DeMartino v. N.Y. State Dep't of Labor

Decision Date01 March 2016
Docket Number13-CV-5273 (KAM) (MDG)
Citation167 F.Supp.3d 342
Parties Frank DeMartino and TADCO Construction Corp., Plaintiffs, v. New York State Department of Labor; Dormitory Authority of the State of New York; Peter M. Rivera, Commissioner of the New York State Department of Labor, in his official and individual capacities; John Padula, in his official and individual capacities; John W. Scott, in his official and individual capacities; Dennis Monahan, in his official and individual capacities; and John Does #1-10, in their official and individual capacities, Defendants.
CourtU.S. District Court — Eastern District of New York

Bryan Ha, White Plains, NY, for Plaintiffs.

Seth Kupferberg, Office of the Attorney General, Deanna DeFrancesco, Margaret Amanda Devoe, New York City Law Department, Scott Brian Glotzer, NYC Office of Corporation Counsel, New York, NY, for Defendants.

MEMORANDUM & ORDER

KIYO A. MATSUMOTO, United States District Judge:

The New York Labor Law authorizes the Commissioner of the New York Department of Labor (DOL) to order the withholding of payments due a contractor on a public works project if that contractor fails to pay a prevailing wage to its workers. Plaintiffs—TADCO Construction Corp. (TADCO), a New York public works contractor, and Frank DeMartino (DeMartino), that entity's owner—filed an amended complaint alleging principally that the DOL improperly issued multiple withholdings in violation of plaintiffs' due process rights, thereby depriving them of payment to which they were contractually entitled. Defendants have moved to dismiss the amended complaint. The plaintiffs have moved for this court's recusal and for injunctive relief. For the reasons set forth herein, the plaintiffs' motions are denied and the defendants' motions to dismiss are granted.

BACKGROUND
I. New York's Prevailing Wage Law

Before addressing the factual background of the instant case, the court will detail the statutory framework of New York's prevailing wage law. See N.Y. Lab. Law § 220 et seq. (§ 220 or the “prevailing wage law”). The prevailing wage law implements Article I, § 17 of the New York Constitution, which provides that no “laborer, worker or mechanic, in the employ of a contractor or sub-contractor engaged in the performance of any public work, shall ... be paid less than the rate of wages prevailing in the same trade or occupation in the locality.”

Under § 220, the wages to be paid in New York on a public project “shall be not less than the prevailing rate of wages.”

§ 220(3)(a). The statute also requires that wage supplements—e.g., benefits—be aligned with prevailing local practices. See § 220(3)(b). The “prevailing rates of wages” in New York state are generally determined by the commissioner of the DOL, based on collective bargaining agreements, though the Comptroller of the City of New York City sets the prevailing wage rates in New York City. See RI, Inc. v. Gardner , 523 Fed.Appx. 40, 41 & n. 2 (2d Cir.2013) (citing § 220(5)(a) ); see also § 220(5)(e). When an employer fails to pay the prevailing wage, the DOL has the authority—either sua sponte or upon a worker's complaint—to direct the contracting agency to withhold payment on the public contract pending DOL's investigation and administrative proceedings. See § 220(7)(8) ; see also § 220–b(2)(c).

There are three types of withholdings relevant to this litigation. The first, referred to as “underpayment withholding,” requires the DOL—when wages or supplements “appear to be due”—to immediately notify the public contracting agency to withhold funds due on a project sufficient “to satisfy said wages and supplements, including interest and penalty.” § 220–b(2)(a)(1). The DOL may then investigate and conduct an administrative hearing. See § 220–b(2)(c); see also § 220(7)(8). If underpayment is determined to have occurred, the DOL may order payment by the contractor of the underpaid wages and supplements, including interest and a civil penalty that cannot exceed 25% of the “total amount found to be due.” § 220(8). The contractor can seek review of that decision in an Article 78 proceeding in New York state court. Id. Pending the final determination, the withheld funds are to be held in trust “for the sole and exclusive benefit of the workers ... and for payment of any civil penalty.” § 220–b(2)(b), (c); Titan Indem. Co. v. Triborough Bridge & Tunnel Auth., Inc. , No. 94–CV–5447, 1996 WL 556988, at *5 (S.D.N.Y. Oct. 10, 1996).

The second type of withholding is referred to as “cross-withholding.” In the event that there are insufficient funds still due to the contractor to satisfy the wages, supplements, interest and penalty due on a particular public project, the DOL is authorized to direct a contracting agency to withhold payment due on a separate public project to cover the difference. See § 220–b(2)(a)(1).

The third type of withholding is referred to as “records withholding.” A public works contractor is required at all times to keep original payrolls “setting forth the names and addresses and showing for each worker, laborer, or mechanic the hours and days worked, the occupations worked, the hourly wage rates paid and the supplements paid or provided.” § 220(3–a)(a)(iii). The DOL is empowered to request such payroll records directly from the contractor, which must be turned over within ten days. See § 220(3–a)(c). If the contractor fails to provide the requested information within ten days, the DOL “shall, within fifteen days, order the [contracting agency] to immediately withhold” up to 25% of the amount due the contractor under the contract, not to exceed $100,000. See id. If the contractor supplies the requested records, however, the DOL must immediately release the funds. See id. While the statutory regime contemplates an administrative hearing to address both an underpayment withholding and a cross-withholding, there is no statutory entitlement to a hearing for a records withholding. Compare § 220(7)(8), with § 220(3–a)(a)(iii)(iv), (c).

II. Factual Background

The following facts are drawn primarily from the Amended Complaint (ECF No. 29, Amended Complaint (“Am. Compl.”)) and, for purposes of this motion, are presumed to be true unless they are conclusory or merely state the elements of a claim.1 Prior to the commencement of the instant dispute, TADCO and its principal owner DeMartino (hereinafter, plaintiffs) were awarded several state and municipal public works contracts. See TADCO Const. Corp. v. Dormitory Auth. of State of New York , 700 F.Supp.2d 253, 257 (E.D.N.Y.2010). This action arises out of two of those contracts, entered into between plaintiffs and the Dormitory Authority of the State of New York (DASNY), “a public benefit corporation responsible for the financing and construction of facilities for State agencies and other entities for which the Legislature has given authorization.” New York State Chapter, Inc. v. New York State Thruway Auth. , 88 N.Y.2d 56, 643 N.Y.S.2d 480, 666 N.E.2d 185, 192 (1996) ; see also N.Y. Pub. Auth. Law § 1675 et seq. (DASNY's implementing legislation).

The first of the projects giving rise to this action involved general construction work at the Queens Hospital Center in Queens, New York (the “Queens Hospital Project”). (See Am. Compl. at ¶ 12.) Plaintiffs and DASNY entered into a contract for the Queens Hospital Project in September 2005. (Id. ) Plaintiffs allege that they completed all work on the project. (Id. at ¶ 13.) The second relevant project took place at or around the same time as the Queens Hospital Project, and involved the construction of a residence building for the Staten Island Developmental Disabilities Services Office (the “Staten Island Project”). (Id. at ¶¶ 14–15.) The Staten Island Project “was beset with construction problems and delays from the outset” and the relationship between TADCO and DASNY on the project was “marked by rancorous disputes over ongoing payment/funding issues and project management and other issues and became deeply acrimonious and adversarial.” (Id. at ¶ 15.)

Disputes over payment on these two projects, as well as two others not relevant in this litigation, led TADCO to bring four suits in early January 2007 in New York state court seeking payment for its work. (Id. at ¶¶ 13-14 & n.1.) In mid-January 2007, after the four suits were filed, DASNY “unilaterally terminated TADCO” from the Staten Island Project over TADCO's objections. (Id. at ¶ 16.) In late January 2007, after TADCO had been terminated from the Staten Island Project, plaintiffs allege that DASNY employee Dennis Monahan (Monahan) contacted DOL investigator John Padula (Padula) and “vindictively and maliciously instructed him to open an investigation against TADCO for alleged prevailing wage law violations” on the Queens Hospital Project. (Id. at ¶ 17.) Plaintiffs allege that this investigation was entirely baseless and that it was undertaken “in retaliation for and as a tactical response to the lawsuits that TADCO had filed and to intimidate, harass and punish TADCO and its principal Mr. DeMartino.” (Id. at ¶¶ 18-23.)

According to the Amended Complaint, DOL investigator Padula was effectively “on loan” to DASNY. (Id. at ¶ 19.) DASNY paid his salary and benefits, and he worked exclusively for DASNY pursuant to a “memorandum of understanding” between DASNY and DOL. (Id. ; see also ECF No. 58, Declaration of Bryan Ha (“Ha Decl.”), Ex. E.) Plaintiffs allege that DASNY, through Monahan and others, “controlled this supposedly independent DOL investigator and through him effectively, and unlawfully, exercised the investigatory and prosecutorial powers of the DOL.” (Am. Compl. at ¶ 19.)

During the DOL investigation, the DOL issued a notice of records withholding in February 2007 for $62,000 in connection with the Queens Hospital Project. (Id. at ¶ 25; see also Ha. Decl., Ex. G.) Plaintiffs allege that Padula obtained TADCO's payroll records from DASNY and, “after conducting his investigation, found no...

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