Isufi et al v. Prometal Construction, Inc. et al
Filing
28
MEMORANDUM, ORDER, AND JUDGMENT granting 5 Motion to Remand to State Court: Plaintiffs' motion to remand this action to state court is granted. Because the court does not have jurisdiction, it will not decide defendants' motion to dismiss. No costs or disbursements are awarded. Ordered by Judge Jack B. Weinstein, on 2/28/2013. Certified copy mailed to Supreme Court of the State of New York, County of New York, on 3/1/2013. (Barrett, C)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
DURIM ISUFI and ENVER KILLOGJERI,
individually on behalf of all other persons
similarly situated who were employed by
PROMETAL CONSTRUCTION, INC., with
respect to certain Public Works Projects
awarded by THE CITY OF NEW YORK, THE
NEW YORK CITY HOUSING AUTHORITY
MEMORANDUM , ORDER, AND
JUDGMENT
12-CV-5225
Plaintiffs,
-againstPROMETAL CONSTRUCTION, INC. and
STY CONSTRUCTION, INC.,
Defendants.
I.
Table of Contents
Introduction ............................................................................................................................. 1
II.
Facts and Procedural History ................................................................................................... 4
Ill. Removal Standard ................................................................................................................... 5
IV. Federal Question Jurisdiction .................................................................................................. 6
a.
Disputed and Substantial Federal Issue ............................................................................... 7
b.
Artful Pleading Doctrine .................................................................................................... 10
V. Conclusion ............................................................................................................................. 13
I.
Introduction
This case presents a vexing problem on the relationship of substantive law governing wage
disputes and procedural law governing removal.
Plaintiffs are a putative class of workers formerly employed by defendant Pro-Metal
Construction, Inc. ("Pro-Metal"). Compl.
~
3, Oct. 18, 2012, ECF No. 1. They worked as
roofers and sheetmetallaborers, and performed other construction jobs, for a federally-funded
1
project at a public housing complex in Brooklyn. !d. The class of putative plaintiffs is
comprised of at least sixty employees. !d. ~ 8. They sue Pro-Metal and the general contractor
STV Construction, Inc. ("STV") for their failure to pay prevailing wages, benefits, and overtime.
Claims are brought under state common and statutory law.
Defendants removed the case from State court. Plaintiffs move to remand to state court, and
Defendants' move to dismiss.
The forum where plaintiffs litigate the action may be dispositive of their claims. In two cases
with almost the same facts, the Court of Appeals for the Second Circuit and the New York State
Court of Appeals disagreed on whether plaintiffs' common law claims for prevailing wages are
preempted by federal law. As a result, the outcome may differ depending on whether the parties
commence the suit in a federal or a state court. It may be appropriate for the appellate courts to
revisit the issue.
In Grochowski v. Phoenix Canst., 318 F .3d 80 (2d Cir. 2003), the Court of Appeals for the
Second Circuit found the federal Davis Bacon Act ("the Act"), 40 U.S.C. § 3141 et seq,
providing for prevailing wages, does not allow a private right of action, preempts workers from
bringing state breach of contract claims for unpaid prevailing wages, and requires aggrieved
plaintiffs to pursue remedies administratively with the New York City Housing Authority
(NYCHA).
Cox v. NAP Constr. Co., Inc., 10 N.Y.3d 592,606-607 (N.Y. 2008), a decision by the New
York Court of Appeals, disagreed with the Grochowski's majority opinion. Adopting Judge
Lynch's dissent in Grochowski, it found no federal preemption, and held that laborers
performing federally-funded work at NYCHA projects may pursue state contract claims for
prevailing wages in a state court without first seeking administrative remedies.
2
Pursuant to Grochowski, defendants argue that the preemption of plaintiffs' common law
claims by the Act serves as the basis for both removal on the grounds of federal question
jurisdiction and then dismissal on the merits. They assert that plaintiffs' only remedy is an
administrative proceeding before the NYCHA.
Even though Judge Lynch's dissent in Grochowski appears to be correct, federal courts
operate within a hierarchical system. See Grochowski, 318 F .3d at 89-91 (Lynch, J. dissenting)
("Surely, some powerful legal reason must compel a conclusion so inconsistent with common
sense, common law, and common justice."). A district court within this circuit must follow the
law as interpreted by the Court of Appeals for the Second Circuit. Given a conflict between a
decision by a majority panel of the Second Circuit on the one hand, and, on the other, a
dissenting opinion to that decision and a New York Court of Appeals decision, this court would
be forced to follow the majority opinion by the Court of Appeals for the Second Circuit. That is
true even if a subsequent opinion by the New York Court of Appeals correctly decided the issue.
Were the present case brought in a federal district court, as was the Grochowski action, the court
would be compelled to reject the ruling ofthe New York State Court of Appeals.
But, since this action was initiated in a New York State court, and preemption is a federal
defense that is not a basis for removal, this court is compelled by governing federal practice
approved by the Supreme Court of the United States to remand. While recognizing that it could
not deviate from the controlling law of the Court of Appeals for the Second Circuit as to the
substantive merits of this case, this court is compelled to follow federal procedural law
governing when removal is proper. Since the parties concede there is also no diversity, removal
was improper. See Tr. 3:9-13, Feb. 27, 2013.
3
After remand, defendants are free to make their arguments concerning preemption in State
court. The action is remanded to state court.
II.
Facts and Procedural History
In October 2009, STV entered into a contract ("the Contract") with NYCHA. See Decl. of
Judith E. Held ("Held Decl.") Ex. A, Nov. 5, 2012, ECF No. 13.
STV was to serve as the
general contractor for the "comprehensive modernization" ofNYCHA's Walt Whitman and
Raymond V. Ingersoll Houses in Brooklyn. Id at 1; Held Decl.
~
2. In March of2011, STV
subcontracted with defendant Pro-Metal for roof installation and related work. Held DecI. Ex. B
("Subcontract"); Held Decl.
~
2. Pro-Metal was to furnish labor, materials, and other equipment
required by the Subcontract. Compl.
~
14.
The Contract and Subcontract state that the defendants, as the general and sub- contractors
shall:
"pay all laborers and mechanics ... not less than the wages prevailing in the locality of the
Project ... pursuant to Federal wage requirements set forth 40 U.S.C. § 3141 et seq
(formerly known as the Davis-Bacon Act) and other related laws and regulations." Held
Decl. Ex. A §38.1.3 ("Prevailing Rate of Wages"); Ex. B Article 35 (C) (same).
According to the defendants, they were required to pay workers the prevailing wages because
NYCHA received funding for this project with federal stimulus money under the American
Recovery and Reinvestment Act of2009. See Defs. Mem. of Law in Supp. of Cross-Mot. to
Dismiss and in Opp. to Pls. Mot. to Remand ("Defs. Mem.") at 8, Nov. 5, 2012, ECF No. 14;
Held Decl.
~~
3, 6 (citing Contract and Subcontract). Attached to both agreements is the
schedule of prevailing wages for various jobs. E.g., Held Decl. Ex B (including schedule with
Contract).
Plaintiffs sued both defendants in New York Supreme Court for the failure to pay these
wages, supplemental benefits, and overtime compensation. Compl.
4
~~
18-19. They assert three
claims. One is for a breach of contract against STV for failing to pay requisite wages and
benefits. Compl. ~~ 28-32. Another is for breach of contract against Pro-Metal for failing to
ensure that plaintiffs received proper compensation. Compl.
~~
20-24. These two causes of
action are based upon the Contract and Subcontract. See e.g., Compl. ~~ 13-16, 22. The
plaintiffs assert that they were third-party beneficiaries. Pis. Mem. of Law in Supp. of Mot. to
Remand ("Pis. Mem.") at 2, Oct. 24, 2012, ECF No.6. The third cause of action alleges that
Pro-Metal failed to pay the plaintiffs statutorily required overtime wages for the work they did in
excess of forty hours per week under New York law. See N.Y. Lab. Law§ 663; 12 N.Y.CRR §
142-2.2; Compl. ~~ 25-27.
The case was removed to this court by defendants. In October 2012, plaintiffs filed a motion
to remand this proceeding to state court for lack of a federal question. See 28 U.S.C. § 1331; Pis.
Mot. to Remand, ECF No.5. Defendants then filed a cross-motion to dismiss the action for
failure to state a claim of relief. See generally Notice of Cross-Motion to Dismiss, Nov. 5, 2012,
ECF No. 10; Defs. Mem. Since the motion to remand is granted, there is no point to deciding the
merits. See, e.g., County ofNassau v. New York, 724 F.Supp.2d 295, 300 (E.D.N.Y. 2010) ("The
Court will address plaintiffs' remand before addressing defendants' motions because the remand
motion challenges the Court's jurisdiction to hear this case. If the Court does not have
jurisdiction, it does not have power to decide the defendants' motions.") (citing Broder v.
Cablevision Sys. Corp., 418 F.3d 187, 194 (2d Cir. 2005)).
III.
Removal Standard
A party may remove from state to federal court any action over which the district court has
original jurisdiction. 28 U .S.C. § 1441. District courts have "original jurisdiction" over "all civil
actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.
5
"[I]n light of the congressional intent to restrict federal court jurisdiction, as well as the
importance of preserving the independence of state governments, federal courts construe the
removal statute narrowly, resolving any doubts against removability." Lupo v. Human Affairs
Int'l, Inc., 28 F.3d 269,274 (2d Cir. 1994) (internal citation omitted). "As a general rule, absent
diversity jurisdiction, a case will not be removable if the complaint does not affirmatively allege
a federal claim." Beneficial Nat'l. Bank v. Anderson, 539 U.S. 1, 6 (2003). The removing party
bears the burden of establishing federal jurisdiction. See, e.g., Durak v. Enterprise Elec.,
Contractors, Inc., 07-CV-5360 (CBA), 2009 WL 877183, at *1 (E.D.N.Y. Mar. 30, 2009) (citing
cases).
IV.
Federal Question Jurisdiction
"Under the well-pleaded complaint rule, 'the plaintiff is the master of the claim; he or she
may avoid federal jurisdiction by exclusive reliance on state law."' Citigroup, Inc. v. Wachovia
Corp., 613 F.Supp.2d 485, 490 (S.D.N.Y. 2009) (quoting Caterpillar Inc. v. Williams, 482 U.S.
386, 392 (1987)). In the absence of a federal cause of action in the well-pleaded complaint,
federal question jurisdiction exists if"a state-law claim necessarily raise[s] a stated federal issue,
actually disputed and substantial, which a federal forum may entertain without disturbing any
congressionally approved balance of federal and state judicial responsibilities." Broder v.
Cablevision Systems Corp., 418 F.3d 187, 194 (2d Cir. 2005) (quoting Grable & Sons Metal
Prods. V Darue Eng'g & Mfg., 545 U.S. 308,314 (2005)). A "case may not be removed to
federal court on the basis of a federal defense, including the defense of preemption, even if the
defense is anticipated in the plaintiffs complaint, and even if both parties admit that the defense
is the only question truly at issue in the case." Franchise Tax Bd. of State ofCal. v. Constr.
Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 14 (1983).
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"[A] plaintiff may not defeat subject-matter jurisdiction by 'artfully pleading' his complaint
as if it arises under state law where the plaintiff's suit is, in essence, based on federal law."
Sullivan, 424 F.3d at 271. The basis for this rule is that the plaintiff"may not defeat removal by
omitting to plead necessary federal questions in a complaint." Franchise Tax Bd., 463 U.S. at
22.
In the present case, the plaintiffs do not assert a federal cause of action. The defendants
argue that federal question jurisdiction must be deemed to exist because of: 1) an "actually
disputed and substantial" federal issue and 2) the artful pleading doctrine. See Defs. Mem. at 45, 11-14. Both arguments are without merit.
a. Disputed and Substantial Federal Issue
"[T]he mere presence of a federal issue in a state cause of action does not automatically
confer federal-question jurisdiction." Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S.
804, 813 (1986). Rather, as the Supreme Court held in Grable, "the question is does a state-law
claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal
forum may entertain without disturbing any congressionally approved balance of federal and
state judicial responsibilities." 545 U.S. at 314 (emphasis added).
A disputed and substantial question sufficient to confer federal jurisdiction is one that is an
"essential element" of a plaintiff's claim and requires a court to examine a contested issue of
federal law in order to resolve the plaintiff's cause of action. See e.g., Grable, 545 U.S. at 315
(finding the existence of federal jurisdiction because an essential element ofplaintiff's quiet title
action was improper notice, requiring the Court to interpret federal tax law on the meaning of
adequate notice prior to the seizure of property); Gunn v. Minton, No. 11-1118, 2013 WL
610193 (Feb. 20, 2013) (applying Grable and finding no federal questionjurisdiction for state
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legal malpractice claim premised on patent litigation, a subject over which federal courts have
exclusive jurisdiction, because case did not present a substantial issue of federal patent law);
Citigroup, Inc. v. Wachovia Corp., 613 F.Supp.2d 485,495 (S.D.N.Y. 2009) (applying Grable
and finding no federal jurisdiction because neither plaintiffs right to relief nor any element of its
claims "depended on a construction of federal law" or an "analysis or interpretation of a federal
statute"); Broder v. Cablevision Systems Corp., 418 F.3d 187 (2d Cir. 2005) (removal
appropriate under Grable because plaintiff sought a declaratory judgment that Cablevision
violated federal law and plaintiffs state law claims explicitly required the court to determine that
defendant violated federal uniform rate requirements); County ofNassau, 724 F.Supp.2d at 302304 (distinguishing Grable and Broder and finding no federal jurisdiction because plaintiffs
claims did not raise or require the resolution of a federal issue) (emphasis added).
A federal defense such as preemption is not a proper basis for removing an action to federal
court. See Franchise Tax Bd., 463 U.S. at 14 ("settled law that a case may not be removed to
federal court on the basis of a federal defense, including the defense ofpreemption ... even if both
parties admit that the defense is the only question truly at issue in the case") (emphasis added);
Beneficial Nat '1 Bank, 539 U.S. at 6 ("[A] defense that relies on the preclusive effect of a prior
federal judgment ... or the pre-emptive effect of a federal statute ... will not provide a basis for
removal.") (internal citations omitted). See also Rivet v. Regions Bank of La., 522 U.S. 470, 471
(1998) ("Because a defense is not part of a plaintiffs properly pleaded statement of his or her
claim... removal of a case to federal court may not be predicated on the presence of a federal
defense.").
The defendants argue that removal is proper in this instance because the project was
federally-funded and the obligation to pay plaintiffs' prevailing wages was governed by the Act,
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a federal statute. See Notice of Removal~ 3, Oct. 18,2012, ECF No.1. They assert that the
disputed and substantial issue underlying federal jurisdiction is that the Act applies to preempt
plaintiffs common law claims for unpaid wages. See Defs. Mem. at 11-14. For this proposition
they cite Grochowski v. Phoenix Canst., 318 F .3d 80 (2d Cir. 2003). In Grochowski, the Court
of Appeals for the Second Circuit determined that construction workers at NYCHA housing
projects, similarly situated to the plaintiffs in this case, could not bring any state law breach of
contract claims against their employers for the failure to pay prevailing wages. The contracts at
issue involved federally-funded work and required prevailing wages pursuant to the Act. Id at
83. Grochowski did not involve removal. The plaintiffs sued in federal court. The Court of
Appeals held that the Act preempted plaintiffs state law claims because they constituted an
"impermissible end run" around the statute's lack of a federal private right of action. See id at
86. Citing mainly to Grochowski, the defendants also argue that plaintiffs' common law claims
must be dismissed on the merits because of preemption under the Act.
In essence, the defendants argue that federal preemption under the Act serves as the basis to
both remove this case to federal court and then to dismiss it on the merits. See generally Defs.
Mem. at 8-14. With respect to the question of removal, they have failed to meet their burden of
demonstrating the existence of an actually disputed and substantial federal issue raised by the
complaint sufficient to give this court jurisdiction over this case.
The language in the Contract and Subcontract do suggest that the Davis Bacon Act provided
the schedule of prevailing wage and benefit rates for this project as a matter of contract law. See
Held Decl. Ex. A §38.1.3 ("pay all laborers and mechanics ... not less than the wages prevailing
in the locality of the Project ... pursuant to Federal wage requirements [in the Davis Bacon Act]
and other related laws and regulations." ");Ex. B Article 35 (C) (same); Pls. Second Mem. at 4.
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Yet the Act did not set the rates of wages attached to the contracts under federal law. All three
of plaintiffs claims would involve purely state common or statutory law. C.f Durak v.
Enterprise Electrical, Contractors, Inc., 07-CV-5360 (CBA), 2009 WL 877183 (E.D.N.Y. Mar.
30, 2009) (remanding action brought by workers on a NYCHA project because defendants failed
to offer competent evidence that Davis Bacon Act set prevailing wages).
Plaintiffs sue for wages owed to them under the contract. They do not bring claims under the
Act. Whether the Act was violated is not an essential element of any oftheir claims. Nor do the
plaintiffs seek resolution of any question regarding the Act's application as part of their right to
relief. They do not contest the prevailing wage rates in the contract schedule, nor the fact that
the statute does not allow for a federal private right of action. The reason they brought their
action in state court is because the federal court does not afford them any relief under
Grochowski. See Pls. Mem. of Law in Further Supp. OfPls. Mot. to Remand and in Opp. To
Defs. Cross-Motion to Dismiss at 8, Nov. 12,2012 ECF No. 18.
Preemption is a defense. The defendants are free to make their arguments about preemption
in state court. But that cannot serve as the grounds to. remove the case. The well-pleaded
allegations in plaintiffs complaint do not raise any "actually disputed and substantial" federal
1ssues.
b. Artful Pleading Doctrine
Defendants argue that plaintiffs artfully pleaded their complaint to avoid referring to the
Davis Bacon Act in order to avoid federal question jurisdiction. See, e.g., Defs. Mem. at 4, 14.
When examining a plaintiffs "artfully (i.e. misleadingly) pleaded complaint, the federal
court may construe the complaint as if it raised the federal claim that actually underlies
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plaintiffs suit." Sullivan, 424 F.3d at 271-72. Included within this doctrine is the concept of
complete preemption, which is a "narrow exception" to the well-pleaded complaint rule. Id at
272; Beneficial Nat'/. Bank, 539 U.S. at 5 ("narrow exception"); County ofNassau, 724
F.Supp.2d at 305 ("[I]n this circuit, [the artful pleading doctrine] includes within it the doctrine
of complete preemption."). "Under the doctrine of complete preemption, certain federal statutes
are construed to have such 'extraordinary' preemptive force that state-law claims coming within
the scope of the federal statute are transformed, for jurisdictional purposes, into federal claimsi.e., completely preempted." Sullivan, 424 F.3d at 272 (quoting Metro. Life Ins. Co. v. Taylor,
481 U.S. 58, 65 (1987)).
The critical question for complete preemption is whether the federal statute "wholly displaces
the state law [claim]" so that the federal statute provides the exclusive cause of action. Beneficial
Nat'/. Bank, 539 U.S. at 8-9. See City of Rome, 362 F.3d at 177-78 (federal statute must provide
"exclusive cause of action") (citing Beneficial Nat'/. Bank). A plaintiffs completely preempted
state law claim makes the case removable to federal court because it is in reality premised on
federal law. Beneficial Nat'/. Bank, 539 U.S. at 1.
"The Supreme Court has only found three statutes to have the requisite extraordinary
preemptive force to support complete preemption: § 301 of the Labor Management Relations Act
(LMRA), 29 U.S.C. § 185 ... § 502 (a) of the Employee Retirement Income Security Act
(ERISA), 29 U.S.C. § 1132 (a) ... and§§ 85 and 86 of the National Bank Act .... " Sullivan, 424
F.3d at 272. See Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557 (1968) (LMRA); Metro. Life
Ins. Co. v. Taylor, 481 U.S. 58 (1987) (ERISA); Beneficial Nat'!. Bank v. Anderson, 539 U.S. 1
(2003) (finding complete preemption under the National Bank Act after first acknowledging that
there were previously only "two categories of cases where this Court has found" the doctrine to
11
apply). Complete preemption is categorically different from ordinary, or defensive, preemption.
Sullivan, 424 F.3d at 272. The number of federal laws for which ordinary preemption exists far
exceeds the three statutes that have been found to completely preempt state law claims. Id. at
272-73. "The Supreme Court has left no doubt ... that a plaintiffs suit does not arise under
federal law simply because the defendant may raise the defense of ordinary preemption." !d. at
273. See City of Rome, 362 F.3d at 177-78 (distinguishing between ordinary preemption as a
"complete federal defense" for which removal is improper, and complete preemption when a
federal statute provides the "exclusive cause of action" for which removal is appropriate).
The Davis Bacon Act is not one of the three statutes for which complete preemption applies,
and the defendants have failed to demonstrate otherwise. The Act does not create an exclusive
cause of action in its provision of an administrative remedy. See Cox v. NAP Constr. Co., Inc.,
10 N.Y.3d 592,606-607 (N.Y. 2008) (holding that the Davis Bacon Act does not preempt
workers' state law claims for prevailing wages for federally-funded work done at NYCHA
projects, nor does any administrative remedy in the statute or accompanying regulations provide
the exclusive means to vindicate their rights); Chan v. City of New York, 1 F.3d 96 (2d Cir. 1993)
(leaving open the possibility that although no action could be brought under the Davis Bacon
Act, one could be brought under 42 U.S.C. § 1983).
Grochowski considered plaintiffs state contract claims for prevailing wages on their merits,
affirming summary judgment for the defendants. Since the plaintiffs brought their suit in federal
court, the decision did not examine the preemptive scope of the Act for the purposes of
jurisdiction. Although the Court of Appeals for the Second Circuit held that the Act preempted
plaintiffs state common law claims, it recognized, and did not disturb, its prior holding in Chan
that the Act did not provide an exclusive cause of action. Grochowski, 318 F .3d. at 85-86 ("The
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Court [in Chan] determined that. .. there is no statement that the administrative remedies are
exclusive ... Here, the plaintiffs did not bring a§ 1983 action .... Unlike claims brought under§
1983, there is no presumption in favor of a right to bring suit for such common law claims.").
Complete preemption does not exist where a state action must be removed because it is
preempted by a federal statute, but where the federal court must then immediately dismiss the
removed action because the same statute provides only for non-judicial remedies. See Sullivan v.
Am. Airlines, Inc., 424 F.3d 267 (2d Cir. 2005) (finding removal improper where the federal
statute that preempts plaintiffs' state law claims provides an arbitration panel with primary
jurisdiction, requiring the federal court to dismiss the action if removed). It would be "internally
inconsistent" to assert that a district court has jurisdiction for the purpose of removal but that the
court must then dismiss the action because the statute confers primary jurisdiction on another
adjudicative body. !d. at 276-77.
V.
Conclusion
Plaintiffs' motion to remand this action to state court is granted. Because the court does not
have jurisdiction, it will not decide defendants' motion to dismiss. No costs or disbursements
are awarded.
Date: February 28, 2013
Brooklyn, New York
enior United States District Judge
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