Matter of Christa Constr. LLC v Smith

[*1] Matter of Christa Constr. LLC v Smith 2008 NY Slip Op 50636(U) [19 Misc 3d 1110(A)] Decided on March 27, 2008 Supreme Court, Albany County Zwack, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 27, 2008
Supreme Court, Albany County

In The Matter of the Application of Christa Construction, LLC, Petitioner,

against

M. Patricia Smith, as Commissioner of the New York State Department of Labor, Respondent.



1030-08



Appearances: Ernstrom & Dreste LLP

Attorneys for Petitioner

John W. Dreste, Esq., of counsel

180 Canal View Boulevard

Suite 600

Rochester, New York 14623

Andrew Cuomo

Attorney General of the State of New York

Attorneys For Respondents

Seth Kupferberg and Mina Kim, Esqs., of counsel

The Capitol

Albany, New York 12224-0341

Henry F. Zwack, J.

Petitioner has commenced the instant CPLR Article 78 proceeding seeking to enjoin respondent from imposing the prevailing wage law under Article 8 of the Labor Law on a construction project currently underway pursuant to a construction contact between petitioner and United Development Corp. ("United") for student housing related to Niagara County Community College (NCCC).

The subject construction project ("project") is located at 3115 Saunders Settlement Road in the Town of Cambria, Niagara County, New York and is for construction of student housing related to NCCC. On September 10, 2007, petitioner entered into a construction contract with United for the subject project. The owner of the subject property is Niagara Student Housing Development Corporation (NSHCD) and the developer of the project is Student Housing Village Corporation (SHVC). Both NSHCD and SHVC are private not-for-profit corporations. The County of Niagara had transferred the twelve acres for the project to NSHCD and it was contemplated that title would be transferred to SHVC for the construction of student housing. Presently, the land is owned by NSHCD and leased to SHVC pursuant to a 40 year lease. In a written Agreement, both NSHCD and SHVC agreed to indemnify the County of Niagara for any claims arising out of the use of the property for student housing, including claims arising out of the use of County roads, or any claims for damage to County roads by construction contractors or agents.

Respondent became aware of the project when a Department of Labor investigator was driving by and stopped to inquire about the work being done, apparently indicating that he believed it was subject to the prevailing wage law. Petitioner then states that in response SHVC hired a law firm to seek an opinion from respondent regarding the applicability of the prevailing wage law. A letter was written on behalf of SHVC by counsel dated December 7, 2007 seeking an opinion.

By letter dated January 11, 2008, an attorney from the Department of Labor, responding at the request of respondent, provided the opinion to SHVC that the project is subject to the prevailing wage law of Labor Law 220. The letter states in relevant part: The documents indicate that the County has agreed to transfer twelve (12) acres of land, apparently previously part of the Community College Campus, to [NSHCD] with a further agreement that it would be passed on to [SHVA]. Were construction to take place on property owned by the county, or by the College, then the rule of Sarkisian Brothers, Inc. v. Hartnett, 172 AD2d 895 (Third Dept. 1991) would apply and this Department would view the work to be subject to the prevailing wage law. The County appears to have attempted to circumvent the Sarkisian decision through the transfer of the real property, which it has done by use of an "agreement" with NSHDC and SHVA. The agreement, however, includes the requirement that "NSHDC will take title and in the future transfer title to SHVA for the construction of student housing at the property" (emphasis added). Therefore, this "agreement" is a contract [for the [*2]construction of student housing] to which a "municipal corporation [the County] is a party and which may involve the employment of laborers, workmen or mechanics. . ." See Labor Law § 220(2). As a result, the prevailing wage requirements are triggered by this contract between the County, NSHDC, and SHVA.As to the applicability of the recent amendments to Section 220 of the Labor Law to this project, you correctly note that those amendments became effective on October 27, 2007, and apply to all contracts entered into on or after such date, thereby insulating the Niagara project from the statute's reach had the contracts in this matter been entered into, as you have stated, on September 1, 2007. However, this is a moot point, as we find that the contract involved herein included as a party a public entity and contemplated a public purpose, thereby meeting both requirements necessary to reach a determination of prevailing wage applicability.

Petitioner contends that this is a private construction project over which respondent has no jurisdiction. Petitioner therefore seeks to enjoin respondent from asserting jurisdiction over the project. In the alternative, if this proceeding is converted to a declaratory judgment action, petitioner seeks an order holding that respondent is without jurisdiction over the project. Petitioner argues that it is conceded by respondent that the 2007 amendment to Labor Law § 220 (third-party bill), does not apply to the present case and that the prior law does not require application of prevailing wage law to the project for two reasons: 1) the contract at issue involving employment of laborers was between petitioner and United and did not involve a public entity; and 2) the contract did not concern a public work project.

Respondent's answer contains objections in point of law that petitioner has failed to exhaust its administrative remedies and that the petition fails to state a cause of action. First, respondent contends that the January 11, 2008 letter from Department of Labor counsel was not a final determination of the Commissioner, who is authorized to investigate and required to hold a hearing prior to issuing an order or determination pursuant to Labor Law § 220. Respondent contends that petitioner is required to exhaust this administrative remedy prior to commencing an Article 78 proceeding. Second, respondent argues that, even considering petitioner's arguments on the merits, respondent had authority and jurisdiction because the indemnification contract between the County, SHVC and NSHDC meets the requirement and also that Department of Labor opinion precedent supports a finding that the project is a public works project.

First, the Court does not find that the January 11, 2008 letter constituted a final determination and does not find that petitioner has exhausted its administrative remedies. The January 11, 2008 letter was an opinion letter and not a final determination after a hearing, which is provided for in the statute (Labor Law § 220). However, the Court does [*3]not find these factors determinative of this Court's ability to preside over the present proceeding under the circumstances presented. One of petitioner's arguments is that an exception to the exhaustion requirement applies because petitioner is contending that respondent's actions have been taken beyond the grant of her authority and in excess of jurisdiction. The Court concurs.

CPLR 7803 provides that an Article 78 proceeding may be maintained if it is alleged that a "body or officer proceeded, is proceeding or is about to proceed without or in excess of jurisdiction." (CPLR 7803[2]). Relief pursuant to CPLR 7803(2) is in the nature of prohibition. Because of its extraordinary nature, prohibition is available only where there is a clear legal right, and then only when a court - in cases where judicial authority is challenged - acts or threatens to act either without jurisdiction or in excess of its authorized powers.

(Holtzman v Goldman, 71 NY2d 564, 569 [1988]). Prohibition is an available remedy in relation to an administrative agency if that agency is acting in a judicial or quasi-judicial capacity and if the petitioner makes a showing of irreparable injury (see American Transit Ins. Co. v Corcoran, 65 NY2d 828 [1985]; Hall v Coughlin, 188 Ad2d 792 [3d Dept 1992]).

The New York Constitution provides that laborers engaged in the performance of a public work must be paid the prevailing wage (NY Const. Art. I, § 17). Labor Law § 220 implements this constitutional mandate and provides the Commissioner of the Department of Labor with jurisdiction over public works projects to ensure that the prevailing wage law is followed. There is authority for this Court to enjoin respondent from continuing to act if this Court finds Labor Law § 220 inapplicable to the present proceeding (see, e.g., Vulcan Affordable Housing Corp. v Hartnett, 151 AD2d 84 [3d Dept 1989]; Penfield Mechanical Contractors, Inc. v Roberts, 119 Misc 2d 105 [1983], aff'd, 98 AD2d 992 [4th Dept], aff'd, 63 NY2d 784 [1984]).

It is undisputed that respondent has commenced an investigation pursuant to the prevailing wage law for the subject project, requesting documents and information. A hearing pursuant to Labor Law § 220 has not yet been held.

While recognizing that prohibition is an extraordinary remedy, the Court finds that under the facts presented it can consider the appropriateness of the remedy in its discretion. Petitioner has argued that it has been and will suffer irreparable harm because respondent's investigation, which is ongoing, has caused subcontractors to make additional wage demands and slow down work in light of the opinion letter that the prevailing wage law applies. Petitioner contends that because of the time constraints applicable to this project, specifically the requirements that the housing be ready for students this fall, it is at risk of not being able to finish the project in a timely manner and will then suffer per diem penalties. Petitioner also argues that it and its subcontractors could face civil and quasi-criminal penalties and that contractors could abandon the [*4]project with these possibilities looming. Petitioner also notes that the project could be in peril for financial reasons if the prevailing wage law is found to apply. The Court finds that petitioner has stated sufficient irreparable harm for this Court to consider its request for relief in the nature of prohibition.

Petitioner argues that a legal question is presented that this Court can resolve and respondent contends that a mixed question of fact and law is presented. It is undisputed that if Labor Law § 220 is applicable to the present proceeding, then the Commissioner has jurisdiction to continue the investigation pursuant to the prevailing wage law that has already commenced. In order for Labor Law § 220, the prevailing wage law, to apply, the following two questions must be answered in the affirmative: 1) was there a contract involving a public entity that may involve the employment of laborers, workers, or mechanics; and 2) was the project of a public nature (see Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285, 287 [3d Dept 1996]).

The Court finds that, as a matter of law, there was no contract involving a public entity that involved the employment of laborers, workers or mechanics, as set forth below (see Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285, 287 [3d Dept 1996]; Erie Co. Indus. Dev. Agency v Roberts, 94 AD2d 532 [4th Dept 1983], aff'd, 63 NY2d 810 [1984]).

The parties do not dispute the relevant facts applicable to resolution of the question as to whether there exists a contract involving the employment of laborers, workers, or mechanics. The contract between petitioner and United undisputedly provides for employment of laborers and workers. However that contract did not have a public entity, the County in this case, as a party. Respondent argues that the indemnification agreement entered into by the County provides the contractual connection and meets the standard of a contract that may involve the employment of laborers, workers or mechanics.

The statute is clear as to the type of contract that must be in effect for Labor Law § 220 to be applicable. As applicable to the present proceeding, Labor Law § 220 is applicable to "[e]ach contract to which the state or a public benefit corporation or a municipal corporation or a commission appointed pursuant to law is a party and which may involve the employment of laborers, workmen or mechanics . . ." (Labor Law § 220[2]). Labor Law § 220 was amended after the date of the contracts in this proceeding and the parties do not dispute that the amendment is not retroactive and is therefore not applicable to this proceeding.

The Agreement between the County of Niagara and NSHDC and SHVC did not involve the employment of laborers, workmen, or mechanics. It is undisputed that the construction contract which expressly provided for employment of laborers, workmen or mechanics was the contract between petitioner and United. The contract involving the County referenced the land transfer to not-for-profit entities and referenced indemnification of the County by those entities. The Court concurs with petitioner that the contract involving the County at most makes references indicating that future contracts, between other parties, are contemplated which would involve employment of [*5]laborers, mechanics or workmen. The Court does not find that the Agreement involving the County of Niagara can be deemed to meet the requirements for a contract which falls under Labor Law § 220 (see Labor Law § 220[2]; Pyramid, supra). The Court has considered the authority set forth by respondent and finds that it is distinguishable from the facts of the present proceeding (see, e.g., Bridgestone/Firestone v Hartnett, 175 AD2d 495 [3d Dept 1991] [state was party to construction contract, and sub-contractor contract arising out of that contract was subject to prevailing wage law]). Indeed, there is no reported or unreported case or opinion of which this Court is aware in which an indemnity agreement was found to constitute the requisite form of contract for laborers under Labor Law § 220(2). The Court also notes that this finding is consistent with the findings in other opinion letters involving other parties issued by respondent over the years (see, e.g., Opinion Letter dated August 19, 2005 regarding Monroe County Community College; Opinion Letter dated January 9, 2003 regarding Sullivan County Community College).

It appears from the legislative history, and from a plain reading of the statute as amended, that the 2007 amendment to Labor Law § 220(2) was for the express purpose of closing a loophole by which land transfers, such as the one in the present proceeding, could result in the evasion of the prevailing wage law. While this Court's determination may have been different if the amended Labor Law § 220(2) provisions regarding third parties was applicable, it is undisputed by both parties that such amendment is not applicable to the present proceeding.

Based upon the Court's findings above, the prevailing wage law is not applicable to the present proceeding and the Court need not reach the issue of whether the project was of a public nature.

Accordingly, it is

ORDERED and ADJUDGED, that the petition is granted, and respondent's motion to dismiss is denied; and it is further

ORDERED and ADJUDGED, that respondent is enjoined from asserting or further seeking to assert jurisdiction, for purposes of imposing the prevailing wage law pursuant to Article 8 of the Labor Law, upon the construction project underway pursuant to a contract between petitioner and United Development Corporation for student housing located at 3115 Saunders Settlement Road in the Town of Cambria, Niagara County, New York.

This constitutes the Decision, Judgment and Order of the Court. All papers including this Decision, Judgment and Order are returned to the attorney for the petitioner. The signing of this Decision, Judgment and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of this rule with regard to filing, entry [*6]and Notice of Entry.

Dated:March, 2008

Troy, New York

________________________________________

Henry F. Zwack

Acting Supreme Court Justice