Opinion
Civil No. 04-74964.
August 14, 2006
OPINION AND ORDER
Plaintiffs bring suit for unpaid fringe benefit contributions pursuant to 29 U.S.C. §§ 1132(g)(2) and 1145. Plaintiffs filed a motion for judgment against Defendant Premier Plumbing and Mechanical, LLC ("Premier") and Defendant City Pride Plumbing and Mechanical Co., LLC ("City Pride"). Defendants have not filed a response to Plaintiffs' motion. The Court will decide this unopposed motion on the briefs filed without a hearing, pursuant to E.D. Mich. LR 7.1(e)(2). For the reasons that follow, the Court will grant Plaintiffs' motion for judgment against Defendants Premier and City Pride.
Plaintiffs do not seek judgment against the two individual Defendants, Kenneth Epstein and Anthony Maruso. Defendant Epstein is now deceased and Defendant Maruso has filed for bankruptcy. (Pls.' Mot. ¶ 2.)
In May 2006, the Court granted Defendants' attorney's motion to withdraw as counsel in this case due to a breakdown in communication with his clients. Defendants were allowed thirty days to obtain new counsel and respond to Plaintiffs' motion, neither of which they have done.
I. STANDARD OF REVIEW
Summary judgment is proper if there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must view the evidence and any inferences drawn therefrom in a light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The movant's burden is satisfied where there is an absence of evidence to support the nonmovant's case.Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
Plaintiffs' motion is titled "Motion for Judgment," which the Court construes as a Motion for Summary Judgment under Fed.R.Civ.P. 56(a) based on the substance of the motion and the relief sought therein.
II. ANALYSIS
Plaintiffs bring this case under the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. A district court has jurisdiction over an action brought by benefit plan trustees to enforce an employer's obligation to make fringe benefit contributions. See 29 U.S.C. §§ 1132(e)(1), 1145;Laborers Health Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484 U.S. 539, 547 (1988). Pursuant to 29 U.S.C. § 1145, "Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement."
A. Defendant Premier
Plaintiffs are trust funds established under a collective bargaining agreement (the "Agreement") between the Plumbers Union Local No. 98 and certain employers and employer associations. (Second Am. Compl. ¶¶ 1, 11.) Plaintiffs have attached to their motion a partial copy of the Agreement and a signature page to the Agreement signed by Defendant Premier. (Pls.' Mot. Exs. A, B.) Pursuant to the Agreement, Defendant Premier was obligated to pay fringe benefit contributions to Plaintiffs each month for union members employed by Premier and covered by the Agreement. (Pls.' Mot. ¶¶ 4, 5, Exs. A, B.) Plaintiffs allege that Premier failed to make contributions for the period of November 2004 through January 2005. (Pls.' Mot. ¶ 9.) Plaintiffs have submitted a letter from O'Brien, Rivamonte Slate, P.C., certified public accountants, showing $25,206.77 in unpaid contributions as of May 12, 2006. (Docket #30, Ex. A.)
Defendant Premier has not filed a response to Plaintiffs' motion and has failed to offer evidence contesting Plaintiffs' factual assertions. See Street v. J.C. Bradford Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989) ("The respondent cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must `present affirmative evidence in order to defeat a properly supported motion for summary judgment.'"). The Court's own review of the record reveals no evidence that would cast doubt on Plaintiffs' assertions regarding Premier's failure to pay contributions. The Court therefore finds that Plaintiffs are entitled to judgment as a matter of law against Defendant Premier.
B. Defendant City Pride
Plaintiffs also seek judgment against Defendant City Pride as the alter ego and successor in liability of Defendant Premier. The doctrine of alter ego liability is applied in labor cases to bind a new employer that continues the operations of an old employer where the new employer is "merely a disguised continuance of the old employer." Wilson v. Int'l Brotherhood of Teamsters, 83 F.3d 747, 759 (6th Cir. 1996) (internal citation omitted). The doctrine is also used to determine "whether two or more coexisting employers performing the same work are in fact one business, separated only in form." Id. The Sixth Circuit holds that a court should consider the following factors in deciding whether one employer is the alter ego of another employer: "whether the two enterprises have substantially identical management, business, purpose, operation, equipment, customers, supervision, and ownership." Id. "No one factor is dispositive in determining whether the corporate form should be disregarded in a particular case." Id.
Although developed in the labor law context, the theory of alter ego liability has been applied by several circuits to ERISA claims involving employee benefit funds. E.g., Mass. Carpenters Cent. Collection Agency v. Belmont Concrete Corp., 139 F.3d 304, 308 (1st Cir. 1998) (listing cases); see also Roofers Local 149 Security Trust Fund v. Duane Smelser Roofing Co., 285 F. Supp. 2d 936 (E.D. Mich. 2003) (Gadola, J.).
Plaintiffs submit the deposition testimony of John Schoen, a former employee of both City Pride and Premier, as evidence of City Pride's alter ego status. (Docket #26, Ex. A.) The Court will consider the Wilson factors in light of this evidence. The management, supervision, and ownership factors weigh in favor of Plaintiffs. Plaintiffs allege that Schoen was the plumbing contractor and master plumber for both City Pride and Premier. Schoen testified that he oversaw both of the defendant companies and performed identical work on a daily basis for both companies. He testified that City Pride and Premier were owned by the same person, Kenneth Epstein, and that City Pride was formed after Schoen began working for Premier.
The operations and equipment factors also indicate that City Pride is Premier's alter ego. Schoen testified that both Defendants were located in the same building, and Schoen thought it would not have been obvious to an uninformed observer that two separate businesses existed there. City Pride had no employees in the office other than Schoen and a secretary who worked for both companies. City Pride did not own any equipment and instead used Premier's equipment. All employees of City Pride and Premier were paid by Premier, City Pride did not maintain separate payroll records, and all W-2 tax forms were submitted by Premier. Insurance for employees of both Defendants was provided by Premier. For both Defendants, company bills were paid by whichever Defendant had enough money at the time the bill was due.
Defendants have offered no evidence to contest Schoen's deposition testimony. Based on the Wilson factors, the Court finds that Defendant City Pride is liable as the alter ego of Defendant Premier, and Plaintiffs are entitled to judgment as a matter of law against City Pride.
Plaintiffs seek judgment in the amount of $64,437.97, which includes unpaid benefit contributions, interest on those contributions, liquidated damages, and attorney's fees and costs. (Docket #30, at 5.) 29 U.S.C. § 1132(g)(2) provides,
In any action under this title by a fiduciary for or on behalf of a plan to enforce [ 29 U.S.C. § 1145] in which a judgment in favor of the plan is awarded, the court shall award the plan —
(A) the unpaid contributions,
(B) interest on the unpaid contributions,
(C) an amount equal to the greater of —
(i) interest on the unpaid contributions, or
(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A),
(D) reasonable attorney's fees and costs of the action, to be paid by the defendant, and
(E) such other legal or equitable relief as the court deems appropriate.
The Court will now examine the components of the judgment award sought by Plaintiffs in light of the evidence submitted. Defendants have not contested Plaintiffs' evidence or calculations as related to the judgment award.
Unpaid contributions: Plaintiffs seek $25,206.77 in unpaid contributions for the period of November 2004 through January 2005. This amount is supported by a letter from O'Brien, Rivamonte Slate, P.C., certified public accountants. (Docket #30, Ex. A.)
Interest on the unpaid contributions: Plaintiffs ask for a total of $4,253.76 in interest on the unpaid contributions ($2,126.88 under § 1132(g)(2)(B) and $2,126.88 under § 1132(g)(2)(C)(i)). The interest award is supported by the same letter from the accountants. (Docket #30, Ex. A.)
Attorney's fees and costs of the action: Plaintiffs request $19,223 in attorney's fees and costs. In ERISA cases, the Sixth Circuit mandates the award of attorney's fees be determined using the "lodestar" approach. Building Serv. Local 47 Cleaning Contractors Pension Plan v. Grandview Raceway, 46 F.3d 1392, 1401-02 (6th Cir. 1995). In applying this method, the Supreme Court has said that "the most useful starting point . . . is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Id. (internal citation omitted). There is a strong presumption that this lodestar figure represents a reasonable fee, although the district court may adjust the fee based on other considerations. Id.
In support of the fee award, Plaintiffs submit the affidavit of their attorney, Alexandra Akas, as well as a detailed breakdown and description of time spent on this case. (Docket #30, Ex. B.) Akas's affidavit describes the professional backgrounds of the attorneys who have worked on the case, and states their billing rates, which range from $150 to $165 per hour. She claims these are reasonable rates based on the prevailing market rate for this type of legal service. A total of 121.65 hours of work were performed for this case. Based on the affidavit and the billing records submitted, the Court finds that the amount of $19,223 represents reasonable attorney's fees and costs in this case.
Liquidated damages: Plaintiffs seek liquidated damages of $15,754.44 owing on benefit contributions that were paid late for the period of January 2003 through August 2004. (Docket #30, Ex. C.) Plaintiffs do not seek liquidated damages under § 1132(g)(2)(C)(ii); instead, they request liquidated damages provided for by the terms of the Agreement. (Docket #30, 3-4.) Section 1132(g)(2)(C)(ii) is the exclusive remedy for liquidated damages on contributions that remain unpaid as of the date of judgment. Michigan Carpenters Council Health Welfare Fund v. C.J. Rogers, Inc., 933 F.2d 376, 389 (6th Cir. 1991). Liquidated damages related to contributions that are paid late are not recoverable under § 1132(g)(2)(C)(ii); however, such damages may be recovered pursuant to a collective bargaining agreement. Id. at 389-90. A district court must determine whether a liquidated damages provision in a collective bargaining agreement constitutes a penalty under federal common law. Id. at 390. To this end, the court should ask whether the harm caused by the breach is very difficult or impossible to estimate, and whether the amount fixed is a reasonable forecast of just compensation for the harm caused. Bricklayers Pension Trust Fund v. Rosati, Inc., 23 Fed. Appx. 360, 360-61 (6th Cir. 2001).
In the present case, the Agreement provides, "In the event that a participating employer fails to deliver its reports and contributions when due, liquidated damages in the amount of 10% of the amount of contributions due will be assessed." (Docket # 25, Ex. F.) In other ERISA benefit contribution cases, courts have found that similar clauses containing a 10% liquidated damages provision did not constitute a penalty. United Order of Am. Bricklayers and Stone Masons Union No. 21 v. Thorleif Larsen Son, Inc., 519 F.2d 331, 337 (7th Cir. 1975); Bds. of Trs. of the Ohio Laborers' Fringe Benefit Programs v. Bihn Excavating, Inc., 2005 U.S. Dist. LEXIS 11965 (S.D. Ohio 2005). In this case, damages that may be difficult to estimate could include additional administrative costs, costs of collection efforts, lost investment income to the funds, and potential loss of benefits to employees. The 10% figure is likely a reasonable forecast of harm because it is proportionate to the magnitude of the breach. Although it fails to account for the length of the breach, it is not an inflexible lump sum payment, which courts have struck down as a penalty. See Thorleif, 519 F.2d at 335. Accordingly, the Court finds that the 10% liquidated damages provision in the Agreement does not constitute a penalty.
III. CONCLUSION
For the reasons stated above, the Court GRANTS Plaintiffs' unopposed motion for judgment against Defendant Premier and Defendant City Pride. Defendants Premier and City Pride are jointly and severally liable to Plaintiffs for the amount of $64,437.97. This award is comprised of the following:
• Unpaid contributions of $25,206.77 for the period of November 2004 through January 2005, pursuant to § 1132(g)(2)(A); • Interest of $4,253.76 ($2,126.88 under § 1132(g)(2)(B) and $2,126.88 under § 1132(g)(2)(C)(i)); • Attorney's fees and costs of $19,223, pursuant to § 1132(g)(2)(D); • Liquidated damages of $15,754.44 on contributions that were paid late for the period of January 2003 through August 2004, pursuant to the Agreement. Plaintiffs' request for sanctions against Defendants and their former counsel is DENIED.