Trs. of Local 1034 Pension Tr. Fund v. N. Cancro, Inc.

TRUSTEES of the LOCAL 1034 PENSION TRUST FUND, Plaintiffs, v. N. CANCRO, INC. d/b/a CANCRO FUNERAL HOME INC.; XYZ CORPORATIONS 1-10;and JOHN AND JANE DOES 1-10, Defendants.

18 CV 7412 (CBA)(RML)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

December 18, 2019

REPORT AND RECOMMENDATION

LEVY, United States Magistrate Judge:

By order dated July 3, 2019, the Honorable Carol Bagley Amon, United States District Judge, referred plaintiffs' motion for a default judgment against defendant N. Cancro, Inc. d/b/a Cancro Funeral Home Inc. ("defendant" or "Cancro") to me for report and recommendation. For the reasons stated below, I respectfully recommend that plaintiffs' motion be granted and that plaintiffs be awarded $263,622.04.

BACKGROUND AND FACTS

Plaintiffs are trustees (the "Trustees") of the Local 1034 Pension Trust Fund ("plaintiffs" or the "Fund"), a jointly-administered multiemployer employee benefit plan. They bring this action pursuant to section 4301 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1451. (Complaint, dated Dec. 28, 2018 ("Compl."), Dkt. No. 1, ¶¶ 2, 6-7.) Plaintiffs seek to recover withdrawal liability that they allege Cancro owes to the Fund, as well as accrued interest, liquidated damages, attorney's fees, and costs.¹ (Id. ¶¶ 1-2.) Cancrois a for-profit domestic corporation with its principal place of business in New York State. (Id. ¶ 8.)

Cancro entered into a collective bargaining agreement (the "CBA") with the International Brotherhood of Teamsters, Local Union No. 813, with respect to which the Fund is a third-party beneficiary. (Id. ¶ 12.) The CBA required Cancro to remit contributions to the Fund on behalf of covered employees. (Id.; Declaration of Sharon Huang, dated July 2, 2019 ("Huang Decl."), Dkt. No. 9-7, ¶¶ 3-4, Ex. 1.)

By letter dated December 19, 2017, the Trustees informed Cancro that, effective immediately, they disclaimed any interest in representing Cancro's employees, thereby effecting a complete withdrawal from the Fund within the meaning of ERISA § 4203, 29 U.S.C. § 1383(a). (Compl. ¶ 13; Huang Decl. ¶ 5, Ex. 2.) In accordance with ERISA § 4219(b)(1) and (c)(1), 29 U.S.C. §§ 1399(b)(1) and (c)(1), by certified letter dated June 14, 2018, the Fund provided Cancro with a calculation of its withdrawal liability in the amount of $200,567 to be paid in 240 installments of $316, commencing on or before August 14, 2018. (See Huang Decl. ¶ 6, Ex. 3.) By letter dated July 19, 2018, Cancro alleged that it had no assets. (Id., Ex. 4.)

When it did not receive the payment due on August 14, 2018, the Fund notified Cancro that it was in default of its withdrawal liability obligations, and offered it an opportunity to cure the default within sixty days. (Id. ¶ 7, Ex. 5.) Cancro did not remit any payment, and by certified letter dated October 19, 2018, the Fund notified Cancro that it remained in default of its withdrawal liability obligations, and that the Trustees had elected to accelerate Cancro's withdrawal liability and to assess interest on the total outstanding amount. (Id. ¶ 8, Ex. 6.) On December 28, 2018, the Trustees commenced this lawsuit, alleging that Cancro has not made any withdrawal liability payments. (Compl. ¶ 17.) Upon plaintiffs' application, and in light ofdefendant's failure to appear or otherwise defend this action, the Clerk of the Court noted Cancro's default on April 22, 2019. (See Clerk's Entry of Default, dated Apr. 22, 2019, Dkt. No. 8.)

DISCUSSION

A. Standard of Review

Once found to be in default, a defendant is deemed to have admitted all of the well-pleaded allegations in the complaint pertaining to liability. See Cement & Concrete Workers Dist. Council Welfare Fund v. Metro Found. Contractors, Inc., 699 F.3d 230, 234 (2d Cir. 2012) (citation omitted); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Bravado Int'l Grp. Merch. Servs., Inc. v. Ninna, Inc., 655 F. Supp. 2d 177, 188 (E.D.N.Y. 2009). "Nevertheless, it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law." LaBarbera v. ASTC Labs., Inc., 752 F. Supp. 2d 263, 270 (E.D.N.Y. 2010) (internal quotation marks omitted); accord Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (recognizing the court's authority, even after default, to determine whether plaintiff has stated a cause of action).

B. Applicable Law

The statutory scheme for determining an employer's liability for unfunded vested benefits was succinctly summarized in Amalgamated Lithographers of America v. Unz & Co., 670 F. Supp. 2d 214 (S.D.N.Y. 2009):

When an employer withdraws from a plan . . ., the plan sponsor must determine the amount of liability and notify the employer of the amount. 29 U.S.C. § 1382. The employer must be notified "as soon as practicable" after withdrawal, and the notice must include the amount of the liability, a schedule for liability payments, and a demand for payment in accordance with the schedule. 29 U.S.C. § 1399(b)(1). Once the employer receivesnotice, it must begin payment in accordance with the schedule within 60 days, "notwithstanding any request for review or appeal of determinations of the amount of such liability or of the schedule." 29 U.S.C. § 1399(c)(2) . . . .

Any dispute concerning the plan's assessment of liability must be settled through arbitration. 29 U.S.C. § 1401(a)(1). . . . If no arbitration proceeding is initiated within [the time frames provided by statute], then the amount demanded by the plan becomes final and must be paid in accordance with the schedule provided by the plan. 29 U.S.C. § 1401(b)(1). Failure to demand arbitration within the statutory time frame bars the employer from contesting liability for the amount demanded. 29 U.S.C. § 1401(a)(1), (b)(1); ILGWU National Retirement Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879, 885-87 (2d Cir. 1988). If the employer defaults in making payments pursuant to the schedule, the plan may require immediate payment of the entire unpaid amount of the employer's withdrawal liability, plus accrued interest on the total outstanding liability from the date of the first scheduled payment that was not timely made. 29 U.S.C. § 1399(c)(5).

Id. at 221-22.

Thus, "[w]ithdrawal liability represents the withdrawing employer's proportionate share of the pension plan's unfunded vested benefits." Gesualdi v. Scara-Mix, Inc., 14 CV 765, 2017 WL 9485710, at *3 (E.D.N.Y. Feb. 7, 2017) (quotation marks and internal citations omitted), report and recommendation adopted, 2017 WL 945090 (E.D.N.Y. Mar. 10, 2017); see also Bowers v. Andrew Weir Shipping, Ltd., 810 F. Supp. 522, 524 n.1 (S.D.N.Y. 1992) (citing 29 U.S.C. §§ 1381, 1391), amended, 817 F. Supp. 4 (S.D.N.Y. 1993), aff'd, 27 F.3d 800 (2d Cir. 1994). Following an employer's withdrawal from a multiemployer pension plan, the plan sponsor has authority to determine the amount of withdrawal liability, notify the employer of the amount, and collect that amount from the employer. Bd. of Trs. of the UFCW Local 50 Pension Fund v. Baker Hill Packing Inc., No. 13 CV 1888, 2015 WL 867013, at *6 (E.D.N.Y. Feb. 27, 2015) (citing 29 U.S.C. §§ 1382, 1399); Gesualdi, 2017 WL 9485710, at *12. Within sixty days after receiving such notice, the employer must make payments in accordance with the plan sponsor's payment schedule. Baker Hill Packing Inc., 2015 WL 867013, at *6.

C. Liability

Plaintiffs have established defendant's liability as a matter of law. As stated above, on December 19, 2017, the Fund informed Cancro that it had disclaimed any interest in representing Cancro's employees, thereby effecting a complete withdrawal from the Fund within the meaning of 29 U.S.C. § 1383(a). (Compl. ¶ 13; Huang Decl. ¶ 5, Ex. 2.) As a result, Cancro became obligated to pay withdrawal liability pursuant to 29 U.S.C. §§ 1399(b)(1) and (c)(2). (Compl. ¶ 14.) Thereafter, the Fund notified defendant of the amount of its withdrawal liability and set a payment schedule. (See id.; Huang Decl. ¶ 6, Ex. 3.) When those payments were missed, the Fund warned defendant that failure to cure within sixty days would result in defendant's default, and that the entire amount of withdrawal liability would in that event be immediately due and owing. (Compl. ¶ 15; Huang Decl. ¶ 8, Ex. 6.) Plaintiffs assert that defendant has not made any payments to date. (Compl. ¶ 17.) Plaintiffs have thus established the elements of their claim for withdrawal liability.

D. Damages

While the allegations of a complaint pertaining to liability are deemed admitted upon entry of default, allegations relating to damages are not. See Greyhound Exhibitgroup, 973 F.2d at 158. Rather, a court must ensure that there is a basis for the damages sought before entering judgment in the amount demanded. See Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). A court may make this determination based upon evidence presented at a hearing or upon a review of detailed affidavits and documentary evidence. See FED. R. CIV. P. 55(b)(2); Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991)(holding that a court is not required to conduct a hearing to determine the basis for damages in every case); Fustok, 873 F.2d at 40 (noting that a court may rely on detailed affidavits and documentaryevidence as the basis for determining damages to be awarded in a default judgment). For the following reasons, I conclude that a hearing on the issue of damages is unwarranted and I respectfully recommend that plaintiffs be awarded the principal amount of withdrawal liability they claim, together with interest, liquidated damages, and attorney's fees and costs as calculated below.

1. Principal Amount of Withdrawal Liability

ERISA provides that "[a]s soon as practicable after an employer's complete or partial withdrawal, the plan sponsor shall (A) notify the employer of (i) the...