International Brotherhood of Electrical Workers Local Union No. 1249 Pension and Insurance Funds et al v. South Buffalo Electric, Inc. et al
MEMORANDUM-DECISION AND ORDER: The Court hereby ORDERS that Plaintiffs' motion for default judgment as to South Buffalo Electric, Co. (Dkt. No. 32) is DENIED with leave to refile; and the Court further ORDERS that Plaintiffs' motion for d efault judgment as to Arnold A. Paolini (Dkt. No. 51) is GRANTED; and the Court further ORDERS that the Clerk of the Court shall enter judgment in the amount of $133,485.33 against Arnold A. Paolini, consisting of (1) $104,892.99 in unpaid contributions, (2) $4,972.13 in interest on unpaid and untimely paid contributions, (3) $20,820.40 in attorneys fees, and (4) $2,799.81 in costs; and the Court further ORDERS that the Clerk of the Court serve a copy of this Memorandum-Decision and Order on all parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 6/8/17. (ban)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
INTERNATIONAL BROTHERHOOD OF
ELECTRICAL WORKERS LOCAL UNION
NO. 1249 PENSION AND INSURANCE FUNDS,
by Daniel R. Dafor, as Administrator, et al.,
SOUTH BUFFALO ELECTRIC, INC., ARNOLD
J. PAOLINI, ARNOLD A. PAOLINI,
BLITMAN, KING LAW FIRM
443 North Franklin Street Suite 300
Syracuse, New York 13204
Attorneys for Plaintiffs
JENNIFER A. CLARK, ESQ.
KEENAN LAW CENTRE, P.C.
3123 Cloverbank Road
Hamburg, New York 14075
Attorney for Defendant Arnold J. Paolini
JOHN J. KEENAN, ESQ.
Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
On June 4, 2015, Plaintiffs International Brotherhood of Electrical Workers Local Union
No. 1249 Insurance Fund ("Insurance Fund"), International Brotherhood of Electrical Workers
Local Union No. 1249 Pension Fund ("Pension Fund"), National Electrical Benefit Fund, New
York State Lineman's Safety Training Fund ("Safety Training Fund"), Northeastern Joint
Apprenticeship and Training Fund (collectively, the "Funds"), and International Brotherhood of
Electrical Workers Local Union No. 1249 (the "Union") commenced this action against
Defendants South Buffalo Electric, Inc. ("South Buffalo"), Arnold J. Paolini, and Arnold A.
Paolini for failing to timely remit benefit contributions and deductions under the Employee
Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., and the Labor
Management Relations Act of 1947 ("LMRA"), 29 U.S.C. § 1985. Presently before the Court are
Plaintiffs' motions for default judgment as to Defendants South Buffalo and Arnold A. Paolini.
See Dkt. Nos. 32, 51. As set forth below, the motion against Arnold A. Paolini is granted, and the
motion against South Buffalo is denied.
Defendant South Buffalo is a New York corporation and Defendants Arnold A. Paolini
and Arnold J. Paolini are managers of South Buffalo. See Dkt. No. 36 at ¶¶ 13-15.
Plaintiffs—who are fiduciaries of the Funds and the business manager of the Union—allege that
South Buffalo is party to certain agreements and trusts requiring it to remit contributions and
deductions to Plaintiffs, and that South Buffalo has failed to do so. See id. at ¶¶ 21-26. Plaintiffs
further allege that Arnold A. Paolini and Arnold J. Paolini are liable for South Buffalo's failure to
pay contributions and deductions to the Funds and the Union. See id. at ¶¶ 52, 82.
The original complaint in this action named only South Buffalo and Arnold J. Paolini as
defendants. See Dkt. No. 1. After filing the original complaint, Plaintiffs requested an entry of
default as to South Buffalo and Arnold J. Paolini, Dkt. No. 7, and that request was granted by the
Clerk of the Court, Dkt. No. 9. On September 9, 2016, Plaintiffs filed a motion for default
judgment against Arnold J. Paolini. See Dkt. No. 25. But on October 10, 2016, Arnold J. Paolini
filed an answer, see Dkt. No. 30, and after a telephone conference the Court vacated the entry of
default as to Arnold J. Paolini and terminated the default judgment filed against him, see Dkt. No.
On November 1, 2016, Plaintiffs filed a motion for default judgment against South
Buffalo. See Dkt. No. 32. Two weeks later, Plaintiffs filed an amended complaint naming South
Buffalo, Arnold J. Paolini, and Arnold A. Paolini as Defendants, but Plaintiffs did not withdraw
their prior motion for default judgment against South Buffalo. See Dkt. No. 36. Arnold J. Paolini
answered the amended complaint, see Dkt. No. 39, and the Clerk of the Court granted entries of
default as to Arnold A. Paolini and South Buffalo, see Dkt. No. 48. On February 3, 2017,
Plaintiffs filed a motion for default judgment against Arnold A. Paolini but not South Buffalo.
See Dkt. No. 51.
Standard of Review
"Generally, 'Federal Rule of Civil Procedure 55 provides a two-step process that the Court
must follow before it may enter a default judgment against a defendant.'" United States v.
Simmons, No. 5:10-CV-1272, 2012 WL 685498, *2 (N.D.N.Y. Mar. 2, 2012) (quoting Robertson
v. Doe, No. 05-CV-7046, 2008 WL 2519894, *3 (S.D.N.Y. June 19, 2008)). "'First, under Rule
55(a), when a party fails "to plead or otherwise defend . . . the clerk must enter the party's
default."'" Id.; see also Fed. R. Civ. P. 55(a). "'Second, pursuant to Rule 55(b)(2), the party
seeking default is required to present its application for entry of judgment to the court.'" Id.
"'Notice of the application must be sent to the defaulting party so that it has an opportunity to
show cause why the court should not enter a default judgment.'" Id.; see also Fed. R. Civ. P.
"When a default is entered, the defendant is deemed to have admitted all of the
well-pleaded factual allegations in the complaint pertaining to liability." Bravado Int'l Grp.
Merch. Servs., Inc. v. Ninna, Inc., 655 F. Supp. 2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound
Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). "While a default
judgment constitutes an admission of liability, the quantum of damages remains to be established
by proof unless the amount is liquidated or susceptible of mathematical computation." Flaks v.
Koegel, 504 F.2d 702, 707 (2d Cir. 1974) (citations omitted); see also Bravado Int'l, 655 F. Supp.
2d at 189-90 (citation omitted). "[E]ven upon default, a court may not rubber-stamp the
non-defaulting party's damages calculation, but rather must ensure that there is a basis for the
damages that are sought." Overcash v. United Abstract Group, Inc., 549 F. Supp. 2d 193, 196
(N.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d
Cir. 1999)). "The burden is on the plaintiff to establish its entitlement to recovery." Bravado
Int'l, 655 F. Supp. 2d at 189 (citing Greyhound Exhibitgroup, Inc., 973 F.2d at 158). "While 'the
court must ensure that there is a basis for the damages specified in a default judgment, it may, but
need not, make the determination through a hearing.'" Id. at 190 (citation omitted).
South Buffalo Electric, Inc.
Plaintiffs filed the motion for default judgment against South Buffalo on November 1,
2016. On November 14, 2016, Plaintiffs filed the amended complaint, which became the
operative pleading in this action. See Shields v. Citrytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d
Cir. 1994) ("It is well established that an amended complaint ordinarily supercedes the original,
and renders it of no legal effect."). Plaintiffs requested a second entry of default against South
Buffalo after filing the amended complaint, see Dkt. No. 44, but they did not file a second motion
for default judgment against South Buffalo, see Dkt. No. 54.
Plaintiffs' motion for default judgment against South Buffalo must be denied as moot
because it was filed prior to the operative pleading in this action. Several courts have held that
"once the amended complaint becomes the operative complaint, a motion for default judgment
made on a prior pleading should be denied." Allstate Ins. Co. v. Yadagarov, No. 11-CV-6187,
2014 WL 860019, *8 (E.D.N.Y. Mar. 5, 2014) (collecting cases). Plaintiffs' motion for default
judgment against South Buffalo, which was made on the original complaint, became moot when
Plaintiffs filed the amended complaint. Although South Buffalo has not answered or otherwise
moved in response to the amended complaint, the Court must deny Plaintiffs' prior default motion
as moot because "procedural irregularities warrant denial of a motion for default judgment; the
court cannot simply overlook a technical error." Id. at *13. Plaintiffs' motion for default
judgment against South Buffalo is therefore denied with leave to refile.
Arnold A. Paolini
In the present matter, the summons and amended complaint were properly served on
Arnold A. Paolini on November 28, 2016, and the Clerk of the Court entered default against him
on January 3, 2017. See Dkt. Nos. 40, 48. Because Arnold A. Paolini has failed to appear in this
action, he is deemed to have admitted all well pleaded, relevant factual allegations for the
purposes of establishing liability. See Bravado Int'l, 655 F. Supp. 2d at 188; see also United
States v. Beam, No. 6:12-CV-0087, 2012 WL 1802316, *2 (N.D.N.Y. May 17, 2012) ("By failing
to answer plaintiff's complaint or oppose this motion, defendant has effectively conceded that [it]
is bound by the terms of the [agreement it] entered into with plaintiff . . . .").
Under ERISA, an employer that is required to make contributions to a multiemployer
benefit plan "must make such contributions in accordance with the terms and conditions of such
plan or [collectively bargained] agreement." 29 U.S.C. § 1145. Here, Plaintiffs allege that South
Buffalo is bound by an agreement requiring it to pay fringe benefit contributions to the Funds for
each hour worked by certain employees, and to deduct from certain employees' wages specified
amounts to be paid to the Union. See Dkt. No. 36 at ¶¶ 21-24. South Buffalo failed to make the
required contributions and deductions and is therefore liable to Plaintiffs for those unpaid
contributions and deductions. See id. at ¶ 27.
Plaintiffs also claim that Arnold A. Paolini is a fiduciary of South Buffalo, and that he is
personally liable for South Buffalo's unpaid contributions to the Pension, Insurance, and Safety
Training Funds. See Dkt. No. 51-31 at 5. Under ERISA, in order to establish that an individual is
personally liable for unpaid contributions as a fiduciary, a plaintiff must show that "(1) the unpaid
contributions were plan assets and (2) [the defendant] exercised a level of control over those
assets sufficient to make him a fiduciary." In re Halpin, 566 F.3d 286, 289 (2d Cir. 2009).
First, "[w]hile unpaid employer contributions are not ordinarily assets of the plan, the
parties to an agreement are free to provide otherwise." Trs. of the Road Carriers Local 707
Welfare Fund v. Goldberg, No. 08-CV-0884, 2009 WL 3497493, *3 (E.D.N.Y. Oct. 28, 2009). In
this case, the trusts and collections policies for the Pension, Insurance, and Safety Training Funds
state that withheld contributions constitute plan assets. See Dkt. No. 51-3 at ¶ 6; Dkt. No. 51-6 at
¶ 9. South Buffalo is bound by those trusts and collections policies. See id. Therefore, the
unpaid contributions were plan assets. Second, according to Plaintiffs, Arnold A. Paolini ran
South Buffalo's day-to-day operations and determined whether money would be paid to the funds.
See Dkt. No. 51-31 at 6. Therefore, Plaintiffs have established that Arnold A. Paolini may be
held personally liable under ERISA.
"A fiduciary that unlawfully withholds plan assets is 'personally liable to make good to
such plan any losses to the plan.'" Bricklayers & Allied Craftworkers Local 2, Albany N.Y.
Pension Fund v. Moulton Masonry & Constr., 779 F.3d 182, 188 (2d Cir. 2015) (quoting 29
U.S.C. § 1109(a)). In this case, Plaintiffs seek to recover unpaid contributions and deductions,
prejudgment interest, attorneys fees, audit fees, and costs from Arnold A. Paolini. See Dkt. No.
51-31 at 3.
a. Unpaid Contributions
Plaintiffs claim that Arnold A. Paolini is liable for unpaid contributions owed to the
Pension, Insurance, and Safety Training Funds. See id. at 8. The total amount consists of
$43,840.39 owed to the Insurance Fund, $55,197.74 owed to the Pension Fund, and $5,854.86
owed to the Safety Training Fund for the period of January 1, 2012 through January 31, 2017.
See Dkt. No. 51-25 at ¶¶ 11-12. After reviewing Plaintiffs' motion and supporting
documentation, the Court awards Plaintiffs $104,892.99 in unpaid contributions.
Prejudgment interest may constitute appropriate relief against a fiduciary under 29 U.S.C.
§ 1109(a). Moulton Masonry, 779 F.3d at 190. The decision of whether to grant prejudgment
interest is at the discretion of the district court, but the court must "explain and articulate its
reasons for any decision regarding prejudgment interest." Id. (quoting Henry v. Champlain
Enters., Inc., 445 F.3d 610, 622-23 (2d Cir. 2006)). "Prejudgment interest is intended to serve 'as
compensation for the use of money withheld' and to put 'the plan in the position it would have
occupied but for the breach.'" Upstate N.Y. Eng'rs Health Fund v. Oneidaview Pile Driving, Inc.,
No. 5:15-CV-512, 2017 WL 1483446, *5 (N.D.N.Y. Apr. 25, 2017) (quoting Diduck v. Kaszycki
& Sons Contractors, Inc., 974 F.2d 270, 286 (2d Cir. 1992)). "Assessing the appropriate amount
of interest requires a comparison of what the plan earned during the time in question and what it
would have earned had the money lost due to the breach been available." Diduck, 974 F.2d at
Here, Plaintiffs request $4,972.13 in interest on unpaid and untimely paid contributions to
compensate for lost investment income from 2009 through 2016. See Dkt. No. 51-25 at ¶ 13.
After reviewing Plaintiffs' submissions, the Court finds this sum reasonable in order to make
Plaintiffs whole for lost investment income.
c. Unpaid Wage Assessments
Plaintiffs assert that South Buffalo is liable under New York Lien Law for misallocating
trust assets that should have been paid to the Union. See Dkt. No. 51-31 at 12. Further, Plaintiffs
claim that Arnold A. Paolini "breached his fiduciary duty under the New York Lien Law to the
employees and Plaintiff Union and, therefore, is personally liable for the debt." Id. Plaintiffs
seek $5,0311.54 plus interest for these unpaid working assessments.
"[T]he primary purpose of the Lien Law is to ensure that 'those who have directly
expended labor and materials to improve real property [or a public improvement] at the direction
of the owner or a general contractor' receive payment for the work actually performed." Canron
Corp. v. City of New York, 89 N.Y.2d 147, 155 (1996) (quoting West-Fair Elec. Contrs. v. Aetna
Cas. & Sur. Co., 87 N.Y.2d 148, 157 (1995)). "To ensure this end, the Lien Law establishes that
designated funds received by owners, contractors and subcontractors in connection with
improvements of real property are trust assets . . . ." Aspro Mech. Contracting, Inc. v. Fleet Bank,
N.A., 805 N.E. 1037, 1039 (N.Y. 2004). Any application of trust assets "for any purpose other
than the trust purposes of that trust" creates civil and potentially criminal liability. N.Y. Lien
Law § 79-a(1).
Section 77 requires that any action to enforce a trust arising under the New York Lien
Law must be brought "in a representative action brought for the benefit of all beneficiaries of the
trust." N.Y. Lien Law § 77(1). In this case, however, Plaintiffs did not file the complaint as a
class action and therefore cannot recover under the New York Lien Law. See U.S. Fidelity and
Guar. Co. v. Madison Fin. Corp., No. 01-CV-3998, 2002 WL 31731020, *3-5 (S.D.N.Y. Dec. 4,
2002). When plaintiffs fail to file New York Lien Law suits as class actions, courts generally
grant an opportunity to amend. See e.g. ADCO Elec. Corp. v. McMahon, 38 A.D.3d 805, 806-07
(2d Dep't 2007) (2d Dep't 2007) ("[A]n action to enforce a trust pursuant to Lien Law § 77 must
be brought as a class action, [but] the failure to do so is not fatal, and may be cured."). However,
at this stage in the litigation, the Court finds that amending the complaint to assert it as a class
action would not be appropriate. Therefore, Plaintiffs' request for damages under the New York
Lien Law is denied.
d. Attorneys' Fees and Costs
In an ERISA action involving delinquent contributions, "the court in its discretion may
allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132(g)(1).
"[A] district court must begin its § 1132(g)(1) analysis by determining whether a party has
achieved 'some degree of success on the merits,' but it is not required to award fees simply
because this pre-condition has been met." Toussaint v. JJ Weiser, Inc., 648 F.3d 108, 110 (2d Cir.
2011) (quoting Hardt v. Reliance Standard Life Ins. Co., 500 U.S. 242, 254 (2010)). Here,
Plaintiffs have achieved success on the merits, and the Court finds that an award of attorneys' fees
Plaintiffs request $33,105.50 in attorneys' fees and $2,799.81 in costs. See Dkt. No. 51-19
at ¶¶ 14, 17. In support of their request, Plaintiffs have submitted a detailed narrative of legal
services showing that 140.33 attorney and paralegal hours were spent on this matter. After
reviewing the time records, the Court finds that the amount of time spent by Plaintiffs' attorneys
was reasonable. However, the Court finds that Plaintiffs' requested hourly rates of $290-$309 for
attorneys and $160-$175 for paralegals are too high.
In determining the reasonableness of attorneys' fees rates, the Second Circuit has held that
the court is "to bear in mind all of the case-specific variables that [the courts] have identified as
relevant to the reasonableness of attorney's fees in setting a reasonable hourly rate," which is "the
rate a paying client would be willing to pay." Arbor Hill Concerned Citizens Neighborhood Ass'n
v. County of Albany, 522 F.3d 182, 190 (2d Cir. 2008). The relevant factors for the court to
consider include the complexity and difficulty of the case, the resources required for effective
prosecution of the case, the case's timing demands, the attorney's interest in achieving the ends of
the litigation, the nature of representation, and the type of work involved in the case. See id. at
In similar actions to recover unpaid contributions under ERISA, this Court has found that
rates of $210 per hour for experienced attorneys and $80 per hour for paralegals are appropriate.
See I.B.E.W. Local 910 Welfare, Annuity & Pension Funds v. Grayco Elec., Inc., No. 7:12-CV652, 2013 WL 495638, *4 (N.D.N.Y. Feb. 7, 2013); Upstate N.Y. Eng'rs Health Fund ex rel.
Harrigan v. Ransom, No. 5:13-CV-1434, 2015 WL 145441, *5 (N.D.N.Y. Jan. 12, 2015). Other
courts in the Northern District have awarded fees at the same rates in ERISA cases. E.g. Upstate
N.Y. Eng'rs Health Fund v. FMC Demolition, Inc., No. 5:13-CV-1307, 2015 WL 401113, *7
(N.D.N.Y. Jan. 28, 2015). The Court awards those same rates in this case. Therefore, the Court
awards Plaintiffs $20,820.40 in attorneys' fees, consisting of $15,498 for attorney work (73.8
hours) and $5,322.40 for paralegal work (66.53 hours). Additionally, the Court has reviewed
Plaintiffs' request for $2,799.81 in costs and finds it reasonable.
e. Audit Fees
Plaintiffs also seek audit fees of $15,199.25. See Dkt. No. 51-31 at 14. "Requests for
audit fees are 'generally determined by utilizing the same standards the court applies in awarding
attorneys' fees.'" Teamsters Local 814 Welfare Fund v. Dahill Moving & Storage Co., 545 F.
Supp. 2d 260, 269 (E.D.N.Y. 2008) (quoting King v. Unique Rigging Corp., No. 01-CV-3797,
2006 WL 3335011, *5 (E.D.N.Y. Oct. 27, 2006)). Accordingly, a party requesting audit fees
must provide sufficient information to allow a court to determine the reasonableness of the fees
requested. Several courts in this circuit have denied audit fees in ERISA actions where the
plaintiffs have failed to provide detailed records of the work that was performed by auditors. See
Oneidaview Pile Driving, 2017 WL 1483446 at *4 (denying audit fees where the plaintiffs
provided an invoice from their auditor stating the number of hours worked without specifying
what work was performed); Eng'rs Joint Welfare Fund v. C. Destro Dev. Co., Inc., 178 F. Supp.
3d 27, 36 (N.D.N.Y. 2016) (same); Dahill Moving & Storage Co., 545 F. Supp. 2d at 269 (same).
In this case, Plaintiffs request $15,199.25 in audit fees. See Dkt. No. 51-31 at 14. To
support that request, Plaintiffs provide an affidavit from their auditor and a series of invoices from
his auditing firm. See Dkt. No. 51-18. But the invoices list only the date, the number of hours
worked, and the title "South Buffalo Electric, Inc."; they say nothing about the specifics of the
work that was performed. See id. Therefore, the Court is not able to determine whether the audit
fees Plaintiffs request are reasonable, and Plaintiffs' request for audit fees is denied.
After carefully reviewing the entire record in this matter, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that Plaintiffs' motion for default judgment as to South Buffalo Electric, Co.
(Dkt. No. 32) is DENIED with leave to refile; and the Court further
ORDERS that Plaintiffs' motion for default judgment as to Arnold A. Paolini (Dkt. No.
51) is GRANTED; and the Court further
ORDERS that the Clerk of the Court shall enter judgment in the amount of $133,485.33
against Arnold A. Paolini, consisting of (1) $104,892.99 in unpaid contributions, (2) $4,972.13 in
interest on unpaid and untimely paid contributions, (3) $20,820.40 in attorneys fees, and (4)
$2,799.81 in costs; and the Court further
ORDERS that the Clerk of the Court serve a copy of this Memorandum-Decision and
Order on all parties in accordance with the Local Rules.
IT IS SO ORDERED.
Dated: June 8, 2017
Albany, New York
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