Vulcan Arbor Hill Corp. v. Reich, 95-5162

• Citation: 81 F.3d 1110
• Decision Date: 19 April 1996
• Docket Number: No. 95-5162,95-5162
• Parties: , 131 Lab.Cas. P 33,368, 3 Wage & Hour Cas.2d (BNA) 367 VULCAN ARBOR HILL CORPORATION, a/k/a Arbor Hill Associates, et al., Appellants, v. Robert B. REICH, Secretary, Department of Labor and Henry Cisneros, Secretary, Department of Housing and Urban Development, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1110

81 F.3d 1110

317 U.S.App.D.C. 154, 131 Lab.Cas. P 33,368,

3 Wage & Hour Cas.2d (BNA) 367

VULCAN ARBOR HILL CORPORATION, a/k/a Arbor Hill Associates et al., Appellants, v. Robert B. REICH, Secretary, Department of Labor and Henry Cisneros, Secretary, Department of Housing and Urban Development, Appellees.

No. 95-5162.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 5, 1996.

Decided April 19, 1996.

Appeal from the United States District Court for the District of Columbia (No. 87cv03540).

Karen M. Lockwood, Washington, DC, argued the cause for appellants, with whom William J. Rodgers and Charles B. Long were on the briefs.

Robert M. Loeb, Attorney, United States Department of Justice, argued the cause for appellees, with whom Frank W. Hunger, Assistant Attorney General, Eric H. Holder, Jr., United States Attorney, and Douglas N Letter, Litigation Counsel, United States Department of Justice, were on the brief.

Before: EDWARDS, Chief Judge, and WALD and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

Dissenting opinion filed by Circuit Judge HENDERSON.

WALD, Circuit Judge:

The developer of a project partially financed by the Department of Housing and Urban Development ("HUD") to rehabilitate 82 dilapidated row houses in inner-city Albany, New York appeals a determination by the Wage and Appeals Board of the Department of Labor ("Board") that it was required to pay "prevailing" wages as determined under the Davis-Bacon Act, 40 U.S.C. § 276a, to laborers who worked on the rehabilitation of the houses. The Board based its decision on section 110 of the Housing and Community Development Act, 42 U.S.C. § 5310, which requires recipients of HUD grant funds to pay Davis-Bacon wages provided the property at issue "is designed for residential use for eight or more families." The developer, Arbor Hill, argued that section 110 did not apply because each separate building being renovated contained fewer than eight residential units. Arbor Hill also argued that HUD, not the Department of Labor, had primary responsibility for interpreting section 110. The Board, however, refused to accord HUD's interpretation of section 110 deference, and held that this project was covered by Davis-Bacon because the residential units in each of the 82 houses under rehabilitation must be aggregated for the purpose of applying the eight-unit threshold. The district court affirmed this decision, 1995 WL 774603, holding that the Department of Labor, not HUD, is principally charged with interpreting section 110, and that its interpretation was correct in this case. In addition, the district court agreed with two of the three members of the Board who, writing separately, had found that irrespective of section 110, Arbor Hill had contractually agreed to pay Davis-Bacon wages in a legally binding agreement with the City of Albany. We affirm the district court's judgment on this latter ground, finding that Arbor Hill did, in fact, contractually agree to pay Davis-Bacon wages. Thus we do not reach the issue of whether Arbor Hill was statutorily required to pay Davis-Bacon wages or which agency has been delegated authority to interpret section 110.

I. BACKGROUND

A. Statutory and Regulatory Framework

The Davis-Bacon Act, 40 U.S.C. § 276a, was passed during the Great Depression "to ensure that workers on federal construction projects would be paid the wages prevailing in the area of construction." Building & Const. Trades' Dep't, AFL-CIO v. Donovan, 712 F.2d 611, 613 (D.C.Cir.1983), cert. denied, 464 U.S. 1069, 104 S.Ct. 975, 79 L.Ed.2d 213 (1984). The Act was aimed at preventing companies from competing for contracts by bringing in laborers from distant areas who would work for substandard wages. Under the Act, the Secretary of Labor sets "prevailing" minimum wage rates which contractors must pay to their employees on any construction project over $2,000 to which the United States is a party. See 40 U.S.C. § 276a(a).

Although the Davis-Bacon Act by its terms applies only to contracts to which the United States is a party, there are more than 50 other statutes which require contractors to pay Davis-Bacon wages under contracts to which the United States is not a party, but which are financed in whole or in part with federal funds. See 29 C.F.R. Part 1, App. A (1995) (collecting statutes). These statutes run the gamut of federal activities, from housing to highway construction to pollution control.

One of these Davis-Bacon related provisions, section 110 of the Housing and Community Development Act of 1974, 42 U.S.C. § 5310, is at the vortex of this dispute. At the time of the events here, section 110 provided:

All laborers and mechanics employed by contractors or subcontractors in the performance of construction work financed in whole or in part with assistance received under this chapter shall be paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor in accordance with the Davis-Bacon Act.... Provided, that this section shall apply to the rehabilitation of residential property only if such property is designed for residential use for eight or more families. The Secretary of Labor shall have, with respect to such labor standards, the authority and functions set forth in Reorganization Plan Number 14 of 1950. ¹

The "Reorganization Plan" referred to in section 110 was originally promulgated by President Truman, and confers on the Department of Labor the authority and responsibility to coordinate the enforcement not only of the Davis-Bacon Act itself, but also Davis-Bacon related statutes. The Plan provides:

In order to assure coordination of administration and consistency of enforcement of labor standards provisions of each of the following Acts by the Federal agencies responsible for the administration thereof, the Secretary of Labor shall prescribe appropriate standards, regulations and procedures, which shall be observed by these agencies....

Reorganization Plan No. 14 of 1950, reprinted at 5 U.S.C.A.App. at 242.

Under this framework, the contracting agency (here, HUD) has the "initial responsibility for determining whether a particular contract is subject to the Davis-Bacon Act." Universities Research Ass'n v. Coutu, 450 U.S. 754, 760, 101 S.Ct. 1451, 1456, 67 L.Ed.2d 662 (1981); see also 29 C.F.R. § 5.5(a). If Davis-Bacon applies, the contracting agency determines the "prevailing" wages, either by consulting wage rates published in the Federal Register, or by requesting a project wage determination from the Wage and Hour Division of the Department of Labor. See Id. §§ 1.5, 1.6. The determination made by the contracting agency is "subject to administrative review" by the Department of Labor. Coutu, 450 U.S. at 760, 101 S.Ct. at 1456. The first step in the appeal process is to request a ruling from the Wage and Hour Administrator of the Department of Labor. Id. § 5.13. A dissatisfied party may then appeal further to the Board, which renders a final agency decision on the matter. See Id. § 7.1(d).

B. Factual and Procedural Background

This case involves a project in inner-city Albany to renovate 82 dilapidated residential row-houses--a project financed in part by a grant from HUD to the City of Albany. The project developer, Arbor Hill, planned to purchase each of these 82 buildings prior to renovation, and then to hire mostly local, inner-city residents to do the rehabilitation work. After the renovations were completed, Arbor Hill would own and manage the buildings for at least 12 years before selling them back to individual buyers. The total cost of the project was estimated at $13 million.

1. Arbor Hill's Contractual Agreement

Prior to the city's securing the grant, Arbor Hill wrote to HUD's Washington, D.C. office on September 20, 1984, discussing the financing details of the project, the construction schedule, and then, in its concluding sentence stating that "Developer acknowledges that with the guidance of the Buffalo area office of the U.S. Dept. of Housing and Urban Development that if Davis-Bacon is required by the area office, such wages will be paid by the developer." Letter from Mark J. Simmons to Stanley Newman, reprinted in App. 510. This sentence, Arbor Hill would later contend, reflected its belief that it was not clear whether Davis-Bacon wages would be required and that it intended to pay them only if the Buffalo HUD office so required. See Affidavit of Mark Simmons, reprinted in App. 733.

Three months later, on December 27, 1984, HUD approved the $3.5 million grant to the City of Albany, under the Urban Development Action Grant program of the Housing and Community Development Act of 1974, 42 U.S.C. §§ 5301, et seq. ² Contemporaneously with the approval of the grant, HUD and the city signed a "Grant Agreement," which contemplated a starting date of July 1, 1985 for the rehabilitation work. The Grant Agreement also provided that "[p]articipating Parties will, prior to any use of grant funds for the Project, enter into legally binding agreements evidencing the commitments which were so relied upon by the Secretary." Grant Agreement § 10.01, reprinted in App. 112 (emphasis supplied). Thus, as a condition of the grant, Arbor Hill and the City of Albany were required to enter into a legally binding agreement before any funds could be expended.

Before Albany and Arbor Hill entered into their agreement, W. Vito Zambelli, the Director of Labor Relations for HUD's Buffalo Area Office, sent a letter to the Albany Urban Renewal Agency, the city agency in charge of the project. In his February 7, 1985 letter, Zambelli enclosed a copy of the "Wage Decision" issued by the Department of Labor for the Arbor Hill project, which set forth in minute detail the hourly rates, fringe benefits, and paid holidays required for each classification of worker, in accordance with Davis-Bacon. See ...