Artec Construction and Development Corp. v. New York City Department of Housing Preservation and Development, et al.
OPINION AND ORDER re: 22 MOTION to Dismiss Notice of Motion filed by New York City Department of Housing Preservation and Development, New York City Department of Investigation. For the foregoing reasons, Defendants 9; motion to dismiss is DENIED without prejudice to refile. Plaintiff is granted leave to file the PSAC contained in Exhibit 1 of its opposition brief (see Dkt. #25-1). The Clerk of Court is directed to terminate the motion at docket entry 22. The p arties are hereby ORDERED to appear for a conference on March 22, 2017, at 11:00 a.m. in Courtroom 618 of the Thurgood Marshall Courthouse, 40 Foley Square, New York, New York, to discuss an expedited briefing schedule in the event that Defendants w ish to refile their motion to dismiss. Any deadlines to answer specified under Federal Rules of Civil Procedure 12 and 15 are stayed pending further order of the Court. (As further set forth in this Opinion and Order.) ( Status Conference set for 3/22/2017 at 11:00 AM in Courtroom 618, 40 Centre Street, New York, NY 10007 before Judge Katherine Polk Failla.) (Signed by Judge Katherine Polk Failla on 2/27/2017) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ARTEC CONSTRUCTION AND
NEW YORK CITY DEPARTMENT OF
HOUSING PRESERVATION AND
DEVELOPMENT and NEW YORK CITY
DEPARTMENT OF INVESTIGATION,
DOC #: _________________
DATE FILED: February 27, 2017
15 Civ. 9494 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
Plaintiff Artec Construction and Development Corp. sues Defendants
New York City Department of Housing Preservation and Development (“HPD”)
and New York City Department of Investigation (“DOI”), pursuant to 42 U.S.C.
§ 1983, for Defendants’ alleged violations of the Equal Protection Clause of the
Fourteenth Amendment. Defendants move to dismiss the Amended Complaint
(the “FAC”) under Federal Rule of Civil Procedure 12(b)(6), arguing that Plaintiff
has failed plausibly to plead a constitutional violation or municipal liability for
any such violation. For the reasons set forth in this Opinion, Defendants’
motion to dismiss is denied without prejudice to refile in light of Plaintiff’s
proposed amendment to the FAC.
Plaintiff, a New Jersey corporation, is a general contractor that builds
affordable housing in New York City. (FAC ¶ 1). Plaintiff accomplishes this
through contracts that are negotiated with private developers but administered
by HPD, an administrative agency of the City of New York (the “City”). (Id. at
¶¶ 1, 4). DOI, another City administrative agency, is tasked in this context
with investigating potential violations of certain wage laws (the “Prevailing
Wage Laws”) applicable to general- and sub-contractors on HPD-administered
construction projects (“HPD-related projects”). (Id. at ¶¶ 1, 5).
Plaintiff was the general contractor on four HPD-related projects (the
“Projects”). (FAC ¶ 8). In or about May 2011, Plaintiff claims, a prominent
trade union “commenced an aggressive public information campaign against
[Plaintiff] alleging that [Plaintiff] and its subcontractors failed to pay the area
standard wages to their employees and violated the Prevailing Wage Laws.” (Id.
at ¶ 10). The campaign communicated its message “to government officials,
power players and others involved in the New York City affordable housing
industry.” (Id. at ¶ 11). It also targeted HPD, accusing the agency through
various mediums of “failing to … withhold contract payments as required by
the law, failing to closely monitor [Plaintiff] and its subcontractors to [e]nsure
This Opinion draws on facts from the Amended Complaint (“FAC,” Dkt. #14), the wellpled facts of which are taken as true for purposes of this motion. See Morrison v. Nat’l
Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008); see also Ashcroft v. Iqbal, 556 U.S.
662, 679 (2009). For convenience, Defendants’ moving brief is referred to as “Def. Br.”
(Dkt. #24); Plaintiff’s brief in opposition as “Pl. Opp.” (Dkt. #25); and Defendants’ reply
brief as “Def. Reply” (Dkt. #29).
compliance with the Prevailing Wage Laws, and essentially falling down on the
job.” (Id. at ¶ 12). For example, the union took out a newspaper advertisement
that labeled Plaintiff a “bad” contractor and bore headlines such as “HPD is
Building a Web of Bad Contractors” and “HPD: Why Are You Perpetuating
These Irresponsible Contractors?” (Id. at ¶ 13).
Plaintiff alleges that as a result of being implicated in Plaintiff’s bad
conduct, HPD “had an axe to grind with [Plaintiff].” (FAC ¶ 15). “Almost
immediately after the [union] began its campaign, Doug Apple, the then-Deputy
Commissioner of HPD, without asking any questions or providing any
information, notified … [Plaintiff’s] owner, that [Plaintiff] could not take on any
further HPD-related projects.” (Id.). Defendants also began investigating
Plaintiff and its subcontractors on the Projects for Prevailing Wage Law
violations. (Id. at ¶ 16).
In or about March 2013, DOI presented Plaintiff with Defendants’
findings that Plaintiff and its subcontractors had committed substantial
violations of the Prevailing Wage Laws and that Plaintiff, as the general
contractor for the Projects, was liable for millions of dollars’ worth of back
wages (the “DOI Wage Figure”). (FAC ¶ 18). DOI never presented Plaintiff with
specific allegations or evidence, and never commenced an administrative
proceeding against Plaintiff. (Id. at ¶¶ 19-20). Instead, “Defendants simply
withheld substantial sums of money due to [Plaintiff] in connection with its
work on the Projects, placed [Plaintiff] on Enhanced Review status, and refused
to allow [Plaintiff] to work on any further HPD-related projects.” (Id. at ¶ 21).
Between 2011 and 2015, Plaintiff reached out to Defendants in order to
obtain substantiation for the DOI Wage Figure and to explore ways that
Plaintiff could resume working on HPD-related projects, but Defendants
rebuffed Plaintiff’s efforts. (FAC ¶¶ 22-23). HPD indicated that DOI approval
was necessary before Plaintiff could work on future HPD-related projects. (Id.
at ¶ 24). DOI, in turn, told Plaintiff that if it “ever wanted to perform work on
City-related construction projects again,” Plaintiff had to agree to:
(i) pay the [DOI Wage Figures] in full with no questions
(ii) subject [Plaintiff’s owner] to a “Queen for a Day”
proffer session with DOI and the New York City District
Attorney’s Office and answer any and all questions
posed by DOI regarding [Plaintiff’s] business operations
and knowledge of any alleged wrongdoing in the
industry whether related or unrelated to [Plaintiff], and
(iii) commit to an ongoing and indeterminate
relationship of cooperation with DOI to assist DOI with
any of its present and/or future investigations in the
construction industry, including, but not limited to, the
requirement that [Plaintiff’s owner] become a DOI
informant, wear a wire at DOI’s command, attend
meetings with DOI whenever DOI so demanded, and
otherwise agree to be at DOI’s beck and call.
(Id. at ¶ 25). Having refused to accede to all of these “bullying and extortionist”
conditions, Plaintiff “is to this day barred from performing work on City-related
construction projects.” (Id. at ¶¶ 25-26).
Plaintiff filed this action in the Supreme Court of New York, New York
County, on November 9, 2015, and Defendants removed it to this Court on
December 4, 2015. (Dkt. #1). Following a January 15, 2016 pre-motion
conference, Plaintiff filed the FAC. (Dkt. #14, 16). On April 5 and 6, 2016,
Defendants filed a motion to dismiss the FAC, a supporting brief, and various
attachments. (Dkt. #22, 24). On May 6, 2016, Plaintiff filed an opposition brief
and various attachments (Dkt. #25), including a Proposed Second Amended
Complaint (Dkt. #25-1). On June 3, 2016, Defendants filed a reply brief. (Dkt.
Defendants’ Motion to Dismiss is Denied Without Prejudice and
Plaintiff is Granted Leave to Amend
Plaintiff sues Defendants — two municipal agencies — pursuant to 42
U.S.C. § 1983 for violations of the Equal Protection Clause of the Fourteenth
Amendment. (FAC ¶¶ 1, 4-5). Plaintiff pursues both a “selective enforcement”
theory and a “class of one” theory. (Id. at ¶¶ 58-68).
The Equal Protection Clause
The Equal Protection Clause requires state governments to treat all
similarly situated people alike. City of Cleburne v. Cleburne Living Ctr., 473
U.S. 432, 439 (1985). The Clause’s protections “apply to administrative as well
as legislative acts.” Engquist v. Oregon Dep’t of Agr., 553 U.S. 591, 597 (2008).
“Although the prototypical equal protection claim involves discrimination
against people based on their membership in a vulnerable class, [courts] have
long recognized that the equal protection guarantee also extends to individuals
who allege no specific class membership but are nonetheless subjected to
invidious discrimination at the hands of government officials.” Harlen Assocs.
v. Inc. Vill. of Mineola, 273 F.3d 494, 499 (2d Cir. 2001). Such non-class-based
equal protection claims may be brought under either a “class of one” theory or
a “selective enforcement” theory. See generally Bizzarro v. Miranda, 394 F.3d
82, 86-89 (2d Cir. 2005).
Under either theory, a plaintiff must demonstrate that the defendant
intentionally treated him differently from others similarly situated. See
Bizzarro, 394 F.3d at 86. 2 Generally speaking, a “class of one” theory requires
the plaintiff also to show that there was no rational basis for the different
treatment, whereas a “selective enforcement” theory requires the plaintiff to
show that the selective treatment was based on impermissible considerations,
such as malicious or bad-faith intent to injure. See Vill. of Willowbrook v.
Olech, 528 U.S. 562, 564 (2000) (per curiam) (describing “class of one”
standard); LeClair v. Saunders, 627 F.2d 606, 609-10 (2d Cir. 1980) (describing
“selective enforcement” standard); see also 33 Seminary LLC v. The City of
Binghamton, No. 15-2646, 2016 WL 6917227, at *2 (2d Cir. Nov. 23, 2016)
(summary order) (“[A ‘selective enforcement’] claim focuses on whether the
alleged animus caused the disparate treatment, whereas a [‘class of one’] claim
looks to whether the official’s conduct was rationally related to the
“Under either standard, a plaintiff must make some showing of different or unequal
treatment.” 33 Seminary LLC v. The City of Binghamton, No. 15-2646, 2016 WL
6917227, at *2 (2d Cir. Nov. 23, 2016) (summary order) (emphasis in original). But the
Second Circuit has not yet resolved whether “different standards govern the showing
necessary to demonstrate unequal treatment under [‘class of one’] and [‘selective
enforcement’] claims.” Id. at *2 n.2.
accomplishment of the work of their agency.”); see generally Bizzarro, 394 F.3d
at 86-89 (comparing both theories).
In Engquist, the Supreme Court eliminated “class of one” claims for
government employees. See 553 U.S. at 603. The Court reasoned that some
types of state action inherently “involve discretionary decisionmaking based on
a vast array of subjective, individualized assessment,” and do not violate the
Equal Protection Clause “because treating like individuals differently is an
accepted consequence of the discretion granted.” Id. The Second Circuit later
clarified in Analytical Diagnostic Labs, Inc. v. Kusel that “[w]hile there may be
some circumstances where Engquist is properly applied outside of the
employment context,” “Engquist does not bar all class-of-one claims involving
discretionary state action.” 626 F.3d 135, 142 (2d Cir. 2010). The Circuit also
reaffirmed the “crucial difference … between the government exercising the
power to regulate or license, as lawmaker, and the government acting as
proprietor, to manage its internal operations.” Id. (internal quotation marks
omitted) (quoting Engquist, 553 U.S. at 598). “Class of one” claims in the latter
context are more likely to fall within the Engquist bar. See id.
A municipality is generally responsible for constitutional-right violations
stemming from the “government’s policy or custom, whether made by its
lawmakers or by those whose edicts or acts may fairly be said to represent
official policy.” Monell v. Dep’t of Social Servs., 436 U.S. 658, 694 (1978). To
hold a municipality liable under § 1983 for the unconstitutional actions of its
employees, “a plaintiff is required to plead and prove three elements: [i] an
official policy or custom that [ii] causes the plaintiff to be subjected to [iii] a
denial of a constitutional right.” Wray v. City of N.Y., 490 F.3d 189, 195 (2d
Cir. 2007) (quoting Batista v. Rodriguez, 702 F.2d 393, 397 (2d Cir. 1983)).
“[T]he single act of a municipal policymaker, i.e., a person with the
authority to set municipal policy, can constitute official policy, and thus, can
give rise to municipal liability.” Santos v. New York City, 847 F. Supp. 2d 573,
576 (S.D.N.Y. 2012) (citing Pembaur v. Cincinnati, 475 U.S. 469, 480 (1986)).
Authority to set municipal policy resides in “the official or officials responsible
for establishing final policy with respect to the subject matter in question.”
Pembaur, 475 U.S. at 483 (citation omitted). “[W]hether an official had final
policymaking authority is a question of state law.” Id.; see also Fierro v. N.Y.C.
Dep’t of Educ., 994 F. Supp. 2d 581, 588 (S.D.N.Y. 2014).
Moreover, under the New York City Charter, Defendants HPD and DOI
are non-suable City agencies, and any claims against them must be brought
instead against the City. See N.Y.C. Charter § 396 (“All actions and
proceedings for the recovery of penalties for the violation of any law shall be
brought in the name of the city of New York and not in that of any agency,
except where otherwise provided by law.”); Garanin v. N.Y.C. Hous. Pres. &
Dev., No. 15 Civ. 3169 (AJN), 2016 WL 1690301, at *5 (S.D.N.Y. Mar. 30, 2016)
(dismissing § 1983 claim against HPD as a non-suable entity); Siino v. Dep’t of
Educ. of City of N.Y., 843 N.Y.S.2d 828, 829 (1st Dep’t 2007) (describing DOI as
an improper party pursuant to the City charter); see also Nnebe v. Daus, 644
F.3d 147, 158 (2d Cir. 2011) (noting “that, as a general matter, agencies of New
York City are not suable entities in § 1983 actions”).
Allegations in the FAC
Plaintiff’s two claims are based on the same alleged differential
treatment: Defendants permitted similarly situated general contractors, which
were also on Enhanced Review status as a result of Prevailing Wage Law
violations or investigations, to redress violations quickly and to continue
working on HPD-related projects. (FAC ¶¶ 27-28, 36-37). By contrast,
Defendants delayed their investigation of Plaintiff for years and continue to this
day to “refuse to allow [Plaintiff] to serve as [a] general contractor” on HPDrelated projects. (Id.). The FAC identifies six comparator general contractors
and the HPD-related projects in which each was permitted to participate after
placement on Enhanced Review status. (Id. at ¶¶ 29-34). In some instances,
the comparator general contractors even worked with the same “problematic”
subcontractors as Plaintiff. (Id. at ¶¶ 31, 34).
The FAC alleges that Defendants intentionally treated Plaintiff differently
without a rational basis and, indeed, with malicious or bad-faith intent to
injure Plaintiff (FAC ¶¶ 54-55), and that Plaintiff was in fact injured: Plaintiff
had entered into agreements with private developers to serve as a general
contractor on seven construction projects worth approximately $171 million.
(Id. at ¶¶ 37-39 (specifying projects and contract prices)). Defendants’ de facto
debarment denied Plaintiff the opportunity to work on these projects and made
waste of the significant time and resources that Plaintiff had spent leading up
to the closings of these projects. (Id. at ¶ 39; see also id. at ¶¶ 40-53 (detailing
the efforts exerted and opportunity lost on each of the seven projects)).
The Parties’ Arguments on the Instant Motion to Dismiss
Defendants’ principal arguments in support of their motion to dismiss
can be boiled down to four. 3 First, HPD and DOI are non-suable mayoral
agencies and, in any case, the FAC fails plausibly to plead a Monell violation to
hold the City itself liable. (Def. Br. 17-18). Second, as to both Equal Protection
theories, Plaintiff fails to demonstrate that it was sufficiently similarly situated
to its comparators. (Id. at 8-10). In this regard, Defendants argue that judicial
notice should be taken of Plaintiff’s guilty plea to falsifying business records;
this criminal record makes Plaintiff materially dissimilar to its comparators.
(Id.). Third, as to the “class of one” theory, Plaintiff’s claim is barred by
Engquist and Analytical Diagnostic Labs because HPD acted as a proprietor
with virtually unfettered discretion in denying Plaintiff future contracts. (Id. at
14-16). Even if Plaintiff’s claim is not barred per se, Defendants contend,
Plaintiff’s criminal conviction was a rational basis for Defendants’ differential
treatment. (Id. at 16-17). Fourth, as to the “selective enforcement” theory,
Plaintiff fails plausibly to plead that Defendants acted with malice or bad faith;
Defendants urge judicial notice of certain filings in related criminal and civil matters,
including notice of the content of these filings. (See Def. Br. 3-5, 8, 12-13; Def. Reply 915; see also Dkt. 24, Ex. B-I, K). Plaintiff generally opposes judicial notice of the
content of these filings. (Pl. Opp. 3-4). The parties also debate whether claims based on
certain of the Projects are barred under § 1983’s three-year statute of limitations. (Def.
Br. 19-20; Pl. Opp. 24-28). See Pearl v. City of Long Beach, 296 F.3d 76, 79 (2d Cir.
2002) (discussing statute of limitations).
indeed, Plaintiff’s own pleadings in this and other related matters render
Plaintiff’s allegations of animus implausible. (Id. at 10-13).
Plaintiff’s opposition arguments are as follows. On the Monell issue,
Plaintiff has adequately pled municipal liability based on the conduct of HPD
Deputy Commissioner Apple, a municipal policymaker in Plaintiff’s view;
Plaintiff does not deny that HPD and DOI are non-suable agencies. (Pl.
Opp. 22-23). In addition, Plaintiff’s criminal plea and conviction do not render
it dissimilar to the comparators for purposes of the instant claims because
Defendants’ differential treatment preceded Plaintiff’s actual plea and
conviction. (Id. at 8-9). For similar reasons, the criminal record could not have
served as a rational basis for Defendants’ conduct, the analysis of which is
typically fact-intensive in any case. (Id. at 11-13). Moreover, under Analytical
Diagnostic Labs, the Engquist bar does not apply here because Defendants
acted more as a regulator than a proprietor when ensuring labor-law
compliance and approving general contractors for participation in HPD-related
projects. (Id. at 14-17). Finally, the genesis of Defendants’ differential
treatment — the union’s embarrassing public-relations campaign — coupled
with Defendants’ “bullying and extortionist” cooperation demands and de facto
debarment, evidence Defendants’ malicious intent to injure Plaintiff. (Id. at 1819). And contrary to Defendants’ position, Plaintiff’s pleadings in other cases
do not offer a non-discriminatory explanation for Defendants’ conduct. At best,
they demonstrate that Defendants had a good-faith belief that Plaintiff violated
the Prevailing Wage Laws, a trait shared by the comparators; the pleadings do
not explain why, unlike its comparators, Plaintiff has remained “effectively
debarred.” (Id. at 19-22).
Plaintiff Is Granted Leave to Amend
In its opposition brief, Plaintiff also seeks leave to amend the FAC, and
attaches a proposed Second Amended Complaint (the “PSAC”). (Pl. Opp. 22-24;
Dkt. #25-1). The Court notes that Plaintiff has already amended the complaint
once following the January 15, 2016 Pre-Motion Conference. (Dkt. #14, 16).
Plaintiff may amend its pleading again with the Court’s leave, which the Court
“should freely give … when justice so requires.” Fed. R. Civ. 15(a)(2). Because
the Court has not yet issued a scheduling order, leave to amend is not held to
the higher “good cause” standard set forth in Rule 16(b). See Fullwood v.
Wolfgang’s Steakhouse, Inc., No. 13 Civ. 7174 (KPF), 2014 WL 6076733, at *2
(S.D.N.Y. Nov. 14, 2014).
Plaintiff argues that it should be granted leave under Rule 15(a)’s liberal
standard because amendment would serve the interests of justice, would not
be futile, and would not prejudice Defendants because discovery has not yet
started. (Pl. Opp. 23-24). The Supreme Court has made clear that
[i]f the underlying facts or circumstances relied upon by
a plaintiff may be a proper subject of relief, he ought to
be afforded an opportunity to test his claim on the
merits. In the absence of any apparent or declared
reason — such as undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of
allowance of the amendment, futility of amendment,
etc. — the leave sought should, as the rules require, be
Foman v. Davis, 371 U.S. 178, 182 (1962) (quoting Fed. R. Civ. P. 15(a)). The
Second Circuit has suggested that prompt repleading upon receipt of a motion
to dismiss may be particularly deserving of a district court’s leave to amend.
See Williams v. Citigroup Inc., 659 F.3d 208, 214 (2d Cir. 2011).
The Court finds that amendment would not be in bad faith or unduly
prejudicial. The Court has not yet set a discovery schedule, the PSAC is
Plaintiff’s first proposed amended pleading after having reviewed Defendants’
motion-to-dismiss briefing, and Plaintiff proactively attaches the PSAC to its
opposition brief. The Court recognizes that Defendants have expended
resources in preparing their motion papers; however, the Court does not
believe that this expenditure, on its own, warrants denial of leave to amend.
The Court also finds that amendment would not be futile. The PSAC
amends the FAC in key ways. Changes include (i) the substitution of the City
for HPD and DOI (PSAC ¶ 4); (ii) the addition of Monell-related details
concerning individuals who Plaintiff alleges possessed final decision-making
authority with respect to Defendants’ conduct (id. at ¶¶ 14-35); and (iii) the
apparent addition of an additional basis of differential treatment beyond
Defendants’ de facto debarment, namely, that unlike its comparators, Plaintiff
was subjected to a criminal investigation (id. at ¶¶ 35, 37-44). To no fault of
their own, Defendants spend only a few pages in their reply brief challenging
the adequacy of the PSAC. (See, e.g., Def. Reply 8, 12).
The Court does not prejudge the merits of the PSAC, but finds that
amendment would not be futile. The substitution of the City for HPD and DOI
resolves a threshold issue. The additional details concerning individuals at
HPD and DOI who allegedly had policymaking authority, and whose decisions
may potentially constitute official policy, strengthens Plaintiff’s Monell
argument. The PSAC maintains the FAC’s considerable amount of factual
material concerning Plaintiff’s Equal Protection claims, including details
regarding Plaintiff’s comparators and lost projects, and Plaintiff’s opposition
brief sets forth at least colorable arguments that those claims cannot be
dismissed on the pleadings. Moreover, Plaintiff’s additional basis for
differential treatment has analytical consequences across both claims, making
resolution on the basis of Defendant’s reply brief unfair to both parties.
“This Court is not prepared to decide that Plaintiff’s new allegations fail
without the benefit of briefing in their defense, and suspects that ‘Defendants,
given their very limited opportunity to respond to these new allegations, would
likely object if the Court decided that the new claims salvaged [Plaintiff’s]
allegations.’” Fullwood, 2014 WL 6076733, at *8 (quoting Am. Stevedoring, Inc.
v. Int’l Longshoreman’s Ass’n, No. 13 Civ. 0918 (KPF), 2014 WL 3582758, at *3
(S.D.N.Y. July 18, 2014)). Accordingly, the Court will grant Defendants a full
opportunity to challenge the allegations in the PSAC, and Plaintiff an
opportunity to defend them, before judging their adequacy under Rule 12(b)(6).
For the foregoing reasons, Defendants’ motion to dismiss is DENIED
without prejudice to refile. Plaintiff is granted leave to file the PSAC contained
in Exhibit 1 of its opposition brief (see Dkt. #25-1). The Clerk of Court is
directed to terminate the motion at docket entry 22.
The parties are hereby ORDERED to appear for a conference on March
22, 2017, at 11:00 a.m. in Courtroom 618 of the Thurgood Marshall
Courthouse, 40 Foley Square, New York, New York, to discuss an expedited
briefing schedule in the event that Defendants wish to refile their motion to
dismiss. Any deadlines to answer specified under Federal Rules of Civil
Procedure 12 and 15 are stayed pending further order of the Court.
February 27, 2017
New York, New York
KATHERINE POLK FAILLA
United States District Judge
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