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Service Employees International Union National Industry Pension Fund v. Liberty House Nursing Home of Jersey City, Inc.

United States District Court, District of Columbia

February 8, 2017

Service Employees International Union National Industry Pension Fund, et al. Plaintiffs,
v.
Liberty House Nursing Home of Jersey City, Inc., Defendant.

          MEMORANDUM OPINION

          AMIT P. MEHTA UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Plaintiff Service Employees International Union National Industry Pension Fund (the “Pension Fund”) is a multiemployer pension plan within the meaning of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Defendant Liberty House Nursing Home of Jersey City, Inc., which formerly operated a nursing home in Jersey City, New Jersey, is a participating employer in the Pension Fund. The Pension Fund and its Trustees (collectively, “Plaintiffs”) brought this action under ERISA, alleging that Defendant made deficient and late payments under the pension plan, underreported employees' salaries in monthly reports used to calculate employer contributions, and neglected to make withdrawal liability payments, which are assessed when an employer prematurely withdraws from a plan. Plaintiffs sought deficient and late contributions, withdrawal liability, liquidated damages, surcharges owed under the Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (2006), interest, and attorney's fees and costs.

         Although properly served, Defendant failed to respond to the Complaint, and the Clerk of the Court entered default on August 23, 2016. Plaintiffs then moved for default judgment, seeking the relief requested in the Complaint. For the reasons discussed below, the court grants Plaintiffs' Motion for Default Judgment.

         II. BACKGROUND

         A. Factual Background

         1.Contractual History

         At all times relative to this action, Service Employees International Union Healthcare 1199 New Jersey (the “Union”) was the collective bargaining representative for full-time and part-time caregiver and healthcare employees at Defendant's nursing home in Jersey City, New Jersey. Compl., ECF No. 1 [hereinafter Compl.], at 3-4. In March 2008, the Union entered into a collective bargaining agreement (the “2008 Agreement”) with Defendant and several other nursing homes that governed the period from March 13, 2008, through February 28, 2013. Id.; Compl., Ex. 1, ECF No. 1-3 [hereinafter 2008 Agreement]; Pls.' Mot. for Default J., ECF No. 7 [hereinafter Pls.' Mot.], Decl. of Kenneth J. Anderson, Jr., ECF No. 7-3 [hereinafter Anderson Decl.], ¶ 4. In 2012, the Union reopened negotiations with the employers over the terms of the agreement for its final year, which it was authorized to do under the agreement, [1]but after both sides failed to reach a resolution, the parties submitted the matter to arbitration. Compl., Ex. 2, ECF No. 1-4 [hereinafter 2012 Agreement], at 2.[2] In November 2012, an arbitrator who was authorized by the agreement to issue a final and binding resolution imposed a collective bargaining agreement on the parties, effective from March 1, 2012, through June 30, 2016 (the “2012 Agreement”). Anderson Decl. ¶ 4; 2008 Agreement art. 34, § 1; 2012 Agreement at 13.

         Under the 2008 Agreement, Defendant agreed to contribute 1.5 percent of each covered employee's gross monthly wages to the Pension Fund starting in 2008. Compl. at 4; 2008 Agreement, art. 30, § 3. That contribution amount subsequently increased in 2010 and 2011 to 2.5 percent and 2.75 percent, respectively. 2008 Agreement, art. 30, § 3. The 2012 Agreement provides that Defendant would make contributions at a rate of 2.75 percent of employees' gross earnings for the duration of the contract. 2012 Agreement at 22.

         The 2008 and 2012 Agreements state that participating employers are bound by the Pension Fund's Agreement and Declaration of Trust (“Trust Agreement”) as well as its Statement of Policy for Collection of Delinquent Contributions (“Collections Policy”). 2008 Agreement; 2012 Agreement; Compl., Ex. 3, ECF No. 1-5 [hereinafter Trust Agreement]; Compl., Ex. 4, ECF No. 1-6 [hereinafter Collections Policy].

         2.The Rehabilitation Plan

         As a result of investment losses in 2008, the Pension Fund was deemed to be in “critical status each year from 2009 through 2016.[3] Anderson Decl. ¶¶ 6-8; Anderson Decl., Ex. A, ECF No. 7-3, at 13-82 [hereinafter Annual Funding Notices], at 79. In response, the Pension Fund's trustees adopted a Rehabilitation Plan in November 2009, designed to improve the fund's fiscal situation. Under the Rehabilitation Plan, participating employers, such as Defendant, were required to pay surcharges and supplemental contributions under one of two schedules-either a “Default” or “Preferred” Schedule. Anderson Decl. ¶¶ 6-8; Annual Funding Notices at 79. The Pension Fund communicated these changes to participating employers each year from 2009 through 2016, notifying them by letter of the Pension Fund's critical status and the Rehabilitation Plan. See Annual Funding Notices. These letters also listed the applicable surcharges. Id. Defendant, as part of the 2012 Agreement, agreed to pay supplemental contributions effective July 1, 2010, under the Preferred Schedule. 2012 Agreement at 19; Anderson Decl. ¶ 10.

         3. The Pension Fund's Assessment of Withdrawal Liability

         On June 30, 2015, the Pension Fund sent a notice and demand for payment to Defendant based on its determination that Defendant had completely withdrawn from the plan as of February 28, 2015, thereby triggering withdrawal liability under 29 U.S.C. §§ 1382 and 1383(a). Anderson Decl., Ex. E, ECF No. 7-3 [hereinafter Withdrawal Liability Assessment]; Anderson Decl. ¶ 23. The Pension Fund assessed $844, 789.39 in provisional withdrawal liability. See Withdrawal Liability Assessment.

         On August 17, 2015, Defendant requested review of the Pension Fund's determination under Section 4219(b)(2)(A) of ERISA, 29 U.S.C. § 1399(b)(2)(A). Compl., Ex. 9, ECF No. 1-11 [hereinafter Request for Review], at 1; Anderson Decl. ¶ 26. Defendant argued that there was “no permanent cessation of [its] obligation to contribute” because its withdrawal from the plan fell under ERISA Section 4218(1)(A), which exempts from withdrawal liability employers who withdraw solely because of a change in business form that “causes no interruption in employer contributions or obligations to contribute under the plan.” See 29 U.S.C. § 1398; Request for Review at 1-2. The Pension Fund responded to Defendant's request for review and rejected its objection. Compl., Ex. 10, ECF No. 1-12 [hereinafter Letter to Liberty House].

         On November 16, 2016, Plaintiffs filed in this case a supplemental memorandum calculating Defendant's final withdrawal liability to be $1, 187, 325.97. See Pls.' Supp. Mem. in Support of Mot. for Default J., ECF No. 8 [hereinafter Pls.' Supp. Mem.]; Pls.' Supp. Mem., Decl. of Kisha Smith, ECF No. 8-1 [hereinafter Smith Decl.], ¶¶ 2-3.

         4.The Audit

         Pursuant to the Pension Fund's Collections Policy, the Pension Fund conducted an audit of Defendant for the calendar years 2012 and 2013. The audit aimed to verify that the hours and salaries reported by Defendant to calculate monthly contributions were the same as those reflected in Defendant's payroll documents and federal tax filings. See Pls.' Mot., Decl. of Andre Joseph, ECF No. 7-4 [hereinafter Joseph Decl.], ¶ 10. The audit revealed that Defendant underreported employee salaries in 2012 and 2013. Id. ¶¶ 10-12. In letters dated November 20, 2015, and January 14, 2016, the Pension Fund notified Defendant of the findings of the audit and Defendant's obligation to pay the missing contributions. Id. ¶ 13; Joseph Decl., Ex. A, ECF No. 7-4, at 9-10. According to Andre Joseph, Payroll Review Manager for the Union, as of October 21, 2016, Defendant had “failed or refused to remit the amounts owed to the Pension Fund under the audit.” Joseph Decl. ¶ 13.

         A. Procedural Background

         On June 29, 2016, Plaintiffs filed a Complaint alleging that Defendant breached the 2008 and 2012 Agreements and violated ERISA by failing to make timely and complete contributions to the plan between October 2012 and February 2015; underreporting employee salaries in 2012 and 2013, and, thereby, underpaying contributions during that time period; and defaulting on withdrawal liability payments after Defendant withdrew from the plan. See Compl. at 12-13. Plaintiffs sought various forms of relief, including: (1) a declaration that Defendant defaulted on withdrawal liability payments to the Pension Fund; and (2) a judgment requiring Defendants to pay withdrawal liability, delinquent contributions, liquidated damages, surcharges owed under the Pension Protection Act, interest, and attorney's fees and costs. Id. at 14-15.

         Defendant failed to respond to the Complaint within 21 days, and the Clerk filed an entry of default on August 23, 2016. See Clerk's Entry of Default, ECF No. 5. On October 21, 2016, Plaintiffs then filed the Motion for Default Judgment presently before the court. See Pls.' Mot.

         III. ...


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