The Building Industry Electrical Contractors Association et al v. The City of New York et al

Filing 37

OPINION AND ORDER re: 21 CROSS MOTION to Amend/Correct 1 Complaint, filed by United Electrical Contractors Association, The Building Industry Electrical Contractors Association. As in Boston Harbor, the PLAs at issue in this case represent propri etary rather than regulatory conduct by the City and are therefore not preempted by the NLRA. 507 U.S. 218. The City has not violated the NLRA by executing these PLAs, and therefore Plaintiffs § 1983 claim has no basis. The Court declines to exe rcise supplemental jurisdiction over Plaintiffs state law claims, because they are challenges to municipal conduct that fall within the purview of N.Y. C.P.L.R. Article 78, and thus are more appropriately heard in state court. Plaintiffs motion to amend is denied. (Signed by Judge Robert P. Patterson on 8/4/2011) Copies Faxed By Chambers. (lmb)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------X
BUILDING INDUSTRY ELECTRICAL
CONTRACTORS ASSOCIATION and the
UNITED ELECTRICAL CONTRACTORS
ASSOCIATION,
Plaintiffs,
10 Civ. 8002 (RPP)
- against THE CITY OF NEW YORK and the
BUILDING AND CONSTRUCTION TRADES
COUNCIL OF GREATER NEW YORK,

OPINION AND ORDER

Defendants.
-----------------------------------------------------------X
ROBERT P. PATTERSON, JR., U.S.D.J.
On December 13, 2010, Defendant the Building and Construction Trades Council
of Greater New York and Vicinity (“BCTC”) moved to dismiss Plaintiffs’ complaint in
its entirety pursuant to Rule 12(b)(6) and 12(b)(1) of the Federal Rules of Civil
Procedure. On December 23, 2010, Defendant the City of New York similarly moved to
dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and (b)(6), or, in the alternative, for summary
judgment under Rule 56. On March 4, 2011, Plaintiffs filed a joint brief in opposition to
these motions along with a motion to amend their complaint. On April 15, 2011, the
Defendants filed reply briefs in support. Oral argument was held on June 1, 2011.
BACKGROUND
I.

The Parties

Plaintiff the Building Industry Electrical Contractors Association (“BIECA”) is a
trade association of twenty-seven contractors, of which 16 perform publicly financed
projects for the city. (Pls.’ Mem. in Opp. at 2.) “The object and purpose of BIECA is . . .
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to further the interests of its members and those in any way related to the construction
industry, to do anything necessary, suitable and proper, including the institution of legal
proceedings, consistent with the public interest as well as the interest of this industry and
trade, to bargain collectively for the members of this association and to strive to secure
labor peace and tranquility in the construction industry.” (Id.)
BIECA, on behalf of its member contractors, has entered into a collective
bargaining agreement (“CBA”) with Local 363 United Electrical Workers of America,
IUJAT (“Local 363”). (Id.) The pertinent sections of the CBA between BIECA and
Local 363 are:
1. Article I requires BIECA and its contractors to recognize Local 363 as
the “sole and exclusive bargaining representative of all of the electrical
workers who are or may hereinafter become employed” by any BIECA
contractor.
2. Article 2 requires all employees, who are employed by BIECA
contractors, to become members of Local 363 by paying dues and
initiation fees.
3. Article 25 requires all contractors that participate in the BIECA to
contribute to the Building Trades Welfare Fund, Building Trades
Annuity Fund, The Building Trades Educational Benefit Fund, and the
Electrician’s Retirement Fund (collectively the “Building Trades
Funds”), as well as the United Service Workers Union Security Fund,
on behalf of their employees who work on job classifications covered
by the CBA.
(Id. at 2; Compl. ¶¶ 6-8.)
“Plaintiff United Electrical Contractors Association (“UECA”) is a trade
organization and not-for-profit corporation formed in 1965.” (Pls.’ Mem. in Opp. at 2-3.)
UECA currently consists of thirteen contractor-members, of which five perform publicly
financed projects for the City of New York. (Id. at 3.) “The object and purpose of the
UECA is . . . to further the interests of its members and those in any way related to the
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construction industry, to do anything necessary, suitable and proper, including the
institution of legal proceedings, for the accomplishment of its lawful objectives, and to
bargain collectively for its members.” (Id.)
Since 1995, the UECA has been engaged in ongoing collective bargaining
negotiations with Local Union No. 3, International Brotherhood of Electrical Workers
(“Local 3”). (Id.) Local 3 is a member of the BCTC. (Id.) To date, UECA and Local 3
have not successfully negotiated a CBA. (Id.) Pursuant to a December 7, 1995
Settlement Agreement with the National Labor Relations Board, UECA contractors are
required to contribute to the Building Trades Funds on behalf of their eligible employees.
(Id.)
Defendant BCTC is an umbrella organization of approximately fifty construction
industry trade unions, representing over 100,000 New York City construction workers.
(Affidavit of Gary LaBarbera (“LaBarbera Aff.”) at ¶ 4.) “The BCTC provides
coordination and support to its affiliated local unions in order to achieve a unified effort
on behalf of organized construction workers with respect to governmental affairs,
improvement of working conditions, and community and economic development.” Id.
The BCTC’s affiliates have CBAs with twenty-eight union contractor associations
which represent approximately 1,700 construction managers, general contractors and
trade contractors. (Id. at ¶ 8.)
II.

The Project Labor Agreement (“PLA”)

‘Project labor agreement’ shall mean a pre-hire collective bargaining
agreement between a contractor and a bona fide building and construction
trade labor organization establishing the labor organization as the
collective bargaining representative for all persons who will perform work
on a public work project, and which provides that only contractors and

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subcontractors who sign a pre-negotiated agreement with the labor
organization can perform project work.
N.Y. Labor Law § 222.
In 2008, the New York State Legislature passed New York Labor Law § 222. See
Labor Law § 222. This law was passed as part of a 2008 reform package, and sought to
reform section 101 of the General Municipal law (known as the “Wicks Law”). See Bill
Jacket to Labor Law § 222, City’s Mem. in Supp. at Appendix 2. The Wicks Law
imposes a number of requirements for public projects, including that local governments
prepare separate specifications for the electrical, plumbing and mechanical portions of the
work. The Wicks Law requires four prime contractors to be involved in the construction
or rehabilitation of a municipal project: electrical, plumbing, and mechanical contractors,
as well as a general contractor. Pertinent to this litigation, New York Labor Law § 222
exempts from the coverage of Wicks Law all projects where a locality operates under a
PLA.
On November 24, 2009, Mayor Michael R. Bloomberg, along with the president
of the BCTC, publicly announced that the City and the BCTC had agreed to enter into
three PLAs to be in force through 2014. (Declaration of Marla G. Simpson, (“Simpson
Decl.”) Ex. C.) These three PLAs are: (1) “Citywide Rehabilitation and Renovation of
City Owned Structures,” which applies to projects that predominantly involve the
renovation, repair, alteration, rehabilitation or expansion of existing structures for
designated City agencies on City-owned property within City limits (Simpson Decl., Ex.
E); (2) “New Construction” for the Department and Design and Construction (“DDC”),
which applies to eight new construction projects (Simpson Decl., Ex. H); and (3) “New

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Construction” for the New York City Department of Sanitation (“DSNY”), which applies
to three new construction projects. (Simpson Decl., Ex. U.)
Subsequent to the November announcement, the City and the BCTC executed
three additional PLAs: (1) a Renovation and Rehabilitation PLA for the New York City
Department of Environmental Protection (“DEP”) (Simpson Decl., Ex. R); (2) a New
Construction PLA for the Department of Parks and Recreation (“DPR”) (Simpson Decl.,
Ex. Z); and (3) a Renovation and Rehabilitation PLA for the New York City Department
of Housing Preservation & Development (“HPD”), which applies to the renovation,
repair, alteration, rehabilitation or expansion of existing City-owned residential buildings
that are part of the Tenant Interim Lease (“TIL”) Program. (Simpson Decl., Ex. CC.)
Prior to entering into the PLAs with the BCTC, the City commissioned studies
from four consultants to evaluate any potential cost savings and efficiencies that might
result from the use of a PLA in conjunction with these projects. (Simpson Decl. ¶ 13-16.)
These consultancies included Hill International, the LiRo Group, the Turner Construction
Company and Tishman Construction. (Id. ¶ 13.) The Director of the Mayor’s Office of
Contract Services (“MOCS”), together with a construction official from the relevant City
agency, prepared a Report and Recommendation to each of the agencies executing the
PLAs. (Id. ¶ 14.) “[E]ach study concludes that by obtaining certain union concessions,
including standardizing work hours, overtime time hours, work shift rules and holidays
for each of the various construction trades along with ‘no strike’ provisions and common
grievance procedures, the City would realize substantial cost savings on projects covered
by these PLAs.” (Pl.’s Mem. in Opp. at 9; see also Simpson Decl. ¶¶ 5-7 and 63-82.)

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There are many similar provisions among the PLAs in question. The most
pertinent among these provisions are that the PLAs: (1) provide for pre-hire recognition
of the BCTC and its affiliates as the bargaining representatives of all construction
workers working on PLA projects; (2) incorporate the affiliates’ CBAs, including union
security clauses; (3) require most contractors to secure a minimum of eighty-eight percent
(88%) of their labor through the BCTC union referral systems; (4) prohibit unions from
discriminating in referrals to the projects on the basis of union affiliation; (5) require
contractors to contribute to the unions’ fringe benefit funds on behalf of all workers in the
bargaining unit; (6) provide for uniform work rules and standardized hours of work; and
(7) include a broad no-strike clause and dispute resolution mechanisms for all job site
disputes. (LaBarbera Aff. at ¶ 28.)
The projects covered by PLAs are open to all successful bidders, union or nonunion, so long as they agree to be bound by the terms and conditions of the PLA.
(Compl. ¶ 23.) Plaintiffs contend, however, that the PLAs favor the signatory contractors
and impose conditions that make it cost-prohibitive for other contractors to bid on PLA
covered projects. (Pls.’ Mem. in Opp. at 4.)
III.

Plaintiffs’ Complaint

The Complaint alleges that the above listed provisions, among others, of the PLAs
between the BCTC and the City effectively exclude the contractor-members of the UECA
and the BIECA from the competitive bidding process for City construction projects.
(Compl. ¶ 29.) For example, Plaintiffs contend that the PLA’s requirement that a
contractor must draw 88% of its labor from the signatory BCTC trade union’s hiring hall
forces a non-BCTC contractor to work with a “stranger” workforce. (Tuerck Aff. at ¶

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25.) Additionally, Plaintiffs assert that the PLAs require participant contractor unions to
pay fringe benefits into BCTC union funds, resulting in a BIECA or UECA paying the
same fringe benefits twice, once into the BCTC union funds and once into the Building
Trades Funds. This, Plaintiffs argue, renders it impossible for BIECA or UECA
contractors to compete on price with BCTC signatory contractors. (Compl. ¶ 33-34.)
Moreover, Plaintiffs challenge the Letter of Assent provision, which requires each
contractor awarded a bid under a City PLA to agree to be bound by the terms of the PLA
and to certify that it has no other commitments or agreements that would preclude its full
and complete compliance with the PLA. (Compl. ¶¶ 30-31.) This requirement, Plaintiffs
argue, would preclude a contractor from bidding on PLA covered work to the extent that
contractor has existing collective bargaining obligations. (Id. ¶ 31-32.) Specifically,
Plaintiffs argue that the Letter of Assent requirement interferes with the existing CBAs
between the BIECA contractors and Local 363, and the ongoing collective bargaining
negotiations between UECA and Local 3. (Id.)
Plaintiffs also contend that the cost savings that the City argues support the
implementation of PLAs are illusory and speculative. (Id. ¶ 40.) The Complaint asserts
that the feasibility studies carried out by the four consultancies are based on flawed
methodology and on the erroneous assumption that only BCTC contractors would be
employed on a particular City project whether or not the project was performed under a
PLA. (Id. ¶ 44.) Plaintiffs argue that the studies prepared ignore the impact of the PLAs
limiting the number of contractors that might participate in a competitive bidding
process. (Id. ¶ 46.) Moreover, the Complaint alleges that the PLAs are not necessary for
labor harmony, and that the PLA studies provide “scant evidence” that the types of

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projects covered by the challenged PLAs have ever been subject to a strike or work
stoppage. (Id. ¶¶ 50; 54-57.)
Plaintiffs’ Complaint asserts five causes of action. First, it asserts that the PLAs
are preempted pursuant to the National Labor Relations Act, 29 U.S.C. §§ 151-169
(“NLRA”). Second, it asserts a cause of action under 42 U.S.C. § 1983 for interference
with Plaintiffs’ right, guaranteed by the NLRA, to bargain collectively free of
government interference. Third, the Complaint requests declaratory judgment setting
forth the “rights duties and responsibilities of the Plaintiffs and Defendants arising from
the City’s mandate of five (5) unlawful PLAs covering present and future public
construction projects.” Fourth, Plaintiffs bring a state law claim asserting that the PLAs
violate General Municipal Law § 103(1), which provides that “all contracts for public
work involving an expenditure of more than thirty-five thousand dollars. . . shall be
awarded. . . to the lowest responsible bidder furnishing the required security after
advertisement for sealed bids in the manner provided for in this section.” Gen. Munic.
Law § 103(1). Finally, the Complaint asserts a state law claim for violation of New York
Labor Law § 222, which provides in pertinent part that a municipality may require a PLA
where it “determines that its interest in obtaining the best work at the lowest possible
price, preventing favoritism, fraud and corruption, and other considerations such as the
impact of delay, the possibility of cost savings advantages and any local history of labor
unrest, are best met by requiring a project labor agreement.” Labor Law § 222. Plaintiffs
contend that the City has violated Section 222 by enacting overbroad PLAs and not
determining the need for a PLA on a case by case basis.

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IV.

Defendants’ Motions to Dismiss or Alternatively for Summary Judgment

Defendants the City of New York and the BCTC filed separate motions to dismiss
or alternatively for summary judgment, raising overlapping arguments.
The City contends that Plaintiffs’ preemption claim must fail because the
Supreme Court, in Building & Constr. Trades Council of the Metro. Dist. v. Associated
Builders and Contractors of Massachusetts/Rhode Island, Inc., 507 U.S. 218 (1993)
(“Boston Harbor”), held that the use of PLAs by local governments was not preempted
by the NLRA where the PLAs were used in conjunction with proprietary, rather than
regulatory conduct on the part of the municipality. Second, the City argues that the Court
lacks subject matter jurisdiction with regard to Plaintiffs’ claims originating under state
law, and that even if the Court could exercise supplemental jurisdiction over those
claims, it should decline to do so. Finally, the City contends that its determination to
require PLAs comported with § 222 and New York’s public bidding laws because it was
rationally based and supported by expert studies on the PLAs concluding that each of the
PLAs would result in substantial savings.
Defendant BCTC moves for dismissal first on the same ground asserted by the
City; that following Boston Harbor, PLAs are not preempted by the NLRA under the
“market participant” doctrine. Second, BCTC asserts that Plaintiffs do not have standing
to assert claims under 42 U.S.C. § 1983, and that even if they do, BCTC as a private
entity is not a state actor subject to suit under § 1983. BCTC also claims that the interests
Plaintiffs’ characterize as liberty interests, which underlie the § 1983 claim, are not
properly characterized as such. BCTC further contends that the PLAs are lawful under
New York’s competitive bidding laws, because they protect the public fisc and prevent

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fraud, favoritism and corruption. BCTC also argues that the PLAs do not violate Labor
Law § 222 because the City properly determined that a PLA requirement would be in the
public interest. Finally, BCTC argues that the Court should dismiss the state law claims
in the event Plaintiffs’ federal claims are dismissed because the Court lacks supplemental
jurisdiction over those state law claims.
In response, Plaintiffs contend that the PLAs are preempted by the NLRA, despite
the Boston Harbor ruling, because here the City is acting as a regulator, rather than as a
proprietor. Plaintiffs contend that they have standing to pursue their § 1983 claim
because their activities have been “perceptibly impaired” by the diversion of their
resources to fighting the City’s practice of employing PLAs. Plaintiffs also argue that the
BCTC has acted under color of state law such that it is subject to suit under § 1983.
Next, Plaintiffs assert that the Court should exercise supplemental jurisdiction over the
Complaint’s state law claims because they derive from a common nucleus of fact and law
as the federal claims. Plaintiffs then argue that Defendants have violated New York’s
public bidding laws because they have not demonstrated more than a rational basis for
implementing the PLAs. Finally Plaintiffs move for leave to amend the Complaint to
include further evidence that their activities have been perceptibly impaired and therefore
they have standing to pursue their claims under § 1983 and to add a PLA that was
executed by the City and the BCTC after the Complaint was filed.
For the reasons discussed below, Defendants’ motions to dismiss are granted.

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DISCUSSION
I.

Standards on a Motion to Dismiss

The “standards for dismissal under [Rule] 12(b)(6) and 12(b)(1) are substantively
identical.” Lerner v. Fleet Bank, N.A., 318 F.3d 113, 128 (2d Cir. 2003). In order to
survive a 12(b)(6) motion to dismiss, Plaintiffs must have alleged “enough facts to state a
claim to relief that is plausible on its face.” Ruotolo v. City of New York, 514 F.3d 184,
188 (2d Cir. 2008) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)). The
court must accept all factual allegations in the complaint as true and must draw all
reasonable inferences in favor of the plaintiff. Ruotolo, 514 F.3d at 188. Consideration
of a Rule 12(b)(6) motion is limited to the factual allegations in the complaint and
documents either attached to or incorporated by reference in the complaint. Marketxt
Holdings Corp. v. Engel & Reiman, P.C., 693 F. Supp. 2d 387, 392-23 (S.D.N.Y. 2010)
(citing Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000)). The PLAs themselves and
the consultant studies related to them were incorporated by reference in Plaintiffs’
complaint, and are thus considered by the court on this motion. See Cortec. Indus. Inc. v.
Sum Holding L.P., 949 F.2d 42, 46-48 (2d Cir. 1991).
The 12(b)(1) motion to dismiss for lack of subject matter jurisdiction challenges
the district court’s statutory or constitutional power to hear Plaintiffs’ state law claims.
“A plaintiff asserting subject matter jurisdiction has the burden of proving by a
preponderance of the evidence that it exists.” Makarova v. U.S., 201 F.3d 110, 113 (2d
Cir. 2000).

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II.

Preemption Under the NLRA

Plaintiffs claim that the PLAs in question are preempted by the NLRA because
they interfere with certain rights that the NLRA protects. (Compl. ¶ 73-74.) These rights
include the right to be free from government interference in the collective bargaining
process regarding wages, hours and other terms or conditions of employment. (Id. ¶ 74.)
Plaintiffs contend that the PLAs unlawfully interfere with these rights because they
preclude Plaintiffs from bidding on covered contracts and interfere with Plaintiffs right to
bargain collectively with member unions and potential member unions. (Id. ¶ 76-77.)
Defendants argue that this claim should be dismissed because, under the Supreme Court’s
decision in Boston Harbor, PLAs between government entities and contractors are not
preempted by the NLRA where the government entity is acting a proprietor rather than a
regulator. (BCTC’s Mem. in Supp. at 8; City’s Mem. in Supp. at 8.)
A. The Boston Harbor Decision
Boston Harbor addressed the issue of whether the NLRA preempts “a state
authority, acting as the owner for a construction project,” from enforcing an otherwise
lawful prehire collective bargaining agreement negotiated by private parties. Id. at 220.
The case arose out of the cleanup of Boston Harbor, a project that was commenced as a
result of a court order demanding that the cleanup project proceed expeditiously and
without interruption. Id. at 221. The project was expected to cost $6.1 billion and take
ten years. Id. The Massachusetts Water Resources Authority (“MWRA”) had primary
authority over the project, and selected Kaiser Engineers to serve as project manager. Id.
Kaiser suggested to MWRA that they be permitted to negotiate a PLA with the Building
and Construction Trades Council and its affiliated organizations that would assure labor

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stability over the life of the projects. Kaiser then negotiated such a PLA with the BCTC
which provided for: 1) recognition of the BCTC as the exclusive bargaining agent for all
craft employees; 2) use of specified methods for resolving all labor-related disputes; 3) a
requirement that all employees be subject to union-security provisions compelling them
to become union members within seven days of their employment; 4) the primary use of
BCTC hiring halls to supply the project’s craft labor force; 5) a ten-year no strike
commitment; and 6) a requirement that all contractors and subcontractors agree to be
bound by the agreement. Id. at 221-222.
At the outset of the Boston Harbor opinion, the Court reviewed two distinct
NLRA preemption principles. Id. at 224. The first, Garmon preemption, see San Diego
Building Trades Council v. Garmon, 359 U.S. 236, (1959), prohibits state and local
regulation of activities protected by § 7 of the NLRA, or that constitute an unfair labor
practice under § 8. Boston Harbor, 507 U.S. at 224-225. The Garmon court held that the
state court was precluded from awarding damages to employers for economic injuries
resulting from peaceful picketing by labor unions. Id. at 225. “[T]he Garmon rule
prevents States not only from setting forth standards of conduct inconsistent with the
substantive requirements of the NLRA, but also from providing their own regulatory or
judicial remedies for conduct prohibited or arguably prohibited by the Act.” Id.
A second NLRA preemption principle was established by the Supreme Court in
Lodge 76, Intern. Ass'n of Machinists and Aerospace Workers, AFL-CIO v. Wisconsin
Employment Relations Comm'n, 427 U.S. 132 (1976) (“Machinists”). Machinists stands
for the principle that state and local governments are prohibited from regulating areas that
the NLRA leaves to “be controlled by the play of economic forces.” Id. at 140. In

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Machinists the Court held that “the Wisconsin Employment Relations Commission could
not designate as an unfair labor practice under state law a concerted refusal by a union
and its members to work overtime, because Congress did not mean such self-help activity
to be regulable by the States.” Boston Harbor, 507 U.S. at 226.
The Court in Boston Harbor then held that each of the two preemption doctrines
applies only to regulatory conduct:
When we say that the NLRA pre-empts state law, we mean that the NLRA
prevents a State from regulating within a protected zone, whether it be a
zone protected and reserved for market freedom, see Machinists, or for
NLRB jurisdiction, see Garmon. A State does not regulate, however,
simply by acting within one of these protected areas. When a State owns
and manages property, for example, it must interact with private
participants in the marketplace. In so doing, the State is not subject to preemption by the NLRA, because pre-emption doctrines apply only to state
regulation.
Id. at 226-227.
The Court distinguished proprietary activity from the type of activity it had found
to be objectionable in Wisconsin Dept. of Industry, Labor and Human Relations v.
Gould, Inc., 475 U.S. 282 (1986). In Gould, the Court explained, the conduct was
regulatory because “the statute at issue in Gould addressed employer conduct unrelated to
the employer's performance of contractual obligations to the State, and because the State's
reason for such conduct was to deter NLRA violations, we concluded: ‘Wisconsin
‘simply is not functioning as a private purchaser of services.’’” Boston Harbor, 507 U.S.
at 228-229. The Gould Court also noted that it was “not say[ing] that state purchasing
decisions may never be influenced by labor considerations.” 475 U.S. at 291.
The Boston Harbor Court then noted certain 1959 amendments to §§ 8(e) and 8(f)
of the NLRA. Id. at 230. “Section 8(f) explicitly permits employers in the construction

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industry-but no other employers-to enter into prehire agreements.” Id. Furthermore,
“[t]he 1959 amendment adding a proviso to subsection (e) permits a general contractor's
prehire agreement to require an employer not to hire other contractors performing work
on that particular project site unless they agree to become bound by the terms of that
labor agreement.” Id. The Court explained that “[i]t is evident from the face of the
statute that in enacting exemptions authorizing certain kinds of project labor agreements
in the construction industry, Congress intended to accommodate conditions specific to
that industry.” Id. at 231. These conditions included the short-term nature of
employment, the contractor’s need for steady labor supply and predictable costs, and the
longstanding practice of prehire bargaining. Id.
The Boston Harbor Court then turned to whether the PLAs entered into by Kaiser
on behalf of the MWRA represented regulation by the state, and found that they did not,
and thus that they were not preempted by the NLRA. The Court reviewed the PLAs at
issue, and found that MWRA was acting as a proprietor, because it was “attempting to
ensure an efficient project that would be completed as quickly and effectively as possible
at the lowest cost.” Id. at 232. The Court noted that the “challenged action in this
litigation was specifically tailored to one particular job, the Boston Harbor cleanup
project. There is therefore no basis on which to distinguish the incentives at work here
from those that operate elsewhere in the construction industry.” Id. It concluded that
“when the MWRA, acting in the role of purchaser of construction services, acts just like a
private contractor would act, and conditions its purchasing upon the very sort of labor
agreement that Congress explicitly authorized and expected frequently to find, it does not

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‘regulate’ the workings of the market forces that Congress expected to find; it
exemplifies them.” Id. at 233.
B. The Market Participant Doctrine
If the City was acting as a market participant in executing the PLAs, rather than as
a regulator, the PLAs are not preempted by the NLRA. Boston Harbor, 507 U.S. 229.
See also Healthcare Ass’n of New York State v. Pataki, 471 F.3d 87, 108-09 (2d Cir.
2006) (“A major limitation on the labor law preemption doctrines is the principle that
state conduct will not be preempted if the state's actions are proprietary, rather than
regulatory.”)
To determine whether a state entity’s actions can be considered those of a market
participant, this Circuit has applied the Fifth Circuit’s test, formulated in the case
Cardinal Towing & Auto Repair, Inc. v. City of Bedford, 180 F.3d 686, 693 (5th Cir.
1999). See Sprint Spectrum L.P. v. Mils, 283 F.3d 404, 420 (2d Cir. 2002). Cardinal
Towing considered a Texas city’s choice to contract with a single towing company for
involuntary tows carried out by its police department rather than rotate through a
selection of local towing companies. There the court held that:
[i]n distinguishing between proprietary action that is immune from
preemption and impermissible attempts to regulate through the spending
power, the key under Boston Harbor is to focus on two questions. First,
does the challenged action essentially reflect the entity’s own interest in its
efficient procurement of needed goods and services, as measured by
comparison with the typical behavior of private parties in similar
circumstances? Second, does the narrow scope of the challenged action
defeat an inference that its primary goal was to encourage a general policy
rather than address a specific proprietary problem?

180 F.3d at 93.

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The Cardinal Towing court explained that both questions seek to identify those
government actions that are narrowly focused and in line with the behavior of private
parties making similar proprietary decisions that there can be no inference of a regulatory
motive. Id. The parties dispute whether both of these questions must be answered in the
affirmative in order for the government action to be considered proprietary. The
Defendants point to Johnson v. Ranch Santiago Cmty. College Dist., 623 F.3d 1011,
1024-25 (9th Cir. 2010), which interpreted the two questions in the Cardinal Towing test
as disjunctive, offering two alternative methods of showing that a given state action
constituted non-regulatory market participation. Under Rancho Santiago’s interpretation,
the first question asks the government entity to show that its activity was proprietary in
nature by showing its motivations to be rooted in a desire for efficiencies and costsavings, and by comparing its conduct to that of a private party. Id. at 1024. The second
question requires a showing that the entity’s action was narrow in scope and therefore not
regulatory. Id. The Rancho Santiago court then stated “we see no reason to require a
state to show both that its action is proprietary and that the action is not regulatory.” Id.
The test established in Cardinal Towing is not formulated as a list of mandatory
elements, each of which must be established for the challenged state action to be
classified as proprietary. Instead, the court described the test as two “key questions” to
be asked in making this determination. As the Ninth Circuit ruled in Rancho Santiago,
the test provides two alternative routes to arrive at the same destination; either the activity
is essentially proprietary due to its apparent motives and similarity with actions generally
taken by a similarly situated private party, or it is so narrowly circumscribed as to not
amount to regulation. 623 F.3d at 1024. Boston Harbor provides that “[a] State may act

17

without offending [the NLRA preemption principles] when it acts as a proprietor and its
acts therefore are not tantamount to regulation or policymaking.” 507 U.S. 218, 229.
This is the standard that the Defendants must meet. While each of the Cardinal Towing
questions are useful tools in determining whether a challenged state action is proprietary
or regulatory, an affirmative answer to both questions is not what Boston Harbor
requires.
C. The City’s Act of Entering into PLAs with the BCTC Was Proprietary and Is
Not Preempted by the NLRA
Here, Plaintiffs argue that Defendants failed to meet either of the Cardinal
Towing prongs, because they have not shown that the PLAs will achieve substantial cost
savings and therefore they cannot show that their conduct compares to that of a private
land owner. (Pls.’ Mem. in Opp. at 26.) Plaintiffs also argue that the PLAs are
overbroad and therefore not so narrowly tailored as to defeat an inference of regulatory
intent. (Id. at 26-28.) The Defendants counter that the PLAs meet both prongs, because
the City’s decision to enter into the PLAs was motivated by an interest in cost savings
and efficiency, and because the PLAs only relate to certain contracts with the City, and
are not directed beyond the City’s own projects. (BCTC’s Mem. in Supp. at 10-11;
City’s Mem. in Supp. at 14-15.)
i.

The City Was Motivated by Proprietary Interests

The first Cardinal Towing question asks whether the City is motivated by its
interest in the efficient procurement of goods and services. In support of their motion,
Defendants contend that each of the studies undertaken by consultants hired by the City
show that the PLAs would be likely to result in substantial cost savings and additional
efficiencies generated by a package of negotiated work rules. (City’s Mem. in Supp. at
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14.) Plaintiffs challenge that conclusion, arguing that the studies were flawed, because
the use of PLAs artificially reduces the bidding pool and thus increases construction
costs. (Pls.’ Mem. in Opp. at 26-27.)
Plaintiffs have failed to show that the City’s decision to engage in these PLAs
with BCTC was motivated by anything other than its interest in managing its construction
projects in an efficient manner and at a manageable cost. As discussed earlier, New York
Labor Law § 222 exempts those projects that operate pursuant to a PLA from the
requirements of the Wicks Law. N.Y. Labor Law § 222. Wicks Law requires the City to
employ multiple contractors to oversee certain components of a shared project, logically
resulting in inefficiencies. Gen. Municipal Law § 101. The City’s consultants concluded
that the exemption from these requirements alone will reduce the costs of these projects.
(Simpson Decl. ¶ 15 (summarizing consultant findings).) Additionally, the PLAs
permitted the City and the BCTC to agree on generally applicable terms of work that will
govern these projects, such as a standardized work week, standard holidays, flexible start
times, and coordinated lunch periods. (Id. ¶¶ 47-62 (citing to the relevant PLA
sections.)) The PLAs also provide for a cap on overtime. (Id.) In addition, the PLAs
prohibit strikes and provide for a uniform jurisdictional disputes resolution procedure.
(Id.) These uniform work procedures and dispute resolution vehicles are clearly targeted
at increasing efficiency and coordination and reducing expense. These provisions clarify
responsibility, minimize administrative difficulties and encourage continuous progress.
These are the exact types of considerations that Cardinal Towing considered to be
indicia of proprietary action. See 180 F.3d at 693 (finding that a towing contract aimed
at easing supervision, minimizing administrative confusion and providing for a unitary

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quality standard indicated that the City was interested in ensuring efficient performance
of the contract). The terms of the PLA lead ineluctably to the conclusion that the City
was motivated by efficient, cost-effective and timely completion of their work, and
Plaintiffs point to no credible alternative purpose underlying the City’s actions.1 While
Plaintiffs contend that the cost-savings and efficiencies the PLAs are projected to provide
are illusory, “whether the [PLA] was a good deal for the [City] does not bear on whether
the Agreement is regulatory or proprietary.” Rancho Santiago, 623 F.3d at 1027. The
PLAs on their face are targeted at increasing efficiencies and reducing costs, and “private
parties undertaking large construction projects commonly enter into pre-hire project labor
agreements like the [PLA] challenged here.” Id. at 1026. There has been no showing
that the City was motivated by any interest other than a proprietor’s interest in having his
project completed in a timely and inexpensive fashion.
ii.

The Breadth of the PLAs Does Not Render Them Regulation

Plaintiffs next contend that the PLAs should be seen as regulatory and not
proprietary action because they are overbroad. In contrast to the PLA at issue in Boston
Harbor, the PLAs here are directed at a number of projects and a “broad spectrum of
work.” (Pls.’ Mem. in Opp. at 28-29.) Plaintiffs contend that this breadth results in an
inference that the City is acting not only as a proprietor, but also with regulatory intent in
executing these PLAs.

1

Moreover, several courts have held that any hidden, subjective reasons that may underlie the City’s
decision to employ PLAs do not weigh into the preemption analysis. See Colfax Corp. v. Illinois State Toll
Highway Auth., 79 F.3d 631, 635 (7th Cir. 1996) (“So long as the frontier is pushed no farther from
“Boston Harbor” than it is here, we will not travel where Colfax urges; we will not go behind the contract
to determine whether the Authority's real, but secret, motive was to regulate labor.”); Johnson v. Rancho
Santiago Cmty. College Dist., 623 F.3d 1011, 1026 (9th Cir. 2010) (“Congress did not intend for the
NLRA's . . . preemptive scope to turn on state officials' subjective reasons for adopting a regulation or
agreement.”).

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The Boston Harbor Court referred to the fact that the PLAs at issue in that case
pertained to a single project as support for its conclusion that “[t]here is. . . no basis on
which to distinguish the incentives at work here from those that operate elsewhere in the
construction industry, incentives that this Court has recognized as legitimate.” 507 U.S.
at 232. A comparison with Cardinal Towing, however, makes clear why the PLAs at
issue here are not preempted despite the fact that they cover more than one project.
In Cardinal Towing, the defendant, the City of Bedford, altered their procedure
for hiring towing companies to tow vehicles abandoned or damaged by accidents. 180
F.3d 688. Historically, these tows were handled by a rotation system pursuant to which
local towing companies would apply and be placed on a list, and when the City needed to
tow a vehicle, they would call whichever company’s “turn” it was at the time that tow
was needed. Id. at 689. The City changed this practice in favor of hiring one towing
company to handle all such tows. Id. This company was selected based on certain
identified criteria after a bidding process. Id.
The Court held that the scope of this contract did not subject it to preemption by
the NLRA, in part because “as in Boston Harbor—but unlike Gould—the specifications
here looked only to the bidder's dealings with the City.” Id. at 694 (emphasis original).
The contract did not affect the conduct of tow truck providers in their dealings with other
customers within the City of Bedford, foreclosing the inference that “the City sought to
change the tow truck industry as a whole, let alone influence society at large.” Id.
Similarly, in Rancho Sanitago, the Ninth Circuit applied the Cardinal Towing test and
held that a PLA that applied to all covered projects in excess of $200,000 and ran for
several years was not preempted by the NLRA, in part because “nothing on the face of

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the [PLA] indicates that it serves purely regulatory purposes unrelated to the performance
of contractual obligations to the state. The [PLA] does not reward or sanction private
parties for their conduct in the private market, but rather addresses only how construction
contractors and subcontractors will perform work on the District's projects.” 623 F.3d
1011 at 1026. See also Metro. Milwaukee Ass’n of Commerce v. Milwaukee Cnty., 431
F.3d 277, 270 (7th Cir. 2005) (“if the state is intervening in the labor relations just of
firms from which it buys services, and it is doing so in order to reduce the cost or
increase the quality of those services rather than to displace the authority of the National
Labor Relations Act and the National Labor Relations Board, there is no preemption.”).
The Rancho Santiago court noted that the substantive scope of the PLA
challenged in that case was:
very similar to the Boston Harbor agreement's. Like the District's [PLA],
the Boston Harbor agreement recognized one exclusive bargaining agent,
specified dispute-resolution mechanisms, required all employees to
become union members within seven days of their employment, required
use of the union's hiring halls to supply the labor force, prohibited strikes
for the term of the agreement, bound all contractors and subcontractors to
the agreement, and prescribed the benefits that workers would receive for
the duration of the project.
Id. at 1028.
The PLAs at issue in this case share many of the same provisions of the PLAs
challenged in Boston Harbor and Rancho Santiago. Indeed, they are nearly
indistinguishable from the Boston Harbor PLAs except for the fact that they cover
multiple projects. Even this distinction might not be of great importance, however, in
view of the fact that the Boston Harbor cleanup project spanned a decade and involved
hundreds of contractors, and was thus an enormous “single” project with many
components. 507 U.S. at 221. Like the PLAs at issue in Cardinal Towing and Metro.
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Milwaukee, the challenged PLAs also apply exclusively to the projects that BCTC will
perform on behalf of the City. They do not extend to govern conduct by the BCTC or
other private parties in the construction industry on behalf of private clients, like the
preempted PLAs in Gould. Therefore, these PLAs are not preempted by the NLRA.
D. 42 U.S.C. § 1983
Plaintiffs also asserted a claim pursuant to 42 U.S.C. § 1983, alleging that the City
and the BCTC violated Plaintiffs’ federally-guaranteed right under the NLRA to bargain
collectively, free from governmental interference.
“To succeed on a claim asserted under 42 U.S.C. § 1983, a party must prove that
he or she was deprived of a right secured by the Constitution or by the laws of the United
States and that the person or persons depriving the party of the right acted under color of
state law.” Ruggiero v. Krzeminski, 928 F.2d 558, 562 (2d Cir. 1991). “In order to seek
redress through § 1983 ..., a plaintiff must assert the violation of a federal right, not
merely a violation of federal law.” Blessing v. Freestone, 520 U.S. 329, 340 (1999).
Here, having found that the PLAs at issue are not preempted by the NLRA, it follows that
“there is no violation of federal law,” and thus no violation of a federal right secured by
the NLRA, “to form the basis for a claim pursuant to § 1983,” Colfax Corp. v. Illinois
State Toll Highway Auth., 79 F.3d 631, 635 (7th Cir. 1996).
III.

State Supplemental Law Claims

Both BCTC and the City urge this Court to dismiss Plaintiffs’ state law claims for
lack of subject matter jurisdiction once the federal claims are dismissed. Both
Defendants claim that the state law claims fall within the ambit of C.P.L.R. Article 78,
which provides a special remedy under New York state law to review administrative

23

determinations, and that therefore federal jurisdiction would be inappropriate. (City’s
Mem. in Supp. at 17; BCTC’s Mem. in Supp. at 24-25.) The City also argues that this
Court should decline supplemental jurisdiction over the state law claims at issue because
they involve novel questions of state law. (City’s Mem. in Supp. at 19.) In the
alternative, Defendants argue that the PLAs are lawful under New York’s competitive
bidding laws. (City’s Mem. in Supp. at 20-25; BCTC’s Mem. in Supp. at 17-24.)
Plaintiffs urge the Court to exercise supplemental jurisdiction over the state law
claims because the evidence underlying the state law claims is the same as that
underlying their federal claims. (Pls.’ Mem. in Opp. at 34.)
A. Law Governing Supplemental Jurisdiction
Under 28 U.S.C. § 1367, “in any civil action of which the district courts have
original jurisdiction the district courts shall have supplemental jurisdiction over all other
claims that are so related to the claims in the action within such original jurisdiction that
they form part of the same case or controversy.” A claim is “so related” to those claims
within the court’s original jurisdiction when the claims “derive from a common nucleus
of operative fact, such that a party “would ordinarily be expected to try them all in one
judicial proceeding.” Valencia ex rel. Franco v. Lee, 316 F.3d 299, 305 (2d Cir. 2003)
(citations omitted). The district courts may decline to exercise supplemental jurisdiction,
however, if the district court has dismissed all claims over which it has original
jurisdiction. 28 U.S.C. § 1367(c)(3).
“Once a district court's discretion is triggered under § 1367(c)(3), it balances the
traditional ‘values of judicial economy, convenience, fairness, and comity,’ Cohill, 484
U.S. at 350, in deciding whether to exercise jurisdiction.” Kolari v. New York-

24

Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (citing Carnegie-Mellon Univ. v.
Cohill, 484 U.S. 343 (1988)). “[I]n the usual case in which all federal-law claims are
eliminated before trial, the balance of factors ... will point toward declining to exercise
jurisdiction over the remaining state-law claims.” Cohill, 484 U.S. at 350 n. 7.
B. Article 78 Proceedings Under New York Law
New York’s Civil Practice Law and Rules (“CPLR”) Article 78 provides a
specific and exclusive remedy where a question raised by a party goes to “whether a
determination was made in violation of lawful procedure, was affected by error of law or
was arbitrary or capricious or an abuse of discretion, including abuse of discretion as to
the measure or mode of penalty or discipline imposed.” CPLR § 7803(3). To determine
whether Article 78 applies to a given dispute, a reviewing court must “examine the
substance of the action to identify the relationship out of which the claim arises and the
relief sought.” Solnick v. Whelan, 49 N.Y.2d 224, 229 (1980). An Article 78 proceeding
is the proper vehicle to determine whether the law has been lawfully applied, or the
validity of certain government acts pursuant to a valid statute, rather than a vehicle for
challenging the validity of a statute itself. Rosenthal v. City of New York, 283 A.D.2d
156, 158 (1st Dep’t 2001); Kovarsky v. Housing and Development Admin., 31 N.Y.2d
184, 191 (1972).
Proceedings under Article 78 can only be heard in the State Supreme Court.
CPLR § 7804(b). A number of district courts have dismissed cases brought in federal
court that should have been brought to State Supreme Court as an Article 78 proceeding.
See Brown v. Tomcat Elec. Sec., Inc., No. 03 CV 5175 (FB), 2007 WL 2461823 at *3
(E.D.N.Y. Aug. 27, 2007) (“New York law vests jurisdiction over Article 78 proceedings

25

solely in the state courts”); Blatch v. Hernandez, 360 F. Supp. 2d 595, 637 (S.D.N.Y.
2005) (“This claim must be dismissed for lack of subject matter jurisdiction, as New
York State has not empowered the federal courts to consider such claims.”); Cartegena v.
City of New York, 257 F. Supp.2d 708, 710 (S.D.N.Y. 2003) (“State law does not permit
Article 78 proceedings to be brought in federal court, and hence I conclude that I do not
have the power to exercise supplemental jurisdiction over [plaintiff’s] Article 78
claims.”); see also Camacho v. Brandon, 56 F. Supp. 2d 370, 380 (S.D.N.Y. 1999);
Luchesi v. Carboni, 22 F. Supp. 2d 256, 258 (S.D.N.Y. 1998).
As pled in their Complaint, Plaintiffs’ state law claims challenge the City’s
decision to enter into the PLAs, arguing that this choice was not “supported by the record
or [] sufficiently tailored to a specific project in order to advance the interests embodied
in the competitive bidding statutes.” (Compl. ¶ 102.) Furthermore, Plaintiffs allege that
Defendants:
have failed to identify any unique challenges posed by the size or
complexity of the projects covered by the City PLAs, failed to
demonstrate actual rather than illusory cost savings, and have failed to
identify any history of labor unrest on similar projects to support the
conclusion that the City PLAs were adopted in conformity with the
competitive bidding scheme.
(Compl. ¶ 103.)
Moreover, Plaintiffs argue that the PLAs specifically violate Labor Law § 222
because the City enacted “blanket PLAs not limited to a specific project and [failed] to
determine the need for a PLA on a project-by-project basis.” (Comp. ¶ 107.)
Plaintiffs’ state law claims are challenges to the City’s actions in view of valid
governing New York law. They amount to an assertion that the City’s choice to execute

26

the PLAs was unlawful or at best arbitrary and capricious. Thus, they are recast Article
78 claims that are not suitable for adjudication in this Court.
Plaintiffs cite several cases from this Circuit’s courts holding that Article 78
claims could be adjudicated by federal courts pursuant to supplemental jurisdiction.
James v. Bauet, No. 09 Civ. 609 (PKC), 2009 WL 3817458 at *2 (S.D.N.Y. Nov. 11,
2009) (“None of the cases cited by the City Defendants hold that a federal court is
stripped of its jurisdiction to hear federal question cases because plaintiff may have been
able to file a parallel Article 78 proceeding in New York state court.”); Acista v. City of
New York, No. 03 Civ. 1452 (TPG), 2004 WL 691270 at *4-5 (S.D.N.Y. March 31,
2004).
The cases cited by Plaintiffs involved viable federal claims and state law claims
that were characterized as arising under Article 78. Here, due to this Court’s dismissal of
Plaintiff’s federal law claims, the state law claims are all that remain. Balancing the
traditional ‘values of judicial economy, convenience, fairness, and comity,’ Cohill, 484
U.S. at 350, this Court declines to retain supplemental jurisdiction over Plaintiffs’ state
law claims. The New York State legislature has devised Article 78 as an exclusive
remedy to resolve challenges to the lawfulness of administrative action. “State law does
not permit Article 78 proceedings to be brought in federal court,” Cartagena, 257 F.
Supp. 2d at 710, and so Plaintiffs’ state law claims are dismissed.
IV.

Plaintiffs’ Motion to Amend

Simultaneously with their Memorandum in Opposition, Plaintiffs moved to
amend their complaint, in order to include “(1) additional allegations that BIECA and
UECA have been perceptibly impaired and therefore have the requisite standing to pursue

27

their claims under §1983; (2) the HPD PLA, which was executed by the City and BCTC
after Plaintiffs filed their Complaint; and (3) any future and all future PLAs that may be
adopted by the City in violation of Plaintiffs’ rights under Federal and New York State
Law.” (Pls.’ Mem. in Opp. at 44-46.)
Leave to amend a complaint should be granted so long as the proposed amended
pleading demonstrates at least “colorable grounds for relief.” Ryder Energy Distribution
Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 783 (2d Cir. 1984). In light of
the Court’s rulings in this Opinion, namely that the City’s conduct in executing the PLAs
in question was proprietary rather than regulatory and that Plaintiffs’ claims are thus
dismissed, these proposed amendments do not make out a colorable claim for relief.
Plaintiffs’ motion to amend is therefore denied.
CONCLUSION
As in Boston Harbor, the PLAs at issue in this case represent proprietary rather
than regulatory conduct by the City and are therefore not preempted by the NLRA. 507
U.S. 218. The City has not violated the NLRA by executing these PLAs, and therefore
Plaintiffs’ § 1983 claim has no basis. The Court declines to exercise supplemental
jurisdiction over Plaintiffs’ state law claims, because they are challenges to municipal
conduct that fall within the purview of N.Y. C.P.L.R. Article 78, and thus are more
appropriately heard in state court. Plaintiffs’ motion to amend is denied.

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IT IS SO ORDERED.
Dated: New York, New York
August!L,2011
Robert P. Patterson, Jr.
U.S.D.J.

Copies of this opinion were faxed to:
Attorneys for Plaintiffs:
Alan Marshall Pollack
Robinson Brog Leinwand Greene Genovese & Gluck PC
875 Third A venue
9th Floor
New York, NY 10022-6225
212 603-6300
Fax: [phone]
Attorney for Defendant:
Jonathan Starr Becker
Office of The Corporation Counsel
100 Church Street
New York, NY 10007
(212)-788-1280
Fax: [phone]
Carol L. O'Rourke Pennington
Colleran, O'hara & Mills LLP
1225 Franklin Avenue, Suite 450
Garden City, NY 11530
(516)-248-5757
Fax: [phone]

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