Mercado v Excel Group, Inc.

[*1] Mercado v Excel Group, Inc. 2004 NY Slip Op 51868(U) Decided on July 23, 2004 Supreme Court, New York County Freedman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 23, 2004
Supreme Court, New York County

Daniel Mercado, ANTHONY RUIZ, ELOY CUSTODIO, and JESUS ROLDAN individually and on behalf of all other persons similarly situated who were employed by ESCO CONSTRUCTION, AKW SYSTEMS, INC., J. WALTER ENTERPRISES, INC. CORP. with respect to certain Public Works Projects awarded by the NEW YORK CITY SCHOOL CONSTRUCTION AUTHORITY, THE CITY OF NEW YORK and THE STATE OF NEW YORK, Plaintiffs,

against

Excel Group, Inc., ESCO CONSTRUCTION, AKW SYSTEMS, INC., RIVERVIEW ARCHITECTURAL PRODUCTS, INC., and SEABOARD SURETY COMPANY, Defendants.



601812/02

Helen E. Freedman, J.

In this class action by window installers who seek unpaid wages and benefits for their labor on public works projects, defendant Seaboard Surety Company ("Seaboard") moves for partial summary judgment declaring that certain class members cannot recover from Seaboard's payment bond because they failed to comply with statutory notice requirements.

Seaboard acknowledges that, pursuant to the payment bond that it issued in connection with the public improvement projects (the "Bond"), it is liable for the unpaid or underpaid wages of class member that Seaboard's principal, defendant AKW Systems, Inc. ("AKW"), and its subcontractors had employed. But Seaboard asserts that its obligation under the Bond are subject to the condition that all "indirect" claimants, i.e., those who worked for a subcontractor of AKW rather than AKW itself, had to notify AKW of their claims within 120 days after they last provided labor. A notice requirement is set forth both in the Bond and in New York State Finance Law § 137(3) ("Section 137"), which governs construction labor and materials payment [*2]bonds for public improvement projects.[FN1]

Plaintiffs, as class representatives, sued on behalf of employees of AKW and it subcontractors who installed windows and modernized various public improvement projects. Under Article 8 of the New York Labor Law ("Article 8"), laborers on public works projects must be paid "prevailing wages"; plaintiffs allege that their employers underpaid them in violation of Article 8. Seaboard states that, at the earliest, the plaintiffs notified AKW about their claims on July 10, 2000, when they filed a complaint setting them forth. Seaboard contends that those class members who last worked on the projects more than 120 days prior to filing this lawsuit, while employed by a subcontractor of AKW, are barred from asserting claims.

After plaintiffs filed an initial class action complaint on July 10, 2000, the main action was broken out into separate sub-actions grouped by contractor. On May 13, 2002, plaintiffs filed the complaint in this action, which pertains only to certain construction projects (the "Projects") for which defendant Excel Group, Inc. ("Excel") served as general contractor. Excel entered into a subcontract with AKW, who then subcontracted with defendants Esco Construction Corp., AKW and Riverview Architectural Products, Inc. (collectively, the "Subcontractors").

Plaintiffs assert that they worked at the Projects for the Subcontractors, but they were not paid prevailing wages, in violation of Article I, Section 17 of the New York Constitution and the New York Labor Law. Of the several causes of action, two are brought against Seaboard: the first alleges that Seaboard and the other defendants violated the New York Constitution, and the sixth, against Seaboard alone, seeks to recover from the Bond for underpaid wages.

Discussion Defendants claim that plaintiffs, as "indirect" claimants lacking privity with Excel, had to notify Excel of their claims within 120 days after they stopped working on the Projects.

That requirement, defendants argue, is set forth in Section 137: Every person who has furnished labor or material, to the contractor or to a subcontractor of the contractor, in the prosecution of the work provided for in the contract and who has not been paid in full therefor before the expiration of a period of ninety days after the day on which the last of the labor was performed or material was furnished by him for which the claim is made, shall have the right to sue on such payment bond in his own name for the amount, or the balance thereof, unpaid at the time of commencement of the action; provided, however, that a person having a direct contractual relationship with a subcontractor of the contractor furnishing the payment bond but no contractual relationship express or implied with such contractor shall not have a right of action upon the bond unless he shall have given written notice to such contractor within one hundred twenty days from the date on which the last of the labor was performed or the last of the material was furnished, for which his claim is made ....[*3]

(emphasis added).

Seaboard contends that the 120-day notice provision for indirect claimants applies to the plaintiffs, who worked for the Subcontractors.

In opposition, plaintiffs argue that New York Labor Law § 220-g ("Section 220-g") modifies the notice requirements set forth under Section 137 so as to permit indirect employees to sue Seaboard on the Bond for their underpaid labor without prior notice.

Section 220-g provides: For the purpose of enforcing [Article 8 of the Labor Law, which requires among other things that laborers be paid prevailing wages on public works projects], the affected employee may bring an action to recover from the bond which is required by section one hundred thirty-seven of the state finance law, of the contractor, the subcontractor or both, unpaid wages and supplements. . . due to persons furnishing labor to either the contractor or subcontractor. Said action may be brought against the contractor, the subcontractor, or the issuer of such bond, without prior notice, within one year of the date of the last alleged underpayment, or within one year of the date of the filing of an order by the commissioner or other fiscal officer determining a wage or supplement underpayment. . . .

(emphasis added).

Seaboard argues that the rules of statutory construction prohibit construing Section 220-g so as to effectively repeal the explicit notice requirement in Section 137. Seaboard further argues that Section 220-g only applies to administrative proceedings to enforce a claimant's rights under the Labor Law, and that plaintiffs cannot rely on Section 220-g because they have not alleged that Seaboard has violated the Labor Law.

Seaboard's motion is denied, because the "without prior notice" provision of Section 220-g relieves plaintiffs of the need to comply with the 120-day notice provision of Section 137. Seaboard cites to several cases in which courts enforced the notice provision of Section 137, but none of them involve labor claims under Section 220-g. Those courts that have addressed the interplay between Section 137 and Section 220-g hold that Section 220-g overrides the notice provision in Section 137. Bravo v Pav-Lak Contracting, Inc., Sup Ct, Nassau Co., Oct. 1, 1996, O'Brien, J., Index No. 14799/96 slip op. at 3; see also Sullivan v Intl. Fid. Ins. Co., Sup Ct, NY Co., Dec. 30, 1997, Gammerman, J., Index No. 12224/06, aff'd 255 AD2d 128 (1st Dept 1998); Lanzafame v AXA Global Risk U.S. Ins. Co., Sup Ct, Queens Co., Feb. 28, 2002, O'Donoghue, J., Index No. 11357/00, slip op. at 5-6.

In Bravo, the Court explicitly held that Section 220-g relieved the plaintiffs, who were employees of a subcontractor on a public works project, from complying with the notice requirement of Section 137. The Court reasoned that, since the legislature enacted Section 220-g to afford a private right of action to underpaid laborers on public works projects, "it is improbable that the legislature would not also provide that suit could be instituted without complying with the notice provisions of the State Finance Law."

Article 8 provides a means of enforcing the prevailing rate of wage law, the Court continued, but it "would be rendered absolutely futile absent access to the payment bond." The Court concludes that "requiring notice according to [Section 137] would in many instances result in denying access to the bond." Bravo, slip op. at 53. [*4]

The reasoning of the court in Bravo and in the other above-cited cases is persuasive and is adopted here. Furthermore, plaintiffs were not required to proceed in an administrative forum before they sued under Section 220-g. See Sullivan, 255 AD2d at 128 Bravo, slip op. at 2 (citing cases).

Although the complaint does not specify that plaintiffs' claim against Seaboard is based on Section 220-g, the allegations in the complaint set forth the elements of a claim, and therefore suffice to make out that cause of action.

Finally, Seaboard's argument that upholding the "without notice" provision of Section 220-g would violate rules of statutory construction by repealing Section 137 lacks merit. Section 220-g applies to a narrow group of claimants and claims: laborers seeking unpaid wages and supplements. Section 137 applies to a wider range of claims, including payments for materials to suppliers or subcontractors.

Accordingly, it is

ORDERED that the motion is denied. The parties are directed to appear before the Court for a status conference on September 14, 2004 at 9:30 a.m.

Dated: July 23, 2004

ENTER:

Helen E. Freedman, J.S.C. Footnotes

Footnote 1:Although paragraph 4.2.1 of the Bond states that an indirect claimant has only 90 days to provide notice, Seabord concedes that the 120-day notice provision in Section 137 controls.