Diamond "D" Const. v. New York State Dept. Labor

• Decision Date: 29 June 2000
• Docket Number: No. 00-CV-335C.,00-CV-335C.
• Citation: 105 F.Supp.2d 167
• Parties: DIAMOND "D" CONSTRUCTION CORP. Plaintiff, v. NEW YORK STATE DEPARTMENT OF LABOR ("DOL") BUREAU OF PUBLIC WORKS; James J. McGowan, Commissioner of Labor of the State of New York; Department of Audit and Control, State of New York; Michael O'Connell, Department of Audit and Control, State of New York; County of Erie; Nancy Naples, Erie County Comptroller; Ronald Kinn, Individually and in His Capacity as Public Work Wage Investigator Employed by the DOL; Dale Stanley, Individually and in His Capacity as an Employee of the DOL; Brian Robison, Individually and in His Capacity as Senior Public Wage Investigator Employed by the DOL; Defendants.
• Court: U.S. District Court — Western District of New York

105 F.Supp.2d 167

DIAMOND "D" CONSTRUCTION CORP. Plaintiff, v. NEW YORK STATE DEPARTMENT OF LABOR ("DOL") BUREAU OF PUBLIC WORKS; James J. McGowan, Commissioner of Labor of the State of New York; Department of Audit and Control, State of New York; Michael O'Connell, Department of Audit and Control, State of New York; County of Erie; Nancy Naples, Erie County Comptroller; Ronald Kinn, Individually and in His Capacity as Public Work Wage Investigator Employed by the DOL; Dale Stanley, Individually and in His Capacity as an Employee of the DOL; Brian Robison, Individually and in His Capacity as Senior Public Wage Investigator Employed by the DOL; Defendants.

No. 00-CV-335C.

United States District Court, W.D. New York.

June 29, 2000.

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Killeen & Killeen LLP (Henry W. Killeen, III, of Counsel), Orchard Park, New York, for Plaintiff.

Eliot Spitzer, Attorney General of the State of New York (Pico Paul Ben-Amotz, Assistant Attorney General, of Counsel), New York, New York, for Defendant New York State Department of Labor.

Frederick A. Wolf, Erie County Attorney (George Michael Zimmermann, Assistant County Attorney, of Counsel), Buffalo, New York, for Defendant Erie County.

DECISION AND ORDER

CURTIN, District Judge.

INTRODUCTION

By a complaint filed April 21, 2000, plaintiff Diamond "D" Construction Corporation commenced this section 1983 action against the New York State Department of Labor ("the DOL"); James J. McGowan, the DOL's Commissioner ("the Commissioner"); Michael O'Connell, a supervisor with the New York State Comptroller's Office ("O'Connell"); Erie County; Nancy Naples, the Erie County Comptroller; Ronald Kinn, a DOL Public Work Wage Investigator; Dale Stanley, a DOL employee; and Brian Robison, a Senior Public Work Wage Investigator for the DOL. Together with its complaint, plaintiff filed motions for a preliminary injunction and an expedited hearing. Item 2. The court granted plaintiff's motion for an expedited hearing and set a schedule for written arguments on the motion for preliminary injunction. Item 10. Defendants submitted opposing papers on May 12, 2000, and plaintiff replied on May 25, 2000. On June 5, 2000, the court heard argument on plaintiff's motion.

BACKGROUND

Joseph DiPizio is the principal of Diamond D, which is a construction company that builds roads for public entities like New York State and Erie County. Item 7, ¶ 14. In addition, it is relevant to note that Leo Hopkins works for Diamond D as a job site supervisor and John Gorski serves as an off-site driver for the company. Both Mr. Hopkins and Mr. Gorski are sons-in-law of Mr. DiPizio. See Item 7, ¶¶ 72-79. Over the last several years, plaintiff Diamond D has been the general contractor for road construction projects on Greiner Road, Heim Road, Main Street, and Sweet Home Road, all of which are located in Erie County. The New York State Department of Transportation was the so-called "sponsoring agency" on the Heim Road and Main Street projects, see Item 7, Exhs. F and S, while the Erie County Department of Public Works was the sponsoring agency for the Greiner Road and Sweet Home Road projects, see id. Exh. T and Item 19, p. 4. The present dispute concerns plaintiff's claim that it has not yet been paid for much of its work on these projects.

The State and County have not yet paid plaintiff because of plaintiff's alleged violations of the State's prevailing wage laws. See New York State Labor Law § 220, et seq. The State's prevailing wage laws require that public works contractors, like plaintiff, pay wages that are equivalent to the prevailing rate of similarly employed workers in the locality where the contract is being performed. See General Electric Co. v. New York State Dep't of Labor, 936 F.2d 1448, 1450 (2d Cir.1991). The Commissioner of the DOL is empowered to enforce compliance with these laws. See New York State Labor Law §§ 220(7), 220-b. As such, the Commissioner and the DOL may conduct investigations into the wages paid by public works contractors. If the DOL determines that a contractor has failed to pay its employees the prevailing wage, then the DOL may estimate the amount of underpayment and order the sponsoring government agency to withhold commensurate payments from that contractor. See generally New York State Labor Law § 220-b. Once the government agency receives such a "Notice of Withholding" or "Notice of Cross-Withholding" ("Notice"), that sponsoring agency must withhold "from any payment due ... sufficient moneys to satisfy" the DOL's claim of underpayment. New York State Labor Law § 220-b(2)(a)(1); see also infra (discussing nature of "cross-withholding").

FACTS

I. The DOL's Notices of Withholding and Cross-Withholding

As of January 2000, the DOL had issued several Notices of Withholding and Cross-Withholding regarding money owed to plaintiff for work completed on four different public works contracts. See Item 7, Exhs. B, C, S, T, and U. As a result of these Notices, the State and County Comptroller have withheld just over $1.2 million from plaintiff.

The present dispute began in April 1998, when defendant Ronald Kinn ("Kinn"), a DOL Public Work Wage Investigator, visited the Diamond D work site on Main Street and informed the supervisors there that the DOL was investigating plaintiff's compliance with prevailing wage laws. See Item 7, ¶ 19. Specifically, Kinn indicated that the DOL had reason to believe that Diamond D was not paying all of its workers the applicable prevailing wages, and that Diamond D was also misrepresenting the number of protected workers at several of its work sites. See id. Kinn requested access to plaintiff's books, but was refused. Later, DiPizio told Kinn that he would provide the DOL with access to plaintiff's records only as part of a discussion between DOL and Diamond D representatives. Id. ¶¶ 20, 22.

In May 1998, the DOL issued a Notice of Withholding for $100,000 of the amount owed on the Main Street project. See Item 7, Exh. C. This initial Notice was based on plaintiff's failure to file certain payroll documents with the DOL. See New York Labor Law § 220(3-a)(c).¹ Plaintiff maintains that DiPizio did agree to provide the DOL with access to its records, but only in the context of a discussion between the two parties. Id. ¶ 25.

As a result of the May 1998 Notice of Withholding, in August 1998, the State Comptroller withheld $100,000 of the money owed on the Main Street project.²

In August and October 1998, Kinn continued his investigation by estimating that plaintiff had underpaid its workers approximately $424,000 for the Greiner Road job, and $385,000 for the Heim Road job. See Item 7, ¶¶ 30-31; New York Labor Law § 220(5)(b). These estimates were recorded in a series of computer printouts. Item 7, Exhs. D and E. Based on the printouts' estimates, in October 1998, the DOL issued two Notices of "Cross-Withholding" regarding under-payments on the Heim Road and Greiner Road projects. See Item 7, Exh. F. These were Notices of Cross-Withholding because the DOL cross-withheld money that was owed on the Main Street project instead of money owed on Heim Road or Greiner Road. See New York State Labor Law § 220-b(2)(a) (McKinney Supp.1999) (empowering DOL to "cross-withhold" money owed on one construction job because of the same contractor's alleged violations of prevailing wage laws at another job site). These Notices of Cross-Withholding covered $241,722 for the Heim Road project and $593,131 for the Greiner Road project. See id.³

After these October 1998 Notices were issued, the State Comptroller withheld money owed on the Main Street project: in December 1998, $76,287 was withheld; in January 1999, $90,731 was withheld; and in July 1999, $392,644 was withheld. Item 12, ¶ 8.

Later, in August and September 1999, Kinn recalculated the amount of alleged under-payments for the Heim Road and Greiner Road projects and estimated that there were only $317,765 in under-payments at Heim Road and $290,186 in under-payments at Greiner Road. Item 7, Exhs. Q and R. In light of these revised estimates, the DOL issued new Notices of Cross-Withholding in October 1999. In these modified Notices of Cross-Withholding, the DOL directed the State Comptroller to release $251,133 that had been Cross-Withheld for under-payments at Greiner Road and release $141,238 that had been Cross-Withheld for under-payments at Heim Road. Item 7, Exh. S and Item 12, ¶ 9.

In addition, the DOL at that time estimated that plaintiff carried an under-payment of $560,033 at the Main Street job. see Item 7, Exh. P, and directed the State Comptroller to withhold an additional $618,739 of the money owed on the Main Street job. Item 7, Exh. S, and Item 12, ¶ 8. As a result of these three 1999 Notices, the State Comptroller withheld an additional $501,566 from plaintiff in December 1999. Item 12, ¶ 10.

In addition to the amounts withheld by the State, in December 1999, the DOL directed the Erie County Comptroller to withhold $100,000 of the amount owed on the Sweet Home Road project because of plaintiff's apparent failure to furnish the DOL with requested documents. See Item 7, Exh. U. On February 24, 2000, the County Comptroller responded to plaintiff's request for payment by withholding $100,000 from plaintiff, and by paying plaintiff the balance that was due—approximately $29,000. Item 15, ¶¶ 7-9, and Item 18, ¶ 10.

In the end, the State and the County Comptrollers have withheld just over $1.2 million from plaintiff.

II. The DOL's Investigation of Diamond D: Allegations of Bad Faith

Diamond D claims that the DOL has failed to conduct a good faith investigation into its Notices of Withholding and Cross-Withholding. Item 7, ¶¶ 37, 52-53. First, plaintiff alleges that the DOL has engaged in a practice of "foment[ing] additional claims from Diamond D's employees, even if those employees have previously acknowledged that they have been paid in full."...