La Barbera v. A.F.C. Enterprises, Inc., 99 CIV.10595 MBM.
| Decision Date | 21 November 2005 |
| Docket Number | No. 99 CIV.10595 MBM.,99 CIV.10595 MBM. |
| Parties | Gary LA BARBERA, Lawrence Kudla, Dennis Gartland, Thomas Gesualdi, Theodore King, Chester, Broman, Frank Finkel, and Joseph Ferrara, as Trustees and Fiduciaries of the Local 282 Welfare, Pension, Annuity Job Training, and Vacation and Sick Leave Trust Funds, Plaintiffs, v. A.F.C. ENTERPRISES, INC., A.F.C. Enterprises, Inc./C.A.C. Industries, Inc., J/V, EM-Rose Enterprises, Inc., Lee Trucking Co., Pirraglia Contracting, Inc., Sette-Juliano Construction and Landsite Contracting Corp., T.P.F. Industries, Defendants. |
| Court | U.S. District Court — Southern District of New York |
William K. Wolf, Esq., Abigail R. Levy, Esq., Friedman & Wolf, New York, NY, for Plaintiffs.
Joshua Marcus, Esq., Franklin, Gringer & Cohen, P.C., Garden City, NY, for Defendant Lee Trucking Co.
By order dated July 5, 2004, I entered default judgment against Defendants Lee Trucking, Inc., and Sette-Juliano Construction and Landsite Contracting Corp. ("Sette-Juliano"), and referred this case to Magistrate Judge Douglas F. Eaton for an inquest as to damages. After receiving submissions from plaintiffs and defendant Lee Trucking,1 Magistrate Judge Eaton issued a Report and Recommendation, dated June 3, 2005 (the "Report"), awarding Plaintiffs unpaid contributions, unpaid interest, additional damages, and other amounts. Lee Trucking has timely filed written objections to the Report pursuant to Fed.R.Civ.P. 72(b) and 28 U.S.C. § 636(b)(1) (2000). For the reasons set forth below, I deny Lee's objections and adopt the Report in its entirety.
Defendants Lee Trucking and Sette-Juliano are parties to Collective Bargaining Agreements ("CBAs") with Teamsters Local 282 ("Local 282") which obligate them to make contributions to the Local 282 Welfare, Pension, Annuity, Job Training, and Vacation and Sick Leave Trust Funds (the "Funds"). (Cody Decl. ¶ 2) The Funds are operated pursuant to the terms of the Agreement and Declaration of Trust (the "Trust Agreement"), which is incorporated by reference into the CBAs. (Id. ¶ 3) Under Article IX of the Trust Agreement, the trustees of the Funds (the "Trustees") are entitled to audit the books and records of any employer, including defendants, at any time, and an employer's failure to produce such books and records within 20 days constitutes a material breach of the Trust Agreement. (Id. ¶ 6)
On October 18, 1999, the Trustees filed a complaint against Lee Trucking, Sette-Juliano, and three other employers to compel them to submit to an audit. (Compl. ¶ 1) The complaint also sought to collect any delinquent contributions revealed by the audits, as well as interest and damages under Section 502(g)(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(g)(2). (Compl. ¶ 1; Levy Decl. ¶ 3) After two of the employers were dropped from the lawsuit and the other three failed to respond to the Trustees' complaint, the Trustees moved for a default judgment. (Levy Decl. ¶ 4) I granted the Trustees' motion by Order dated July 5, 2004, and referred the case to Magistrate Judge Eaton for an inquest as to damages. A default judgment in favor of plaintiffs was entered on October 21, 2004, requiring the three remaining defendants — Lee Trucking, Sette-Juliano, and EM-Rose Enterprises, Inc. ("EM-Rose") — to submit certain books and records for audit within 30 days. (Id. ¶ 5) Plaintiffs subsequently dropped their suit against EM-Rose. (Id. ¶ 6)
Because neither Lee Trucking nor Sette-Juliano submitted records sufficient to complete their audits, plaintiffs instructed their independent auditors at Abrams, Herde & Merkel LLP ("AHM") to audit the two companies using a set formula prescribed in the Trust Agreement. (Report at 2; Levy Decl. ¶¶ 14, 15, 16, 21) Those audits concluded that Lee Trucking owed the Funds $84,508.04 in unpaid contributions and $100,146.60 in interest, while Sette-Juliano owed $40,582.48 in unpaid contributions and $60,479.11 in interest. (Novick Decl. ¶ ¶ 11, 13, 19, 21) The interest on the unpaid contributions was calculated at a rate of 16 percent. (Id. ¶¶ 13, 21)
Magistrate Judge Eaton adopted the amounts prescribed in the AHM audit in his June 3, 2005 Report over several objections advanced by Lee Trucking, including a challenge to the 16 percent rate used to calculate the interest. (See Report at 3-11) Magistrate Judge Eaton also awarded $100,146.60 from Lee Trucking and $60,479.11 from Sette-Juliano in "additional damages" pursuant to the Trust Agreement and Section 502(g)(2)(C) of ERISA, 29 U.S.C. § 1132(g)(2)(C) (Report at 12); $1,195.00 from Lee Trucking and $1,420.00 from Sette-Juliano in audit fees (Report at 12-13); $4,030.07 from both Lee Trucking and Sette-Juliano in attorney's fees (Report at 13-17); and $112.43 from Lee Trucking and $144.43 from Sette-Juliano in court-related costs (Report at 17).
On June 9, 2005, Lee Trucking filed objections to the Report pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b). Neither Sette-Juliano nor plaintiffs have filed any objections, and plaintiffs ask that the Report be adopted in its entirety.
A district court reviewing a magistrate judge's report follows the standards established in 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b). The district judge must make a de novo determination of those parts of the report to which timely written objection has been made by any party, but may adopt the uncontested portions of the report unless they show clear error. See Thomas v. Arn, 474 U.S. 140, 151-52, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Grassia v. Scully, 892 F.2d 16, 19 (2d Cir.1989); Tapia-Garcia v. United States, 53 F.Supp.2d 370, 373 (S.D.N.Y.1999).
This court has jurisdiction based on Section 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1), and Section 301(E), of the Labor Management Relations Act, 29 U.S.C. § 185(E).
Lee Trucking's sole objection to Magistrate Judge Eaton's Report concerns the Report's determination of the interest rate to apply to its unpaid contributions. After careful analysis, the Report concluded the applicable annual rate was 16 percent. (See Report at 5-11) Lee Trucking disagrees and argues that the Report should have applied a six percent annual rate. (See Def. Objections to the Report and Recommendations of Magistrate Judge Eaton ("Def. Objections") at 1-3)
The applicable interest rate owed on the unpaid contributions is set forth in the Trust Agreement, which states:
In addition to any other remedies to which the parties may be entitled an Employer in default for five working days shall be obligated to pay interest, at the rate specified in Section 5-501 of the General Obligations Law of the State of New York, as the same may be amended from time to time, on the monies due to the Trustees from the first day of the month when the payment was due to the date when payment was made, together with attorney's fees, auditor's fees and liquidated damages....
(Cody Decl., Ex. 1, at 30 (emphasis added)) Section 5-501 of the General Obligations Law ("G.O.L.") instructs: "The rate of interest, as computed pursuant to this title, upon the loan or forbearance of any money, goods, or things in action ... shall be six per centum per annum unless a different rate is prescribed in section fourteen-a of the banking law." N.Y. Gen. Oblig. Law § 5-501(1) (McKinney 2001) (emphasis added). Section 14-a of the Banking Law then provides: "The maximum rate of interest provided for in section 5-501 of the general obligations law shall be sixteen per centum per annum." N.Y. Banking Law § 14-a(1) (McKinney 2001) (emphasis added). The question naturally arises whether the rate "specified" by Section 5-501 is therefore six percent or 16 percent. If Section 14-a(1) actually "prescribes" a "different rate," logic would dictate that the six percent rate has no effect because the "unless" clause causes the 16 percent rate to govern the provision. If Section 14-a(1) does not "prescribe" a rate, however, the six percent rate would be the one "specified" by Section 5-501. Federal courts confronted with the two statutes have been unable to agree on how the provisions should be interpreted.
Many courts — including several interpreting the same Trust Agreement provision as in the present action — have concluded that Section 14-a of the Banking Law does indeed "prescribe" a 16 percent rate. Some of these courts have arrived at this conclusion with little analysis, treating Section 5-501(1) of the G.O.L. as a simple cross-reference to the rate set in Section 14-a(1). See, e.g., Report and Recommendation, Bourgal v. Robco Contracting Enters., Ltd., No. 93 Civ. 2664(ADS)(VVP), at 8 (E.D.N.Y. Aug. 8, 1997), adopted by Judge Spatt (Sept. 24, 1997) (unpublished order); Second Report and Recommendation, La Barbera v. Bevel Props., Inc., No. 02 Civ. 6673(ARR)(VVP), at 4 (E.D.N.Y. Mar. 11, 2005), adopted by Judge Ross (Mar. 30, 2005) (unpublished opinion and order). Other courts have pointed to another provision of the Banking Law, Section 14-a(5), as evidence that the 16 percent rate is "prescribed." Section 14-a(5) provides:
Whenever reference is made in this chapter or in any other law, contract or document to the rate of interest prescribed or to be prescribed by the banking board or the superintendent pursuant to this section or any former section fourteen-a of this chapter, such reference shall be deemed a reference to the rate of interest prescribed in subdivision one of this section.
N.Y. Banking Law § 14-a(5) (emphasis added); see Report and Recommendation, La Barbera v. Bulldog Constr., Ltd., No. 98 Civ. 7286(JS)(MLO), at 6 (E.D.N.Y. July 28, 2005), adopted by Judge Seybert (Aug. 12, 2005) (unpublished order). Still others have looked to the history of the G.O.L. and Banking Law, as well as state and federal cases construing earlier iterations of both laws, to arrive at 16 percent. (See Report at 5-11); see also Report...
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