Associated Builders v. City of Jersey City
| Decision Date | 12 September 2016 |
| Docket Number | No. 15-3166,15-3166 |
| Citation | 836 F.3d 412 |
| Court | U.S. Court of Appeals — Third Circuit |
| Parties | Associated Builders and Contractors Inc New Jersey Chapter; GMP Contracting LLC ; Alpine Painting & Sandblasting Contractors ; Alper Enterprises Inc; Ron Vasilik, Appellants, v. City of Jersey City, New Jersey; Hudson County Building and Construction Trades Council (Intervenor in District Court). |
Russell J. McEwan, Esq., (Argued), Ivan R. Novich, Esq., Littler Mendelson, 1085 Raymond Boulevard, One Newark Center, 8th Floor, Newark, NJ 07102, Attorneys for Plaintiff-Appellants.
Zahire D. Estrella, Esq., (Argued), Jersey City Law Department, 280 Grove Street, City Hall, Jersey City, NJ 07302, Attorney for Defendant-Appellee.
Raymond G. Heineman, Esq., (Argued), Seth Ptasiewicz, Esq., Kroll Heineman, 99 Wood Avenue South, Metro Corporate Campus I, Suite 307, Iselin, NJ 08830, Attorney for Defendant-Intervenor-Appellee.
Before: CHAGARES, KRAUSE, and SCIRICA, Circuit Judges
KRAUSE
, Circuit Judge.
In an effort to stimulate economic development, Jersey City, New Jersey offers tax exemptions and abatements to private developers of projects in certain designated areas. Under a law passed by the City, however, those tax benefits are conditioned on the developers' entry into agreements with labor unions that bind the developers to specified labor practices. Appellants in this case, various employers and a trade group, sought to challenge that law on the grounds that it is preempted by the National Labor Relations Act (“NLRA”) and Employee Retirement Income Security Act (“ERISA”) and barred by the dormant Commerce Clause of the U.S. Constitution. The District Court dismissed Appellants' complaint, concluding that Jersey City acts as a market participant, not a regulator, when it enforces the law, and therefore that Appellants' NLRA, ERISA, and dormant Commerce Clause claims were not cognizable. Because we conclude that Jersey City was acting as a regulator in this context, we will reverse and remand for those claims to be reinstated.
New Jersey's Long Term Tax Exemption Law and Five-Year Exemption and Abatement Law authorize local governments in the State to provide tax exemptions and abatements to private developers of projects within areas the locality has marked for redevelopment. See N.J. Stat. Ann. §§ 40A:20–1
to -22; 40A:21-1 to -21.1 The exemptions on such Tax Abated Projects significantly reduce developers' property tax burden, although developers may still be required to make payments in lieu of property taxes. See Id. § 40A:21-10.
With this authorization, Jersey City offers tax exemptions to private developers on certain redevelopment projects. However, Section 304 of Jersey City's Municipal Code (the “Ordinance”) imposes certain requirements on developers of “Public Construction Project[s],” which are projects costing at least $5,000,000 (excluding land acquisition costs) and “entered into by the City using public funds,” and “Tax Abated Project[s],” which are projects costing at least $25,000,000 (excluding land acquisition costs) and funded only with private investment.2 Jersey City, N.J., Mun. Code § 304-33(8) to - 33(9) (“Mun. Code”); see Associated Builders & Contractors, Inc. v. City of Jersey City , 2:14–cv–05445, 2015 WL 4640600, at *1–2 (D.N.J. Aug. 3, 2015)
; Compl. ¶ 9; Appellants' Br. at 34.
Specifically, the Ordinance requires that, prior to commencing work on construction projects exceeding these thresholds, developers of such projects must execute project labor agreements (“PLAs”), unless the City's Business Administrator determines that a PLA is not appropriate in light of the “nature, size, and complexity of the project.” Mun. Code § 304-33(7), 34(1). PLAs require developers of Tax Abated Projects to abide by a pre-hire collective bargaining agreement that will cover all employees for the duration of the Tax Abated Project and that also will bind the developer's contractors and subcontractors. Id. § 304-33(7), -33(9), -34(1), -35(3).
Because a PLA, by definition, is entered into with a labor union, it requires that an employer negotiate with a labor union and that all employees be represented by that labor union as part of the negotiations—even if the developers, contractors, and subcontractors do not ordinarily employ unionized labor and the employees are not union members. See Compl. ¶¶ 16, 31. The PLAs required by the Ordinance also specify that “there will be no strikes, lock-outs, or other similar actions” and that the developer and union will agree to procedures to resolve any labor disputes. Mun. Code § 304-35(1) to -35(2). Under the Ordinance, with limited exceptions, each contractor and subcontractor working on a Tax Abated Project must have “a local federally registered apprenticeship program,” and twenty percent of all labor hours must be performed by apprentices who are City residents. Id. § 304-35(4) to -35(5).
Having accepted the obligations of a PLA, a developer who fails to fulfill them does so at its peril. Among other significant consequences it can impose, the City may “[s]uspend the tax abatement” until the developer complies with the PLA, during which time the City can assess three times the amount of conventional real estate taxes. And if the developer fails to cure within six months, the City may terminate the exemption. Id. § 304-37(2). The City may also collect liquidated damages that include, among other things, a payment of two percent of the annual payment in lieu of taxes for each month a developer, contractor, or subcontractor is in material breach. Id. Further, if a developer estimates that the cost of a project that received a tax exemption will be less than $25,000,000 such that a PLA is not required, but the total cost meets or exceeds that threshold upon completion, then the developer must pay significantly increased payments in lieu of taxes. Id. § 304-37(3).
Appellant Associated Builders and Contractors, Inc., New Jersey Chapter (“ABC-NJ”) is a non-profit organization that “advocat[es] for open competition in the award of construction contracts based on merit, and regardless of the bidding contractor's labor affiliation.” Compl. ¶ 2. Appellants GMP Contracting LLC, Alpine Painting & Sandblasting Contractors, and Alper Enterprises, Inc., are New Jersey businesses and members of ABC-NJ, and Appellant Ron Vasilik is an employee of Alpine.3 Together, these Appellants allege that they and other members of ABC-NJ have been “deterred” from bidding on projects covered by the Ordinance for various reasons, including because they have no established relationships with any union and have never worked under PLAs; they would have to hire employees through a union hiring hall and not in accordance with their own standards; they would be restricted to hiring only subcontractors that also comply with PLAs; and they would have to force their employees to comply with an agreement negotiated by a union regardless of their employees' desires. Compl. ¶ 31.
Appellants sued to enjoin enforcement of the Ordinance in August 2014, bringing five counts. Count I alleges that the Ordinance is preempted by sections 7 and 8 of the NLRA, 29 U.S.C. §§ 157
-158. Count II alleges that the Ordinance violates the dormant Commerce Clause and Privileges and Immunities Clause of the U.S. Constitution because the Jersey City apprenticeship requirement unduly favors in-state individuals and denies out-of-state individuals access to the privileges and immunities of in-state apprentices. Count III alleges that the apprenticeship requirement is also preempted by ERISA, 29 U.S.C. § 1144(a). Count IV alleges violations of the Due Process and Equal Protection Clauses of the U.S. and New Jersey constitutions. Finally, based on the alleged constitutional violations, Count V asserts a claim under 42 U.S.C. § 1983.
In the District Court, the Hudson County Building and Construction Trades Council (“Council”) filed a motion to intervene, which was granted. The Council, joined by the City, filed a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6)
, arguing among other things, that the NLRA, dormant Commerce Clause, and ERISA do not apply because the City imposes and enforces the PLA requirement in its capacity as a market participant, not a regulator.4 The Council also argued that none of Appellants had standing to bring a Privileges and Immunities Clause claim because none of them are from outside New Jersey. Appellants opposed the motion and also sought to file an amended complaint pursuant to Federal Rule of Civil Procedure 15(a) that would have clarified some of the allegations and added an out-of-state plaintiff in an effort to cure the alleged standing deficiency.
The District Court determined that the City enforces the Ordinance as a market participant, thus rendering the NLRA, ERISA, and Commerce Clause claims not cognizable. See Associated Builders , 2015 WL 4640600, at *5–7
. Having rejected the remaining claims, the District Court granted the 12(b)(6) and 12(c) motions in full and denied ABC-NJ's Rule 15(a) motion for leave to amend. On appeal, however, Appellants challenge only the District Court's ruling on the NLRA, ERISA, and dormant Commerce Clause claims, see Oral Arg. Tr. at 16 (argued June 8, 2016), thus presenting only the question of whether the City is properly deemed as a market participant, in which case Appellants' claims under the NLRA, ERISA, and dormant Commerce Clause are not viable, or whether the City instead enforces the Ordinance in its capacity as a regulator, in which case the Ordinance might be preempted under the NLRA or ERISA or forbidden by the dormant Commerce Clause.
We review dismissals for failure to state a claim and grants of motions for judgment on the pleadings de novo , taking all factual allegations in the complaint as true and construing them in the light most favorable...
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