Ball, Ball & Brosamer, Inc. v. Reich

• Decision Date: 10 June 1994
• Docket Number: No. 92-5366,92-5366
• Parties: , 62 USLW 2781, 128 Lab.Cas. P 33,100, 39 Cont.Cas.Fed. (CCH) P 76,669, 2 Wage & Hour Cas.2d (BNA) 132 BALL, BALL & BROSAMER, INC., Appellant, v. Robert B. REICH, Secretary of Labor, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1447

24 F.3d 1447

306 U.S.App.D.C. 339, 62 USLW 2781,

128 Lab.Cas. P 33,100,

39 Cont.Cas.Fed. (CCH) P 76,669,

2 Wage & Hour Cas.2d (BNA) 132

BALL, BALL & BROSAMER, INC., Appellant, v. Robert B. REICH, Secretary of Labor, et al., Appellees.

No. 92-5366.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 2, 1994.

Decided June 10, 1994.

Appeal from the United States District Court for the District of Columbia 91cv03266.

John R. Little, Jr., Boulder, CO, argued the cause for appellant. With him on the briefs was G. Henry Seaks, Denver, CO.

Charles F. Flynn, Asst. U.S. Atty., Washington, DC, argued the cause for appellees. With him on the brief were Eric H. Holder, Jr., U.S. Atty., John D. Bates and R. Craig Lawrence, Asst. U.S. Attys., and Marva Peace-Jackson, Atty., U.S. Dept. of Labor, Washington, DC.

On the brief for amicus curiae Associated General Contractors of America were William A. Isokait, Silver Spring, MD, Charles E. Murphy, and Robert P. Casey, Chicago, IL.

Before EDWARDS, BUCKLEY, and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

Appellant Ball, Ball & Brosamer, Inc. ("Ball") appeals from an order of the district court granting summary judgment in favor of the Secretary of Labor in an action to review the Secretary's determination that Ball and its subcontractor violated the Davis-Bacon Act while performing work on a federal construction project. Ball maintains that the district court erred in concluding that the terms of its contract with the government barred judicial review of its claims and that the regulations under which the Secretary acted were a reasonable interpretation of the Davis-Bacon Act. For the reasons set forth below, we conclude that appellant is correct on both counts and order the district court to enter summary judgment in Ball's favor.

I. BACKGROUND

In September 1985, Ball entered into a $14.5 million contract with the Department of Interior's Bureau of Reclamation to construct thirteen miles of the Tucson Aqueduct between Phoenix and Tucson, Arizona. Ball subcontracted with Red Rock Products, Inc., an Arizona-based company, for the concrete and gravel it needed for the project. Red Rock obtained raw materials from a local sand and gravel pit and set up a portable batch plant for mixing concrete. The borrow pit and batch plant were located about two miles from the construction site at its nearest point.

The Wage and Hour Division of the Department of Labor began an investigation to determine whether Red Rock's pay practices conformed with the Davis-Bacon Act, 40 U.S.C. Sec. 276a(a) (1988). The Act requires generally that laborers and mechanics under covered government contracts will be paid at least the prevailing wages for corresponding classes in the area of performance of the contract as determined by the Secretary of Labor. See id. By its terms, it applies to "all mechanics and laborers employed directly upon the site of the work." Id. (emphasis added). The Division found Red Rock's employees to be covered by the Act. As the Division also found that they had not received prevailing wages, it concluded that Red Rock and Ball ¹ had violated the Act. The Division notified the Bureau of Reclamation of its findings, and the Bureau of Reclamation withheld $60,976.71 from the contract price owed to Ball for back wages relating to the alleged Davis-Bacon violations. See id. Secs. 276a(a) & 276a-2(a) (authorizing withholding and repayment of wages due under Act).

Ball filed a petition for review with the Wage Appeals Board, ² arguing that the Red Rock batch plant and borrow pit were not "directly upon the site of the work" within the meaning of the Act. The Board denied the petition, stating that the facts of record supported a finding that Red Rock's borrow pit and batch plant were on the site of the work, as the Secretary's regulations define that phrase. The Secretary's regulations provide:

Except as provided in paragraph (l )(3) of this section, fabrication plants, mobile factories, batch plants, borrow pits, job headquarters, tool yards, etc., are part of the site of the work provided they are dedicated exclusively, or nearly so, to performance of the contract or project, and are so located in proximity to the actual construction location that it would be reasonable to include them.

29 C.F.R. Sec. 5.2(l )(2) (1993).

After the Wage Appeals Board denied the petition for review, Ball brought suit in the U.S. District Court for the District of Columbia. On cross-motions for summary judgment, the District Court ruled in favor of the Secretary. See Ball, Ball & Brosamer, Inc. v. Martin, 800 F.Supp. 967 (D.D.C.1992). The district court first held that Ball's challenge to the validity of the Secretary's regulations was precluded by the terms of its contract with the government. Paragraph I.7.9 of Ball's contract with the Bureau of Reclamation, referred to by the parties as the "incorporation clause," provided that "[a]ll rulings and interpretations of the Davis-Bacon and Related Acts contained in 29 C.F.R. Parts 1, 3, and 5 are herein incorporated by reference in this contract." The district court accepted the Secretary's position that in the incorporation clause, Ball agreed to abide by the Secretary's definition of "site of the work" found in Part 5 of the regulations and therefore could not challenge the regulations as inconsistent with the Davis-Bacon Act. Id. at 971-73.

The district court also held that even if Ball were not contractually precluded from bringing its challenge, the Secretary's regulations at Sec. 5.2(l )(2) were a reasonable interpretation of the statutory phrase "directly upon the site of the work." Id. at 975. In so holding, the district court rejected Ball's argument that this court's opinion in Building & Construction Trades Dep't., AFL-CIO v. United States Dep't. of Labor Wage Appeals Board, 932 F.2d 985 (D.C.Cir.1991) (the "Midway " decision), required a strict geographical proximity test for evaluating what areas are "directly upon the site of the work" for purposes of the Davis-Bacon Act. Id. at 973-75.

II. DISCUSSION

A. Standard of Review

Because the parties agree that there are no genuine issues of material fact in dispute here, this court's only task on appeal is to ensure that the district court properly applied the relevant law to the undisputed facts. Beckett v. Air Line Pilots Ass'n, 995 F.2d 280, 284 (D.C.Cir.1993). Like the district court, our review of the Secretary's conclusion that Ball violated the Davis-Bacon Act is limited to determining whether the Secretary's decision was arbitrary, capricious, or contrary to law within the meaning of the APA. Dr. Pepper/Seven-Up Companies v. FTC, 991 F.2d 859, 862 (D.C.Cir.1993); 5 U.S.C. Sec. 706(2)(A) (1988). We examine de novo the legal question whether judicial review of Ball's claims can be limited pursuant to the terms of its contract with the government. See HOH Co. v. Travelers Indem. Co., 903 F.2d 8, 12 n. 6 (D.C.Cir.1990).

B. The Reviewability of Ball's APA Claims

Paragraph I.7.9 of Ball's contract with the Bureau of Reclamation incorporated by reference "[a]ll rulings and interpretations of the Davis-Bacon and Related Acts contained in 29 C.F.R. Parts 1, 3, and 5." The incorporation clause was included in the contract pursuant to the Secretary's regulations at 29 C.F.R. Sec. 5.5(a), which expressly require government agencies

to insert in full in any contract in excess of $2,000 ... for the actual construction ... of a ... public work ... which is subject to the labor standards provisions of any of the acts listed in Sec. 5.1, [including the Davis-Bacon Act] the following clauses ...:

. . . . .

(8) ... All rulings and interpretations of the Davis-Bacon and Related Acts contained in 29 CFR parts 1, 3, and 5 are herein incorporated by reference in this contract.

29 C.F.R. Sec. 5.5(a) (emphasis added). The consequences for a contractor who refuses to include this clause are also spelled out in the Secretary's regulations: the contractor will not receive payment for work performed under the contract. See id. Sec. 5.6(a)(1).

The Secretary contends that the effect of the mandatory incorporation clause is to bar Ball, as a matter of contract, from challenging the validity of Sec. 5.2(l )(2). This application of the incorporation clause forecloses all judicial review of the validity of the Secretary's regulations when those regulations are later applied to a particular contractor in an adjudicatory setting. Such an attempt to limit judicial review runs counter to the fundamental principles of reviewability underlying the Administrative Procedure Act.

The Administrative Procedure Act "embodies the basic presumption of judicial review to one 'suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute,' 5 U.S.C. Sec. 702, so long as no statute precludes such relief or the action is not one committed by law to agency discretion." Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 1511, 18 L.Ed.2d 681 (1967). Because of this "well-settled presumption" in favor of judicial review, McNary v. Haitian Refugee Center, Inc., 498 U.S. 479, 496, 111 S.Ct. 888, 898, 112 L.Ed.2d 1005 (1991), "clear and convincing evidence" of a legislative intention to preclude judicial review is required before we presume that Congress intended to foreclose judicial examination of the legality of administrative action. Reno v. Catholic Social Servs., Inc., --- U.S. ----, ----, 113 S.Ct. 2485, 2499, 125 L.Ed.2d 38 (1993).

An agency can neither adopt regulations contrary to statute, nor exercise powers not delegated to it by Congress. The Secretary, therefore, cannot adopt regulations erasing the presumption of reviewability embodied in the APA unless the Davis-Bacon Act reveals "clear and convincing evidence" that Congress...