Mason Tenders District Council Welfare Fund v. Shelbourne Construction Corp.

Background

The plaintiffs were Mason Tenders District Council Welfare Fund, Mason Tenders District Council Pension Fund, Mason Tenders District Council Annuity Fund, Mason Tenders District Council Training Fund, Mason Tenders District Council Health and Safety Fund, and Dominick Giammona, identified as the funds’ Contributions/Delinquency Manager. The opinion describes the funds as jointly administered, multi-employer labor-management trust funds established under collective bargaining and trust agreements.

Shelbourne Construction Corp. was alleged to be an employer covered by the agreements. Shelbourne and a union entered into a Master Independent Collective Agreement covering July 1, 2002 through June 30, 2005, with a provision extending it from year to year unless properly terminated. Shelbourne was also a member of the Building Contractors Association, which entered into a collective bargaining agreement with the union covering July 1, 2010 through June 30, 2014, later extended through June 30, 2021.

The agreements required Shelbourne to report hours of covered work, pay fringe-benefit contributions based on those hours, deduct and remit union dues and political-action contributions, permit audits, and pay interest and other charges on delinquent contributions. An audit covering January 1, 2013 through March 28, 2017 found that Shelbourne had not complied with these obligations for 13,182.50 hours of covered work. The plaintiffs also alleged that the violations continued after the audit period.

The plaintiffs sued under sections 502(a)(3) and 515 of the Employee Retirement Income Security Act of 1974 (ERISA) and section 301 of the Labor-Management Relations Act of 1947 (LMRA). They served Shelbourne through the New York Secretary of State, obtained a clerk’s certificate of default, and moved for default judgment.

Jurisdiction, standing, and default procedures

The court found personal jurisdiction because Shelbourne did business in New York, venue proper because the funds were administered in the district, and subject-matter jurisdiction under federal-question jurisdiction and ERISA’s jurisdictional provision.

The court explained that the funds themselves were not among the parties authorized to sue under ERISA section 502(a)(3). It nevertheless found jurisdiction over the ERISA claims because Giammona was a fiduciary of the funds and had standing to sue on their behalf. The court also found that the LMRA did not restrict the plaintiffs’ ability to sue over rights arising from the agreements.

The court found that the summons, complaint, default motion, and related papers had been properly served and that the plaintiffs had followed the federal and local procedures for seeking default judgment.

Liability

A default judgment treats well-pleaded factual allegations as admitted, but it does not automatically establish legal liability or the amount of damages. The court therefore reviewed whether the complaint adequately alleged each claim and separately reviewed the evidence supporting damages.

For the ERISA claim, the court found that the plaintiffs adequately alleged that Shelbourne was an employer, that the funds were multi-employer plans, that the agreements were collective bargaining agreements, and that Shelbourne was required to make contributions and remit deductions. The allegations also established that Shelbourne failed to make the required payments. The court therefore found liability under ERISA section 515.

The court reached the same result under LMRA section 301, finding that Shelbourne breached the agreements by failing to make required contributions and remit dues and political-action contributions.

The plaintiffs also asserted common-law breach-of-contract claims. The court did not grant default judgment on those claims. It concluded that claims involving obligations arising under ERISA were preempted by ERISA’s exclusive enforcement scheme and that claims involving dues and political-action contributions were preempted by the LMRA. The court stated that the plaintiffs had not provided authority showing otherwise.

Relief

The court awarded the following relief for the audit period, January 1, 2013 through March 28, 2017:

- $361,358.30 in unpaid fringe-benefit contributions. - Interest on those contributions at the rate provided by 26 U.S.C. § 6621. Because the amount had changed since the plaintiffs’ motion, the court required a supplemental affidavit with updated calculations. - Liquidated damages equal to the interest due on the unpaid contributions. - $27,663.05 in unpaid union-dues checkoffs and political-action contributions. - Prejudgment interest on those unpaid dues and contributions at an annual rate of 9 percent. - $122,861.82 for the imputed cost of the audit. - $4,973.39 in attorney fees and costs, including the requested fees and litigation costs.

The court also granted the plaintiffs’ requests for injunctions requiring Shelbourne to comply with the collective bargaining and trust agreements and ERISA, submit to an audit of relevant books and records, pay amounts owed, and permit and cooperate with the requested audit.

Disposition and further filings

The court granted the motion for default judgment and resolved docket item 11. Within 21 days, the plaintiffs were required to justify why the court should retain jurisdiction over additional delinquencies arising after the periods covered by the requested judgment, file a supplemental affidavit with updated interest and liquidated-damages calculations, and file a proposed final judgment for the court’s consideration.