Griffin v. Reich, C. A. No. 95-054L (D. R.I. 2/__/1997)
| Decision Date | 01 February 1997 |
| Docket Number | C. A. No. 95-054L. |
| Court | U.S. District Court — District of Rhode Island |
| Parties | LLOYD T. GRIFFIN, JR., LTG CONSTRUCTION CO., INC., PHOENIX-GRIFFIN GROUP II, LTD, GATSBY HOUSING ASSOCIATES, INC., Plaintiffs, v. ROBERT REICH, SECRETARY OF THE UNITED STATES DEPARTMENT OF LABOR, MARIA ESCHAVESTE, Individually and in her official capacity as Administrator of the Wage & Hour Division of the U.S. Department of Labor, Defendants. |
This case arises from the involvement of Lloyd T. Griffin, Jr., LTG Construction, Co., Inc., Phoenix-Griffin Group II, Ltd, and Gatsby Housing Associates, Inc. (collectively "plaintiffs") in the Turnkey Housing Project, a public housing development in Providence, Rhode Island funded by the United States Department of Housing and Urban Development ("HUD") under the Housing Act of 1937, 42 U.S.C. 1437 (1994) et seq. After conducting an investigation into plaintiffs' activities at the Turnkey Project, the Wage and Hour Division of the United States Department of Labor found plaintiffs to be in willful violation of the Davis-Bacon and Related Acts ("DBRA") and ordered payment by plaintiffs of $460,000 in alleged unpaid wages to various workers on the Project and the debarment of plaintiffs from government contracts for three years. Both an Administrative Law Judge ("ALJ") and the Wage Appeals Board ("WAB") subsequently affirmed those orders.
This matter is before the Court on defendants' motion for summary judgment. In addition, plaintiffs seek judicial review of the WAB's decision pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 (1994) et seq.1 This Court has the authority to review the WAB's decision pursuant to 5 U.S.C. § 704 (1994), as that decision constitutes final agency action by the Department of Labor. See 29 C.F.R. § 7.1(d) (1995). For the reasons that follow, defendants' motion for summary judgment is denied, plaintiffs' appeal is sustained, and the case is remanded to the Department of Labor for further consideration and fact finding.
The following facts are undisputed, except as noted. The Turnkey Housing Project is a public housing development in Providence, Rhode Island funded by HUD under the Housing Act of 1937, 42 U.S.C. § 1437 et seq (1994). In January of 1990, Phoenix-Griffin Group II, Ltd ("PGG") and the Providence Housing Authority ("PHA") entered into a contract under which PGG agreed to construct 92 units of scattered site, low-income housing for the Turnkey Project. PGG contracted with LTG Construction Co., Inc. ("LTG") to build the units, and LTG then contracted with Gatsby Housing Associates ("GHA") to clean the units before they were tendered to the Housing Authority. Plaintiff Lloyd T. Griffin is the president of PGG, LTG, and GHA.
Under the Housing Act of 1937, 42 U.S.C. § 1437 (1994) et seq, a Davis-Bacon Related Act, a contract for "loans, contributions, sale, or lease" of low-income housing, such as the one entered into by PHA and PGG, must:
contain a provision that not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act [40 U.S.C. § 276a et seq.], shall be paid to all laborers and mechanics employed in the development of the project . . . (emphasis added).2
42 U.S.C. 1437j (1994). The Housing Act defines "development" as "any or all undertakings necessary for . . . construction . . . in connection with a low-income housing project." 42 U.S.C. § 1437(c)(1) (1994).
HUD had the initial responsibility to ensure compliance with prevailing wage rules on the Turnkey Housing Project. See 29 C.F.R. § 5.6 (1995); Reorg. Plan No. 14 of 1950, reprinted in 5 U.S.C. app. at 1472 (1994).3 In this capacity, HUD approved the contract between PHA and PGG as conforming to labor standards requirements.
Before PHA and PGG signed the contract, however, Griffin sought advice from HUD concerning whether work for the Turnkey Project to be performed at a location on Veazie Street in Providence would be subject to prevailing wage rates. LTG used the Veazie Street facility to construct sections of housing units. Those sections were then transported to the scattered sites for installation.
In response to Griffin's inquiry, the PHA investigated the matter. Stephen J. O'Rourke, Executive Director of the PHA, sent a letter to Casimir Kolaski, the manager of the HUD Providence Office, and Michael J. Dziok, the Director of Housing Management. In the letter, O'Rourke stated his view that work at the Veazie Street fabricating facility would not be subject to Davis-Bacon prevailing wage requirements and asked Kolaski and Dziok to "confirm [his] understanding." In reply, Dziok wrote on September 19, 1989:
In response to your letter dated September 15, 1989, Davis Bacon Wage Rates do not apply to the fabrication of building components unless conducted in connection with and at the site of the project, or in a temporary plant set up elsewhere to supply the needs of the project and dedicated exclusively, or nearly so, to the performance of the contract or project.
There is some dispute concerning the extent of the knowledge these HUD officials possessed about the Turnkey Project at the time the letter was written.
The statement in Dziok's letter mirrors the standard articulated in Federal Labor Standards Compliance in Housing and Community Development Programs Handbook (the "HUD Handbook"), a book of guidelines published by HUD, which Griffin also consulted. The Handbook states, in pertinent part:
The precutting of parts and/or the prefabrication of assemblies are not covered [i.e. subject to Davis-Bacon prevailing wage rates] unless conducted in connection with and at the site of the project, or in a temporary plant set up elsewhere to supply the needs of the project and dedicated exclusively, or nearly so, to performance of the contract or project.
HUD Handbook, 1344.1 Rev.1 § 7.12 (1986).
PHA and PGG subsequently signed the contract, and plaintiffs did not pay prevailing wage rates to workers at the Veazie Street facility. In November of 1990, however, the Wage and Hour Division of the Department of Labor instituted an investigation into possible Davis-Bacon violations on the Turnkey Project. The Wage and Hour Administrator later concluded that there were several Davis-Bacon violations. Most significantly, the Administrator determined that plaintiffs should have paid prevailing wage rates at the Veazie Street facility. That matter accounts for approximately $250,000 of the approximately $300,000 in wages at issue in the present case, but the Administrator also concluded that prevailing wages were owed for work performed by working subcontractors and by cleaning personnel. The HUD Handbook also contains provisions pertaining to those two issues. See HUD Handbook, 1344.1 Rev.1 § 7.3, 7.4 (1986).4
In March of 1991, the Wage and Hour Division directed HUD to withhold $500,000 from the amounts to be paid to PGG upon completion of some housing units. At that time, plaintiffs had completed and conveyed title to fifty-two (52) units to PHA. Thirty-five (35) other units were nearly completed, and the development of the remaining five (5) units was in the beginning stages.
Plaintiffs filed a suit in United States District Court for the District of Rhode Island seeking to prevent the enforcement of the withholding order in April of 1991. See Project B.A.S.I.C. v. Kemp, 768 F.Supp. 21 (D.R.I. 1991). In an effort to allow the project to continue, Judge Raymond J. Pettine of this Court ordered HUD to pay plaintiffs the $500,000 that had been previously withheld and later held HUD in contempt for failing to comply. However, the First Circuit reversed the contempt order, Project B.A.SI.C. v. Kemp, 947 F.2d 11 (1st Cir. 1991), the money was not paid, and plaintiffs never resumed work on the Turnkey Project.
In addition, in August of 1991, the Wage and Hour Division issued findings of additional violations allegedly committed by plaintiffs and ordered plaintiffs' debarment from government contracts for three years.
Plaintiffs sought a hearing before an ALJ to challenge those findings. On July 1, 1993, after a 24-day hearing, the ALJ upheld the determinations of the Wage and Hour Division. The ALJ found that the Veazie Street facility was subject to Davis-Bacon prevailing wage rates for two reasons. First, the ALJ ruled that the Housing Act standard concerning "the development of the project" encompassed the work at the Veazie Street facility. Second, the ALJ held that the Veazie Street location fell within the regulatory definition of "site of work" at 29 C.F.R. 5.2(l)(2) (1995) because "the products fabricated there were `dedicated exclusively, or nearly so,' to performance of the contract or project and as the facility was located in proximity to the actual construction location that inclusion would be reasonable."5 The ALJ also ruled that plaintiffs owed Davis-Bacon wages to all persons who worked at the scattered-site locations, whether they were subcontractors or employees of subcontractors. In addition, the ALJ decided that the cleaning work at issue was "construction" and was therefore subject to prevailing wage requirements. Finally, the ALJ, addressing twelve alleged infractions, found that plaintiffs had committed aggravated and willful violations of the DBRA and ordered their debarment from government contracts for three years.
In December of 1994, the WAB rendered a decision affirming the ALJ in every respect. The WAB held that the language of the Housing Act concerning "the development of the project" controlled the Veazie Street issue, holding that work at the off-site facility fell "within the plain meaning of the statute." The WAB did not rely on the ALJ's second rationale for finding the Veazie Street facility subject to prevailing wage requirements; the D.C. Circuit had recently held that the concept of "site...
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