Multiemployer funds awarded over $660K in unpaid contributions, plus damages

 

A district court did not abuse its discretion when it entered a default judgment of over $660,000 against a construction company that failed to make contributions to two multiemployer pension funds in accordance with the terms of a collective bargaining agreement, the U.S. Court of Appeals in New York City (CA-2) has ruled. However, the appellate court vacated the default judgment against the company owner in his individual capacity with respect to the award of liquidated damages, excessive interest, and attorney’s fees.

Background

As signatory to the CBA, the construction company was required to make contributions to two pension funds and to remit deductions from union workers’ paychecks to the funds. Participation in audits as requested by the funds was also required.

After the company’s failure to comply with repeated requests from the funds’ auditor, the pension funds sought and received from the district court an entry of default against the employer. After eventually receiving some cooperation from the company, the auditor concluded the company owed the funds about $450,000 in unpaid contributions and deductions.

The funds filed a motion for default judgment against the company and the owner individually, including a request for damages, for which the funds supplied extensive supporting documentation. The district court granted the motion, and awarded the funds just over $660,000, including about $450,000 in unpaid contributions and deductions; $100,000 in interest; $100,000 in liquidated damages; and $7,000 in attorney’s fees. The company and its owner appealed.

Initial entry of default

The lower court’s refusal to vacate the initial entry of default was not an abuse of discretion, the appellate court concluded. The defendants’ conduct indicated a clear pattern of willful and deliberate disregard for the litigation.

The appellate court also agreed the funds were entitled to a default judgment as a matter of law. Under ERISA §515, an employer obligated under a collective bargaining agreement to make contributions to a multiemployer plan must do so in accordance with the terms of the plan. Under ERISA §502(g)(2), failure to do so subjects the employer to an award of unpaid contributions, interest, liquidated damages and attorney’s fees as ordered by a court.

Individual defendant

Under ERISA §515, the owner of the company could not, in his individual capacity, be an “employer.” However, the owner was a fiduciary under ERISA §409 and thus was personally liable for the unpaid contributions.

However, the lower court erred when it awarded liquidated damages, interest and attorney’s fees against the individual defendant without providing a specific explanation as to why such a judgment was warranted. On remand, the lower court must provide such an explanation.

Source: Bricklayers and Allied Craftworkers Local 2, Albany, New York Pension Fund v. Moulton Masonry & Construction, LLC (CA-2).

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