Iron Workers Local No. 60 Annuity Pension Fund v. Solvay Iron Works, Inc.

• Decision Date: 11 May 2018
• Docket Number: 5:15-cv-54 (BKS/DEP)
• Parties: IRON WORKERS LOCAL NO. 60 ANNUITY PENSION FUND, by Gary E. Robb and Sam Conley, as Trustees; IRON WORKERS LOCAL UNION NO. 60 TRAINING, SKILL IMPROVEMENT, EDUCATION AND APPRENTICESHIP FUND, by Gary E. Robb and Sam Conley, as Trustees; CENTRAL NEW YORK IRONWORKERS AND EMPLOYERS COOPERATIVE TRUST, by Gary E. Robb and Sam Conley, as Trustees; IRON WORKERS LOCAL UNION 60 SUPPLEMENTAL BENEFIT PLAN, by Gary E. Robb and Sam Conley, as Trustees; IRON WORKERS LOCAL UNION NO. 60, by Gary E. Robb, as Business Manager; IRON WORKERS DISTRICT COUNCIL OF WESTERN NEW YORK AND VICINITY WELFARE FUND, by Suzanne Ranelli, as Administrative Manager; IRON WORKERS DISTRICT COUNCIL OF WESTERN NEW YORK AND VICINITY PENSION FUND, by Suzanne Ranelli, as Administrative Manager; IRON WORKERS DISTRICT COUNCIL OF WESTERN NEW YORK AND VICINITY ANNUITY FUND, by Suzanne Ranelli, as Administrative Manager; UPSTATE IRONWORKER EMPLOYERS' ASSOCIATION, INC., by John Gorczynski, as President; UPSTATE NEW YORK DISTRICT COUNCIL OF IRON WORKERS EMPLOYERS COOPERATIVE TRUST, by Garrett Geartz and John Linehan, Jr., as Trustees; IRON WORKERS LOCAL UNIONS NOS. 33/440 SUPPLEMENTAL BENEFIT FUND, by Garrett Geartz and John Linehan, Jr., as Trustees; IRON WORKERS LOCAL NO. 33 JOINT APPRENTICESHIP COMMITTEE APPRENTICE TRAINING FUND, by Garrett Geartz and John Linehan, Jr., as Trustees; IRON WORKERS LOCAL UNION NO. 33, by John Linehan, Jr., as Business Manager; INTERNATIONAL ASSOCIATION OF BRIDGE, STRUCTURAL AND ORNAMENTAL IRON WORKERS LOCAL UNION NO. 440 JOINT APPRENTICE TRAINING FUND, by Thomas Thomas and John Gorczynski, as Trustees, and IRON WORKERS LOCAL UNION NO. 440, by Thomas Thomas as Business Manager, Plaintiffs, v. SOLVAY IRON WORKS, INC., JOHN B. MAESTRI, Individually and as an Officer and Shareholder of Solvay Iron Works, Inc., BERT MAESTRI, Individually and as an Officer and Shareholder of Solvay Iron Works, Inc., SHEILA MAESTRI, Individually and as an Officer and a Director of Solvay Iron Works, Inc., ALFRED R. CHEMOTTI, JR., Individually and as an Officer and Shareholder of Solvay Iron Works, Inc., KELLY C. ORMSBY, Individually, as an Officer of Solvay Iron Works, Inc. and as an Officer of Ormsby Iron, LLC, and ORMSBY IRON, LLC, Defendants.
• Court: U.S. District Court — Northern District of New York

IRON WORKERS LOCAL NO. 60 ANNUITY PENSION FUND,by Gary E. Robb and Sam Conley, as Trustees;IRON WORKERS LOCAL UNION NO. 60 TRAINING,SKILL IMPROVEMENT, EDUCATION AND APPRENTICESHIP FUND,by Gary E. Robb and Sam Conley, as Trustees;CENTRAL NEW YORK IRONWORKERS AND EMPLOYERS COOPERATIVE TRUST,by Gary E. Robb and Sam Conley, as Trustees;IRON WORKERS LOCAL UNION 60 SUPPLEMENTAL BENEFIT PLAN,by Gary E. Robb and Sam Conley, as Trustees; IRON WORKERSLOCAL UNION NO. 60, by Gary E. Robb, as Business Manager;IRON WORKERS DISTRICT COUNCIL OF WESTERN NEW YORKAND VICINITY WELFARE FUND, by Suzanne Ranelli, as Administrative Manager;IRON WORKERS DISTRICT COUNCIL OF WESTERN NEW YORKAND VICINITY PENSION FUND, by Suzanne Ranelli,as Administrative Manager; IRON WORKERS DISTRICT COUNCILOF WESTERN NEW YORK AND VICINITY ANNUITY FUND,by Suzanne Ranelli, as Administrative Manager; UPSTATE IRONWORKEREMPLOYERS' ASSOCIATION, INC., by John Gorczynski, as President;UPSTATE NEW YORK DISTRICT COUNCIL OF IRON WORKERSEMPLOYERS COOPERATIVE TRUST, by Garrett Geartz and John Linehan, Jr.,as Trustees; IRON WORKERS LOCAL UNIONS NOS. 33/440SUPPLEMENTAL BENEFIT FUND, by Garrett Geartz and John Linehan, Jr., as Trustees;IRON WORKERS LOCAL NO. 33 JOINT APPRENTICESHIP COMMITTEEAPPRENTICE TRAINING FUND, by Garrett Geartz and John Linehan, Jr., as Trustees;IRON WORKERS LOCAL UNION NO. 33, by John Linehan, Jr.,as Business Manager; INTERNATIONAL ASSOCIATION OF BRIDGE,STRUCTURAL AND ORNAMENTAL IRON WORKERS LOCAL UNIONNO. 440 JOINT APPRENTICE TRAINING FUND, by Thomas Thomasand John Gorczynski, as Trustees, and IRON WORKERS LOCAL UNION NO. 440,by Thomas Thomas as Business Manager, Plaintiffs, v. SOLVAY IRON WORKS, INC., JOHN B. MAESTRI, Individually and asan Officer and Shareholder of Solvay Iron Works, Inc., BERT MAESTRI,Individually and as an Officer and Shareholder of Solvay Iron Works, Inc.,SHEILA MAESTRI, Individually and as an Officer and a Director ofSolvay Iron Works, Inc., ALFRED R. CHEMOTTI, JR., Individuallyand as an Officer and Shareholder of Solvay Iron Works, Inc., KELLY C. ORMSBY,Individually, as an Officer of Solvay Iron Works, Inc. and as anOfficer of Ormsby Iron, LLC, and ORMSBY IRON, LLC, Defendants.

5:15-cv-54 (BKS/DEP)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK

May 11, 2018

APPEARANCES:

Blitman & King LLP

Jennifer A. Clark, of Counsel

Franklin Center, Suite 300

443 North Franklin Street

Syracuse, New York 13204-1415

Attorneys for Plaintiffs

Hancock Estabrook, LLP

Daniel B. Berman

Whitney M. Kummerow

1500 AXA Tower I

100 Madison Street

Syracuse, New York 13202

Attorneys for Defendants John Maestri and Sheila Maestri

Kelly C. Ormsby, pro se

Fulton, New York

Hon. Brenda K. Sannes, United States District Judge:

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

On January 16, 2015, Plaintiffs Iron Workers Union Nos. 60, 33, and 440 (the "Unions") and a number of the Iron Workers benefit funds ("Plaintiff Funds"), by their trustees, managers, and officers, filed a Complaint against Defendant Solvay Iron Works, Inc., John B. Maestri, Bert Maestri, Sheila Maestri, Alfred R. Chemotti, Jr., Frank Petro,¹ Kelly C. Ormsby, and Ormsby Iron, LLC,² alleging that Defendants violated, inter alia, sections 406, 409, and 515 of the Employment Retirement Income Security Act of 1974 ("ERISA") (codified at 29 U.S.C. §§ 1106, 1109, 1145) and New York state law by diverting assets of the Plaintiff Funds andfailing to timely remit fringe benefit contributions and deductions. (Dkt. No. 1). Plaintiffs filed an Amended Complaint on May 14, 2015.³ (Dkt. No. 63).

Defendant Solvay Iron Works, Inc. neither filed an answer nor appeared in this action, and Plaintiffs moved for default judgment. (Dkt. No. 90). On March 28, 2017, the Court granted Plaintiffs' motion and entered partial judgment against Defendant Solvay Iron Works on the First, Second, Third, and Fourth Causes of Action in the sum of $755,977.68 in contributions, deductions, interest, liquidated damages, and attorney fees and costs. (Dkt. No. 134, at 22).

Presently before the Court are: (1) Defendant Sheila Maestri's motion under Rule 56 of the Federal Rules of Civil Procedure for summary judgment (Dkt. No. 161); (2) Plaintiffs' motion under Rule 56 for summary judgment against Defendants Sheila Maestri, John Maestri, and Kelly Ormsby (Dkt. No. 163);⁴ and (3) Plaintiffs' supplemental application for attorneys' fees and costs (Dkt. No. 148), which the Court authorized in its Memorandum-Decision and Order granting Plaintiffs' motion for default judgment (Dkt. No. 134). Plaintiffs oppose Sheila Maestri's motion for summary judgment, Defendants⁵ oppose Plaintiffs' motion for summaryjudgment, and there is no opposition to Plaintiffs' supplemental application. For the following reasons, Sheila Maestri's motion for summary judgment is granted in part and denied in part, Plaintiffs' motion for summary judgment is granted in part and denied in part, and Plaintiffs' supplemental application for attorneys' fees and costs is granted.

II. BACKGROUND⁶

A. Plaintiff Funds

The Plaintiff Funds are jointly-administered benefit plans maintained by employee organizations and employers pursuant to agreements and declarations of trust to provide, inter alia, health, retirement, unemployment, and training benefits to eligible participants. (Dkt. No. 163-1, ¶¶ 1-11; 174-1, ¶¶ 1-11). The Plaintiff unions are labor organizations located in Rochester, Whitesboro, and Syracuse, New York. (Dkt. No. 163-1, ¶¶ 12-14; 174-1, ¶¶ 12-14).

B. Solvay Iron

Defendant John Maestri ran Solvay Iron from 1948, when it opened, until it closed in September 2013, (Dkt. No. 174-7, at 8), and at all relevant times was the chief executive officer, majority shareholder, and a member of Solvay Iron's board of directors. (Dkt. No. 163-10, ¶ 12). In the fall of 2011, John Maestri hired Kelly Ormsby as a consultant to review Solvay Iron's "financial books and records and its shop and field procedures." (Dkt. No. 163-10, ¶ 9). Ormsby discovered that Solvay Iron "was millions of dollars in debt⁷ and [that] it was not paying its creditors" and "concluded that it could not overcome th[e] deficit." (Dkt. No. 163-10, ¶ 9). In November 2011, Ormsby met with John Maestri and his daughter Sheila Maestri (who was not yet formally associated with Solvay Iron), advised them of his assessment, and recommendedthat Solvay Iron cease operations and close. (Dkt. No. 163-10, ¶ 10). According to Ormsby, John Maestri responded "that he would not close his business, wanted to save his company, and asked that [Ormsby] help." (Id.).

In December 2011, Ormsby, with John Maestri's authorization, entered into a collective bargaining agreement⁸ with Plaintiffs obligating Solvay Iron to remit contributions and deductions to the Plaintiff Funds for each hour of bargaining unit work, i.e., iron workers' work.⁹ (Dkt. No. 63; Dkt. No. 163-1, ¶ 15; Dkt. No. 163-8, ¶ 13; Dkt. No. 174-1, ¶ 15).

At a January 28, 2012 meeting of Solvay Iron's board of directors, Ormsby became Solvay Iron's chief operating officer¹⁰ "with full authority over all operations." (Dkt. No. 163-10, at 272). The board also approved John Maestri's motion to: (i) appoint Sheila Maestri as "Vice Chairman of the Board and secretary of the corporation"; and (ii) enable her to "immediately assume responsibilities as Chairman of the Board and Chief Executive Office[r] ofthe Corporation" in the event John Maestri was "temporarily or permanently unable to fulfill his role" as CEO.¹¹ (Dkt. No. 163-10, at 272; Dkt. No. 161-11, ¶ 2).

Ormsby states that in 2012, despite his efforts to turn the company around, growing debt, an underbid project, and the death of a Solvay Iron employee at a construction site¹² weakened Solvay Iron's finances. (Dkt. No. 163-10, ¶¶ 25-30). Ormsby further states that in May 2012, he told John and Sheila Maestri that "Solvay Iron would need to sell $12 million worth of work and make a twenty percent (20%) profit in 2013 to cover the debt." (Dkt. No. 163-10, ¶ 28).

By July 2013, Solvay Iron had $5,000 in its general account, $2,000 in its "payroll account," and $2.3 million in debt. (Dkt. No. 163-10, ¶ 40). Ormsby tendered a resignation from Solvay Iron on July 5, 2013, (Dkt. No. 163-1, ¶ 20), but remained involved in the company. (Dkt. No. 174-1, ¶ 20).

On August 29, 2013, John and Sheila Maestri and Ormsby met with Plaintiffs to discuss the debt. (Dkt. No. 163-8, ¶ 18). Plaintiffs advised these Defendants that Solvay Iron's debt, including interest and liquidated damages, exceeded $1 million. (Dkt. No. 163-10, ¶ 41). According to Plaintiffs, from June 2012 through September 30, 2013, "Solvay Iron was paid over $8.6 million by its customers for its employees' work." (Dkt. No. 163-1, ¶ 27; Dkt. No. 174-1, ¶ 27). Plaintiffs claim that Defendants nevertheless failed to pay $673,824.75 in contributions for hours worked by Solvay Iron employees, (Dkt. No. 163-1, ¶ 22; Dkt. No. 174-1, ¶ 22), and "untimely remitted $263,092.07 in contributions to Plaintiffs for hours worked by [Solvay Iron's] employees" during that same time period. (Dkt. No. 163-1, ¶ 23; Dkt. No. 174-1, ¶ 23).

Solvay Iron ceased operations on or about September 27, 2013. (Dkt. No. 163-10, ¶ 42). Sheila Maestri "officially resigned from the Board on February 20, 2014."¹³ (Dkt. No. 161-1, ¶ 11).

C. Individual Defendants - Roles at Solvay Iron

Plaintiffs claim that John and Sheila Maestri and Kelly Ormsby were fiduciaries with respect to plan assets and are therefore liable for the unpaid and untimely contributions and deductions. Each of these Defendants deny having fiduciary status.

1. John Maestri

Defendant John Maestri is the former Chief Executive Officer of Solvay Iron Works. (Dkt. No. 161-11, ¶ 1). It is undisputed that John Maestri had authority and control over Solvay Iron's bank accounts. (Dkt. No. 163-1, ¶ 41; Dkt. No. 174-1, ¶ 41). Plaintiffs contend that John Maestri determined which of Solvay's Iron's bills to pay and when to pay them and...