G & G Fire Sprinklers, Inc. v. Bradshaw, s. 95-56639
| Decision Date | 07 May 1996 |
| Docket Number | No. 95-56639,Nos. 95-56639,96-55194,s. 95-56639,95-56639 |
| Citation | 156 F.3d 893 |
| Parties | G & G FIRE SPRINKLERS, INC., Plaintiff-Appellee, v. Victoria L. BRADSHAW, an individual, in her capacity as Labor Commissioner of the State of California; Lloyd W. Aubry, Jr., Director; Daniel Dellarocca, an individual, in his official capacity as Deputy Labor Commissioner of the State of California; Roger Miller, an individual in his official capacity as Deputy Labor Commissioner of the State of California; Rosa Frazier, an individual in her capacity as Deputy Labor Commissioner of the State of California, Defendants-Appellants. G & G FIRE SPRINKLERS, INC., Plaintiff-Appellee, v. Victoria L. BRADSHAW, an individual, in her official capacity as Labor Commissioner of the State of California; Lloyd W. Aubry, Jr., an individual, in his official capacity as Director of the Department of Industrial Relations of the State of California; Daniel Dellarocca, an individual, in his official capacity as Deputy Labor Commissioner of the State of California; Roger Miller, an individual in his official capacity as Deputy Labor Commissioner of the State of California; Rosa Frazier, an individual, in her official capacity as Deputy Labor Commissioner of the State of California; Division of Labor Standards Enforcement, an agency of the State of California; Department of Industrial Relations, an agency of the State of California, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Thomas S. Kerrigan, State of California Department of Industrial Relations, Los Angeles, California for defendants-appellants.
Stephen A. Seideman, Levin, Stein, Chyten & Schneider, Los Angeles, California, for plaintiff-appellee in No. 95-56639.
Thomas J. McDermott and Harvey Rochman, Manatt, Phelps & Phillips, Los Angeles, California, for plaintiff-appellee in No. 96-55194.
William P. Gemmill, Gascou, Gemmill & Thornton, Los Angeles, California, for plaintiff-appellee on rehearing.
Scott A. Kronland, Altshuler, Berzon, Nussbaum, Berzon & Rubin, San Francisco, California, for amici curiae on rehearing.
Appeals from the United States District Court for the Central District of California; Manuel L. Real, Chief District Judge, Presiding. D.C. Nos. CV-95-04839-MLR, CV-95-04839-R.
Before: REINHARDT, KOZINSKI and HAWKINS, Circuit Judges.
Opinion by Judge MICHAEL DALY HAWKINS; Dissent by Judge KOZINSKI.
This case requires us to decide whether certain California Labor Code provisions, authorizing the state to seize money and impose penalties for a subcontractor's failure to comply with prevailing wage requirements, violate the Due Process Clause of the Fourteenth Amendment because no notice or hearing is required before such adverse action is taken. Specifically, Victoria L. Bradshaw, Labor Commissioner of the State of California, and others appeal the district court's order granting summary judgment in favor of G & G Fire Sprinklers, Inc. ("G & G"), the public works subcontractor here, and permanently enjoining Bradshaw from enforcing California Labor Code §§ 1727, 1730-33, 1775, 1776(g) and 1813 against G & G for alleged violations of California prevailing wage laws. We hold that G & G has standing to maintain this action and that due process requires either a pre- or post-deprivation hearing, but that the district court's injunction should be narrowed to apply only until such time as the state may adopt by regulation or otherwise appropriate procedures affording such hearings.
Appellee G & G is a fire protection company that installs fire sprinkler systems. G & G has performed numerous public works projects as a contractor or subcontractor. Appellants are the California Division of Labor Standards Enforcement ("DLSE"), Department of Industrial Relations, and officials thereof (collectively "the state").
The California Labor Code requires contractors and subcontractors on public works projects to pay a state-determined prevailing wage to all their workers. Cal. Lab.Code § 1771. To enforce this requirement, the body awarding the contract ("the awarding body") is allowed to withhold funds from a prime contractor should it determine that the contractor or one of its subcontractors has violated the prevailing wage law. § 1727. The state is authorized to withhold an amount equal to the total amount that all the workers have been underpaid, as well as up to $50 per day, per worker in fines for each instance in which the contractor fails to pay the prevailing wage. § 1775. A withholding order can only be issued after a full investigation by DLSE or the awarding body, unless the withholding is from the final payment to be made to the prime contractor. § 1727. If the violator is a subcontractor, the prime contractor is authorized to withhold an equivalent amount from its payments to the subcontractor. § 1729. All of these provisions must be incorporated into all public works contracts. Cal. Admin. Code, Title 8, § 16430.
A notice to withhold to an awarding body is a standard procedure utilized by DLSE, but no notice or hearing is required prior to its issuance. DLSE is not required to produce any evidence of a violation of the law, no specific standard is applied in determining whether to issue a notice to withhold, and no procedure exists to guard against the issuance of improper or excessive notices to withhold. Moreover, while DLSE has no formal procedures for conducting investigations, as a general rule, information from a witness/informant must be verified with an independent source. In addition, recommendations to withhold must be reviewed by a supervisor.
The exclusive remedy after withholding is a lawsuit by the prime contractor against the awarding body for recovery of the money withheld. §§ 1730-33. Such a suit must be filed within 90 days of the withholding, and the contractor bears the burden of establishing that there was no violation. § 1733. DLSE may defend the lawsuit upon request by the awarding body. Id. Subcontractors are not given the right to bring suit, although a prime contractor is allowed to assign its right to sue. Id. If a suit is not brought within 90 days, the state disburses the withheld funds to the underpaid workers; if a suit is brought within this period, then the money is held in escrow until its resolution. § 1731.
This case arose when DLSE issued three withholding notices against G & G for a total of at least $120,000. The notices were for three separate projects on which G & G had served as a subcontractor. 1 The awarding bodies for each of the projects have withheld money from the prime contractors, who in turn have withheld payment from G & G. No evidence in the record explains in detail the basis for the state's decision to withhold funds from G & G.
The issuance of the notices to withhold has a substantial detrimental effect on G & G's ability to do business, as their effect is to reduce, or cut off, payments for work performed and to damage G & G's reputation in the industry. Inasmuch as G & G intends to perform further public works projects in the future, the issuance of additional improper notices to withhold also could impair G & G's cash flow and ability to do business.
G & G filed this action for declaratory and injunctive relief, claiming that the issuance of the notices to withhold without a prior hearing constitutes a deprivation of property without due process of law in violation of the Fourteenth Amendment. The state responded with a motion to dismiss, and G & G later filed a motion for summary judgment. The district court granted G & G's motion for summary judgment and denied the state's motion to dismiss. The district court's judgment declares sections 1727, 1730-33, 1775, 1776(g) and 1813 of the California Labor Code and the state's practices thereunder unconstitutional and enjoins the state from enforcing these sections against G & G.
We first address whether G & G has standing to maintain this action. 2 The state argues G & G does not have standing because subcontractors lack privity of contract with the state under the Labor Code and because the state withheld monies from the prime contractors, not G & G, thus precluding any direct causal connection between G & G's alleged injury and the state's conduct.
Standing is a question of law that we review de novo. Sahni v. American Diversified Partners, 83 F.3d 1054, 1056 (9th Cir.1996). To establish standing, a federal plaintiff must show (1) an injury in fact; (2) a causal connection between the injury and the conduct complained of; and (3) that it is likely, as opposed to speculative, that the injury will be redressed by favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).
To establish injury in fact, a plaintiff must demonstrate that the injury is "concrete and particularized" and that it is "actual or imminent, not conjectural or hypothetical." Id. at 560, 112 S.Ct. 2130. The injury here is both concrete and actual. As a result of the state's withholding procedures, G & G has not been paid approximately $120,000, to which it claims it is entitled. G & G meets the first requirement for standing.
A plaintiff must also show that the injury "fairly can be traced to the challenged action of the defendant" and that it does not result "from the independent action of some third party not before the court." Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 41-42, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976). The Supreme Court detailed the methodology to be followed in determining causation in a case of this type:
When the suit is one challenging the legality of government action or inaction, the nature and extent of the facts that must be averred (at the summary...
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