Webb v. Gaf Corp.

• Decision Date: 03 December 1996
• Docket Number: No. 85-CV-777.,85-CV-777.
• Citation: 949 F.Supp. 102
• Parties: Jack WEBB, Eugene Sterner, Fred Ryan, Alex Koulikas, Frances Kurau and William Collier, as individuals, and on behalf of a class of individuals similarly situated, Plaintiffs, v. GAF CORPORATION; GAF Employee Benefit Program for International Association of Machinists and Aerospace Workers, Johnson City Lodge # 1807; and GAF Employee Benefit Program for International Chemical Workers, Local # 306, Defendants.
• Court: U.S. District Court — Northern District of New York

949 F.Supp. 102

Jack WEBB, Eugene Sterner, Fred Ryan, Alex Koulikas, Frances Kurau and William Collier, as individuals, and on behalf of a class of individuals similarly situated, Plaintiffs, v. GAF CORPORATION; GAF Employee Benefit Program for International Association of Machinists and Aerospace Workers, Johnson City Lodge # 1807; and GAF Employee Benefit Program for International Chemical Workers, Local # 306, Defendants.

No. 85-CV-777.

United States District Court, N.D. New York.

December 3, 1996.

COPYRIGHT MATERIAL OMITTED

Hancock & Estabrook (David E. Peebles, of counsel), Syracuse, NY, for Plaintiffs Jack Webb, Eugene Sterner, Fred Ryan and "IAM" Class.

Carpenter, Bennett & Morrissey (Patrick Brady, of counsel), Newark, NJ, for Defendants.

MEMORANDUM-DECISION AND ORDER

MUNSON, Senior District Judge.

The court now considers the Report and Recommendation of Magistrate Judge David R. Homer in regard to the calculation of damages to the plaintiff class in this case about retiree medical benefits. Defendants have lodged objections to that portion of the report concerning the recommended award of prejudgment interest. Doc. 257. Plaintiffs have not responded to the objections but have requested clarification of the injunction entered in this court's prior opinion deciding the post-trial motions. Doc. 263.¹ Both parties request an order allowing applications for attorneys' fees to be postponed until the Second Circuit decides any appeal of this case. The following constitutes the court's disposition of these issues.

As a preliminary matter the court accepts the following recommendations and findings which do not appear to be controverted: (1) the loss to the IAM plaintiff class totals $278,454.24,² allocated among the classmembers as specified in plaintiffs' exhibit 41, Ex. B att'd to Brady Aff., Doc. 258; and (2) if prejudgment interest is awarded, the interest rates should be the same as those used to calculate postjudgment interest pursuant to 28 U.S.C. § 1961(a), although the mechanics of applying those rates is in contention. See Rep.-Rec., Doc. 255, at 2-3. To accept the recommendations of a federal magistrate judge to which there are no objections, "a district court need only satisfy itself that there is no clear error on the face of the record." McAllister Bros., Inc. v. Ocean Marine Indem. Co., 742 F.Supp. 70, 74 (S.D.N.Y.1989). As no manifest error presents itself, the court adopts in full the magistrate's recommendations with respect to these uncontested issues.

A district judge is tasked to "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1)(C). In the instant matter, defendant objects to (1) the award of any prejudgment interest, (2) the methodology the magistrate recommends for determining how to apply the interest rates to the damage increments, and (3) the decision to use compound rather than simple interest. Defs.' Mem. Law, Doc. 257. The court's plenary review of these points commences below.

I. DISCUSSION

A. Prejudgment Interest

Defendant disputes the propriety of the award of prejudgment interest. Initially, the court notes that the IAM plaintiff class recovered on causes of action arising under section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), and section 301 of the Labor Management Relations Act of 1947 (LMRA or Taft-Hartley Act), 29 U.S.C. § 185.

The Second Circuit Court of Appeals, in considering a district court's grant of prejudgment interest in a case under section 303(b) of the Taft-Hartley Act, held that such an award was within the sound discretion of the trial judge. Wickham Contracting v. Local Union No. 3, Int'l Bhd. Of Elec. Workers, 955 F.2d 831 (2d Cir.), cert. denied, 506 U.S. 946, 113 S.Ct. 394, 121 L.Ed.2d 302 (1992). That discretion is guided by the following considerations:

[T]he award should be a function of (i) the need to fully compensate the wronged party for actual damages suffered, (ii) considerations of fairness and the relative equities of the award, (iii) the remedial purpose of the statute involved, and/or (iv) such other general principles as are deemed relevant by the court.

Id. at 833-34 (citations omitted).

Those "other general principles" include whether the legislative intent was to preclude prejudgment interest, whether such a grant would overcompensate the plaintiff, and whether the defendant acted innocently. Id. at 834. If the statute in question already provides for full compensation or punitive damages, prejudgment interest is likely improper, and the speculative nature of damages until the date of judgment also might render such an award unfair. Id. at 835. Ultimately, the purpose of prejudgment interest is to fully compensate the plaintiff, by taking into account the time-value of money. See Zicherman v. Korean Air Lines Co., 814 F.Supp. 605, 608 (S.D.N.Y.1993), aff'd in part, rev'd in part on other grounds, 43 F.3d 18 (2d Cir.1994), aff'd in part, rev'd in part on other grounds, ___ U.S. ___, 116 S.Ct. 629, 133 L.Ed.2d 596 (1996).

Applying these standards, the Wickham panel affirmed the award. Although that case was an appeal of a section 303(b) suit, the Wickham analysis is equally applicable to actions pursuant to section 301 of the LMRA. See Id. at 838. Subsequent cases also have utilized the Wickham regime in ERISA suits. See, e.g., Mendez v. Teachers Ins. and Annuity Ass'n, 982 F.2d 783, 790 (2d Cir.1992); Connecticut Gen. Life Ins. Co. v. Cole, 821 F.Supp. 193, 202 (S.D.N.Y.1993).

In the present case, the magistrate determined that in order to compensate the plaintiff class fully, prejudgment interest on the damages should be allowed. This court concurs. Plaintiffs were charged excess premiums from October 1, 1984 until the date defendant began to comply with the injunction, April 1, 1995, a period exceeding ten years. The value of the overcharged monies has depreciated over a period as long as twelve years. Cf. Zicherman, 814 F.Supp. at 608 (nine years; prejudgment interest allowed). Unless the IAM classmembers recover the cost of GAF's use of their money in this interim, they will not be compensated fully for their loss.

The relative equities of this matter, the second consideration in Wickham, also weigh in favor for the award. The record in this case reveals that some of the plaintiffs elected early retirement to the detriment of their pension receipts in order to secure the benefit of GAF's medical insurance program after the sale of the company's reprographics and graphic arts divisions in the Binghamton area. See, e.g., Test. of Frances L. Kurau, J.A. II, Doc. 260, at A0844-46. Having decided to forgo some economic benefits in order to guarantee that they would continue to be covered by advantageous medical coverage, it would be unfortunate not to compensate the IAM classmembers for the lost use of money they had to spend to continue the medical benefits for which they sacrificed part of their pensions.

Turning to the third factor, that is, whether the statute in question is remedial, it seems evident that section 301 of the LMRA is. See 93 Cong.Rec. 3656 (1947) ("[Section 301] contemplates not only the ordinary lawsuits for damages but also such other remedial proceedings, both legal and equitable, as might be appropriate in the circumstances....") (statement of Rep. Barden). The decision in IAM v. United Aircraft affirmed that "[i]n suits for breaches of labor agreements ... a vital ingredient in the determination whether to award prejudgment interest is a desire to make whole the party injured by the breach." 534 F.2d 422, 447 (2d Cir.1975), cert. denied, 429 U.S. 825, 97 S.Ct. 79, 50 L.Ed.2d 87 (1976). And as the Ninth Circuit observed, "[o]ther courts have similarly allowed tort-like, `make-whole' remedies" in breach of CBA suits under the Taft-Hartley-Act. Rozay's Transfer v. Local Freight Drivers, Local 208, Int'l Bhd. Teamsters, 850 F.2d 1321, 1335 (9th Cir. 1988), cert. denied, 490 U.S. 1030, 109 S.Ct. 1768, 104 L.Ed.2d 203 (1989). The remedial scheme of ERISA also suggests prejudgment interest is appropriate if required to make the prevailing party whole. See Katsaros v. Cody, 744 F.2d 270, 281 (2d Cir.) (holding that "it is well-settled that ERISA grants the court wide discretion in fashioning equitable relief to protect the rights of pension fund beneficiaries including the award of prejudgment interest"), cert. denied sub nom. Cody v. Donovan, 469 U.S. 1072, 105 S.Ct. 565, 83 L.Ed.2d 506 (1984); Scalamandre v. Oxford Health Plans, 823 F.Supp. 1050, 1063 (E.D.N.Y.1993) (section 502(a)(1)(B) claim). But see id. (concluding that simple interest should be used).

As for the "other general principles" referred to in Wickham's fourth factor, 955 F.2d at 834, GAF interposes the objection to an award of prejudgment interest that it acted in good faith in disputing the meaning of the collective bargaining agreements at issue. Indeed, Magistrate Judge Homer found that there was insufficient evidence available "to assess whether GAF acted in good faith or was unjustly enriched." Rep.-Rec., Doc. 255, at 5. Delay alone however can be sufficient to justify an award of prejudgment interest. Algie v. RCA Global Comms., Inc., 891 F.Supp. 875, 899 (S.D.N.Y. 1994), aff'd, 60 F.3d 956 (2d Cir.1995). Even assuming GAF's good faith, prejudgment interest is compensatory, not punitive, in nature and "wrongdoing by a defendant is not a prerequisite to an award." Lodges 743 & 1746, Int'l Ass'n of Machinists v. United Aircraft Corp., 534 F.2d 422, 447 (2d Cir. 1975) (reversing district court's refusal to make award), cert. denied, 429 U.S. 825, 97 S.Ct. 79, 50 L.Ed.2d 87 (1976). Therefore, defendant's good faith does not shift the balance of equities away from a grant of prejudgment interest in this matter.

The Second Circuit in Wickham also observed...