Opinion
6138/2008.
Decided September 19, 2008.
TO: ARCHER, BYINGTON, GLENNON LEVINE, LLP, Attorney for Plaintiffs Maraia and International Brotherhood of Electrical, Worker, AFL-CIO, Melville, New York.
MONTALBANO, CONDON FRANK, P.C., Attorneys for Plaintiffs Hudson Valley Chapter of National Electrical Contractors Union and All Bright Electric Corp., New City, New York.
BLEAKELY, PLATT SCHMIDT, LLP, Attorneys for Defendant Orange Regional Medical Center, White Plains, New York.
Upon the foregoing papers it is ORDERED that this motion by defendant Orange Regional Medical Center (hereinafter "defendant") is denied and the motion by plaintiffs is granted to the extent that defendant, its employees and agents are restrained, pending further order of the court, from proceeding with or allowing electrical work at the hospital construction project which is the subject of this action pursuant to the contract with defendant Rondout Electric, Inc.Plaintiffs are an electrical contractor, an association of electrical contractors and a labor union of electricians. They commenced this action against defendant in connection with defendant's construction project of a new hospital in the Town of Wallkill. Defendant has received a grant to assist it in constructing the hospital from defendant New York State Department of Health (hereinafter "DOH") pursuant to the Health Care and Affordability Law of New Yorkers ("HEAL NY" [Public Health Law § 2818]). The statute provides in relevant part, "[c]ontracts awarded to eligible applicants shall require that work performed thereunder shall be deemed public work' and subject to and preformed [sic] in accordance with articles eight, nine and ten of the labor law and the contractors performing such work shall also be deemed a state agency for the purpose of article fifteen-A of the executive law and subject to the provisions of such article" [Public Health Law § 2818(1)(e)].Pursuant to Article 8 of the Labor Law, "public work" requires that workers be paid at the "rate of wage paid in the locality . . . by virtue of collective bargaining agreements between bona fide labor organizations and employers of the private sector" [Labor Law § 220(5)(a)]. The grant contract in question so provides, stating, " [a]ll contracts entered into by the Contractor in connection with the Project shall provide that (A) the work covered by such contract shall be deemed "public work" subject to and in accordance with Articles 8, 9 and 10 of the Labor Law" [Article VII(I)of Exhibit "A" to the Amended Complaint (emphasis added)].
The amended complaint (hereinafter "the complaint") alleges that plaintiff Local 363 represents approximately 3,200 electricians living in the lower and middle Hudson Valley, in counties north and west of Westchester County. Local 363 has collective bargaining agreements with various electrical contractors throughout the region, including plaintiff All Bright Electric Corp. The contractors negotiate these agreements through their agent, plaintiff Hudson Valley Chapter of National Electrical Contractors Association.
The complaint further alleges that plaintiff All Bright and other contractors submitted bids for the electrical work at the project at the prevailing rate of wage as established by the Department of Labor. Defendant, however, awarded the bid to defendant Rondout Electric, Inc. which bid below that rate.
This action ensued. Plaintiffs seek a preliminary injunction to stop the electrical work at the hospital construction project. Defendant moves, pre-answer, for an order dismissing the complaint pursuant to CPLR 3211, arguing both that the complaint fails to state a cause of action and that plaintiffs lack standing to sue.Defendant, in connection with that branch of the motion which seeks dismissal for failure to state a cause of action, relies upon an opinion letter from an associate attorney in the Bureau of Health Insurance Programs of the Department of Health to defendant's vice-president and general counsel dated December 24, 2007. The letter responds to defendant's concern that the HEAL NY grant contract could require that all work at the hospital construction project be subject to the provisions of Public Health Law § 2818. The associate attorney stated:
However, after discussing this matter with appropriate Department officials, I am authorized to advise you that it is the Department's position and interpretation of article VII(A)(6) that the term "project" is intended to pertain, and does pertain, only to the construction being funded under "this Grant Contract" and that it is the Department's position that the additional project construction descriptions set forth in appendixes (B) and (D) that extend beyond what is being funded under the terms of the HEAL contract are purely for informational purposes. Accordingly, it is the Department's position and interpretation of this contract that those portions of OMRC's overall construction project that are not funded under the HEAL grant contract (which does include the "match" amount from [defendant]) are not subject to the Labor Law provisions in question.
(Letter from Robert A. Veino, Esq. to James M. Anesi, Esq., dated December 24, 2007, Amended Complaint, Exhibit "C")
The main issue in this case is whether counsel was correct. The court begins analysis with this issue since, if defendant and the Department of Health are correct, the action ultimately fails regardless of standing issues which are advanced for dismissal.
Article VII(A)(6) of the grant contract states that "Project' means the work or services described in Appendix B (Budget) and Appendix D (Program Work Plan) to this Grant Contract". Reference to the appendices reveals that 15 million dollars of NY HEAL grant is allocated to "New Construction", 8 million dollars to "Design Fees" and 1.6 million dollars to "other planning/preconstruction fees" (Appendix B) and that the project is described as the "Closure of Two Existing Hospitals and Replacement with One Smaller Hospital" (Appendix D). Further study of the appendices is not illuminative as to why "appropriate Department officials" felt that the grant money was not being used for electrical work or that electrical workers were not to be paid the prevailing rate of wage as required by the Public Health Law. Moreover, the appendices do not indicate that the grant money can be segmented in this fashion; the greatest portion of it is allocated to "construction" generally.
In any event, the court is not bound by the opinion of an agency attorney in contractual and statutory interpretation; the letter is of limited value, especially since the writer seems to rely on conversations with unnamed persons in reaching his conclusion and not upon any articulated legal analysis. There is an issue on this record as to whether the opinion was given dispassionately.
In opposition to the motion, plaintiffs submit the affidavit of Paul N. D'Onofrio, legislative counsel and a registered lobbyist for the plaintiff labor union who states that when Public Health Law § 2818 was under consideration by the State Legislature there was an issue as to whether capital projects being funded by the law would be built subject to the provisions of Article 8 of the Labor Law. The HEAL NY grant funds are funded, in part, by surcharges on employee welfare funds including Taft-Hartley health plans of construction unions. D'Onofrio states that as the funds the State received from the settlement of the Attorneys General's lawsuit against tobacco manufacturers were depleted, the burden on Taft-Hartley funds to maintain monies available for grant intensified. The unions therefore took a position that since their benefit plans were being used to fund the grants, union labor should be used for construction. This position was opposed by lobbyists from the health care industry including James W. Clyne, Jr., who is now a Deputy Commissioner in the Department of Health, on the ground that if union labor was used, fewer projects could be funded. Eventually, the unions prevailed and language was placed in the statute to require union labor at HEAL NY grant funded projects. Clyne, in his official position, submits an affidavit in opposition to the motion for a preliminary injunction confirming that his counsel's letter represents the Department of Health's "position and interpretation" of section 2818 of the Public Health Law, but, like his counsel, not how that "position and interpretation" were reached. Public Health Law § 2818 itself requires that work performed pursuant to contracts awarded to successful applicants for HEAL NY grants be performed in accordance with Article 8 of the Labor Law. The grant contract at issue does not allocate the grant funds and segment them as defendant claims. In fact, the only way one would know how defendant claims it has allocated the money would be by defendant's say-so.
Defendant objects to D'Onofrio's affidavit as inserting matters outside the scope of the complaint. The legislative history of the statute, however, bears upon the court's interpretation of it. Defendant does not submit an affidavit of Clyne to contradict D'Onofrio.
Accordingly, plaintiffs have demonstrated a likelihood of success on the substantive merits, one of the prerequisites to preliminary injunctive relief (see e.g. Incorporated Village of Plandome Manor v Ioannou, 54 AD3d 364).
Nevertheless, defendant argues that plaintiffs lack standing to sue. In this regard they characterize plaintiffs' causes of action as "a thinly disguised attempt to assert claims for purported violations of the prevailing wage provisions of New York Labor Law § 220 while evading the jurisdictional and procedural requirements that statute imposes on all such claims" (Defendant's Memorandum of Law in Support of Motion to Dismiss, dated August 5, 2008, p. 4). That section of the Labor Law sets forth a procedure to be followed in the event a worker alleges that a contractor or subcontractor has not paid the prevailing rate of wages when public work is being performed. The fiscal officer (the Commissioner of Labor or a comptroller in a city with a population over a million persons), upon a complaint, is to make a determination after a hearing which is subject to review by Supreme Court in a proceeding pursuant to CPLR Article 78. In that regard, defendant argues there is no private right of action for a violation of Labor Law by a labor union, but only by the aggrieved worker who has exhausted her or his administrative remedies. Defendant is correct insofar as it argues that the present plaintiffs may not prosecute an action predicated upon Labor Law § 220; settled case law so holds (see Brandy v Canea Mare Contracting, Inc., 34 AD3d 512; P T Iron Works v Talisman Contracting Co., Inc., 18 AD3d 527; Matter of Pyramid Co. of Onondaga v Hudacs, 193 AD2d 924).But to this extent, defendant has set up a straw man to knock down. Plaintiffs candidly agree with defendant concerning Labor Law § 220 (Plaintiffs' Memorandum of Law in Opposition to Defendant's Motion to Dismiss the Amended Complaint, dated August 15, 2008, pp. 2-4). A labor union does not have standing to enforce Labor Law § 220 (see International Ass'n of Bridge, Structural and Ornamental Ironworkers, Local Union No. 6, AFL-CIO v State, 280 AD2d 713; Matter of Yerry v Goodsell, 4 AD2d 395, affd, 4 NY2d 999). Although the court does not view this issue as one of subject matter jurisdiction, as characterized by defendant, nevertheless the present plaintiffs cannot state a cause of action pursuant to that statute.
Plaintiffs All Bright Corp. and Hudson Valley Chapter of National Electrical Contractors Association, as an unsuccessful bidder on the project and an association of electrical contractors in the region, clearly have standing to challenge the award of the contract to Rondout Construction and the manner in which that contract was awarded (see Transactive Corp. v New York State Dept. of Social Services, 92 NY2d 579)
As to the remaining plaintiff labor union, the issue before the court is whether this plaintiff has standing to assert a claim that 1) defendant is required to bid out the work for its construction in accordance with Public Health Law § 2818 when the Department of Labor takes a position inconsistent with the statute and 2) to enjoin the performance of electrical work at the project at wages less than prevailing wages. Plaintiffs assert a third-party contract beneficiary theory of standing which defendant rejects.
Defendant argues that none of the plaintiffs are intended beneficiaries of the contract, relying upon Fourth Ocean Putnam Corp. v Interstate Wrecking Co., Inc. ( 66 NY2d 38). In Fourth Ocean, a property owner of property which had been condemned by a municipality claimed to be a third-party beneficiary of a contract between a wrecking company and the municipality and sued the wrecking company and municipality for demolishing the building. Adopting the Restatement [Second] of Contracts formulation of "intended beneficiaries" and "incidental beneficiaries", the Court of Appeals held that only the former, not the latter, had third-party rights for breach of contract. In the case before it, the Court of Appeals found that the plaintiff was not an intended beneficiary, as the work was being performed not for plaintiff's benefit, but to cure its default for failing to maintain its building. Defendant argues that under the Restatement formulation adopted by the Court of Appeals, plaintiffs do not qualify as "intended beneficiaries" of the grant contract inasmuch as the language of the grant contract does not clearly evince an intent to permit enforcement by plaintiffs, nor is this a situation where "no one other than the third party can recover if the promisor breaches the contract" (66 NY2d supra at 44). Defendant argues that Rondout Electric's employees, if not paid the prevailing wage, could follow the procedure set forth in Labor Law § 220 to assert any rights.
Plaintiffs, in turn, rely upon Cox v Nap Construction Co. ( 10 NY3d 592). In Cox, the Court of Appeals held that "when a contractor has promised to pay its workers the prevailing wage required by the United States Housing Act, the workers may sue under state law to enforce the promise" ( Id. at 599). Cox concerned plaintiffs who were employees of contractors who had agreements with the New York City Housing Authority to do construction work on public housing projects funded by the federal government under the Housing Act ( 42 USC § 1437, et seq.). The contractors' contracts contained provisions requiring that they pay wages as predetermined by the Secretary of Labor of the United States pursuant to the Davis-Bacon Act ( 40 USC § 3141 et seq.). Supreme Court had dismissed the action on authority of Federal case law which held that there was no private right of action under the Federal Davis-Bacon Act. The Court of Appeals held that the plaintiffs had a remedy under New York State law as third-party beneficiaries of the contracts even though there is no Federal private right of action under the Davis-Bacon Act. The court found that even though there was no Federal private right of action, there was no preemption of state law. The defendants in that case argued that enforcement of the Davis-Bacon Act was properly the province of the Secretary of Labor. The court stated, "[t]he only way for workers to get the benefit of the regulations is to call violations of law to an agency's attention and hope for the best — a course plaintiffs, have already pursued with very little success. Since plaintiffs have no remedy under the federal regulations, defendants' exhaustion' agreement boils down to a claim that they have no remedy at all — that they must wait, perhaps forever, for an agency to act" ( Id. at 606).
It would appear that the plaintiff union cannot be afforded standing under a third-party beneficiary theory. In Cox, which the plaintiff union heavily relies upon, the plaintiffs were employees of contractors, not the employees' union as is the case here. It appears that labor unions do not have common law third-party contractual beneficiary status absent an assignment to them, by their members, of those contractual rights (see Sheet Metals Workers' International Assn., Local Union No. 33 v Gene's Refrigeration, Heating Air Conditioning, Inc., 2008 WL 623407 [Ohio App., 9th Dist. 3/10/2008], lv to app. granted, 118 Ohio St. 3d 1105, 889 NE2d 1024; Road Sprinkler Fitters Local Union No. 669 v G G Fire Sprinklers, Inc., 102 Cal. App.4th 765, 125 Cal. Rptr.2d 804 [3rd Dist.]).
Nevertheless, the court is not convinced, at this pre-answer stage of the litigation, that the plaintiff labor union has no standing because of the somewhat peculiar nature of the facts alleged. The plaintiff labor union asserts standing pursuant to State Finance Law § 123-b(1) pursuant to which a citizen-taxpayer may bring suit to prevent the unlawful expenditure of state funds. The court agrees, under the facts of this case and at this juncture of the litigation, that it has such standing.
As Judge ROSENBLATT stated in Saratoga County Chamber of Commerce v Pataki ( 100 NY2d 801):
Standing to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress. It is difficult to draw an exquisitely sharp line separating the worthy litigant from one who would generate a lawsuit to advance someone else's cause. The rules governing standing help courts separate the tangible from the abstract or speculative injury, and the genuinely aggrieved from the judicial dilettante or amorphous claimant. . . . The task, of course, is to distinguish between cases that present a challenge to the expenditure of money and those that use the expenditure of money as a pretense to challenge a governmental decision. As we have said, "it is one thing to have standing to correct clear illegality of official action and quite another to have standing in order to interpose litigating plaintiffs and the courts into the management of public enterprises. Accordingly, a claim that state funds are not being spent wisely is patently insufficient to satisfy the minimum threshold for standing, but a claim that it is illegal to spend money at all for the questioned activity likely would provide the plaintiff with standing.
( Id. at 814-815 [internal citation omitted, emphasis original])
Here, the plaintiff labor union alleges that defendant and the Department of Health are, in effect, colluding to avoid compliance with the statutory language requiring contractors to pay the prevailing wage. This is not a claim that the monies are being unwisely spent but that they are being spent illegally. Accordingly, the court finds that the plaintiff labor union has standing.
The standing issues having been, for the moment, resolved, the court now returns to the preliminary injunction motion. Having found a likelihood of success on the merits, the court must now balance the equities concerned.
Defendant's Chief Operating Officer, Scott J. Batulis, submits an affidavit on the preliminary injunction motion stating that the total cost of the new hospital is estimated to be $306,000,000.00. $261,000,000.00 of those funds were raised by the issuance of tax-exempt bonds through the Dormitory Authority of the State of New York. He contends that if defendant were required to pay for all the construction at prevailing wage levels the hospital could not be built. There is no financial analysis submitted to support this claim; it is unclear whether or not it is litigation hyperbole. The HEAL NY grant (which must be matched by defendant) is $15,000,000.00.
On the other hand, counsel for the union states that the union has 1,200 construction electrician members in this portion of the Hudson Valley, 160 of whom were unemployed in June; an approximate unemployment rate of 13%.
As for the issue of irreparable harm, plaintiffs contend that they have no remedy if the injunction is not granted. While defendant argues that any problem could be solved by a Rondout Electric employee's complaining to the Department of Labor to obtain a prevailing wage, that does not afford these plaintiffs a remedy should it ultimately be determined that plaintiffs are correct on the merits, as it now appears. The electrical contractors with collective bargaining agreements with the union would not have been given a fair opportunity to bid and, should it be determined that the Legislature's intent, as it appears to be, was to give union labor a fair opportunity to bid on projects which receive HEAL NY grants, that intent would be defeated.
Therefore, the court is satisfied that a preliminary injunction is warranted to the extent above indicated (see e.g. Matter of Advanced Digital Security Solutions, Inc. v Samsung Techwin Co., Ltd., 53 AD2d 612; Winzelberg v 1319 50th Realty Corp., 52 AD3d 700).
This matter is scheduled for status conference on October 7, 2008 at 9:15 a.m. at the Orange County Courthouse, 285 Main Street, Courtroom No. 12, Goshen, New York. Counsel will be heard at that time as to the appropriate amount of undertaking plaintiffs will be required to post pursuant to CPLR 6312(b).
The foregoing constitutes the decision and order of the court.