Opinion
No. C-96-2976 SI
January 9, 2002
ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS' MOTION FOR SUMMARY ADJUDICATION OF LIABILITY
On November 16, 2001, the Court heard argument on defendants' motion for summary judgment and plaintiffs' motion for summary adjudication of liability. Having carefully considered the arguments of counsel and the papers submitted, the Court hereby GRANTS defendants' motion and DENIES plaintiffs' motion.
BACKGROUND
A. Factual Background
Plumbers Steamfitters Local Union No. 38 ("U.A. Local 38"), an affiliate of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO, CLC, and Lawrence J. Mazzola, U.A. Local 38's business manager. brought this qui tam suit against C. W. Roen Construction Co., one of its officers, and an employee, For alleged violations of the False Claims Act (FCA) and the California unfair competition statute.
In May 1992, the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry, AFL-CIO, Pipe Trades District Council No. 51 ("UA") and the Northern California District Council of Laborers ("Laborers") signed a jurisdictional agreement ("1992 Agreement") resolving the classification of piping work on Northern California water treatment plant projects. The 1992 Agreement provided in part that "[i]n the construction of water treatment plants . . . for work performed both inside and outside of buildings, the prevailing rate of per diem wages established for Plumber-Steamfitter-Pipefitter is paid to those employees who perform all piping work of every description and material (except as noted in paragraph 2)." The work described in paragraph 2 is paid at the Laborers rate. See Plaintiffs' Declarations and Exhibits in Opposition to Defendants' [Original] Motion for Summary Judgment, ("Pls.'s Ev."), Tab 7, p. 2. According to the Laborers Union, the UA used the agreement as the basis for a request to the U.S. Department of Labor ("DOL") for its certification of the negotiated classifications without consulting the Laborers. See Pls.'s Ev. Tab 5. In January 1994, District Director Frank Conte of the DOL's Wage and Hour Division sent a letter to U.A. Local 38's counsel, John Davis, stating that the 1992 Agreement between the UA and the Laborers "establishes the prevailing practice in Northern California" for classifications of work done on water treatment plants ("1994 letter"). Pls.'s Ev. Tab 19. In July 1994, plaintiffs sent a copy of the 1994 Determination to Roen Construction. Pls.'s Ev. Tab 2.
In June 1994, the business manager of the Laborers sent a letter to the UA purporting to terminate the 1992 Agreement, after discovering that the UA had unilaterally used the agreement in its certification request. Pls.'s Ev. Tab 5. The UA refused to accept the termination of the Agreement, denying that the UA had sought certification from the DOL. Pls.'s Ev Tab 22. Also in 1994, C. W. Roen Construction Co. was awarded a contract with the City of Santa Rosa to undertake the "Laguna Wastewater Treatment Plant Improvements Project" ("Project"). Because the Project is federally-funded, the Roen defendants were required to comply the Davis-Bacon Act, and the Copeland Act, two statutes designed to protect laborers working on government contracts. The implementing regulations of the Davis-Bacon Act and related federal laws, at issue in this case, are contained in Part of Title 29 of the Code of Federal Regulations. The regulations are promulgated under authority of the Secretary of Labor to "coordinate the administration and enforcement of the labor standards provisions" of the various statutes by the agencies responsible for administering them. 29 C.F.R. § 5.1(a). They require contractors to maintain payroll records including each worker's correct classification, and to provide weekly copies of these records to the contracting agency, accompanied by a Statement of Compliance certifying that the information provided is correct and that workers have been paid "not less than the applicable wage rates . . . for the classification of work performed." 29 C.F.R. § 5.5 (a)(3). The False Claims Act imposes liability when one knowingly presents the government with a "false or fraudulent claim for payment or approval." 31 U.S.C. § 3729 (a)(1). Plaintiffs allege that defendants' weekly statements misclassified Plumbers Steamfitter work in the Laborer wage rate classification, and consequently violated the FCA. Compl. at ¶¶ 13-14.
U.S.C. § 276a.
40 U.S.C. § 276c.
Laborers are paid at a substantially lower rate than workers in the Plumbers Steamfitter classification. Compl. at ¶ 14.
In March 1996, District Director Conte sent a second letter to U.A. Local 38's counsel confirming his conclusion that the relevant job classifications for the construction of water treatment plants were those set forth in the 1992 Agreement ("1996 letter"). Pls.'s Ev. Tab 26. In March 1997, John Fraser, the acting administrator of the Wage and Hour Division of the DOL, notified Mr. Davis that the DOL had reexamined its position regarding its ability to enforce the 1992 Agreement, and had concluded that it could not enforce the Agreement because there were indications that the Agreement had not been followed in practice. Pls.'s Ev. Tab 36.
B. Procedural Background
Plaintiffs filed their original complaint under seal on August 19, 1996, claiming that the alleged misclassifications constituted violations of the FCA and California's unfair competition law. The United States Government declined to intervene in the case. On April 18, 1997 defendants answered and filed a notice of two potentially related cases pending in this District, United Stases of America, ex rel. Plumbers and Steamfitters Local Union No. 342, et al., v. Dan Caputo Co., et al., C 95-0684-MMC, and United States of America, ex rel. Plumbera and Steamfitters Local Union No. 159, et al. v. Kiewit Pacific Co., et al., C 93-3187-CW. Judge Wilken later issued an order determining that the three actions were not related.
In September 1997, this Court entered summary judgment for defendants. On appeal, the Ninth Circuit reversed. United States ex rel. Plumbers and Steamfitters et al. v. Roen et al. 183 F.3d 1088 (1999). On August 11, 2000, the parties filed cross-motions for summary judgment. Defendants challenged this Court's jurisdiction over plaintiffs' qui tam action under the FCA's "public disclosure" bar. See 31 U.S.C. § 3730 (e)(4)(A). This issue had not previously been raised during the litigation of this case. After supplemental briefing the Court denied the cross-motions for summary judgment on March 20, 2001, finding that, although the Court does have subject matter jurisdiction over the instant action, the record did not contain sufficient evidence regarding the DOL's job classification procedure to permit summary judgment as to whether defendants violated the ECA.
On August 17, 2001, plaintiffs filed a renewed motion for summary adjudication of defendants' liability, and defendants filed a cross motion for summary judgment. Both parties filed additional evidence to support their motions. Those motions and documents are presently before this Court.
LEGAL STANDARD
A motion for summary judgment may be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this burden, the nonmoving party must then set forth "specific facts showing that there is a genuine issue for trial." FRCP 56(e); see also T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).
DISCUSSION
On appeal, the Ninth Circuit resolved several issues. First, the FCA does extend to false claims regarding the payment of prevailing wages. 183 F.3d at 1092. Second, a showing of "knowing" false presentation does not require proof of specific intent to defraud. Id. In addition, the appeals court held that prevailing wage rates may be derived from collective bargaining agreements, without resort to an area practice survey conducted by the Department of Labor. Id. at 1093. The court further held that "there was nothing uncertain about the Department's efforts to establish the relevant wage classifications, at least during the period of time that Roen was making its wage certifications." Id. at 1094. The Ninth Circuit observed that this finding, combined with defendants' failure to seek clarification from the DOL before certifying their rates, and their failure to explain why they believed the Laborer's rate constituted the prevailing wage rate, "suggests that Roen's certification may well have risen at least to the level of `deliberate indifference' or `reckless disregard.'" Id. at 1094-95. Finally, the court held that summary judgment was inappropriately granted because a number of complex questions had not been sufficiently developed. Id. at 1095. These "difficult issues" included:
the precise manner in which the Department may or must determine prevailing wage rates and job classifications, the effect of the Department's post-hoc repudiation of earlier wage-rate determinations on the question of the falsity of previously submitted wage-rate certifications, the extent to which contractors may be deemed to have knowledge of the Department's actions, [and] the type of certification that is appropriate if the contractor contends that no prevailing wage exists or that the classification issue remains unresolved. . . .
Id.
In light of the Ninth Circuit's ruling, and having received further briefing and evidentiary submissions from the parties subsequent to its March 20, 2001 denial of summary judgment, the Court again undertakes to examine these questions.
A. Subject Matter Jurisdiction
The Court addresses first defendants' contention that the Court cannot act on plaintiffs' claims because the requisite administrative proceedings have not yet taken place. Defendants argue that the DOL acted within its discretion when it decided not to conduct an investigation or take enforcement action against defendants, and that the absence of an investigation deprives this Court ofjurisdiction over this matter. Defs.'s Oppo. at 16:8-17:21. Plaintiffs counter, persuasively, that a qui tam action, by definition, substitutes for the government's own enforcement of the FCA. Pls.'s Reply at 10:4-11:2. The Court finds that it does have jurisdiction over the instant action. Defendants' motion for summary judgment is therefore DENIED as to the jurisdictional question.
B. Authoritativeness of the 1994 and 1996 Letters
The Court proceeds to the central question presented by this case and highlighted by the Ninth Circuit: whether, in light of the regulations in place and the surrounding circumstances, the letters authored by District Director Conte in 1994 and 1996 amount to an agency determination to which defendants were bound.
1. District Director Conte's Authority to Determine the Prevailing Wage
Plaintiffs assert that District Director Conte did have the authority to make a binding determination as to the prevailing wage. Pls.'s Renewed Mot. at 12:16-14:10. Defendants counter that plaintiffs have not adduced proof of this authority. Def.'s Reply at 2:22-4:4. As defendants point out, it is the Administrator of the Wage and Hour Division or her "authorized representative" who has authority to issue determinations of the prevailing wage. See 29 C.F.R. § 1.2. The Seventh Circuit explained that the "chain of delegated powers within the Department" determines whether an officer has the authority to make a binding agency determination. Western Illinois Home Health Care, Inc., v. Herman 150 F.3d 659, 663 (1998). Defendants argue that plaintiffs have not presented evidence proving that Mr. Conte was the Administrator's "authorized representative." Def's Reply at 2:22-4:4.
In fact, plaintiffs have introduced some evidence in support of their contention that Mr. Conte was authorized to make the determinations at issue. First, they submit the job description for the district directorship held by Mr. Conte. Pl's Ev. Tab 41. Under the heading "Duties and Responsibilities, " the description states that the district director:
plans, directs and supervises all facets of the Wage and Hour programs in the assigned jurisdiction. . . . Interprets and implements National and Regional ESA Wage and Hour enforcement and administrative policies and procedures. . . . Serves as the Area Office authority on all provisions of Wage and Hour laws, Acts, regulations, and Executive Orders.
Id. Plaintiffs also point to the phone conversation between their attorney, John Davis, and Ethel P. Miller, the senior enforcement official in the National Office of the DOL's Wage and Hour Division. Pls.'s Renewed Mot. at 13:18-22. During that conversation, which took place in December 1991, Ms. Miller told Mr. Davis that the prevailing wage issue "really should be directed to Frank A. Conte." Davis Second Supp. Decl. at ¶ 5.
Plaintiffs' evidence does not directly prove Mr. Conte's authority to set the prevailing wage. The terms of Mr. Conte's job description are sweeping, but do not specifically confer the authority to make the ruling at issue here. Likewise, although Ms. Miller's statement to Mr. Davis could suggest that Ms. Miller meant to designate Mr. Conte as her "authorized representative" or to confirm that making prevailing wage determinations were already in his power, it could as easily reflect merely Ms. Miller's displeasure at the paperwork "piled up in her office" and her desire that Mr. Conte resolve the matter in one way or another, without necessarily conferring any authority upon Mr. Conte. Davis Second Supp. Decl. at ¶ 5. In sum, the evidence in the record raises a material issue of fact as to the
District Director's authority to issue a prevailing wage determination. Therefore, both parties' motions for summary judgment as to this question are DENIED.
This finding forecloses the possibility of summary adjudication in plaintiffs' favor. The Court proceeds with its examination of the evidence to determine whether summary judgment should be entered for defendants, and whether partial summary judgment is appropriately entered for either side.
2. DOL Compliance With Administrative Procedures
a. Applicability of 29 C.F.R. § 5.13
In accordance with the appeals court's ruling, this Court addresses the manner in which the Department may determine prevailing wage rates and job classifications. The parties dispute exactly which section of the DOL regulations sets out the procedures for establishment of a prevailing wage. Defendants argue that the applicable procedure is contained in 29 C.F.R. § 5.11. Def's Oppo. at 4:10-8:24. Section 5.11 states:
This section sets forth the procedure for resolution of disputes of fact or law concerning payment of prevailing wage rates, overtime pay, or proper classification. The procedures in this section may be initiated upon the Administrator's own motion, upon referral of the dispute by a Federal agency . . . or upon request of the contractor or subcontractor(s).29 C.F.R. § 5.11(a). The section goes on to describe the procedures followed when a factual dispute exists, wherein the Administrator must notify the affected contractors of the its findings (§ 5.11(b)(1)), the contractors may request a hearing (§ 5.11(b)(2)), and the matter may be referred to an administrative law judge (§ 5.11(b)(3)). If no factual dispute appears, a separate procedure is followed, commencing with notification of the affected contractors by the Administrator. 29 C.F.R. § 5.11(c). There appears to be no dispute that the § 5.11 procedures were not followed by the DOL or plaintiffs.
According to plaintiffs, the applicable rule is contained in 29 C.F.R. § 5.13. That provision states: "All questions relating to the application and interpretation of wage determinations (including the classifications therein) . . . shall be referred to the Administrator for appropriate ruling or interpretation. The rulings and interpretations shall be authoritative. . . ." The section goes on to direct requests for such rulings to be addressed to the Wage and Hour Administrator in Washington, D.C. RI. Pls.'s Reply at 3:23-4:17. Plaintiffs contend that § 5.13 creates a relatively informal alternative procedure to that described in § 5.11. Pls.'s Reply at 4:18-5-26. Plaintiffs claim this procedure was initiated by the East Bay Municipal Utilities District ("EB MUD") in connection with the Kicwit dispute, was continued by Mr. Davis in connection with this case, and ultimately resulted in Mr. Conte's letters of 1992 and 1994. Pls.'s Reply at 4:18-5-26.
Defendants base their argument for the applicability of § 5.13 in large part upon the district court's discussion of the same question in the Caputo case. The facts of Caputo were nearly identical to those in the case at bar. In Caputo, it was U.A. Local 342, rather than Local 38, of the Plumbers and Steamfitters Union which brought suit against Mr. Caputo, a construction contractor, and a subcontractor. See Order Denying Plaintiffs' Motion for Summary Adjudication; Granting Defendants' Motion for Summary Judgment, United States, ex rel. Plumbers and Steamfitters Local Union No. 342, et al., v. Dan Caputo Co. et al., C 95-0684 MMC, ("Caputo Summ. J Order"), 2. Mr. Caputo was awarded a contract for a federally financed wastewater treatment facility project in Alameda County. § Caputo Summ. J Order at 2. Caputo paid workers performing piping work at Laborer rates, while his subcontractor paid them at Millwright prevailing rates. Caputo Summ. J Order at 2. Local 342 brought suit against those defendants under the same reasoning as in the instant case, namely, it claimed that the applicable wage classifications were set by the 1992 union agreement and effectively adopted by the DOL in the 1994 and 1996 Conte letters. Caputo Summ. J Order at 10. By submitting statements of compliance classifying the work differently from the 1992 Agreement, claimed the Qapi.iio plaintiffs, defendants violated the False Claims Act. Caputo Summ. J Order at 8. Defendants offered largely the same defenses as in this case, principally that the Conte letters did not constitute binding agency determinations because they were not issued in compliance with DOL regulations. Caputo Summ. J Order at 12.
Without reaching the issue of whether the district court's ruling in Caputo has an estoppel effect in this case, the Court is persuaded by the Caputo court's reasoning. In Caputo, as in this case, plaintiffs did not argue that their contacts with Miller and Conte constituted requests for classification determinations under § 5.11. Caputo Summ. J Order at 13. In that case, they argued that § 5.6 applied. Caputo Summ. J Order at 13. Section 5.6 provides for DOL investigation of alleged noncompliance with the Davis-Bacon Act. see 29 C.F.R. § 5.6. The Caputo court found that the notification of the awarding agency required by § 5.6 had not taken place, and that the Conte letters therefore did not constitute agency action under that section. Caputo Summ. J Order at 14. The Court also rejected plaintiffs' contention that the letters had been issued pursuant to an "amalgamation" of regulations. Caputo Summ. J Order at 14 n. 19. The Caputo court, observing the plain language of § 5.11, found that it is the provision that "sets forth `the procedure for resolution of disputes of fact or law concerning . . . proper classification.'" Caputo Summ. J Order at 12. Caputo Summ. J. Order at 12. Finally, the Caputo court rejected plaintiffs' argument that the Conte letters could bind defendants even if they were not issued pursuant to any federal regulations. Caputo Summ. J. Order at 14-16. The court found that the cases upon which plaintiffs relied, Western Illinois Home Health Care, Inc. v. Herman, 150 F.3d 659 (7th Cir. 1998), and Saavedra v. Donovan, 700 F.2d 496 (9th Cir. 1983). were distinguishable.
This Court agrees with the Caputo court and concludes that, as a matter of law, § 5.11, not § 5.13, sets forth the administrative procedure by which wage classification determinations must be made. Plaintiffs argue that because § 5.11, by its terms, is available only to administrators, contractors and the Wage and Hour Administrator, § 5.13 exits to provide a less formal procedure to "any interested party," including unions and workers. Pl.'s Reply at 3:23-4:17. By its terms, however, § 5.13 makes no reference to interested parties, nor does it feature any other indication that it is intended to provide an alternative procedure to § 5.11. Plaintiffs offer no extrinsic evidence of such a purpose. The Court concludes that § 5.13 merely indicates a means by which agency action may be requested, namely, by a written appeal to the Administrator.
Plaintiffs do not dispute that the § 5.11 procedures were not followed. Having found that the § 5.11 procedure applied to this case, the Court finds that the Conte letters were not issued in accordance with DOL procedure and therefore did not constitute binding agency determinations. Defendants' motion for summary judgment is therefore GRANTED, and plaintiffs' motion for summary adjudication is DENIED.
b. Sufficiency of Procedure Under 29 C.F.R. § 5.13
As an alternative holding, the Court finds that, even taking as true plaintiffs' claim that § 5.13 provides an alternative procedure to § 5.11, plaintiffs did not comply with even the relaxed procedural requirements of§ 5.13.
Plaintiffs never addressed a request for agency action under § 5.13 to the Wage and Hour Administrator in Washington. They argue, however, that EBMUD did explicitly attempt to initiate DOL action under § 5.13, in its July 15, 1991 letter directed to the Administrator. See Pls.'s Ev. Tab 12. Plaintiffs claim that the § 5.13 procedure initiated by EBMUD continued in 1993 and 1994 with meetings among Mr. Davis, Mr. Conte, and Adam Hodess, an officer of Union Local 159 in Martimez, ultimately resulting in Mr. Conte's 1994 letter. Pl's Reply at 5:10-11; Second Supp. Davis Decl. at ¶¶ 7-9. An examination of the evidence reveals that this interpretation is untenable.
In its July 15, 1991 letter to the Administrator, EBMUD stated: "The District hereby submits a request for a determination regarding appropriate wage classifications, in accordance with 29 C.F.R. Part 5, 5.13, Rulings and Interpretations." Pls.'s Ev. Tab 12. By September, the Wage and Hour Division had indicated to EBMUD that "it would not review this matter in the near future." Pls.'s Ev. Tab 14. EBMUD therefore conducted its own area survey and found there to be no predominant classification for the work at issue. Pls.'s Ev. Tab 14. It appears that EBMUD submitted a second request to the Administrator in November 1991, to which Richard Cheung of the San Francisco District Office replied on June 12, 1992. See Pl.'s Ev. Tab 18. Mr. Cheung indicted that he had received area surveys from EBMUD and two unions which arrived at contradictory conclusions. Id. Mr. Cheung further indicated that he had received the 1992 Agreement reached between the unions, and had decided to terminate his review of the surveys in light of the clarification of the "scope of work and applicable rates" contained in the Agreement. Id.
Plaintiffs characterize Mr. Cheung's letter as a "final agency action" and an agency "determination" in the § 5.13 proceeding initiated by EBMUD. Pl's Reply at 5:4-9. The Court disagrees. Mr. Cheung's letter does not state that the DOL had completed a review process or intended to adopt the union agreement's terms. His words unequivocally indicate that the agency was abandoning its review of EBMUD's request:
In view of the agreement reached over the disputed scope of work, and the survey parameters utilized, the Department is terminating its review of the three surveys submitted. In the absence of a conclusion regarding the conflicting surveys, it would not be appropriate for the Department to take exception to the contractor's pay practices. . . .
Pl's Ev. Tab 18 (emphasis added). The Court concludes that Mr. Cheung's June 12, 1992 letter cannot be construed as a DOL determination of the prevailing wage. Nor can it be argued that the 1994 and 1996 letters which plaintiffs claim were binding on defendants grew from the proceedings initiated by EBMUD. The DOL terminated its inconclusive review of EBMUD's request in 1992. Thus, even assuming arguendo that § 5.13 does provide an alternative procedure for the DOL's determination of the prevailing wage, plaintiffs' own evidence demonstrates that they cannot claim the benefit of EBMUD's compliance with that section's requirement that requests for rulings be addressed to the Wage and Hour Administrator in Washington, D.C. The Court finds, therefore, that the series of events leading to Mr. Conte's 1994 and 1996 letters does not amount to compliance with § 5.11 or § 5.13 of the DOL's regulations.
On appeal, the Ninth Circuit held that, "there was nothing uncertain about the Department's efforts to establish the relevant wage classifications." Because the Department followed no procedure prescribed in its own regulations, however, its efforts did not succeed. This conclusion is further supported by the opinion of defendants' expert, Travis M. Campbell, as to the nature of the letters upon which plaintiffs base their claims. See Campbell Decl. (filed 08/17/01). Mr. Campbell observed that,
given the absence of a finding of the actual practice of contractors as to the wage classifications at issue, the Conte letters do not constitute a wage classification. Campbell Decl. at ¶¶ 6-8. Instead, the letters merely signify Mr. Conte's acceptance of the Union's counsel's representations as to the prevailing practice in Northern California. Campbell Decl. at ¶ 8. Further evidence on this point is provided by Anne Burke-Filer, who was Senior Wage Specialist with the Wage and Hour Division during the relevant years. See Burke-Filer Decl. (filed 08/17/01). She concludes that the Conte letters are "completely atypical of area practice determinations." Burke-Filer Decl. at ¶ 4. While determinations are made on a county-by-county basis, the letters purport to cover all of Northern California. Burke-Filer Decl. at ¶ 4. The letter appears to proceed upon the representation of Mr. Davis that an agreement between labor unions sets forth the prevailing practice, even though such agreements are only sufficient in conjunction with evidence that no controversy existed in the area regarding wage classifications. Burke-Filer Decl. at ¶ 4. Finally, the Agreement was, by that date, over a year old, and would not normally be accepted as conclusive evidence of area practice. In sum, as concluded by the Dan aputo court, Mr. Conte's letters represent neither final agency action nor an agency determination. Consequently, there existed no binding DOL determination during the relevant period of time for defendants to have violated. Defendants' motion for summary judgment is therefore GRANTED and plaintiffs' False Claims Act cause of action is DISMISSED.
The Court declines to exercise supplemental jurisdiction over the remaining state law claim. See 28 U.S.C. § 1367(c)(3). Plaintiffs' state law claim is DISMISSED without prejudice to refiling in state court.
CONCLUSION
For the foregoing reasons, defendants' motion for summary judgment is GRANTED and plaintiffs' motion for summary adjudication of liability is DENIED. The Court does not reach the remainder of the issues briefed by the parties.