COX NAP NAP v. NAP CONSTRUCTION COMPANY INC (2005)

Defendants and Third Party Defendants, NAP Construction Company, Inc., Anthony Panagio and Sheryl Panagio move to dismiss all of plaintiffs' claims for failure to state a cause of action, CPLR 3211(a)(7).   Defendants St. Paul Mercury Insurance Company and Greenwich Insurance Company submit briefs in support of the motion to dismiss.

Background

This action arises out of defendant NAP's alleged failure to pay the prevailing wage rates and supplemental benefits and overtime, to the named plaintiffs, and other members of the certified class, for labor they performed on certain public works projects.   The projects included construction projects located at the Baruch Houses, Grant Houses, Manhattanville Houses, Monroe Houses, St. Nicholas Houses, Bayview Houses, Baychester Houses, Smith Houses and Douglas Houses, and Throgs Neck Houses (collectively the Public Works Projects).

In September 1997, NAP entered into public works contracts with the New York City Housing Authority (NYCHA), contracting that NAP would perform general construction work at the Public Work Projects (Public Works Contracts).   The Public Works Contracts provided that NAP:

“shall pay to all laborers and mechanics employed in this work not less than the wages prevailing in the locality of the Project, as predetermined by the Secretary of Labor of the United States pursuant to the Davis-Bacon Act (Title 40 U.S.C. Sections 276a-276a-5).”

Public Works Contracts, General Conditions, Section 43(a).

Plaintiffs allege that NAP paid them far less than the prevailing wage and benefit rates listed in the schedule annexed to the Public Works Contracts.   Plaintiffs also allege that they worked eight to twelve hours a day, and never received overtime compensation.

As a result, plaintiffs brought this action against NAP, Anthony Panagio, one of the ten largest shareholders of NAP, and Greenwich Insurance Company and St. Paul Mercury Insurance, the insurance companies which issued labor and material payment bonds on behalf of NAP under the Public Works Contracts.   Plaintiffs allege causes of action for breach of contract, quantum meruit, fraud, unjust enrichment, overtime compensation under the Fair Labor Standards Act, Labor Law § 655 and 12 NYCRR 142-3.2, failure to pay wages and benefits and overtime rates under Labor Law §§ 190, 191, and 198-c, personal liability under the Business Corporation Law § 630 and the Fair Labor Standards Act § 230, and suretyship.

Analysis

The Public Works Contracts provide that,

“the following Labor Standards Provisions are applicable to federally-funded contracts and shall be deemed to supplement and not supercede any other provisions in this Contract:

1.  Davis-Bacon Act (40 U.S.C. 276a-276a-7) ․

2.  Contract Work Hours and Safety Standards Act-Overtime Compensation (40 U.S.C. 327-333) ․”

Public Works Contracts, General Conditions, Section 49.

Therefore, the Davis-Bacon Act (40 USC § 276a et seq.) applies to these federally-funded Public Works Contracts.

 The first issue to be addressed is whether a private right of action exists to enforce contracts requiring the payment of Davis-Bacon Act prevailing wages.   In Gonzalez v. D & S Zaffuto Joint Venture, 271 A.D.2d 356, 707 N.Y.S.2d 87 [1st Dept.2000], the Court held that plaintiffs do not have a claim for breach of contract or quantum meruit on the grounds that a private right of action does not exist under the Davis-Bacon Act.  Gonzalez, 271 A.D.2d 356, 707 N.Y.S.2d 87 (1st Dept.2000).

Plaintiffs here argue that, in Gonzalez, the First Department relied on an incomplete record, in that the briefs submitted did not cite Court of Appeals' decisions that have some relevance to the issue.   The argument is without merit.   To the extent that this nisi prius court is invited to change the rule enunciated by the First department, the invitation is declined.   The Gonzalez decision can only be overruled by the Appellate Division or Court of Appeals.   The causes of action for breach of contract, quantum meruit, and unjust enrichment are dismissed.

Plaintiffs have chosen to bring some of their claims under New York Labor Law.   Therefore, the court must address the issue of whether the Davis-Bacon Act preempts the New York Labor Law cited by plaintiffs.

Defendants argue that the doctrine of preemption applies to this action.   They rely on a decision by the Supreme Court, Kings County, Majstrovic v. Maric Piping, Inc., 171 Misc.2d 429, 655 N.Y.S.2d 285 [Sup. Ct., Kings Cty. 1997].   In Majstrovic, the court held that the Davis-Bacon Act preempts state law on a housing project that is federally-funded. The Majstrovic court relied on the federal regulation entitled, “Preemption of State Prevailing Wages,” and FHM Constructors v. Village of Canton Housing Authority, 1993 WL 23587 [N.D.N.Y.1993], in which a Federal District court held that the United States Housing Act preempted New York Labor Law § 220.   This court respectfully disagrees with the determination made by the Majstrovic court, because the authority relied on addressed the issue of preempting federal wage rates, and not the preemption of state statutory law in regards to claims for unpaid wages.   Thus, defendants' reliance on these case is inapplicable to the case at bar.

 A federal law may preempt state law in three ways:  express preemption, implied preemption, and conflict preemption.   See Hillsborough County v. Automated Medical Labs., 471 U.S. 707, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985).   It is clear that the Davis-Bacon Act does not contain an express state law preemption clause.   Further, this court does not find any indication in the Davis-Bacon Act, or its related regulations, that implies Congress' intent to encompass the entire field relating to Davis-Bacon wages.   The last type of preemption, conflict preemption, exists when compliance with both the state law and the federal law is impossible, or when the state law stands as an obstacle to the accomplishment of the purposes and objectives of Congress.  FHM Constructors v. Village of Canton Housing Authority, 1993 WL 23587 (N.D.N.Y.1993) (quotes and citations omitted).

 Here, there is no conflict with the New York Labor Law sections allowing workers to sue for unpaid wages and fraud, because the Davis-Bacon Act does not give workers an express administrative remedy.   Thus, the New York Labor Law sections relied on by the plaintiffs do not frustrate the purpose of the Davis-Bacon Act. Plaintiffs are not disputing the Davis-Bacon wage rates, rather, they allege they were not paid those rates at all.

The state laws also do not stand as an obstacle to the Davis-Bacon Act's purpose of protecting workers by requiring that certain minimum wages be paid to them.   The state laws allow a worker to enforce the proper payment of wages, which is not an obstacle to the Act's purpose to protect workers.   Thus, the New York State Labor Laws cited by plaintiffs are not preempted.

 Plaintiffs have also brought a claim for overtime under the Fair Labor Standards Act. Defendants argue that this cause of action is an attempt to circumvent the procedural requirements of the Davis-Bacon Act, as stated in Grochowski v. Phoenix Construction, 318 F.3d 80 [2nd Cir.2003].   However, the Grochowski court did not find that the plaintiffs therein could not bring a claim under the Fair Labor Standards Act.   Rather, the court only stated that the plaintiffs were trying to circumvent the Davis-Bacon Act because, after the District Court limited the plaintiffs' overtime claim to hourly time and a half under the Fair Labor Standards Act, the plaintiffs appealed to calculate the overtime rates as prevailing wages hourly time and a half rates.   The Second Circuit found that this was an attempt to circumvent the Davis-Bacon Act, because plaintiffs chose to bring their claim under the Fair Labor Standards Act, and were now trying to apply Davis-Bacon Act wage rates to their owed overtime.   That is not the situation here.   Therefore, plaintiffs are permitted to bring a claim under the Fair Labor Standards Act.

Plaintiffs also bring claims for personal liability, under the Business Corporation Law and the Fair Labor Standards Act, against defendant Anthony Panagio.   These particular claims were not addressed by the parties, and thus, the court will not address them herein.

Plaintiffs also bring a claim against the sureties, Greenwich and St. Paul. This claim is limited to the causes of action remaining in this action.   The parties' remaining arguments need not be considered in light of the above decision.

Accordingly, it is

ORDERED that the motion to dismiss is granted, in part, in that the first, second, and fourth causes of action of the Amended Complaint are dismissed;  and it is further

ORDERED that the motion is otherwise denied;  and it is further

ORDERED that the defendants are directed to answer the Amended Complaint within ten days of service of a copy of this decision with Notice of Entry upon their attorneys.

HERMAN CAHN, J.