Ames Const. Co. v. Dole

• Decision Date: 11 December 1989
• Docket Number: No. Civ. 4-89-883.,Civ. 4-89-883.
• Citation: 727 F. Supp. 502
• Parties: AMES CONSTRUCTION COMPANY, a Minnesota corporation, Plaintiff, v. Elizabeth DOLE, Secretary of Labor, Frances Perkins Building, Third Street and Constitution Avenue, Washington, D.C. 20210; United States Department of Labor, Employment Standards Administration, Wage and Hour Division, Washington, D.C.; United States Department of Labor, Employment Standards Administration, Wage and Hour Division, Minneapolis District Office, 220 South Second Street, Room 106, Minneapolis, MN 55401; Leonard Levine, individually and in his capacity as Director of the Minnesota Department of Transportation, John Ireland Boulevard, St. Paul, MN 55155; Paul M. Bergman, individually and in his capacity as a Contract Administration Engineer for the Minnesota Department of Transportation, Defendants.
• Court: U.S. District Court — District of Minnesota

727 F. Supp. 502

AMES CONSTRUCTION COMPANY, a Minnesota corporation, Plaintiff, v. Elizabeth DOLE, Secretary of Labor, Frances Perkins Building, Third Street and Constitution Avenue, Washington, D.C. 20210; United States Department of Labor, Employment Standards Administration, Wage and Hour Division, Washington, D.C.; United States Department of Labor, Employment Standards Administration, Wage and Hour Division, Minneapolis District Office, 220 South Second Street, Room 106, Minneapolis, MN 55401; Leonard Levine, individually and in his capacity as Director of the Minnesota Department of Transportation, John Ireland Boulevard, St. Paul, MN 55155; Paul M. Bergman, individually and in his capacity as a Contract Administration Engineer for the Minnesota Department of Transportation, Defendants.

No. Civ. 4-89-883.

United States District Court, D. Minnesota, Fourth Division.

December 11, 1989.

A. Patrick Leighton, John M. Harens, Phyllis Karasov, Moore, Costello & Hart, St. Paul, Minn., for plaintiff.

Jerome G. Arnold, U.S. Atty., and Kenneth W. Saffold, Asst. U.S. Atty., Minneapolis, Minn., for defendants Elizabeth Dole, U.S. Dept. of Labor, Washington, and U.S. Dept. of Labor, Minneapolis.

Hubert H. Humphrey, III, Minnesota Atty. Gen., and Donald J. Mueting, Asst. Atty. Gen., St. Paul, Minn., for defendants Levine and Bergman.

MEMORANDUM AND ORDER

MacLAUGHLIN, District Judge.

This matter is before the Court on plaintiff's motion for a preliminary injunction. The motion will be denied.

FACTS

Plaintiff Ames Construction Company is a Minnesota corporation engaged primarily in earth work, excavation, heavy highway work and site development. The present action arises out of Ames' involvement in the construction of the I-394 construction project in Minneapolis. Ames successfully bid on an earth-moving job for the I-394 project, and subcontracted with four trucking firms to deliver granular fill material to the site. The Davis-Bacon Act, 40 U.S.C. § 276a, et seq., requires that government contractors pay "prevailing wage rates" at federal or federally-assisted construction projects for work performed "on site." The four firms with whom Ames subcontracted for hauling sand and gravel to the site, however, paid their truck drivers less than "prevailing wages" when they delivered material to the site, on the grounds that this work was not covered by Davis-Bacon because it was not "on site." Ames claims that it, in preparing and submitting its bid on the I-394 project, and the trucking firms in setting the wages for their truckers, relied upon specific representations concerning the applicability of Davis-Bacon to the trucking operations made by the Minnesota Department of Transportation (MnDOT), on a well-established policy of the Federal Highway Administration, as well as on specific guidelines of the Department of Labor Field Operations Handbook.

After plaintiff began work on the I-394 project on March 11, 1985, the Department of Labor (DOL) began an independent investigation of Ames' payroll records to determine whether the trucking firms were complying with the Davis-Bacon Act. The Wage and Hour Division of the DOL determined that the four trucking firms owed their employees approximately $530,614.20 under the provisions of Davis-Bacon, as well as the Contract Work Hours and Safety Standards Act. After the DOL notified each individual trucking firm of their respective back wage assessments, and after each of the firms refused to pay these assessments, the DOL sent Ames a letter demanding that Ames either commit to paying the $530,614.20 in back wages by July 19, 1989 or face immediate suspension of contract funds earned on the I-394 project. On August 11, 1989, the regional director of the DOL's Wage and Hour Division wrote to the contracting officer of MnDOT ordering him to withhold the funds from Ames' next pay request on the I-394 job. On September 11, 1989, the MnDOT officer responded by stating that the funds would be withheld on November 1, 1989.¹

On October 5, 1989 plaintiff brought this action claiming that withholding funds due Ames for work performed on the I-394 project prior to providing a hearing on Ames' liability for Davis-Bacon violations would be a deprivation of property without due process of law. Ames seeks an order preliminarily enjoining the MnDOT and the DOL from withholding funds until a hearing on the alleged violations has been held.

DISCUSSION

The test for whether preliminary injunctive relief should issue is set forth in Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109 (8th Cir.1981). "At base, the question is whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined." 640 F.2d at 113. Four factors are weighed:

(1) the threat of irreparable harm to the movant;

(2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant;

(3) the probability that movant will succeed on the merits; and

(4) the public interest.

Dataphase, 640 F.2d at 114.

The key issue under the Dataphase factors is whether Ames is likely to prevail at a trial of the merits of its claim that it will be denied due process by the prehearing suspension of funds. Section 1(a) of the Davis-Bacon Act, the provision under which the DOL ordered suspension of the funds, provides that every contract to which the Act applies must contain a stipulation that:

there may be withheld from the contractor so much of accrued payments as may be considered necessary by the contracting officer to pay employees on the contract the difference between the rates of wages required by the contract ... and the rates of wages received....

40 U.S.C. § 276a(a). Regulations promulgated pursuant to this provision require that payments under the contract shall be withheld for failure to comply with the Act:

In the event of failure or refusal of the contractor or subcontractor to comply with labor standards clauses contained in section 5.5 in the applicable statutes ... a federal agency, upon its own action or upon written request of an authorized representative of the Department of Labor, shall take such action as may be necessary to cause a suspension of the payment, advance or guarantee of funds....

29 C.F.R. § 5.9. The Act provides that following notification of alleged violations, a contractor may, within thirty days, make a written request for hearing. 29 C.F.R. § 5.11(b)(2). Upon receipt of a contractor's request, the matter is referred to the chief ALJ for designation of an ALJ to conduct hearings. 29 C.F.R. § 5.11(b)(3). The hearing is to be conducted according to the rules of practice for administrative proceedings as set forth in 29 C.F.R. Part 6. While these administrative procedures are pending, contract funds are held in a deposit account. The provisions do not require a hearing prior to suspending contract payments, nor do they contain a deadline by which the government must provide a hearing following suspension.

Plaintiff does not question the constitutionality of the suspension provisions per se, but rather disputes the DOL's application of them through suspension of contract payments prior to providing plaintiff with an opportunity to be heard on the alleged Davis-Bacon violations. By failing to provide such a pre-suspension hearing, Ames alleges that the DOL has deprived it of property without due process of law in violation of the fifth amendment.

I. The Deprivation Inquiry

A due process claim has two elements: (1) deprivation of a protectible interest, and (2) denial of adequate procedural protections. Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1983). In arguing that it has a protectible interest in contract payments from the DOL and MnDOT, Ames relies upon analogy to prehearing garnishment of wages or suspension of government benefits, two issues addressed by the United States Supreme Court in Sniadach v. Family Finance Corp. of Bay View, 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), and Goldberg, 397 U.S. 254, 90 S.Ct. 1011. In Sniadach, the Court invalidated Wisconsin's garnishment procedure whereby wages could be frozen upon issuance of a summons by the clerk of court at the request of a creditor's lawyer. The Court found this to be an "obvious" deprivation of property without due process. Sniadach, 395 U.S. at 342, 89 S.Ct. at 1823. In Goldberg, the Court overturned New York procedures by which welfare benefits could be terminated without prior notice or hearing. The Court held that welfare benefits were a matter of statutory entitlement for persons qualified to receive them, and that their termination involved state action that adjudicates important rights. Goldberg, 397 U.S. at 262, 90 S.Ct. at 1017. Finding that welfare benefits are not merely a "privilege" but are rather a form of "property" to which due process rights apply, the Court discussed the concept of property as follows:

Much of the existing wealth in this country takes the form of rights that do not fall within traditional common law concepts of property. It has been aptly noted that

"society today is built around entitlement. The automobile dealer has his franchise, the doctor and lawyer their professional licenses, the worker his union membership, contract, and pension rights, the executive his contract and stock options; all are devices to aid security and independence. Many of the most important of these entitlements now flow from government: subsidies to farmers and businessmen, routes for airlines and channels for television stations; long term contracts for defense, space, and education; social security pensions for individuals. Such sources of security, whether private or public, are no longer regarded as luxuries or gratuities; to the

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