98 Civ. 5056 (RLC)
193 F.R.D. 112; 2000 U.S. Dist. LEXIS 205; 45 Fed. R. Serv. 3d
(Callaghan) 1263
COUNSEL:
[**1] For Plaintiffs: ALLYSON L. BELOVIN, LAWRENCE A. KRAVITZ, Of
Counsel, GORLICK, KRAVITZ & LISTHAUS, P.C., New York, New York.
For Defendants: MICHAEL R. STRAUSS, Of Counsel, HOLLANDER, STRAUSS &
MASTROPIETRO, LLP, New York, New York.
JUDGES: ROBERT L. CARTER, U.S.D.J.
OPINIONBY: ROBERT L. CARTER
OPINION: [*113]
BACKGROUND Mason Tenders District
Council Welfare Fund, Pension Fund, and Annuity Fund;
Mason
Tenders Training Fund; New York State Laborers - Employers Cooperation
and Education Trust Fund; New York Laborers' Health and Safety Trust Fund
(collectively "plaintiff Funds"); Building Contractors' Association Industry
Advancement Program; John J. Virga, Director of the plaintiff Funds; and Anthony
Silveri, Business Manager of the
Mason Tenders District Council
of Greater New York ("Union") brought the instant action, pursuant to §§
502(a)(3) and 515 of the Employee Retirement Income Security Act ("ERISA"),
29
U.S.C. §§ 1132(a)(3) & 1145, and § 301 of the Labor Management Act of
1947,
29
U.S.C. § 185 ("the Taft Hartley Act"), for equitable and injunctive relief
under ERISA, and for breach of contract. Plaintiffs brought suit to compel the
defendants [**2] to perform their statutory and contractual
obligation to pay monetary contributions and/or make reports to the plaintiff
Funds, and to compel the defendants to remit dues checkoffs and New York
Laborers' Political Action Committee contributions ("NYLPAC contributions") that
were deducted from the wages of employees, as per written employee
authorizations directing said payments to the Union.
The Defendants: M
& M Contracting & Consulting and M & M Consulting & Contracting,
Inc., d/b/a M & M Contracting & Consulting ("defendant company"
collectively) are for-profit organizations that are doing business in the City
and State of New York. The organizations are also "employers," as defined by §§
3(5) and 515 of ERISA,
29
U.S.C. §§ 1002(5) & 1145. Defendants also are "employers in an industry
affecting commerce," as defined by § 301 of the Taft-Hartley Act,
29
U.S.C. § 185. Michael T. Moscato, Jr., president of the company, has
authority over the payment of the required contributions and over the submission
of the required reports to the plaintiff Funds; he also exercises authority over
payments, deductions, and remittances of dues checkoffs [**3] and
NYLPAC contributions to the Union. As such, Moscato also is an employer within
the meaning of §§ 3(5) and 515 of ERISA, and is an employer within the meaning
of § 301 of the Taft-Hartley Act,
29
U.S.C § 185. See Aff. of Lawrence Kravitz, Esq. in Opp. to Motion n1
("Kravitz Aff.").
- - - - - - - - - - - - - - - - - -Footnotes- -
- - - - - - - - - - - - - - - -
n1 This refers to the Affidavit of
Lawrence Kravitz, Ex. in Opposition to Defendants' Motion to Vacate Default
Judge.
- - - - - - - - - - - - - - - - -End Footnotes- - - - - -
- - - - - - - - - - -
On April 24, 1998, the defendant company was
notified that it had failed to remit dues checkoffs and NYLPAC contributions to
the Union for the period between June 25, 1997, through November 30, 1997;
immediate payment of all delinquencies was demanded. Ex. A, Kravitz Aff. On May
12, 1998, the defendant company was notified that it had failed to remit dues
checkoffs owed to the Union for the period between June 25, 1997, through
November 30, 1997. Full and immediate payment of all dues checkoffs was
demanded. Ex. B, Kravitz Aff. On June 4, 1998, the defendant company was
notified that it [**4] had failed to pay contractually-due fringe
benefit contributions owed to the plaintiff Funds for the period between June
25, 1997, and November 30, 1997. Immediate payment of all fringe benefits
contributions [*114] was demanded. Ex. C, Kravitz Aff. The defendant
company did not respond to these notices and demands, and did not cure the
delinquencies. Plaintiffs therefore instituted the instant action in this court
on July 16, 1998. Kravitz Aff. at 8.
On July 21, 1998, Timothy M. Botti,
a licensed process server, served the defendant company with the summons and
complaint of this action at the company's place of business: 159 Mallory Avenue,
Jersey City, New Jersey. Ex. D, Kravitz Aff. Botti also served a copy of the
summons and complaint on Moscato by personally delivering the documents to Tom
Rey, a man who identified himself to the process server as an agent authorized
by appointment to receive service at that address. Ex. E, Kravitz Aff. On July
22, 1998, Botti served another copy of the summons and complaint on Moscato by
first class mail; the documents were addressed to Michael T. Moscato, Jr., 159
Mallory Avenue, Jersey City, New Jersey, and were placed in a postpaid envelope
marked [**5] personal and confidential. Id. Proof of service was
filed with the court on July 29, 1998. Kravitz Aff. at 8.
Moscato and
the defendant company did not file an answer to the complaint and on August 21,
1998, the plaintiffs moved for an order granting judgment against the defendants
by default. Id. Plaintiffs mailed copies of their motion for default to
defendants at 159 Mallory Avenue, Jersey City, New Jersey. Ex. F, Kravitz Aff.
No papers in opposition to the motion were filed and on September 23, 1998, a
default judgment was entered which required defendants to pay the plaintiff
Funds $ 37,656.76. The payment provided by the default judgment covered the
amounts the defendant company owed in delinquency to the plaintiff Funds,
statutory damages, interest, costs and attorneys' fees; it also included a $
2,825.10 payment to the plaintiff Union for the amount in delinquency to the
Union and for interest. Ex. G, Kravitz Aff.
On September 23, 1999,
defendants moved to vacate the default judgment pursuant to Rules 60(b)(1) and
(6), F.R. Civ. P., as to all defendants, claiming that their inaction
constituted excusable neglect and that they had a meritorious defense.
Defendants [**6] also moved pursuant to Rule 60(b)(4), F.R. Civ. P.,
to vacate the default judgment as to Moscato, on the ground that the judgment
was void because the court issuing the judgment lacked personal jurisdiction
over Moscato. Aff. of Michael Strauss, Esq. in Support of Motion. n2
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - -
- -
n2 Refers to the Affidavit of Michael Strauss, Esq. in Support of
Motion to Vacate Default Judgment.
- - - - - - - - - - - - - - -
- -End Footnotes- - - - - - - - - - - - - - - - -
In support of their
motion to vacate the default judgment, defendants assert that Moscato delivered
the summons and complaint in this action to defendants' former counsel, Kimberly
Hintze, Esq., and was informed that Hintze would file a timely answer and defend
the action on the merits. However, Hintze failed to file an answer, and default
judgment was entered against defendants. Defendants claimed that they only
learned of the events leading to the default judgment in June, 1999. Defendants
further contend that the plaintiffs are not entitled to the fringe benefit
contributions and dues payments they claim they are owed because the defendants
[**7] paid these monies to another union for defendants' employees
who were members of that union. Aff. of Moscato, Jr.
DETERMINATION I. 
Rule 55(c), F.R. Civ. P., provides that a default judgment may be
set aside under Rule 60(b), F.R. Civ. P. on several grounds: under Rule
60(b)(1), for "mistake, inadvertence, surprise or excusable neglect," under Rule
60(b)(4), when "the judgment is void," and under Rule 60(b)(6) for "any other
reason justifying relief from the operation of the judgment."
The court determines whether a default judgment should be set aside
pursuant to Rules 60(b)(1) and (6), by assessing whether (1) the defendant's
default was willful; (2) whether the defendant has a meritorious defense; and
(3) the level of prejudice that the [*115] non-defaulting party may
suffer as a result of the default being set aside. See
Enron
Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). Even aside from these
considerations, judgments by default are not favored as strong public policy
considerations counsel that courts should, when possible, resolve disputes on
the merits rather than on technical pleading deficiencies. See id. Nonetheless,
"courts have an [**8] interest in expediting litigation [and] abuses
of process may be prevented by enforcing those defaults that arise from
egregious or deliberate conduct."
Am.
Alliance Ins. Co. Ltd. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996).
The "excusable neglect" standard is construed generously.
Id.
at 58. In order to determine whether it applies, the court must ascertain
whether defendant's behavior leading to the default can be characterized as
willful. See Salomon v. 1498 Third Realty Co., 148 F.R.D. 127, 129 (E.D.N.Y.
1993). Ultimately, however, the decision as to whether a default judgment should
stand is committed to the sound discretion of the district court, as that court
is in the best position to weigh the facts of the case and assess the
defendant's conduct. See
Davis
v. Musler, 713 F.2d 907, 912 (2d Cir. 1983). Defendants claim that
their conduct amounts to excusable neglect under Rule 60(b)(1), F.R. Civ. P.,
because their sole error was failing to timely recognize that their counsel
negligently failed to file an answer in this action. However,
in most circumstances, under the Rule 60(b) "a client is not . . .
excused from [**9] the consequences of his attorney's nonfeasance or
negligence." See, e.g.,
Sasso
v. M. Fine Lumber Co., Inc., 144 F.R.D. 185, 189 (E.D.N.Y. 1992) (declining
to extend relief to a client under Rule 60(b)(1) merely because his attorney
provided erroneous advice);
Nemaizer
v. Baker, 793 F.2d 58, 62 (2d Cir. 1986) (declining to extend Rule 60(b)(1)
relief to a client for counsel's error in judgment);
Dominguez
v. United States, 583 F.2d 615, 618 (2d Cir. 1978)(declining to offer a
client relief under Rule 60(b)(1) when his counsel failed to appear at a court
hearing).
Given the longstanding rule that proof of an attorney's
negligence or malfeasance does not establish excusable neglect, defendants'
assertions about their counsel's negligence fail to constitute excusable neglect
within the meaning of Rule 60(b)(1). Moscato alleges that when he received the
summons and complaint in July, 1998, he gave the documents to defendants'
counsel and he believed that an answer had been filed. However, defendants had
ample opportunity to learn that the answer had not been filed.
The
summons and complaint were mailed in July, 1998, to defendants' Mallory
[**10] address, (Ex. D, Kravitz Aff.) and defendants do not claim
that these documents did not arrive at their place of business. Second,
plaintiffs mailed a copy of their notice of motion for entry of default judgment
to defendants at the defendants' place of business on August 21, 1998. (Ex. F,
Kravitz Aff.) Even if the court accepts defendants' contention that they first
learned of the default judgment in June, 1999, there is no showing that
defendants made any inquiry of counsel about the status of the case between
July, 1998, and June, 1999. Moreover, after learning of the default judgment in
June, 1999, defendants did not initiate this proceeding to vacate the default
judgment until September 23, 1999. These facts compel the court's finding that
defendants' default was both willful and fatally dilatory.
Defendants'
claim of a meritorious defense similarly fails to survive serious scrutiny.
Article VI, Section 3 of the collective bargaining agreement provides that all
interior demolition workers may authorize a dues checkoff and the monies
deducted from their checks will be paid over to the Union. (Ex. A, Aff. of
Anthony Silveri in Opp. to Motion, at 15.) n3 Additionally, Article VI,
[**11] Sections 4 through 9 of the agreement provide for wage
benefit contributions to the various plaintiff Funds; (Section 4, Welfare Fund;
Section 5, Pension Fund; Section 6, Annuity Fund; Section 7, Training Fund;
Section 8, New York State Laborers' - Employers' Cooperation [*116]
and Education Trust Fund; Section 9, Health and Safety Trust Fund) on behalf of
interior demolition workers, and Section 10 of the agreement provides for NYLPAC
contributions from the wages of employees who authorize same to be paid over to
the Union. Id. at 15-18. The agreement is signed by M & M Contracting &
Consulting, Michael T. Moscato, Jr., President, 159 Mallory Ave., Jersey City,
New Jersey. (Id. at 41.) The agreement also provides for specific welfare,
pension and annuity fund contributions on behalf of eligible Union employees,
but this is in addition to the contributions required for interior demolition
workers. Id., sections 4(b), 5(b), 6(b) at 16-17.
- - - - - - - -
- - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n3 This
refers to the Affidavit of Anthony Silveri in Opposition to Motion to Vacate
Default Judgment.
- - - - - - - - - - - - - - - - -End Footnotes-
- - - - - - - - - - - - - - - - [**12]
Defendants' claim
that they made contributions on behalf of members of another union does not
suffice to meet their obligation to make contributions to the plaintiff Funds
and the Union on behalf of interior demolition workers, no matter what their
union affiliation. Under the collective bargaining agreement defendants are
clearly obligated to make contributions to the plaintiff Funds and makes dues
checkoff payments to the Union. To vacate the default judgment and allow the
defendants to litigate the issue here would merely prolong the inevitable with
nothing gained, and would waste time and resources.
Because the court
has concluded that defendants have failed to establish that their failure to
respond to the complaint constituted excusable neglect or that they have a
meritorious defense against the claims in the default judgment, the court denies
their motion, pursuant to Rule 60(b)(1) & (6), F.R. Civ. P., to vacate the
default judgment.
II. Moscato argues that the
default judgment entered against him is void pursuant to Rule 60(b)(4), F.R.
Civ. P., because he was not served personally with the documents in this action
and, therefore, the court lacks personal jurisdiction [**13] over
him.
Service of process in federal actions is governed by Rule 4(e)(1),
F.R. Civ. P.; which provides that a party may serve an individual in any
judicial district of the United States pursuant to the law of the forum state.
N.Y.C.P.L.R § 308 provides that personal service may be made on a
natural person within the State of New York by delivering the summons to a
person of suitable age and discretion at the actual place of business of the
person to be served, and by mailing the summons via first class mail in an
envelope marked personal and confidential to the person to be served at his
actual place of business. The delivery and mailing of the summons and complaint
must be effected within twenty days of each other. Id.
Additionally, as
Moscato is
a non-domiciliary of New York and was served out of state, the
court can exercise personal jurisdiction over him if he satisfies the
transacting business test allowing for long arm jurisdiction under N.Y.C.P.L.R.
§ 302. Specifically,
section 302(a)(1) provides that personal jurisdiction may be had
over a non-domiciliary "who in person or through an agent transacts any business
within the state or contracts anywhere to supply goods [**14] or
services within the state . . . [when] the cause of action is related to the
transaction or contract."
Falik
v. Smith, 884 F. Supp. 862, 866 (S.D.N.Y. 1995) (Carter, J.) (discussing
N.Y.C.P.L.R. § 302(a)(1)).
Moscato meets both categories for service on
a non-domiciliary under N.Y.C.P.L.R. § 302(a)(1). For one, the company he works
for performs work in New York City. Second, he as company representative, is
required to make contributions to the various plaintiff Funds, which maintain
offices at 32 West 18th Street, New York, New York, and the plaintiff Funds are
suing the Moscato because of his actions regarding these contributions. Since
the evidence establishes that the court may exercise personal jurisdiction over
Moscato pursuant to the transacting business test under § 302(a)(1), the next
consideration is whether he was properly served in compliance with N.Y.C.P.L.R.
§ 308.
The plaintiff's process server's affidavit indicates that the
summons was delivered on July 21, 1998, to Tomas Rey, a man the process server
describes as "a white male, approximately 52 years of age;" the process server
further attests that Rey was found at 159 Mallory Avenue in [**15]
Jersey City, New Jersey, the location which is Moscato's actual
[*117] place of business. n4 (Botti Aff. at 1.) Also, plaintiffs
provided evidence that on July 22, 1998, the summons was mailed to Moscato,
first class, in an envelope marked personal and confidential. Id. Given these
facts, it is clear that all of the requirements under N.Y.C.P.L.R. § 308 for
effecting service on Moscato under were met.
- - - - - - - - - -
- - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n4 Botti
Aff. refers to the Affidavit of Timothy M. Botti, Exhibit E, Kravitz Aff.
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - -
- - - - - - -
The court's conclusion that Moscato was served in
accordance with N.Y.C.P.L.R. §§ 302 and 308 establishes that the court issuing
the default judgment had personal jurisdiction over him, and therefore
defendants' motion to vacate the default judgment under Rule 60(b)(4), F.R. Civ.
P. must fail.
III. Section 502(g)(2) of ERISA,
29
U.S.C § 1132(g)(2)(D) provides for an award of reasonable attorneys' fees
and costs incurred in the collection of unpaid fringe benefit contributions. See
Alyeska
Pipeline Svce Co. v. Wilderness Society, 421 U.S. 240, 269-71, 44 L. Ed. 2d 141,
95 S. Ct. 1612 (1975); [**16]
San
Pedro Fishermen's Welfare Trust Fund Local 33 v. Di Bernardo, 664 F.2d 1344,
1346 (9th Cir. 1982). Plaintiffs should submit an application for their
reasonable attorneys fees and costs with supporting documentation.
IT IS SO ORDERED. DATED: New York, New
York
January 13, 2000
ROBERT L. CARTER
U.S.D.J.
Civil
Procedure : Early Pretrial Judgments : Default : Relief From Default 