NEW JERSEY REGIONAL COUNCIL OF CARPENTERS et al v. AG CONSTRUCTION CORP.

Filing 7

OPINION. Signed by Judge Kevin McNulty on 4/15/2015. (nr, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

NEW JERSEY REGIONAL COUNCIL OF
CARPENTERS; NEW JERSEY
CARPENTERS FUNDS AND THE
TRUSTEES THEREOF,

Civ. No. 14-58 18 (KM)(MAH)

OPINION
Plaintiffs,

V.

AG CONSTRUCTION CORP.,
Defendant.

I have spent considerable time and effort cleaning up a slipshod
arbitration award rendered by J.J. Pierson. Even where a petition is
unopposed, key figures—interest rates, for example, or “liquidated
damages”—cannot simply be plucked from the air; they must conform to the
CBA. The difference is not trivial. I now enter judgment in the amount of
$475,726.56, some $237,000 lower than the figure calculated by the arbitrator.
If I had not authorized a motion for reconsideration, that figure would have
been even lower.
This case arises from a construction company’s alleged failure to make
contributions to a union fund for employee “fringe” benefits. The union brought
the matter to arbitration and obtained an award. The union then filed a motion
before this Court to confirm that award. I granted that motion in part and
denied it in part. With respect to three categories of damages that the arbitrator
had awarded, I held that the arbitrator had erred, or at least had not
adequately explained how those damages were calculated. I allowed, however,
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that the Union could file a motion for reconsideration within fourteen days
explaining the arbitrator’s calculations. The union has filed such a motion.
They ask that I confirm the arbitrator’s award with respect to two of the three
categories of damages I had previously declined to confirm. After reviewing the
union’s submissions, I will modify the arbitrator’s award to reduce the amount
of damages in those two categories. See 9 U.S.C.

§ 11(a) (court may modify

award to correct an “evident material miscalculation of figures”). I will confirm
the Award as modified.
Background
AG construction Corp. entered into a contract with a labor union called
the New Jersey Regional Council of Carpenters (“Union”). Under the contract,
AG would hire members of the Union to perform work on construction projects
that AG was completing. (Opinion,1 2) As part of the agreement, AG was
required to make contributions to various union funds for employee “fringe
benefits.” (Opinion, 1) The Union alleged that AG failed to make some of these
contributions and initiated an arbitration proceeding. AG did not defend itself
in the arbitration proceeding. The arbitrator awarded the Union $713,200.27 in
damages, interest, attorneys’ fees, and costs. (Award, 4)
The New Jersey Regional Council of Carpenters (the “Council”) filed a
motion to confirm that arbitration award. (Dkt. 2) AG did not answer or
otherwise appear. I granted that motion in part and denied it in part. (Dkt. 4)
Specifically, the arbitrator had awarded actual damages, interest, liquidated
damages, attorneys’ fees, and arbitration costs. (Opinion, 4) I confirmed the
arbitration award with respect to actual damages and arbitration costs, but did
1

Citations to the record will be abbreviated as follows:

“Award” Award and Order by J.J. Pierson, Arbitrator, Dkt. No. 1, Exh. D.
“CBA”
Building Contractors Association of New Jersey Collective Bargaining
Agreement, Dkt. No. 1, Exh. A.
Motion to Confirm Arbitration Award by New Jersey Carpenters Funds and
the Trustees Thereof; Dkt. No. 6.
“Opinion” Opinion dated March 30, 2015, Dkt. No. 4.
-

—

—

—

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not confirm the award with respect to interest, liquidated damages, or
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attorneys’ fees. (Opinion, 4) The arbitration award, I held, had not adequately
explained how those portions of the award were calculated. (Opinion, 4-5) I did,
however, invite the Union to file a motion for reconsideration within fourteen
days in which it could explain how the arbitrator arrived at his figures. The
Union has now filed that motion for reconsideration. With respect to the
interest portion of the award, the motion requests that I now confirm the
arbitrator’s original award. (Mot., 2-3) With respect to attorneys’ fees, the
motion requests that I modifr the amount that the arbitrator awarded. (Mot., 3)
With respect to liquidated damages, however, the Union concedes that I should
not confirm that portion of the arbitrator’s award.

Discussion
1. Interest
The arbitrator awarded actual damages of $361,649.85, and awarded
interest in the amount of $188,057.92. (Award, 3) According to the arbitrator’s
Order, the interest award represented “interest at the rate of 1% above the
current prime rate per annum.., on the unpaid balance of contributions for the
period such monies remain outstanding.” (Award, 3) In my prior opinion, I held
that this was not a sufficient explanation of how the interest award was
calculated. Without the start dates and end dates for the period for which
interest was charged, I could not make even an approximate recalculation of
the interest award. (Opinion, 4-5) Additionally, I observed that the rate the
arbitrator reported using, “1% above the current prime rate,” comes out to
4.25%. To generate almost $190,000 of interest on a principal balance of nearly
$362,000 at a rate of 4.25%, the time period would have to be very long—so
long that it seemed impossible that there wasn’t some error in either the
interest calculation or the explanation of that calculation. (Opinion, 5)

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also awarded the Union its filing fee in this court. (Opinion, 6)
3

The Union has provided an explanation of how the arbitrator calculated
the interest amount. Based on that explanation, it seems that the interest
award is erroneous on its face. I will therefore modify the interest award to
reflect a more conservative estimate of the interest due.

The Union’s explanation for the interest award
In its motion for reconsideration, the Union has explained how the
arbitrator arrived at his interest calculation. I note that this appears to be the
Union’s reconstruction of what must have been the arbitrator’s thought
process. As noted in my prior Opinion, it does not flow naturally or easily from
the text of the Award itself. Here is what the Union says the arbitrator did:

•

The arbitrator began with a principal amount of $361,649.85
(representing the total actual damages awarded). (Mot., 2)

•

He then used an interest period of 52 months. The Union says this
represented the period from January 1, 2010 (the date of the “accrual of
AG Construction’s delinquency”) to April 30, 2014 (the date of the
arbitrator’s opinion).

•

The Union says, albeit equivocally, that the arbitrator applied an interest
rate of 12% per year, which is the rate provided for in Article XXVI(2) of
the CBA. Evidently trying to simplify matters, the arbitrator
3

The Union, in its written explanation, states that although the CBA calls for a rate of
12% per annum, the arbitrator used a rate of 10% per annum. The Union explained
that its “standard practice is to seek interest at 10 percent for collections arbitrations.”
(Mot., 2) However, in the actual calculation that the Union provided, it used an
interest rate of 1% per month, which roughly equals a rate of 12% per year. See Mot.,
2 (recalculating the interest to be “$361,649.85 * 0.0 10 * 52 mos. = ...$188,057.92”). I
will construe the Union’s argument to be that the arbitrator awarded interest at a rate
of 12% per year, which is the rate provided for in Article XXVI(2) of the CBA.
3

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approximated that rate to be 1% per month, and multiplied 1% by the
$361,649.85 in principal, then by the 52 month period, and arrived at
interest of $188,057.92 (0.01 x 361,649.85 x 52

=

$188,057.92).

Even with this explanation, however, it still seems that the interest calculation
is erroneous on its face. See 9 U.S.C.

§ 11(a). Mainly, it is unclear when the

$361,649.85 in unpaid fringe benefits (or each component of that sum) became
due.
Interest, of course, can be charged only after a payment becomes due. If
the entire payment fell due on January 1, 2010, and remained unpaid on April
30, 2013, then the delinquent party is liable for 52 months of interest.
However, if half of that payment did not become due until, say, June 30, 2010,
then the interest on that half portion did not begin to accrue until June 30,
2010.
There is every indication here that the entire $361,649.85 did not become
due on January 1, 2010. The CBA provides that fringe benefit payments are
due weekly. That is, a fringe benefit payment must be paid at the same time
that the corresponding employee is paid for the work that generated the fringe
benefit obligation. (See CBA,

§ XXIV(5) (“Fringe benefits must be paid weekly by

check to the Shop Steward on the job...”)).
The Union has stated that of the $361,649.85 in unpaid fringe benefits,
$306,746.22 was attributable to fringe benefit contributions “during the period
of January 1, 2010 through June 30, 2013.” (Mot., 2). This seems to imply,
without actually stating, that the $306,746.22 represents the total of benefits
that accrued week by week from January 1, 2010 through June 30, 2013. If so,
then the start date for the interest calculation would be the date on which each
weekly payment became due. In other words, for the portion of the $306,746
that became due on, say, January 8, 2010, the interest would begin running

As for the arbitrator’s statement that he calculated the interest using a rate of 1%
above prime, the Union says simply that that “language in the Award... appears to be a
mistake.” (Mot., 3)
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on January 8, 2010. But for the portion of the $306,746 that became due a
week later, on January 15, 2010, the interest would not begin running until
January 15, 2010.
What the arbitrator’s award has done, in contrast, is to calculate interest
as if the entire $306,746.22 became due on January 1, 2010. Maybe the
obligation did become due then; I don’t know. But that would seem
inconsistent with the Union’s statement that the $306,746.22 in actual
damages was based on fringe benefit contributions “during the period of
January 1, 2010 through June 30, 2013.” (Mot., 2).
The same problem applies to the interest calculation for the remaining
$54,903.63 in actual damages. The Union says this amount was “owing from
payroll periods December 30, 2013 through February 22, 2014.” (Mot., 2). But
the Union calculates interest as if that entire amount became due on January
1, 2010.
There is therefore an evident miscalculation of figures in the arbitrator’s
award. 9 U.S.C.

§ 11(a). Rather than simply disallow interest, I will attempt to

correct this apparent calculation error.

Modifying the interest award
As explained above, the Union, given at least two chances, has failed to
supply any factual basis for the accrual of interest on the total balance starting
from January 1, 2010. If I am not simply to disallow interest, I have no choice
but to make the conservative assumption that the full amount of each portion
did not become due until the last day of the period that the Union has
identified. Thus, for the $306,746.22 that the Union says represented fringe
benefits for the period January 1, 2010 through June 30, 2013, I will assume
that the full amount became due on June 30, 2013. (Mot., 2) Likewise, for the
$54,903.63 in damages that the Union says was attributable to the payroll
period from December 30, 2013 through February 22, 2014, I will assume that
the full amount of the $54,903.63 became due on February 22, 2014. In both

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cases, I will assume that the arbitrator intended to calculate interest through
the date of his decision on April 30, 2014.
Applying an interest rate of 12% to both of those principal amounts
results in interest totaling $31,517.99.

‘

Attorneys’ fees
The arbitrator awarded the Union some $90,412.50 in attorneys’ fees.
(Award, 3) To arrive at that figure, the arbitrator, without explanation, simply
applied a rate of 25% to the $361,649.85 in actual damages awarded. (Award,
3) In my prior Opinion, I pointed out that the CBA seemed to provide that
attorneys’ fees would be calculated differently: the prevailing party would
receive attorneys’ fees in the amount of 27.5% of the first $750.00 awarded,
and 22.5% of any amount awarded over $750.00. (Opinion, 5).
In its Motion, the Union agrees that the rates in the CBA should apply to
any attorneys’ fees awarded in this case. The Union thus suggests that I modify
the arbitrator’s order to award the Union $81,408.72 in attorneys’ fees,
representing a fee of $206.25 on the first $750 awarded (0.275 x 750

=

$206.25); and $81,202.47 in attorneys’ fees on the remaining $360,899.85
awarded (0.225 x 360,899.85

=

$81,202.47). (Mot., 3) Because that is what the

CBA requires, I will adopt that recalculation and modify the Award to provide
for $81,408.72 in attorneys’ fees.
Interest is calculated using the formula P x (1+i)’’(n/365)

-

P where:

P = the original payment due
i
A

=

the interest rate, here 12%

signifies an exponent

n = the number of days between the contribution due date and April 30, 2014
(the date of the arbitrator’s decision).

I apply that formula to each portion of the actual damages awarded in this case:
• $306,746.22 x (1 + 0. 12)A(304/365) 306,746.22 = $30,363.88
• $54,903.63 x (1 + 0.12)”(67/365) —54,903.63) = $1,154.11
—

Added together, those interest figures total $31,517.99.
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Liquidated damages

In its motion for reconsideration, the Union has withdrawn its request
that the Court confirm the arbitrator’s award of liquidated damages. (Mot., 4).
In that connection, I reiterate what I held in my prior opinion:
The Arbitrator calculated a damage amount of $72,330.00. I am
unable to discern where the liquidated damages amount comes
from. There is no citation to a liquidated damages provision in the
CBA.
(Opinion, 5) Was the arbitrator misled? Did the arbitrator simply err? It is hard
to say. But the Union has not directed me to any relevant liquidated damages
provision, so I will not confirm that portion of the award.
Conclusion

I will therefore order that the arbitrator’s award will be confirmed, as
modified in the following ways:
•

I will reduce the award of interest in the amount of $188,057.92 (Award,
3) to $31,517.99.

•

I will redUce the award of attorneys’ fees in the amount of $90,412.50
(Award, 3) to an award of $81,408.72.

•

I will remove the award of liquidated damages in the amount of $72,330
(Award, 3).

In addition, I incorporate by reference the portion of my prior Opinion in
which I confirmed the arbitration award with respect to two categories of
damages:
•

Actual damages of $361,649.85.

•

$750.00 in arbitration costs.

•

The filing fee of $400 in this Court.

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The total confirmed award, then, is $475,726.56. A separate order and
judgment will issue.

Dated: April 15, 2015
Newark, New Jersey

KEVIN MCNUL
United States District Judge

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