Finkel v. Gaffney-Kroese Elec. Supply Corp.

• Docket Number: 22-CV-1777 (DG) (TAM)
• Decision Date: 22 February 2023
• Parties: DR. GERALD R. FINKEL, as Chairman of the Joint Industry Board of the Electrical Industry, Plaintiff, v. GAFFNEY-KROESE ELECTRICAL SUPPLY CORP.; GAFFNEY-KROESE EXPORT CORP.; CK & JK LLC; GK SUPPLY, LLC; GKTT LLC; and J AND C, LLC, Defendants.
• Court: U.S. District Court — Eastern District of New York

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DR. GERALD R. FINKEL, as Chairman of the Joint Industry Board of the Electrical Industry, Plaintiff,
v.
GAFFNEY-KROESE ELECTRICAL SUPPLY CORP.; GAFFNEY-KROESE EXPORT CORP.; CK & JK LLC; GK SUPPLY, LLC; GKTT LLC; and J AND C, LLC, Defendants.

No. 22-CV-1777 (DG) (TAM)

United States District Court, E.D. New York

February 22, 2023

REPORT AND RECOMMENDATION

TARYN A. MERKL, United States Magistrate Judge.

Dr. Gerald R. Finkel, as Chairman of the Joint Industry Board of the Electrical Industry (“Plaintiff”), initiated this action on March 30, 2022, against Defendants Gaffney-Kroese Electrical Supply Corp. (“Gaffney-Kroese”); Gaffney-Kroese Export Corp. (“GK Export”); CK & JK LLC (“CK & JK”); GK Supply, LLC (“GK Supply”); GKTT LLC (“GKTT”); and J and C, LLC (“J&C”). (Complaint (“Compl.”), ECF No. 1.) Plaintiff seeks withdrawal liability and related relief arising from Defendant Gaffney-Kroese's cessation of pension benefit contributions to the Employees Security Fund of the Electrical Products Industries, a plan governed by the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001-461, as amended by the Multiemployer Pension Plan Amendments Act of 1980, Pub. L. No. 96-364, 94 Stat. 1208. Specifically, Plaintiff seeks a default judgment against Gaffney-Kroese and entities Plaintiff alleges are affiliated with Gaffney-Kroese, including GK Export, CK & JK, GK Supply, GKTT,

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and J&C (the “Affiliated Entities”), as businesses under “common control” with Gaffney-Kroese within the meaning of 29 U.S.C. § 1301(b)(1), making them jointly and severally liable for Gaffney-Kroese's withdrawal liability. (Compl., ECF No. 1, ¶¶ 18, 27, 31.) In addition, Plaintiff requests an award of interest, attorney's fees and costs. (Id. ¶ 34.)

Currently pending before this Court is Plaintiff's motion for default judgment, which the Honorable Diane Gujarati referred to the undersigned Magistrate Judge for a report and recommendation. (See Notice of Mot. for Default J., ECF No. 15; Aug. 22, 2022 ECF Order.) For the reasons set forth below, this Court respectfully recommends that Plaintiff's motion for default judgment be granted.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

I. Factual Background

Plaintiff is the Chairman of the Joint Industry Board of the Electrical Industry (the “Joint Industry Board”). (Compl., ECF No. 1, ¶ 4.) The Joint Industry Board administers the Employees Security Fund of the Electrical Products Industries (the “Pension Fund”) pursuant to the collective bargaining agreement (“CBA”) between Local Union No. 3 of the International Brotherhood of Electric Workers, AFL-CIO (the “Union”) and employer associations and employers in the electrical, elevator, sign, television, burglar alarm, and other related industries. (Id. ¶¶ 4, 12-13.) The Pension Fund is a benefit pension plan subject to Title IV of ERISA, and has a joint labormanagement Board of Trustees in accordance with the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185(c)(5). (Compl., ECF No. 1, ¶ 14.) Under ERISA, the Pension Fund is a “multiemployer plan” and “employee benefit pension plan.” (Id. ¶ 15.) See 29 U.S.C. § 1002(37), (2)(A). The Joint Industry Board is the administrator of the Pension Fund, and the Joint Industry Board and its members are fiduciaries to the

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Pension Fund within the meaning of ERISA. (Compl., ECF No. 1, ¶ 16; see also Decl. of Charles R. Virginia, Esq. in Supp. of Pl.'s Mot. for Default J. (“Virginia Decl.”), ECF No. 16, ¶ 11.) See 29 U.S.C. § 1002(16)(A), (21)(A).

Plaintiff alleges that at all relevant times, Defendant Gaffney-Kroese was bound by the CBA with the Union, obligating them to “contribute specified amounts to the Pension Fund on behalf of each employee who performed specific categories of work.” (Compl., ECF No. 1, ¶¶ 12-13.) Further, Plaintiff alleges that in 2021, Gaffney-Kroese permanently ceased all business operations in the Union's geographic jurisdiction, and permanently ceased its obligations to contribute to the Pension Fund. (Id. ¶ 17.) Accordingly, Plaintiff alleges that these actions effected a “complete withdrawal” from the Pension Fund under ERISA, 29 U.S.C. § 1383(a), causing Gaffney-Kroese to incur withdrawal liability. (Compl., ECF No. 1, ¶¶ 17, 18.) See 29 U.S.C. § 1381, 1391.

Although withdrawal liability is generally to be paid in installments under ERISA, payment of withdrawal liability may be accelerated upon an employer's default, as defined by the plan's rules. (Compl., ECF No. 1, ¶ 19.) See 29 U.S.C. § 1399(c)(5); see also 29 U.S.C. § 1399(c)(2)-(3). Here, the Pension Fund's Trust Agreement provides, in pertinent part, as follows:

[A] default may be declared if . . . it reasonably appears to the [Joint Pension] Committee, or the Joint Industry Board that the Employer has experienced a change in circumstances of a substantial nature from which it can be reasonably anticipated that future installments cannot be paid

(Pension Fund Trust Agreement (“Trust Agreement”), ECF No. 16-5, Art. IX § 1(I); see also Compl., ECF No. 1, ¶ 19.) Plaintiff sent Gaffney-Kroese a “Notice and Demand” on November 16, 2021, claiming that its cessation of business operations constituted a “substantial change in circumstances” that met the above threshold, and that Gaffney-Kroese was, accordingly, in “default” on its ERISA obligations. See 29 U.S.C.

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§ 1399(c)(5)(B). (Compl., ECF No. 1, ¶¶ 20, 21, 24; Notice and Demand Letter, ECF No. 16-6.)

Plaintiff also alleges that Christopher C. Kroese and John S. Kroese III together own at least 80% of issued and outstanding stock of the Affiliated Entities, including GK Export, CK & JK, GK Supply, GKTT, and J&C, as well as Defendant Gaffney-Kroese (referred to collectively as “Defendants”). (Compl., ECF No. 1, ¶¶ 27-30.) Accordingly, Plaintiff maintains that Defendants are all under common control and that they are jointly and severally liable for Gaffney-Kroese's withdrawal liability. See 29 U.S.C. §§ 1301(b)(1), 1399(c)(5)(B). (Compl., ECF No. 1, ¶¶ 31, 33.)

On the basis of their complete withdrawal from the plan, Plaintiff claims that Defendant Gaffney-Kroese is liable in the amount of $538,982, plus 1.5% monthly prejudgment interest, liquidated damages in an amount equal to the greater of the foregoing amount of interest or 20% of the foregoing amount of withdrawal liability, and attorney's fees and costs. (Id. ¶ 25, Prayer for Relief.) See 29 U.S.C. §§ 1132(a)(3), (g)(2), 1145, 1399(c)(6), 1451(b), (e); 29 C.F.R. § 4219.33. (See also Trust Agreement, ECF No. 16-5, Art. IX § 1(I).) Plaintiff also asserts that all Defendants are jointly and severally liable for the same amount. (Compl., ECF No. 1, ¶ 34, Prayer for Relief.) No Defendants have made any payment toward the withdrawal liability assessment. (Id. ¶¶ 23, 32.)

II. Procedural History

As noted, Plaintiff commenced this action on March 30, 2022. (Compl., ECF No. 1.) On May 20, 2022, the Clerk of Court entered a certificate of default pursuant to Rule 55(a) of the Federal Rules of Civil Procedure, due to Defendants' failure to appear or otherwise defend this action. (Clerk's Entry of Default, ECF No. 12.) Plaintiff then moved for default judgment against Defendants on August 19, 2022. (See Notice of Mot. for Default J., ECF No. 15.) On August 22, 2022, Judge Gujarati referred Plaintiff's

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motion to the undersigned Magistrate Judge for a report and recommendation. (Aug. 22, 2022 ECF Order.) On October 11, 2022, the Court scheduled a status conference on the default motion for November 3, 2022, and mailed formal written notice to Defendants at all available addresses. (See Oct. 11, 2022 ECF Scheduling Order; Notice to Defs., ECF No. 19.) Defendants did not appear at the November 3, 2022 conference. (Nov. 3, 2022 ECF Minute Entry and Order.)

DISCUSSION

I. Default Judgment

A. Legal Standards

Federal Rule of Civil Procedure 55 provides a “two-step process” for obtaining a default judgment. Priestley v. Headminder, Inc., 647 F.3d 497, 504 (2d Cir. 2011). The plaintiff must first obtain an entry of default when a defendant “has failed to plead or otherwise defend” in an action. Fed.R.Civ.P. 55(a). Second, after the certificate of default is entered and on the plaintiff's application, the district court may then enter a default judgment. Fed.R.Civ.P. 55(b); see also E.D.N.Y. Local Civ. R. 55.2(b).^[1] A “plaintiff is not entitled to a default judgment as a matter of right simply because a party is in default.” Finkel v. Universal Elec. Corp., 970 F.Supp.2d 108, 118 (E.D.N.Y. 2013). Rather, the decision to grant a motion for default judgment is “left to the sound

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discretion of [the] district court because it is in the best position to assess the individual circumstances of a given case and to evaluate the credibility and good faith of the parties.” Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993).

The district court must also determine whether the plaintiff's “allegations establish [the defendant's] liability as a matter of law.” Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009). In making this determination, the “court is required to accept all of the . . . factual allegations as true and draw all reasonable inferences in [the plaintiff's] favor.” Id. It is “the plaintiff's burden to demonstrate that those uncontroverted allegations, without more, establish the defendant's liability on each asserted cause of action.” Gunawan v. Sake Sushi Rest., 897 F.Supp.2d 76, 83 (E.D.N.Y. 2012).

Moreover, while a default constitutes an admission of liability as to well-pleaded allegations, a default is “not considered an admission of damages.” Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). “The district court must instead conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d...