Lujan v. G & G Fire Sprinklers Inc.

• Citation: 532 U.S. 189,149 L.Ed.2d 391,121 S.Ct. 1446
• Decision Date: 17 April 2001
• Docket Number: 00152,99-1702
• Parties: ARTHUR S. LUJAN, LABOR COMMISSIONER OF CALIFORNIA, et al., PETITIONERS v. G & G FIRE SPRINKLERS, INC.SUPREME COURT OF THE UNITED STATES
• Court: United States Supreme Court

532 U.S. 189

121 S.Ct. 1446

149 L.Ed.2d 391

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press

ARTHUR S. LUJAN, LABOR COMMISSIONER OF CALIFORNIA, et al., PETITIONERS v G & G FIRE SPRINKLERS, INC.

No. 00-152

SUPREME COURT OF THE UNITED STATES

Argued February 26, 2001

Decided April 17, 2001

Syllabus

The California Labor Code (Code) authorizes the State to order withholding of payments due a contractor on a public works project if a subcontractor on the project fails to comply with certain Code requirements; permits the contractor, in turn, to withhold similar sums from the subcontractor; and permits the contractor, or his assignee, to sue the awarding body for alleged breach of the contract in not making payment to recover the wages or penalties withheld. After petitioner State Division of Labor Standards Enforcement (DLSE) determined that respondent G & G Fire Sprinklers, Inc. (G & G), as a subcontractor on three public works projects, had violated the Code, it issued notices directing the awarding bodies on those projects to withhold from the contractors an amount equal to the wages and penalties forfeited due to G & G's violations. The awarding bodies withheld payment from the contractors, who in turn withheld G & G's payment. G & G filed a 42 U.S.C. 1983 suit against DLSE and other state petitioners in the District Court, claiming that the issuance of the notices without a hearing deprived it of property without due process in violation of the Fourteenth Amendment. The court granted G & G summary judgment, declared the relevant Code sections unconstitutional, and enjoined the State from enforcing the provisions against G & G. The Ninth Circuit affirmed. This Court granted certiorari, vacated that judgment, and remanded for reconsideration in light of its decision in American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, that the respondents there had no property interest in payment for disputed medical treatment pending review of the treatment's reasonableness and necessity, as authorized by state law. On remand, the Ninth Circuit reinstated its prior judgment and opinion, explaining that G & G's rights were violated not because it was deprived of immediate payment, but because the state statutory scheme afforded no hearing at all.

Held: Because state law affords G & G sufficient opportunity to pursue its claim for payment under its contracts in state court, the statutory scheme does not deprive it of due process. In each of this Court's cases relied upon by the Ninth Circuit, the claimant was denied a right by virtue of which he was presently entitled either to exercise ownership dominion over real or personal property, or to pursue a gainful occupation. See, e.g., United States v. James Daniel Good Real Property, 510 U.S. 43, 62. Unlike those claimants, G & G has not been deprived of any present entitlement. It has been deprived of payment that it contends it is owed under a contract, based on the State's determination that it failed to comply with the contract's terms. That property interest can be fully protected by an ordinary breach-of-contract suit. If California makes ordinary judicial process available to G & G for resolving its contractual dispute, that process is due process. Here, the Code, by allowing a contractor to assign the right of suit, provides a means by which a subcontractor may bring a breach-of-contract suit to recover withheld payments. That damages may not be awarded until the suit's conclusion does not deprive G & G of its claim. Even if G & G could not obtain assignment, it appears that a breach-of-contract suit against the contractor remains available under state common law, although final determination of the question rests in the hands of the California courts. Pp. 5-9.

204 F.3d 941, reversed.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Rehnquist, C. J., delivered the opinion for a unanimous Court.

Opinion of the Court

Chief Justice Rehnquist delivered the opinion of the Court.

The California Labor Code (Code or Labor Code) autho-rizes the State to order withholding of payments due a contractor on a public works project if a subcontractor on the project fails to comply with certain Code requirements. The Code permits the contractor, in turn, to withhold similar sums from the subcontractor. The Court of Appeals for the Ninth Circuit held that the relevant Code provisions violate the Due Process Clause of the Fourteenth Amendment because the statutory scheme does not afford the subcontractor a hearing before or after such action is taken. We granted certiorari, 531 U.S. 924 (2000), and we reverse.

Petitioners are the California Division of Labor Standards Enforcement (DLSE), the California Department of Industrial Relations, and several state officials in their official capacities. Respondent G & G Fire Sprinklers, Inc. (G & G) is a fire-protection company that installs fire sprinkler systems. G & G served as a subcontractor on several California public works projects. "Public works" include construction work done under contract and paid for in whole or part by public funds. Cal. Lab. Code Ann. 1720 (West Supp. 2001). The department, board, authority, officer, or agent awarding a contract for public work is called the "awarding body." 1722 (West 1989). The California Labor Code requires that contractors and subcontractors on such projects pay their workers a prevailing wage that is determined by the State. 1771, 1772, 1773 (West 1989 and Supp. 2001). At the time relevant here, if workers were not paid the prevailing wage, the contractor was required to pay each worker the difference between the prevailing wage and the wages paid, in addition to forfeiting a penalty to the State. 1775 (West Supp. 2001).¹ The awarding body was required to include a clause in the contract so stipulating. Ibid.

The Labor Code provides that "[b]efore making payments to the contractor of money due under a contract for public work, the awarding body shall withhold and retain therefrom all wages and penalties which have been forfeited pursuant to any stipulation in a contract for public work, and the terms of this chapter." 1727 (West Supp. 2001). If money is withheld from a contractor because of a subcontractor's failure to comply with the Code's provisions, "[i]t shall be lawful for [the] contractor to withhold from [the] subcontractor under him sufficient sums to cover any penalties withheld." 1729 (West 1989).²

The Labor Code permits the contractor, or his assignee, to bring suit against the awarding body "on the contract for alleged breach thereof in not making ... payment" to recover the wages or penalties withheld. 1731, 1732 (West Supp. 2001). The suit must be brought within 90 days of completion of the contract and acceptance of the job. 1730. Such a suit "is the exclusive remedy of the contractor or his or her assignees." 1732. The awarding body retains the wages and penalties "pending the outcome of the suit." 1731.³

In 1995, DLSE determined that G & G, as a subcontractor on three public works projects, had violated the Labor Code by failing to pay the prevailing wage and failing to keep and/or furnish payroll records upon request. DLSE issued notices to the awarding bodies on those projects, directing them to withhold from the contractors an amount equal to the wages and penalties forfeited due to G & G's violations. The awarding bodies withheld payment from the contractors, who in turn withheld payment from G & G. The total withheld, according to respondent, exceeded $135,000. App. 68.

G & G sued petitioners in the District Court for the Central District of California. G & G sought declaratory and injunctive relief pursuant to Rev. Stat. 1979, 42 U.S.C. 1983 claiming that the issuance of withholding notices without a hearing constituted a deprivation of property without due process of law in violation of the Fourteenth Amendment. The District Court granted respondent's motion for summary judgment, declared 1727, 1730-1733, 1775, 1776(g), and 1813 of the Labor Code unconstitutional, and enjoined the State from enforcing these provisions against respondent. App. to Pet. for Cert. A85-A87. Petitioners appealed.

A divided panel of the Court of Appeals for the Ninth Circuit affirmed. G & G Fire Sprinklers, Inc. v. Bradshaw, 156 F.3d 893, 898 (CA9 1998) (Bradshaw I). The court concluded that G & G "has a property interest in being paid in full for the construction work it has completed," id., at 901, and found that G & G was deprived of that interest "as a result of the state's action," id., at 903. It decided that because subcontractors were "afforded neither a pre- nor post-deprivation hearing when payments [were] withheld," the statutory scheme violated the Due Process Clause of the Fourteenth Amendment. Id., at 904.

Following Bradshaw I, we decided American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40 (1999), where respondents also alleged a deprivation of property without due process of law, in violation of the Fourteenth Amendment. Sullivan involved a challenge to a private insurer's decision to withhold payment for disputed medical treatment pending review of its reasonableness and necessity, as authorized by state law. We held that the insurer's action was not "fairly attributable to the State," and that respondents therefore failed to satisfy a critical element of their 1983 claim. Id., at 58. We also decided that because state law entitled respondents to reasonable and necessary medical treatment, respondents had no property interest in payment for medical treatment not yet deemed to meet those criteria....