Alborn Constr., Inc. v. State

• Decision Date: 08 April 2022
• Docket Number: Supreme Court No. S-17905
• Citation: 507 P.3d 468
• Parties: ALBORN CONSTRUCTION, INC., Appellant, v. State of Alaska, DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT, LABOR STANDARDS & SAFETY DIVISION, and Deborah Kelly, in an official capacity, Appellees.
• Court: Alaska Supreme Court

507 P.3d 468

ALBORN CONSTRUCTION, INC., Appellant,

v.State of Alaska, DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT, LABOR STANDARDS & SAFETY DIVISION, and Deborah Kelly, in an official capacity, Appellees.

Supreme Court No. S-17905

Supreme Court of Alaska.

April 8, 2022

Herbert A. Viergutz and Kevin D. Fowler, Barokas & Martin, Anchorage, for Appellant.

Siobhan McIntyre, Assistant Attorney General, Anchorage, and Treg R. Taylor, Attorney General, Juneau, for Appellees.

Before: Winfree, Chief Justice, Maassen, Carney, and Henderson, Justices. [Borghesan, Justice, not participating.]

OPINION

WINFREE, Chief Justice.

I. INTRODUCTION

A construction company filed an administrative appeal of a final agency decision that a renovation project on a State-leased office building fell under a wage statute for public construction projects. During enforcement proceedings an administrative law judge (ALJ) found that the project parties had entered into a sham contract in an attempt to evade the statute's coverage. The State agency charged with enforcing the wage statute adopted the ALJ's findings verbatim as its final agency decision. The construction company appealed; acting as an intermediate court of appeals, the superior court affirmed the final agency decision. The construction company now appeals to us. For the reasons set forth below, we affirm the superior court's decision affirming the agency decision.

II. FACTS AND PROCEEDINGS

A. Facts

Juneau I, LLC has leased a Juneau building to the State since 1984, primarily for Department of Transportation and Public Facilities (DOT&PF) offices. In early 2013 Juneau I and the Department of Administration began discussing building renovations in advance of renewing the State's lease.¹ The Department of Administration drafted a lease amendment detailing the State's requested building improvements. In July the Department of Administration and Juneau I executed a lease amendment, known as Amendment 54, specifying building upgrades, significantly raising the State's monthly rent upon completing the renovation, and extending the lease for ten years.

Amendment 54's upgrades included: bringing the commercial building into compliance with more stringent federal Americans with Disabilities Act (ADA) requirements for public buildings, specified window coverings, specified floor coverings, acoustical partitions calibrated to State-approved sound ratings, State-approved signage, and mechanical and electrical system upgrades. DOT&PF's tenant requests, incorporated in Amendment 54, included: 30 new windows meeting specific lighting requirements, a thorough mold inspection, roof repair, and new restrooms with State-approved design. The Amendment required that Juneau I certify compliance with the State's specifications and all State laws, including the set of statutes known colloquially as the Little Davis-Bacon Act.²

The Act defines public construction³ and requires public construction project contractors to pay prevailing wages set by Department of Labor and Workforce Development,⁴ whose Labor Standards and Safety Division, Wage and Hour Administration (Wage and Hour), determines the Act's application to projects and invites contractors to request coverage determinations about applicable wages.⁵

Juneau I sought a coverage determination, inaccurately representing the project as merely a routine building upgrade with no specific State requests and asserting that it did not believe the renovations were covered by the Act. Wage and Hour determined the project was not covered by the Act based on this information but warned that its determination was subject to change based on new information.

New information soon appeared; the Department of Administration provided Wage and Hour a copy of Amendment 54. Wage and Hour then notified the parties that it considered the entire renovation project to be covered by the Act because the lease extension and rent increase were contingent on the building improvements. Wage and Hour again included the caveat that its determination could change based on new information.

Wage and Hour's coverage determination caused Juneau I to halt the project. Discussions ensued among counsel for the Department of Labor, DOT&PF, the Department of Administration, and Juneau I; in April 2014 Wage and Hour subsequently issued a new coverage determination we refer to as the Bifurcation Letter. The Bifurcation Letter proposed an "unorthodox" solution to "compromise" on coverage questions under the Act and get the project moving. Construction would be bifurcated into the State-required projects covered by the Act and general upgrades not covered by the Act. Wage and Hour determined that seven items fell under the Act: (1) ADA compliance for public entities; (2) remodeling after State occupancy; (3) adding windows to comply with State-specified lighting requirements; (4) renovating office walls to State-specified requests; (5) replacing flooring with State-specified colors and with State-approved materials; (6) painting interior spaces with State-specified colors; and (7) State-specified lighting fixture upgrades. Wage and Hour expressly stated that "the overall construction project as contemplated could be covered" by the Act, and again warned that this determination, like its previous ones, was based on "the information at hand" and "may not be supportable if the circumstances ... change." Wage and Hour also urged project participants and their contractors to seek private counsel.

The Department of Administration and Juneau I then signed a new lease amendment, Amendment 55, omitting the items the Bifurcation Letter listed as "public construction" covered by the Act. But Juneau I confirmed in a letter (the Companion Letter) to the Department of Administration that the omitted items would be completed, for free, on Juneau I's own initiative. Despite Amendment 55 excluding seven construction items, the rent increase remained the same as in Amendment 54.

Near the end of 2014 Juneau I and Alborn Construction, Inc. executed a roughly $5.5 million construction contract; a clause gave Alborn the right to increased payment if the Act applied to the project. By early 2016 renovations were complete. The Department of Administration completed its inspection, and Juneau I certified compliance with State requirements.

Wage and Hour began investigating Alborn's failure to pay Act wages while the project was ongoing.⁶ Wage and Hour requested Alborn's payroll records and subcontractor contracts. Although untimely, Alborn eventually complied with the requests. Wage and Hour completed its investigation and issued a Notice of Findings,⁷ explaining that because Alborn had refused to cooperate and had refused to pay Act wages on any part of the construction project, including the parts the Bifurcation Letter listed as covered under the Act, Wage and Hour was prepared to treat the entire project as covered by the Act. Wage and Hour requested a meeting to negotiate a resolution,⁸ but Alborn did not meet with Wage and Hour. Wage and Hour then referred the matter to the Office of Administrative Hearings for resolution by an independent ALJ.⁹

B. Administrative Proceedings

In the administrative proceeding the facts were generally undisputed; the Act's prevailing wage coverage was the only issue and both parties requested summary adjudication, the equivalent of summary judgment in a civil proceeding.¹⁰ Summary judgment is appropriate when "there is no genuine issue as to any material fact and ... [the moving] party is entitled to a judgment as a matter of law."¹¹ The ALJ issued a summary adjudication decision, applying a five-factor test explained in Western Alaska Building &Construction Trades Council v. Inn-Vestment Associates of Alaska ( Western Alaska ) and determining that the Act covered the entire construction project.¹²

The ALJ concluded that Amendment 55 was an invalid attempt to circumvent the Act's purpose and goals. The Companion Letter and Amendment 55's facially fewer renovations with the same higher lease rate were important considerations leading the ALJ to characterize Amendment 55 as a "sham" contract. The ALJ concluded that Amendment 54 controlled for purposes of the Act's coverage analysis. The ALJ rejected Alborn's argument that the Bifurcation Letter's listing of covered and non-covered items should estop Wage and Hour from arguing that the Act covered the entire project.

The ALJ partially granted a subsequent motion for reconsideration after allowing Alborn to submit additional briefing. The ALJ then clarified parts of the decision without changing the conclusions. The parties stipulated that if the Act applied, Alborn owed $586,316.41 in unpaid wages. The Department of Labor adopted the ALJ's reconsidered decision verbatim as its final agency decision.¹³

C. Superior Court Proceedings

Alborn appealed the Department of Labor's agency decision to the superior court,¹⁴ arguing that the ALJ: had no jurisdiction to assess Amendment 55's validity and erroneously concluded the renovations were a "public construction" project; erroneously rejected Alborn's estoppel defense; denied due process by not giving Alborn adequate notice that Amendment 55's validity was in question; and inappropriately issued a summary adjudication.

The superior court reviewed the ALJ's Act coverage analysis, including its grant of summary adjudication, under a reasonable basis standard. The court found no genuine dispute of material fact precluding summary adjudication and considered the ALJ's Western Alaska and other analysis thorough and reasonable. The court also applied reasonable basis review in affirming the ALJ's sham contract determination, reasoning that the analysis fell within the Department of Labor's area of expertise.

The superior court reviewed Alborn's estoppel, due process, and jurisdiction claims under a substitution of judgment standard. The court rejected Alborn's estoppel defense, concluding that the Department of...