¶¶ 54, 63. At that time, all escorts for special education students were employed by a single company, Professional Detail Service. Defs.' 56.1 Stmt. ¶ 64; Pls.' 56.1 Reply ¶ 64. However, in 1980, the DOE terminated its relationship with Professional Detail Service and thereafter required bus companies, such as the ones operated by Fazzia, either to employ escortsor subcontract with escort companies. Defs.' 56.1 Stmt. ¶ 64; Pls.' 56.1 Reply ¶ 64. Fazzia initially hired escorts as employees of his bus companies and, in 1997, incorporated Canal as a separate entity to provide escorts for the routes served by his bus companies. Defs.' 56.1 Stmt. ¶¶ 64, 65; Pls.' 56.1 Reply ¶¶ 64, 65.

Canal operated through informal subcontracts with bus companies servicing DOE bus routes. Defs.' 56.1 Stmt. ¶ 69; Pls.' 56.1 Reply ¶ 69. In order to operate through these informal subcontracts, Canal became a signatory to and bound by a Collective Bargaining Agreement ("CBA") with the Union. Defs.' 56.1 Stmt. ¶ 69; Pls.' 56.1 Reply ¶ 69; see CBA, Dkt. 93-1. As a signatory to the CBA, Canal was "obligated to contribute to the Fund on behalf of its covered employees" and "abide by the terms and conditions of the Fund's Trust Agreement." Pls.' 56.1 Stmt. ¶¶ 6, 9; Defs.' 56.1 Stmt. ¶¶ 6, 9. The DOE reimbursed Canal's expenses, including its contributions to the Fund. Defs.' 56.1 Stmt. ¶ 70; Pls.' 56.1 Reply ¶ 70. The DOE also paid Canal a management fee that was calculated as a percentage of Canal's total revenues and paid to Fazzia as the sole office employee of Canal. Defs.' 56.1 Stmt. ¶ 71; Pls.' 56.1 Reply ¶ 71.

The DOE determined the bus routes that would be approved, the dates and times that escort services would be provided, and the process for certifying individuals seeking employment as escorts. Defs.' 56.1 Stmt. ¶¶ 72, 73; Pls.' 56.1 Reply ¶¶ 72, 73. The DOE also provided training for escorts and was involved in disciplining them. Defs.' 56.1 Stmt. ¶¶ 74, 75; Pls.' 56.1 Reply ¶¶ 74, 75. Canal was not allowed to provide its own training for escorts. Defs.' 56.1 Stmt. ¶ 74; Pls.' 56.1 Reply ¶ 74.

In 2013, the DOE began soliciting bids for new bus and escort contracts that did not include EPPs. Defs.' 56.1 Stmt. ¶ 80; Pls.' 56.1 Reply ¶ 80. The Union went on strike, and Canal, in turn, decided to terminate its striking escorts. Defs.' 56.1 Stmt. ¶ 82; Pls.' 56.1 Reply¶ 82. When the strike ended in February 2013, Fazzia agreed to rehire two-thirds of the terminated escorts. Defs.' 56.1 Stmt. ¶ 83; Pls.' 56.1 Reply ¶ 83.

In 1983, the Fund received an exemption from PBGC that allowed it not to assess withdrawal liability on employers who stopped doing business with the DOE. Defs.' 56.1 Stmt. ¶ 84; Pls.' 56.1 Reply ¶ 84. In April 2013, though, the Fund changed its rules so that the exemption no longer applied. Defs.' 56.1 Stmt. ¶ 84; Pls.' 56.1 Reply ¶ 84. Canal asserts that when it agreed to rehire the terminated escorts, it "did not know that the Fund was going to change its rules and that the Fund would attempt to assess millions of dollars of withdrawal liability against Canal if it ceased operations." Defs.' 56.1 Stmt. ¶ 85; Pls.' 56.1 Reply ¶ 85.

Canal was still bound by the CBA to contribute to the Fund on behalf of its covered employees even after the DOE solicited new contracts without EPPs in 2013. Defs.' 56.1 Stmt. ¶ 80; Pls.' 56.1 Reply ¶ 80. As a result, Canal could not compete with other companies that were not bound by the CBA and were therefore able to bid for escort service contracts at lower rates. Defs.' 56.1 Stmt. ¶¶ 80, 81; Pls.' 56.1 Reply ¶¶ 80, 81. These circumstances essentially forced Canal to cease operations. Defs.' 56.1 Stmt. ¶ 81; Pls.' 56.1 Reply ¶ 81.

The Fund subsequently determined that on or about August 6, 2013, Canal "effected a 'complete withdrawal' from the Fund as defined in ERISA § 4203, 29 U.S.C. § 1383." Pls.' 56.1 Stmt. ¶ 26; Defs.' 56.1 Stmt. ¶ 26. On December 12, 2013, the Fund sent to Canal a Notice and Demand, which informed Canal that its "withdrawal liability was $4,229,356.00, payable according to the schedule contained therein in 71 quarterly payments of $105,004.63 [plus] a final quarterly payment of $23,902.99," and that the "first payment was due to the Fund by February 10, 2014 and quarterly thereafter." Pls.' 56.1 Stmt. ¶¶ 27, 28; Defs.' 56.1 Stmt. ¶¶ 27, 28; see Notice & Demand, Dkt. 93-5. The Notice and Demand further stated that the withdrawalliability was owed by Canal and "any or all trades or businesses under common control with Canal." Pls.' 56.1 Stmt. ¶ 29 (quoting Notice and Demand at 1); Defs.' 56.1 Stmt. ¶ 29.⁴ Canal received the Notice and Demand on or about December 14, 2013. Pls.' 56.1 Stmt. ¶ 30; Defs.' 56.1 Stmt. ¶ 30. Neither Canal nor any of the Control Group Defendants made any payments to the Fund pursuant to the schedule set forth in the Notice and Demand. Pls.' 56.1 Stmt. ¶ 31; Defs.' 56.1 Stmt. ¶ 31.

On March 3, 2014, Canal, through counsel, sent a letter to the Fund requesting review of the Fund's withdrawal liability assessment ("Request for Review"). Pls.' 56.1 Stmt. ¶ 37; Defs.' 56.1 Stmt. ¶ 37; see Request for Review, Dkt. 93-8. On June 3, 2014, the Fund responded to the request but declined to alter its assessment ("Response Letter"). Pls.' 56.1 Stmt. ¶ 38; Defs.' 56.1 Stmt. ¶ 38; see Response Letter, Dkt. 93-9. Canal received the Response Letter on June 5,...