Sheet Metal, Air, Rail and Transportation Workers Local Union No. 137 and Board of Trustees of the International Association of Sheet Metal, Air, Rail, and Transportation Workers Local Union No. 137 I et al v. Frank Torrone & Sons, Inc. d/b/a Torrone Sig

Filing 45

ORDER ADOPTING REPORT AND RECOMMENDATIONS. For the reasons set forth in the attached order, the court affirms and adopts the 43 Report and Recommendation in its entirety. Consequently, in an exercise of the court's discretion, the Default Ju dgment Motion is DENIED, and the default is VACATED. The parties are respectfully directed to file a joint letter stating their intentions with respect to this action within fourteen (14) days. Ordered by Judge Kiyo A. Matsumoto on 10/3/2018. (Flores, Diego)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------X
SHEET METAL, AIR, RAIL AND
TRANSPORTATION WORKERS LOCAL UNION NO.
137; BOARD OF TRUSTEES OF THE
INTERNATIONAL ASSOCIATION OF SHEET
METAL, AIR, RAIL, AND TRANSPORTATION
WORKERS LOCAL UNION NO. 137 INSURANCE
FUND; INTERNATIONAL ASSOCIATION OF
SHEET METAL, AIR, RAIL, AND
TRANSPORTATION WORKERS LOCAL UNION NO.
137 ANNUITY FUND; INTERNATIONAL
ASSOCIATION OF SHEET METAL, AIR, RAIL,
AND TRANSPORTATION WORKERS LOCAL UNION
NO. 137 APPRENTICESHIP TRAINING FUND;
AND PAUL COLLINS JR SCHOLARSHIP FUND,

ORDER ADOPTING R&R

15-CV-2224(KAM)(PK)

Plaintiffs,
-againstFRANK TORRONE & SONS, INC. d/b/a/
TORRONE SIGNS,
Defendant.
--------------------------------------X
KIYO A. MATSUMOTO, United States District Judge:
Plaintiffs (collectively, “plaintiffs”) Sheet Metal,
Air, Rail and Transportation Workers Local Union No. 137 (the
“Union”), the Board of Trustees of the International Association
of Sheet Metal, Air, Rail, and Transportation Workers Local
Union No. 137 Insurance Fund; the International Association of
Sheet Metal, Air, Rail, and Transportation Workers Local Union
No. 137 Annuity Fund; the International Association of Sheet
Metal, Air, Rail, and Transportation Workers Local Union No. 137
Apprenticeship Training Fund; and the Paul Collins Jr.

Scholarship Fund, commenced the instant action against defendant
Frank Torrone & Sons, Inc. d/b/a Torrone Signs (“defendant”) on
April 20, 2015 by filing a complaint (“Compl.” or the
“complaint,” ECF No. 1), under the Employee Retirement Income
Security Act of 1974 (“ERISA”).

(See generally Compl.)

Presently before the court is the Report and
Recommendation of United States Magistrate Judge Peggy Kuo,
filed on September 4, 2018, recommending that the court vacate
the Clerk of Court’s Entry of Default in this action (the
“Default,” ECF No. 11), and deny plaintiffs’ third motion for a
default judgment (the “Default Judgment Motion,” ECF No. 35.)
(Report and Recommendation re Motion for Summary Judgment (“R&R”
or the “Report and Recommendation”), ECF No. 43, at 2, 15.)
Plaintiffs timely objected to the Report and Recommendation (see
Objection to R&R (“Obj.”), ECF No. 44), but defendant did not
object.

For the reasons set forth below, plaintiffs’ objection

is overruled, and the court adopts Judge Kuo’s thorough and
well-reasoned Report and Recommendation in its entirety.
Background
The court assumes familiarity with the underlying
factual allegations and procedural history, as set forth in
greater detail in the Report and Recommendation.
9.)
2

(See R&R at 1-

I.

Plaintiffs’ Allegations
As relevant here, plaintiffs allege in their complaint

that, between May 1, 2013 and August 31, 2014, defendant
violated ERISA and the terms of collective bargaining agreements
between defendant and the Union (the “CBAs”) 1 by failing to make
certain required contributions to various employee benefit plans
(the “Funds”) and failing to employ Union members to perform
certain work.

(See Compl. ¶¶ 6-7, 13-26.)

More specifically, the CBAs required defendant to
“make monthly payments into each of the Funds ‘for all
Journeymen and Shop Production Workers,’ at specified hourly
amounts, and for all Apprentices at specified percentages of the
Journeyman contribution rate.”
§§ 1-6).)

(R&R at 2 (quoting CBAs Art. IX

Further, the CBAs obligate defendant to require Union

membership “as a condition of continued employment of all
Employees performing any of the work specified in Article 1,
Section 2” of the CBA, and to employ “no one but” Union members,
“all who are members of the [bargaining] unit . . . on any work
described in Article 1, Section 2” of the CBA.

(CBAs, Art. I §

3, Art. II § 1; see also R&R at 3 (discussing relevant CBA
provisions).)

1

The CBAs are annexed as Exhibits A and B to the Declaration of Dante
Dano (the “Dano Declaration,” ECF No. 32), and as Judge Kuo observed in the
Report and Recommendation, their terms are “identical for purposes of this
action.” (R&R at 2.)

3

Article 1, Section 2 of the CBA, in turn, “specifies”
and “describes” the following work:
the manufacture, fabrication, assembly, erection,
installation, dismantling, re-conditioning,
adjustment, alteration, repairing, servicing and
maintenance of all ferrous or non-ferrous sheet
metal work of any and all substitute materials
used in lieu thereof, in the manufacture and
erection of all sheet metal, electrical, plastic,
and neon signs, as well as commercial signs, road
signs, bulletin boards and/or billboards for
outdoor advertising, which would be erected on
what is commonly known as a “Unipole” or any
other similar type structure for the same said
purpose.
(CBAs, Art. I § 2; see also R&R at 3 (quoting CBA provision).)
According to plaintiffs, defendant failed to comply
with its obligations to make contributions to the Funds and to
hire Union workers pursuant to the foregoing provisions of the
CBAs.

The complaint alleges that defendant applied to the New

York City Department of Buildings (“DOB”) for various “sign
hanger permits to install work covered by [the] [CBAs],” but
“failed to employ[] [Union] members to perform the covered work
under the sign permits.”

(Compl. ¶ 22.)

In support of this

allegation and in connection with their Default Judgment Motion,
plaintiffs have submitted copies of various work DOB sign
hanging permits issued to defendant between April 2013 and
August 2016.

(R&R at 4 (citations omitted).)

It is undisputed

that defendants did not hire Union members for any jobs
4

pertaining to these permits, and thus did not make any
contributions to the Funds as a result of the permitted jobs.
(Id. at 13; see also id. at 4 (noting that defendant had not
contacted the Union’s business manager to seek Union workers for
the permitted jobs).)
Also in connection with the Default Judgment Motion,
plaintiffs have submitted estimates by the Union’s business
agent of the number of worker-hours needed to fabricate and
install each sign.

(Id. at 4 (citations omitted).)

The worker-

hour estimates form a basis for plaintiffs’ damages
calculations.

(Id. (citations omitted).)

Additionally,

plaintiffs annexed to the complaint a report by their retained
accounting firm, Schultheis & Panettieri, LLP (“S&P”), which
indicates that between May 2013 and August 2014, defendant made
out 65 checks to “cash” or “petty cash,” in an aggregate amount
of $93,147.
3, 5-7).) 2

(Id. at 4-5 (citing Compl. Ex. A, ECF No. 1-1, at
S&P treated this entire $93,147 sum as attributable

to payments to non-Union workers for covered work, and computed
a resulting “fringe benefit deficiency” of $136,589.87,
“including interest and audit cost . . . based on an assumed
hourly wage rate of $20.00 per hour.”

(Id. at 5 (citations

omitted); see also Compl. Ex. A. at 3, 5-7.)

2

References to page numbers in Exhibit A to the complaint are to the
page numbers generated by the ECF system.

5

As the Report and Recommendation observed, the S&P
report states no basis for assuming an hourly wage rate of
$20.00.

(R&R at 5 n.4)

Further, defendant’s inability to

provide documentation substantiating defendant’s assertion to
S&P that the checks related to supply purchases is the only
apparent rationale for treating the full $93,147 amount of the
checks as payments to non-Union workers for covered work.

(Id.

at 5 (citing Compl. Ex. A at 3).)
II.

Procedural History
The complaint and a summons were served on defendant

on June 16, 2015 (see Affidavit of Service, ECF No. 7), but
defendant did not answer or appear timely, and the Clerk of
Court entered the Default on October 16, 2015.
Defendant eventually appeared on March 30, 2017.

(See Default.)
(See Notice of

Appearance and Motion for Extension of Time, ECF No. 20.)
Although this action has involved a number of motions
and contemplated motions by plaintiffs and defendant, only two
are relevant to the Report and Recommendation and plaintiffs’
objection: the plaintiffs’ Default Judgment Motion, and
defendant’s opposition to the Default Judgment Motion and crossmotion to vacate the Default (the “Motion to Vacate”).
38.) 3

(ECF No.

Plaintiffs filed the Default Judgment Motion and

3
As discussed in the Report and Recommendation, the other motions and
contemplated motions in this action, including two previous motions by

6

supporting documents on September 26 and 29, 2018.

(See Default

Judgment Motion; Memorandum of Law in Support, ECF No. 31; Dano
Declaration; Affirmation of Thomas Keane, Esq., ECF No. 30;
Declaration of Viorel Kuzma, ECF No. 33; Declaration of Lois
Fusco, ECF No. 34.)

Following a stipulated extension of time to

respond (see October 26, 2017 Docket Order), on November 1,
2017, defendant filed its opposition to the Default Judgment
Motion, the Motion to Vacate the Clerk’s entry of default, and
an answer to the complaint setting forth general denials and
eight affirmative defenses.

(See Motion to Vacate; Answer, ECF

No. 37, ¶¶ 12-26 and at 4.)
Judge Kuo set a hearing on the Motion to Vacate and,
after defendant failed to appear at two scheduled hearings, (R&R
at 8; January 4, 2018 Minute Entry; February 22, 2018 Scheduling
Order), heard argument and orally denied the Motion to Vacate at
a telephonic hearing on February 22, 2018.

(R&R at 9; see also

February 22, 2018 Minute Entry; Transcript of February 22, 2018
Hearing, ECF No. 41, at 41:19-43:24.)

On April 27, 2018, the

undersigned judge formally referred the Default Judgment Motion
to Judge Kuo for a report and recommendation.
2018 Referral Order.)

(See April 27,

Judge Kuo issued the Report and

plaintiffs for entry of a default judgment, were filed improperly, withdrawn,
and/or never actually filed. (See R&R at 6-8.)

7

Recommendation on September 4, 2018, and plaintiffs timely
objected on September 18, 2018.
Legal Standard
I.

Review of Magistrate Judge Determinations
Pursuant to Federal Rule of Civil Procedure (“Rule”)

72, the standard of review for a matter properly referred to a
magistrate judge depends on whether the matter is “dispositive”
or “nondispositive.”

See Fed. R. Civ. P. 72(a)-(b) (setting

forth standards of review for dispositive and nondispositive
matters); accord 12 Charles A. Wright and Arthur R. Miller,
Federal Practice and Procedure, § 3068.2 at 332 (4th Ed. 2015)
(“Any pretrial matter properly referred to a magistrate judge
must be categorized under Rule 72 as either ‘dispositive’ or
‘nondispositive’ for purposes of the standard of review to be
exercised by the district judge.”).
If a matter is “not dispositive of a party’s claim or
defense . . . [t]he district court must consider timely
objections and modify or set aside any part of the order that is
clearly erroneous or is contrary to law.”
72(a).

Fed. R. Civ. P.

If a matter is dispositive, “the court is permitted to

adopt those sections of the report to which no specific
objection is made, so long as those sections are not facially
erroneous.”

Pizarro v. Bartlett, 776 F. Supp. 815, 817
8

(S.D.N.Y. 1991) (citations omitted).

Where a party makes a

specific objection, however, “the court is required to conduct a
de novo review of the contested sections.”

Id.; accord Fed. R.

Civ. P. 72(b)(3) (“The district judge must determine de novo any
part of the magistrate judge’s disposition that has been
properly objected to . . . [and] may accept, reject, or modify
the recommended disposition.”).
II.

Entry of Default and Default Judgment
Rule 55 sets forth a “‘two-step process’ for the entry

of judgment against a party who fails to defend: first, the
entry of a default, and second, the entry of a default
judgment.”

City of New York v. Mickalis Pawn Shop, LLC, 645

F.3d 114, 128 (2d Cir. 2011) (citing New York v. Green, 420 F.3d
99, 104 (2d Cir. 2005)).

Rule 55(a) governs entry of default,

and provides that “[w]hen a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise
defend, and that failure is shown by affidavit or otherwise, the
clerk must enter the party’s default.”

“‘The court may set

aside an entry of default for good cause,’ which requires the
court’s consideration of three factors: ‘(1) whether the default
was willful; (2) whether setting aside the default would
prejudice the party for whom default was awarded; and (3)
whether the moving party has presented a meritorious defense.’”
9

Cartin-Enario v. Tecson, No. 15-CV-710(GLS)(DJS), 2016 WL
4703732, at *2 (N.D.N.Y. Sept. 8, 2016) (quoting Fed. R. Civ. P.
55(c) and Peterson v. Syracuse Police Dep’t, 467 F. App’x. 31,
33 (2d Cir. 2012)).
Once a default is entered, a party seeking a default
judgment may “apply to the court for a default judgment.”
R. Civ. P. 55(b)(2).

Fed.

In determining whether to enter default

judgment, the court is “guided by the same factors that apply to
a motion to set aside entry of a default: (1) whether the
default was willful; (2) whether the plaintiffs would be
prejudiced by the denial of the motion for default judgment; and
(3) whether there are any meritorious defenses to plaintiff’s
claims.”

O’Callaghan v. Sifre, 242 F.R.D. 69, 73 (S.D.N.Y.

2007) (collecting cases).
In adjudicating a motion for a default judgment,
courts may also consider “numerous” other factors, including
“whether plaintiff has been substantially prejudiced by the
delay involved and whether the grounds for default are clearly
established or are in doubt,” id. (citations omitted), as well
as the nature of the failure to answer, “the merits of the
plaintiff’s substantive claim, the sufficiency of the complaint,
the sum at stake,” and the presence of excusable neglect.
Feeley v. Whitman Corp., 65 F. Supp. 2d 164, 171 (S.D.N.Y. 1999)
10

(citing Pinaud v. County of Suffolk, 52 F.3d 1139, 1152 (2d Cir.
1995); Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir.
1993); and Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir.
1998)).
Additionally, it is well established that defaults and
default judgments are disfavored, “[a] clear preference exists
for cases to be adjudicated on the merits,” and doubts are to be
resolved in favor of the defaulting party.

U.S. Fid. & Guar.

Co. v. Petroleo Brasileiro S.A., 220 F.R.D. 404, 406 (S.D.N.Y.
2004) (quoting Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167,
174 (2d Cir. 2001) and citing Enron Oil, 10 F.3d at 96)
(discussing default judgments); Meehan v. Snow, 652 F.2d 274,
277 (2d Cir. 1981) (“Defaults are not favored, particularly when
the case presents issues of fact, and doubts are to be resolved
in favor of a trial on the merits.” (citation omitted)).
Further, the Second Circuit has cautioned that because entry of
default judgment represents an “extreme sanction,” it “must
remain a weapon of last, rather than first, resort.”
652 F.2d at 277 (citations omitted).

Meehan,

Finally, subject to the

foregoing guidance, “[t]he dispositions of motions for entries
of defaults and default judgments and relief from the same. . .
are left to the sound discretion of a district court.”
Oil, 10 F.3d at 95 (citations omitted).
11

Enron

Discussion
I.

The Report and Recommendation
The Report and Recommendation correctly evaluates the

appropriateness of a default judgment by examining whether
defendant’s default was willful, whether defendant presented a
meritorious defense, and whether denial of the Default Judgment
Motion would prejudice plaintiffs.

(See R&R at 9-15.)

The

Report and Recommendation notes “a pattern of missed deadlines,
missed court appearances, and deficient pleading, including
Motion to Vacate papers which omitted key arguments.”
11.)

(R&R at

In light of these issues, as well as the lengthy delay

between service of the complaint, defendant’s appearance, and
defendant’s presentation of argument on its Motion to Vacate,
the Report and Recommendation concludes that defendant’s default
was willful.
Regarding the presence of a meritorious defense, the
Report and Recommendation notes that the CBAs require that
defendant “employ [Union] members . . . in performing its
signage work, and . . . pay benefits for the hours they work.”
(R&R at 13 (citing CBAs, Art. I §§ 2-3, Art. II § 1, Art. IX §§
1-6).)

However, plaintiffs offered “no support” in the CBAs,

related Declarations of Trust, or applicable law, for the
position that plaintiffs are “entitled to contributions for work
12

done by any workers.”

(Id. at 14.)

Further, plaintiffs offered

no “direct evidence” that defendant “actually hired non-Union
workers to perform covered work.”

(Id. at 13.)

Plaintiffs

instead “dr[e]w an inference” from “the unexplained checks made
out to ‘Cash’” and the “DOB permits . . . issued to [d]efendant
but on which jobs no [Union] members . . . were called to work.”
(Id.)

In light of the foregoing, the Report and Recommendation

concludes that defendant presented a meritorious defense in
asserting that it did not perform any covered work, and that
“[t]here may . . . be merit to [d]efendant’s argument that
benefit contributions are due only for the hours worked by
Union, not non-Union employees.”

(Id. at 14.)

Finally, the Report and Recommendation observes that
plaintiffs’ prejudice arguments “go primarily to delay and their
expenditure of ‘considerable resources in time and legal fees to
obtain a default judgment.’”

(Id. at 15 (quoting Plaintiffs’

Memorandum of Law, ECF No. 39, at 7).)

The CBAs and related

Declarations of Trust, however, “permit the recovery of
interest, legal fees and costs if there is a breach of the
agreement,” and consequently the Report and Recommendation finds
plaintiffs’ arguments unavailing.

(Id. at 15.)

Further, the

Report and Recommendation notes that “prejudice results from
delay when it causes the loss of evidence, creates increased
13

difficulties of discovery, or provides greater opportunity for
fraud and collusion,” but that plaintiffs “have not pointed out
any risk” of any of these potential problems.

(Id. at 14-15

(internal quotation marks and citations omitted).)
Because of defendant’s potentially meritorious defense
and the lack of prejudice to plaintiffs, and taking into account
the Second Circuit’s strong preference for the disposition of
matters on the merits, the Report and Recommendation recommends
denial of the Default Judgment Motion.
omitted).)

(Id. at 15 (citations

Additionally, in its conclusion, the Report and

Recommendation recommends that the Default be vacated.
II.

(Id.)

Plaintiffs’ Objections
The main thrust of plaintiffs’ objection is that,

under the “law of the case” doctrine, Judge Kuo’s February 22,
2018 oral denial of the Motion to Vacate should stand.
Obj. at 2-4.)

(See

In presenting this argument, plaintiffs do not

take issue with the Report and Recommendation’s articulation of
the law applicable to motions for a default judgment, and
identify only one purported flaw in the application of relevant
law.

Specifically, plaintiffs assert that the Report and

Recommendation fails to consider that plaintiffs will experience
prejudice because vacatur of the Default “will only permit
[defendant] to continue to benefit from its breach of the
14

collective bargaining agreement,” which “undermines the strength
of [the] Union’s collective bargaining relationship with all
other signatory employers.”

(Obj. at 3-4 (citation omitted).)

Plaintiffs also assert that the parties’ CBAs support their
claims in this action, and that their complaint “alleges clear
violations of the CBA[s].”

(Id. at 4-5.)

Based on these

assertions, plaintiffs contend that the undersigned judge should
decline to accept the Report and Recommendation and “proceed to
consider the pending [Default Judgment Motion].”
A.

(Id. at 5.)

Law of the Case Doctrine
1.

Applicable Law

“As most commonly defined, the [law of the case]
doctrine posits that when a court decides upon a rule of law,
that decision should continue to govern the same issues in
subsequent stages in the same case.”

Arizona v. California, 460

U.S. 605, 618 (1983) (citation omitted).

Law of the case is “at

best, a discretionary doctrine which does not constitute a
limitation on the court’s power,” and instead “merely expresses
the practice of the courts generally to refuse to reopen what
has been decided.”

Devilla v. Schriver, 245 F.3d 192, 197 (2d

Cir. 2001) (quoting United States v. Williams, 205 F.3d 23, 34
(2d Cir. 2000) and Messinger v. Anderson, 225 U.S. 436, 444
(1912)); accord Arizona v. California, 460 U.S. at 618 (“Law of
15

the case directs a court’s discretion, it does not limit the
tribunal’s power.” (citations omitted)).
The Second Circuit has cautioned, however, that
although a district court may revisit earlier rulings in the
same case, including under Rule 54(b), under the law of the case
doctrine, “where litigants have once battled for the court’s
decision, they should neither be required, nor without good
reason permitted, to battle for it again.”

Official Comm. of

Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand,
LLP, 322 F.3d 147, 167 (2d Cir. 2003) (quoting Zdanok v. Glidden
Co., 327 F.2d 944, 953 (2d Cir. 1964)).

Accordingly, earlier

decisions in the same case “may not usually be changed unless
there is ‘an intervening change of controlling law, the
availability of new evidence, or the need to correct a clear
error or prevent a manifest injustice.’”

Id. (quoting Virgin

Atl. Airways, Ltd. v. Nat’l Mediation Bd., 956 F.2d 1245, 1255
(2d Cir. 1992)).
2.

Application to Recommendation to Deny Default
Judgment Motion

In raising their law of the case argument, plaintiffs
do not clearly make a specific objection to the portion of the
Report and Recommendation that recommends denial of the Default
Judgment Motion.

Plaintiffs instead raise law of the case

solely to argue that Judge Kuo’s February 22, 2018 denial of the
16

Motion to vacate should stand.

(See Obj. at 2 (“The doctrine of

the law of the case would argue against reversing the February
22nd ruling.”).)
Consequently, although a motion for a default judgment
is dispositive, a review of the recommendation to deny the
Default Judgment Motion under a clear error standard may be
appropriate.

See Laboratorios Rivas, SRL v. Ugly & Beauty,

Inc., No. 11-CV-5980(RA)(JLC), 2013 WL 5977440, at *1 n.1
(S.D.N.Y. Nov. 12, 2013) (concluding motion for default judgment
is dispositive and collecting cases), report and recommendation
adopted, 2014 WL 112397 (S.D.N.Y. Jan. 8, 2014); Pizzolo, 776 F.
Supp. at 817 (“[T]he court is permitted to adopt those sections
of the report to which no specific objection is made, so long as
those sections are not facially erroneous.”). 4
Even applying a de novo standard of review, however,
the undersigned judge concludes that the Default Judgment Motion
should be denied.

“[T]he plaintiff is not entitled to a default

judgment as a matter of right” solely because a party is in

4

Additionally, the plaintiffs’ objection regarding the factors that
guide a court’s discretion in determining whether to enter a default judgment
raises only two specific purported flaws in the Report and Recommendation’s
analysis. First, the objection asserts that the Report and Recommendation
fails to consider prejudice resulting from the Union’s purportedly undermined
position vis-à-vis other employers. (See Obj. at 2-4.) Second, the
objection suggests that the Report and Recommendation erred in concluding
that the CBAs do not require that defendant contribute to the Funds for hours
worked by non-Union employees. (See Obj. at 5.) These arguments are
addressed in greater detail below.

17

default.

Bravado Int’l Grp. Merch. Servs., Inc. v. Ninna, Inc.,

655 F. Supp. 2d 177, 186 (E.D.N.Y. 2009) (citation omitted).
Consequently, even absent the recommendation to vacate the
Default, the court must separately evaluate whether entry of a
default judgment represents an appropriate exercise of its
discretion.

In making this determination, the court “is . .

.guided by the same factors that apply to a motion to set aside
entry of default,” but may also consider “numerous” factors
other factors.
omitted).

O’Callaghan, 242 F.R.D. at 73 (citations

The court is mindful that default judgments are

“disfavored,” Pecarsky, 249 F.3d at 174, and a “weapon of last .
. . resort.”

Meehan, 652 F.2d at 277 (citations omitted).

Here, the court finds that the following factors weigh
against entry of a default judgment: defendant has presented a
meritorious defense, the merits of plaintiffs’ substantive
claims are disputable, and proceeding to litigation on the
merits will not prejudice plaintiffs.

See Pecarsky, 249 F.3d at

171 (identifying factors that must be examined in determining
whether to enter a default judgment); Pinaud, 52 F.3d at 1152
n.11 (concluding that district court was “quite right” to deny
entry of default judgment where district court relied in part on
the “disputable merits of [plaintiff’s] claims”).

18

The undersigned judge agrees with the Report and
Recommendation’s analysis of the existence of a meritorious
defense.

Plaintiffs’ objection raises only one argument that is

relevant to the Report and Recommendation’s meritorious defense
analysis.

Specifically, plaintiffs assert, without citation to

any supporting authority, that the CBA’s requirement that nonUnion members be required to join the Union as a condition of
continued employment implicitly requires that defendant
contribute to the Funds for non-Union work.

(See Obj. at 5.)

Even on this unsupported reading of the CBAs, however, defendant
is plainly not required to contribute to the Funds where no
covered work is performed whatsoever.
Further, the complaint indicates that plaintiffs’
assertion that defendant hired non-Union workers to perform
covered work is based entirely on the issuance of DOB permits
and the issuance of checks to “Cash.”
A.)

(Compl. ¶¶ 16, 22 and Ex.

Defendant, however, asserts that it did not perform any

work of the type set forth in Article 1, Section 2 of the CBAs,
and that the permits were for “electrical work to illuminate
signs,” which was performed by a member of the relevant
electricians’ union.

(R&R at 13-14 (citations omitted).)

Nothing in the CBAs, in plaintiffs’ objection, or in any other
document before the court establishes that Article 1, Section 2
19

of the CBAs encompasses all of plaintiff’s operations and,
therefore, it is possible that the purported illumination work
was not subject to the CBAs’ Union employment and Fund
contribution requirements.

Thus, the basis of plaintiffs’

substantive contentions is at least arguably tenuous, and
defendant’s denial that its employees performed any work for
which Union employment and Fund contributions were required is
at least facially plausible in light of the basis for
plaintiffs’ allegations and the CBAs.
Defendant’s meritorious defense indicates also that
plaintiffs’ claims are disputable.

Further supporting this

conclusion, plaintiffs’ accountants’ report states that the
accountants compared defendant’s payroll records to tax filings
and “the contribution base . . . for each participant reported
to the Funds,” and found no indication of contribution
shortfalls using these procedures.

(Compl. Ex. A. at 2-3.)

Additionally, plaintiffs’ argument in their objection
regarding prejudice is unavailing.

Plaintiffs assert that

“vacating the entry of default will only permit [defendant] to
continue to benefit from its breach of the collective bargaining
agreement,” which “undermines the strength of [the] Union’s
collective bargaining relationship with all other signatory
employers.”

(Obj. at 3-4 (citation omitted).)
20

Plaintiffs offer

no support for the proposition that the potential incentives
faced by non-parties with which they have business relationships
suffice to establish prejudice to plaintiffs in this action.
Nor do plaintiffs explain why the fee shifting provisions in the
CBAs and related Declarations of Trust do not suffice to
mitigate the possible harm plaintiffs identify.

(See R&R at 15

(noting fee shifting provisions).)
Moreover, plaintiffs do not assert that the Report and
Recommendation erred in its observation that plaintiffs “have
not pointed out any risk that evidence will be lost, any
increased difficulties of discovery, or how proceeding on the
merits . . . creates a greater opportunity for fraud or
collusion.”

(Id.)

Further, it appears that plaintiffs’

prosecution of this action has been less than diligent, like the
defense of this action.

The undersigned judge agrees that

plaintiffs have not pointed out any of the foregoing risks,
difficulties, or opportunities for fraud, and consequently
concludes, on de novo review, that plaintiffs have not
established prejudice.

See Arthur F. Williams, Inc. v. Helbig,

208 F.R.D. 41, 45 (E.D.N.Y. 2002) (“To establish prejudice in
the context of a default, there must be a showing that ‘the
delay will result in the loss of evidence, create increased
difficulties of discovery, or provide greater opportunity for
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fraud and collusion.’” (quoting Davis v. Musler, 713 F.2d 907,
916 (2d Cir. 1983))).
To recapitulate, defendant has presented a meritorious
defense, the substantive merits of plaintiffs’ claims are
disputable, and proceeding to litigation on the merits will not
prejudice plaintiffs.

Based on these determinations, and in

light of the Second Circuit’s “clear preference . . . for cases
to be adjudicated on the merits,” Pecarsky, 249 F.3d at 174, the
court concludes that, even if the Default were to stand
undisturbed under the law of the case doctrine, entry of default
judgment is not warranted here.
3.

Application to Recommendation to Vacate Default

Although the Second Circuit has not definitively ruled
on the issue, the weight of authority indicates that vacatur of
a default is not dispositive.

E.g., Unger v. Sogluizzo, 673 F.

App’x 250, 252 n.2 (3d Cir. 2016) (“[Defendant’s] motion to
vacate entry of default . . . was not a dispositive motion
because it did not seek to dispose of claims without further
proceedings.”); Burns v. Dailey, 12-CV-0229(GTS)(ATB), 2012 WL
6201831, at *2 n.1 (N.D.N.Y. Dec. 12, 2012) (“[A] motion to
vacate default is non-dispositive in nature.”).

Therefore, a

magistrate judge may decide whether a default should be vacated,
and a district court need only review that determination to
22

ensure that it is not “clearly erroneous or . . . contrary to
law.”

Fed. R. Civ. P. 72(a). 5
Upon review, the court finds no clear error or legal

defect in Judge Kuo’s conclusion that the Default should be
vacated, and would uphold the conclusion even on de novo review.
As set forth above, defendant has presented a meritorious
defense, and moving forward with the instant action on the
merits will not prejudice plaintiffs.

Further, in the Second

Circuit, “[d]efaults are not favored, particularly when the case
presents issues of fact, and doubts are to be resolved in favor
of a trial on the merits.”
omitted).

Meehan, 652 F.2d at 277 (citations

Accordingly, Judge Kuo was correct in determining

that, upon further evaluation of the issues of a meritorious
defense and lack of prejudice, her February 22, 2018 denial of
the Motion to Vacate should be revised.

See Color Tile, 322

F.3d at 167 (noting that earlier decisions in the same case may
be changed where there is, in relevant part, a “need to correct
a clear error.” (citation omitted)).

5

If vacatur of a default is dispositive, then the law of the case
doctrine is inapplicable to this action. The law of the case doctrine
applies only where a court “decides upon a rule of law.” Arizona v.
California, 460 U.S. at 618 (citation omitted). Magistrate judges, however,
may not decide dispositive matters, and must instead “enter a recommended
disposition.” Fed. R. Civ. P. 72(b). No recommended disposition was ever
entered with respect to Judge Kuo’s denial of the Motion to Vacate, and
consequently, if the Motion to Vacate was dispositive, the initial denial was
without effect.

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B.

Import of Collective Bargaining Agreement
In light of the court’s determination that plaintiffs’

arguments regarding the applicability of the law of the case
doctrine do not alter the conclusion that the Default should be
vacated and the Default Judgment Motion denied, the court
readily concludes that plaintiffs’ arguments remaining arguments
are without merit.

Plaintiffs argue, in sum and substance, that

the CBAs require that defendant exclusively hire Union members
to perform covered work, require Union membership as a condition
of continued employment for employees performing covered work,
and pay into the Funds.

(Obj. at 4-5.)

Plaintiffs further

assert that the complaint “alleges clear violations of the
CBA[s] in that [d]efendant has failed to contribute to the Funds
for hours of work covered by the CBA[s] and . . . fail[ed] to
employ Union members to perform the covered work.”

(Id. at 4.)

Plaintiffs’ arguments and assertions regarding the
sufficiency of the complaint and the provisions of the CBAs fail
to address defendant’s meritorious defense that defendant did
not actually perform covered work.

If this defense were

established, it would defeat liability with respect to the
complaint’s allegations.

Establishment of this defense would

also render irrelevant plaintiffs’ argument that defendant must
contribute to the Funds for all covered work regardless of
24

whether the employee performing it is a Union member.
Accordingly, plaintiffs’ arguments regarding the sufficiency of
the complaint and the support it finds in the CBA do not call
into question the Report and Recommendation’s conclusions that
the Default Judgment Motion should be denied and the Default
vacated.
Conclusion
For the foregoing reasons, the court affirms and
adopts the Report and Recommendation in its entirety.
Consequently, in an exercise of the court’s discretion, the
Default Judgment Motion is DENIED, and the default is VACATED.
The parties are respectfully directed to file a joint letter
stating their intentions with respect to this action within
fourteen (14) days of entry of this Order.
SO ORDERED.
Dated:

October 3, 2018
Brooklyn, New York
___________/s/ _______________
Hon. Kiyo A. Matsumoto
United States District Judge

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