Matter of ADC Contr. & Constr. Inc. v Town of Southampton

[*1] Matter of ADC Contr. & Constr. Inc. v Town of Southampton 2004 NY Slip Op 51845(U) Decided on December 7, 2004 Supreme Court, Suffolk County Emerson, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 7, 2004
Supreme Court, Suffolk County

In the Matter of the Claim of ADC Contracting & Construction, Inc., Petitioner,

against

Town of Southampton, TOWN BOARD FOR THE TOWN OF SOUTHAMPTON, Hon. Patrick A. Heaney, Town Supervisor, Hon. Nancy S. Graboski, Councilwoman, Hon. Linda A. Kabot, Councilwoman, Hon. Steven T. Kenny, Councilman, Hon. Dennis A. Suskind, Councilman, Charlene G. Kagel, as Comptroller, Town of Southampton, State of New York, Department of Labor, Respondents.



16316-04



KUSHNICK & ASSOCIATES, P.C.

Attorneys for the Petitioner

445 Broadhollow Road, Suite 124

Melville, New York 11747

O'BRIEN & O'BRIEN, LLP

Attorneys for Respondents Town of Southampton and Town Board for the Town of Southampton

168 Smithtown Blvd.

Nesconset, New York 11767

ELIOT SPITZER, ESQ.

Attorney for the Respondent State of New York, Department of Labor

120 Broadway New York, New York 10271

Elizabeth Hazlitt Emerson, J.

ORDERED that this motion by the Town of Southampton respondents for an order dismissing the petition in this CPLR article 78 proceeding is denied as to the final release amount of $149,541.97, and is otherwise granted, and it is further

ORDERED that Town of Southampton respondents are directed to serve and file their answer to the petition, and to file a certified return, within 10 days of service of a copy of this order with notice of entry, and it is further

ORDERED that pursuant to CPLR 7804[f], either party may re-notice this matter for hearing upon appropriate notice, and it is further

ORDERED that the petition is dismissed as to respondent State of New York, Department of Labor.

In this CPLR article 78 proceeding, petitioner seeks an order compelling the Town of Southampton respondents to release monies held in trust pursuant to Labor Law 220-b and a declaration that the Town's refusal to release said monies, as stated by the New York State Department of Labor, was arbitrary, capricious, in bad faith and violation of law, including Article 8 of the Labor Law and Article 3-a of the Lien Law. The Town of Southampton respondents move to dismiss based upon CPLR 3211(a)(1), (4), (5) and (7), Town Law §65(3) and General Municipal Law §50-e and §50-h.

Petitioner is the construction contractor for the Town of Southampton Animal Shelter, a public works project. The genesis of the petition is monies which the New York State Department of Labor directed the Town of Southampton to withhold from payments to petitioner pending a final determination of whether petitioner or its subcontractors owed wages to laborers, pursuant to Labor Law §220-b. The notice to withhold, dated August 2, 2001, directed the Town to withhold $244,200.00. The amount withheld, $246,577.29, included a 5% retainage (representing liquidated damages) pursuant to the contract, as stated by the deputy comptroller on August 7, 2001.

The Department of Labor matter was resolved by a stipulation signed October 1, 2002, wherein $75,811.80 was to be paid to eighteen workers.[FN1] Thereafter, by notice dated [*2]October 15, 2002, the amount to be withheld by the Town was reduced to $168,388.20. When some of the workers could not be timely located, $8,464.89 of the settlement was returned to the Town "to compensate other employees on the project who were underpaid." The letter from the Office of the Attorney General dated March 31, 2003, stated that the $8,464.89 should be held with the other withheld funds and released "in accordance with directions from the New York State Department of Labor." Accordingly, the Town's motion to dismiss is granted as to that portion of the petition which seeks to have the sum of $8,464.89 paid to the petitioner. Petitioner has no claim to the $8,464.89, which was to be used to compensate underpaid employees and was included in the stipulated settlement.

Pursuant to the final release issued by the Department of Labor (DOL) on April 22, 2004, the Town was to release $149,541.97 to the petitioner and $18,846.23 [FN2] to the Commissioner of Labor. The Town has refused to release the funds as stated in the Department of Labor's notice and argues, inter alia, that the money is already the subject of a contract dispute between the parties ( ADC Contracting & Construction, Inc. v The Town of Southampton, et. al., Index No. 02-31308)[FN3] and, therefore, this action is duplicative.

The Court finds unavailing the Town's claim that an article 78 proceeding is unavailable to petitioner because the claim sounds in breach of contract. As a general rule, issues raised by withholding sums of money pursuant to Labor Law §220-b are expressly reviewable in CPLR article 78 proceedings (see, Snyder Constr. Co. v State of New York, 53 NY2d 613 [1981], relying upon dissent at 73 AD2d 50, 53, 426 NYS2d 102 [1980]).

Labor Law § 220-b (2) (b), the statute upon which the DOL's authority to order the withholding of funds is based, provides, in pertinent part, "Moneys withheld pursuant to this section shall be held by the financial officer for the sole and exclusive benefit of the workers employed on said public improvement and for payment of any civil penalty that may be assessed as provided herein and shall not be used for any other purpose except upon court order." The purpose of Labor Law § 220-b is to create a trust to ensure that funds are available to pay the claims of employees based upon underpayment of wages ( Matter of Beltrone Constr. Co. v McGowan, 260 AD2d 870, 688 NYS2d 783 [1999]; In Re Great South Beach Constr., 145 BR 372, 374, 1992 US Dist LEXIS 15044).

In view of the foregoing, the withheld funds were to be held by the Town pending the resolution of DOL's action (Labor Law §220-b [2][a][c] ). The amount to be released to petitioner could not have been ascertained until the notice of release dated April 22, 2004, and any claim that the funds have been unlawfully retained could not have been made until the Town [*3]refused to release them by letter dated May 13, 2004 (Pav-Lock Contr. Inc. v McGowan, 184 Misc 2d 386, 714 NYS2d 855 [2000]). Therefore, petitioner's notice of claim, dated May 20, 2004, is timely.

It is well-settled that it is respondents' burden to establish that this article 78 proceeding should be dismissed. In determining pre-answer motions to dismiss under CPLR 7804 (f) or 3211, the court may not look beyond the petition and must accept all of its allegations as true (Matter of Scott v Commissioner of Correctional Servs., 194 AD2d 1042, 1043, 600 NYS2d 639 [1993]; Matter of Mattioli v Casscles, 50 AD2d 1013, 377 NYS2d 264 [1975]). Only affidavits submitted by petitioner and exhibits attached to the petition may be considered on such a pre-answer motion (see, Matter of Board of Educ., Lakeland Cent. School Dist. of Shrub Oak v State Educ. Dept., 116 AD2d 939, 941, 498 NYS2d 516 [1986]). Further, in determining whether it states a cause of action the court must interpret the facts in the light most favorable to petitioner (Matter of De Paoli v Board of Educ., 92 AD2d 897, 440 NYS2d 773 [1981]).

Here, the Court finds that the moving respondents have not established that CPLR 3211(a)(1), (4), (5) and (7), Town Law §65(3) or General Municipal Law §50-e and §50-h, would bar the instant action. The petition, which is in the nature of a writ of mandamus, states a cause of action as to the $149,541.97 that the DOL's release of April 22, 2004, directs to be released to petitioner.[FN4] However, so much of the petition as seeks to compel the Southampton respondents to release $8,464.89 to petitioner is dismissed. As previously stated, petitioner has no claim to this money, which was to be used to compensate underpaid employees, not petitioner, and when undeliverable, was incorporated in the final release of $18,846.23 to the Commissioner of Labor. Further, so much of the petition as seeks payment of the $18,846.23 to petitioner or the Commissioner of Labor is also dismissed since petitioner also has no claim to this money.

Lastly, the answer submitted on behalf of the Department of Labor has established that it does not now, nor did it ever, have control of the monies it directed the Town to hold in trust pending resolution of the Labor Law §220-b action. Accordingly, the petition is dismissed as to respondent State of New York Department of Labor.

DATED: December 7, 2004

J. S.C. Footnotes

Footnote 1: The release request to the Town sought one check payable to the NYS Dept. of Labor in the stipulated amount, $75,811.80 (see, Executive Law section 60)

Footnote 2: Petitioner consented to this amount regarding a prevailing wage violation for the purposes of LL section 220-b (3)(b) and 235. The Town's motion to dismiss does not contain any indication that it has complied with the directive to release the $18,846.23 to the Commissioner of Labor.

Footnote 3: See the Order of this Court dated, July 28, 2004, wherein plaintiff's first, third, and fourth causes of action were severed and continued.

Footnote 4: Construing the petition in a light most favorable to petitioner, the disputed funds may be separate and apart from the contract dispute which was instituted in 2002, before the Labor Law claim was resolved.