Artec Construction and Development Corp. v. New York City Department of Housing Preservation and Development, et al.
OPINION AND ORDER: re: 35 MOTION to Dismiss Second Amended Complaint, filed by City Of New York. For the foregoing reasons, Defendant's motion to dismiss is GRANTED. The Clerk of Court is directed to terminate all pending motions, adjourn all remaining dates, and close this case, and as further set forth in this order. (Signed by Judge Katherine Polk Failla on 11/28/2017) (ap)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ARTEC CONSTRUCTION AND
CITY OF NEW YORK,
DOC #: _________________
DATE FILED: November 28, 2017
15 Civ. 9494 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
In June 2015, after a criminal investigation into its conduct, Plaintiff
Artec Construction and Development Corporation (“Artec”) pleaded guilty to a
felony charge of falsifying business records. For several years prior to that
plea, Plaintiff contends, various agencies of Defendant City of New York —
including the Department of Housing Preservation and Development (“HPD”)
and the Department of Investigation (“DOI”) — treated Plaintiff differently from
other general contractors in the award of city-sponsored housing projects.
Plaintiff argues that this disparity in treatment amounted to an equal
protection violation, and now seeks redress pursuant to 42 U.S.C. § 1983.
The Court briefly addressed Plaintiff’s allegations when presented with
the first motion to dismiss, filed by then-Defendants HPD and DOI. In light of
Plaintiff’s proposed amendments to its pleading, the Court denied that motion
and left for a later day an evaluation of the merits of Plaintiff’s allegations. See
Artec Constr. & Dev. Corp. v. N.Y.C. Dep’t of Hous. Pres. & Dev., No. 15 Civ.
9494 (KPF), 2017 WL 782911 (S.D.N.Y. Feb. 27, 2017) (“Artec I”). That day has
come: Plaintiff filed its Second Amended Complaint on February 28, 2017, and
Defendant argues, again, that Plaintiff has failed to plead a plausible
constitutional violation or municipal liability for any such violation. For the
reasons set forth in this Opinion, Defendant is correct, and its motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6) is granted.
For purposes of the instant motion, all well-pleaded allegations in the
Second Amended Complaint are taken as true. Plaintiff is a contractor that
builds affordable housing in New York City, in part through contracts
administered by HPD. (SAC ¶ 1). Plaintiff has served as the general contractor
for at least six HPD-administered projects. (Id. at ¶ 7). 2 Of note, these
contracts are subject to the Davis-Bacon Act of 1931, which is codified at 40
U.S.C. §§ 3141-3148 and which, along with related statutes, requires
contractors and subcontractors on public works projects to pay laborers the
local prevailing wages (the “Prevailing Wage Laws”).
In or about May 2011, the United Brotherhood of Carpenters and Joiners
(the “UBC”), an influential trade union, “commenced an aggressive public
This Opinion draws principally from the Second Amended Complaint (“SAC,” Dkt. #33)
and, for reasons explained below, from certain facts and documents of which judicial
notice can be taken. For convenience, the Court refers to Defendant’s moving brief
(Dkt. #37) as “Def. Br.”; to Plaintiff’s brief in opposition (Dkt. #38) as “Pl. Opp.”; and to
Defendant’s reply brief (Dkt. #39) as “Def. Reply.” The Declaration of Jenna Krueger in
Support of the Motion to Dismiss (Dkt. #36) is referred to as “Krueger Decl.”
Plaintiff does not specify when it was awarded these six contracts; Plaintiff simply says
it had these contracts “[d]uring the relevant time period.” (SAC ¶ 7).
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.” (SAC ¶ 9). The UBC conducted this socalled “smear campaign” through social media, the local press, and “emails and
letters to government officials, power players and others involved in the New
York City affordable housing industry[.]” (Id. at ¶¶ 10-11). A full-page ad ran
in the newspaper City Hall, asking, “HPD: Why are you perpetuating these
irresponsible contractors?” (Id. at ¶ 12). Similarly, the UBC accused HPD of
enabling Plaintiff’s wage violations by “failing to affirmatively collect certified
payrolls and withhold contract payments as required by the law.” (Id. at ¶ 11).
According to Plaintiff, these allegations gave HPD “an axe to grind with
[Plaintiff].” (SAC ¶ 14). In consequence, in or about late June 2011, Doug
Apple, then-First Deputy Commissioner of HPD, informed Plaintiff’s owner,
Chris Tsetsekas, of HPD’s decision to prohibit Plaintiff from acting as general
contractor on a public housing project known as the West Wind project, located
at 45 East 131st Street. (Id. at ¶ 14). While not explicit in his reasoning, Apple
intimated that the prohibition was in response to the UBC’s accusations
against Plaintiff and, in turn, that Plaintiff could resume working on HPD
projects “[w]hen the dust settle[d].” (Id. at ¶ 15).
In the following months, Plaintiff made amends with the UBC, which
then agreed to “fully support [Plaintiff’s] efforts to get new HPD-related
projects.” (SAC ¶ 16). Plaintiff informed HPD about its agreement with the
UBC, but by that time DOI was investigating possible violations of the
Prevailing Wage Laws by Plaintiff and its subcontractors. (Id. at ¶¶ 17, 20).
Plaintiff reached out to James Tierney, the DOI Inspector General, to ask for a
meeting with DOI “to learn the basis of the investigation and to figure out how
it could begin to take on new City-related construction projects again”;
eventually, Plaintiff secured a meeting with a DOI investigator. (Id. at ¶¶ 21,
23). Plaintiff complains that DOI was “anything but forthcoming” and would
not reveal the details of its investigation — even as it sought to question
Tsetsekas about Plaintiff’s oversight of subcontractors. (Id. at ¶ 23). DOI
denied, however, that it directed HPD to reject Plaintiff’s applications to work
on HPD-funded projects. (Id.).
On September 14, 2012, HPD placed Plaintiff on “Enhanced Review
status” because of Plaintiff’s “$1,689,262.79 in prevailing wage violations.”
(SAC ¶ 24). Kimberly Hardy, HPD’s Special Counsel for Regulatory
Compliance, insinuated that this decision was prompted by DOI. (Id. at ¶ 25).
And by March 2013, Plaintiff learned that DOI was working with the United
States Attorney’s Office for the Eastern District of New York (the “EDNY”) on a
criminal investigation into Plaintiff’s alleged Prevailing Wage Law violations.
(Id. at ¶ 26).
Plaintiff came to understand that the EDNY “had no interest” in bringing
a case against it, and hoped that this disinterest would put an end to the
investigation. (SAC ¶ 28). Instead, however, Michael Carroll, the DOI Deputy
Commissioner and Chief of Investigations, teamed up with the New York
County District Attorney’s Office (“DANY”). (Id. at ¶¶ 28-29). Thereafter, DOI
demanded that Plaintiff pay the allegedly unpaid wages, require Tsetsekas to
sit for a proffer session with DOI and DANY, and cooperate with DOI in future
investigations of the construction industry. (Id.). Plaintiff refused, and now
alleges that DOI “made sure [Plaintiff] would be forever barred from performing
work on City-related construction projects.” (Id. at ¶ 30).
In sum, Plaintiff alleges that Apple and Hardy of HPD, and Carroll and
Tierney of DOI, were “policymakers” by virtue of their inclusion on the New
York City Policymaker List that the New York City Conflicts of Interest Board
issues annually pursuant to the New York City Charter. (SAC ¶¶ 31-35).
Plaintiff further alleges that, in their capacity as policymakers, Apple and
Hardy precluded Plaintiff from working on HPD projects and placed Plaintiff on
Enhanced Review, while Carroll and Tierney singled out Plaintiff for a criminal
investigation, and effected a “de facto debarment” from working on HPD
projects. (Id. at ¶¶ 33-35). Specifically, Plaintiff alleges that HPD barred it
from working as the general contractor on seven projects — identified as the
West Wind, Cypress Hill, Sugar Hill, East Clarke Place, Alembic/Cypress,
Alembic/Broadway, and West 53rd Street projects — that were collectively
valued at $171,000,000. (Id. at ¶¶ 47-64). Plaintiff further alleges that, during
the same time period, HPD permitted seven developers — Mountco
Construction & Development Inc. (“Mountco”), Galaxy General Contracting
(“Galaxy”), Lettire Construction Corporation (“Lettire”), Procida Construction
Corporation (“Procida”), Lemle & Wolff Construction Corporation (“Lemle &
Wolff”), Mega Contracting (“Mega”), and MDG Design (“MDG”) — to continue
working on affordable housing projects, even though they, too, had been placed
on Enhanced Review status by HPD because of suspected Prevailing Wage Law
violations and had worked with the same problematic subcontractors. (Id. at
¶¶ 37-46). To compensate for this unequal treatment, Plaintiff seeks an award
of $171,000,000. (Id. at ¶ 80).
This case was removed from New York State Supreme Court, New York
County, on December 4, 2015. (Dkt. #1). As noted above, HPD and DOI
previously moved to dismiss Plaintiff’s First Amended Complaint (Dkt. #22); the
Court denied that motion and granted Plaintiff leave to replead, Artec I, 2017
WL 782911, at *5-6. Plaintiff filed its SAC on February 28, 2017 (Dkt. #33),
and the parties appeared for a pre-motion conference on March 22, 2017 (see
Dkt. #34). Defendant moved to dismiss the SAC on April 28, 2017 (Dkt. #35),
Plaintiff filed its opposition on May 26, 2017 (Dkt. #38), and Defendant filed its
reply in further support of its motion on June 11, 2017 (Dkt. #39).
Motions to Dismiss Under Rule 12(b)(6)
When evaluating the sufficiency of a pleading under Rule 12(b)(6), a
court must accept all well-pleaded allegations as true and must make all
reasonable inferences in favor of the plaintiff. Harris v. Mills, 572 F.3d 66, 71
(2d Cir. 2009). This obligation does not apply, however, to legal conclusions
couched as factual allegations. Id. at 72. “To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Nielsen v. Rabin, 746 F.3d 58, 62
(2d Cir. 2014) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). But a
complaint need not meet a “probability requirement,” and a plaintiff’s claim can
proceed even if it appears that success on the merits is unlikely. Id. (quoting
Iqbal, 556 U.S. at 678)).
Consideration of Documents Outside the Pleadings
Defendant has submitted with its briefing copies of Plaintiff’s Plea
Agreement with DANY, dated June 16, 2015, in which Plaintiff pleaded guilty to
one count of Falsifying Business Records in the First Degree, in violation of
New York Penal Law § 175.10 (Krueger Decl., Ex. C); a Superior Court
Information in the matter People v. Artec Construction & Development
Corporation, Case No. SCI-02139-2015, dated February 2, 2016 (id.); and a
Certificate of Disposition in the same matter, dated January 7, 2016 (id at
Ex. D). While the Second Amended Complaint speaks at length about the
unconstitutionality of the DOI and DANY criminal investigation, it omits
mention of Plaintiff’s concomitant plea and conviction.
Typically, when deciding a motion to dismiss, a court may consider “facts
alleged in the complaint, documents attached to the complaint as exhibits, and
documents incorporated by reference in the complaint,” along with documents
so heavily relied upon that they are integral to the complaint. DiFolco v.
MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010); see generally Goel v.
Bunge, Ltd., 820 F.3d 554, 559 (2d Cir. 2016) (discussing documents that may
be considered in resolving a motion pursuant to Fed. R. Civ. P. 12(b)(6)).
Defendant encourages the Court to take judicial notice of Plaintiff’s guilty plea
and conviction. (Def. Br. 6). And, indeed, a court may take judicial notice of
convictions that are a matter of public record. Shmueli v. City of N.Y., 424 F.3d
231, 233 (2d Cir. 2005). The Court thus considers the fact of Plaintiff’s guilty
plea and felony conviction, though it does not rely on the Plea Agreement,
Superior Court Information, or Certificate of Disposition for the truth of the
matters asserted therein. Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007)
(“If the court takes judicial notice, it does so in order to determine what
statements they contained — but again not for the truth of the matters
asserted.” (internal quotation marks omitted)).
The Equal Protection Clause
Plaintiff pursues two theories of violation of the Equal Protection Clause,
known as “selective enforcement” and “class of one.” By way of background,
the Equal Protection Clause is a mandate that all state governments —
including administrative agencies — treat all similarly situated people alike.
See Engquist v. Oregon Dep’t of Agr., 553 U.S. 591, 597 (2008); City of Cleburne
v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985). “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.” Artec I, 2017 WL 782911, at *2 (quoting Harlen
Assocs. v. Inc. Vill. of Mineola, 273 F.3d 494, 499 (2d Cir. 2001) (alteration in
A plaintiff who does not allege any protected class affiliation can,
nonetheless, demonstrate an equal protection violation where the plaintiff
shows that he or she was treated differently from similarly situated individuals
in circumstances where there was no rational basis for the difference in
treatment (“class of one”), or where the different treatment was based on a
malicious or bad-faith intent to injure (“selective enforcement”). 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 generally Bizzarro v.
Miranda, 394 F.3d 82, 86-89 (2d Cir. 2005) (discussing both theories of
With respect to a “class of one” claim, the Supreme Court has recognized
“a crucial difference, with respect to constitutional analysis, between the
government exercising the power to regulate or license, as lawmaker, and the
government acting as proprietor, to manage [its] internal operation.” Engquist,
553 U.S. at 598 (internal quotation marks and citation omitted) (alteration in
original). This is because governmental entities must, at times, engage in
“discretionary decisionmaking based on a vast array of subjective,
individualized assessments” in which “treating like individuals differently is an
accepted consequence of the discretion granted.” Id. at 603. For such cases,
generally speaking, equal protection claims are not viable.
Though Engquist was decided in the public employment context, the
Second Circuit has recognized that “there may be some circumstances where
Engquist is properly applied outside of the employment context,” while making
clear that “Engquist does not bar all class-of-one claims involving discretionary
state action.” Analytical Diagnostic Labs, Inc. v. Kusel, 626 F.3d 135, 142 (2d
Cir. 2010). As this Court noted in Artec I, “class of one” claims are more likely
to fall within the Engquist bar when they challenge actions in the Government’s
role as a proprietor, managing its internal operations. Artec I, 2017 WL
782911, at *3. 3
Finally, to hold a municipality such as Defendant liable for the alleged
constitutional violations, 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)). This is because a municipality is only liable for actions that
flow from a “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 Soc. Servs. of City of N.Y., 436 U.S. 658, 694 (1978).
Engquist did not discuss claims for selective enforcement and the Second Circuit has
not yet addressed the question of whether Engquist’s holding can be extended to such
claims. See Emmerling v. Town of Richmond, 434 F. App’x 10, 12 (2d Cir. 2011)
A “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).
Plaintiff’s Suit Is Not Barred by Heck
Defendant first argues that to the extent Plaintiff’s equal protection
claims are based on the propriety of DOI’s investigation, those claims amount
to an attack on the validity of Plaintiff’s criminal conviction, and, as such, are
barred by the Supreme Court’s decision in Heck v. Humphrey, 512 U.S. 477,
486-87 (1994). (Def. Br. 7). The Supreme Court in Heck held that a plaintiff
cannot challenge a criminal conviction under § 1983 unless the conviction “has
been reversed on direct appeal, expunged by executive order, declared invalid
by a state tribunal authorized to make such determination, or called into
question by a federal court’s issuance of a writ of habeas corpus.” Heck, 512
U.S. at 486-87. This is often called the “favorable termination” requirement.
Poventud v. City of N.Y., 750 F.3d 121, 130 (2d Cir. 2014) (en banc).
Neither party argues that Plaintiff’s conviction has been vacated or
otherwise invalidated. Plaintiff sources its claim, however, in an exception to
the Heck bar recognized by the Second Circuit, which exception permits § 1983
claims to proceed where the plaintiff is no longer in state custody and does not
have any available habeas remedy. (Pl. Opp. 2-3 (citing Leather v. Ten Eyck,
180 F.3d 420, 424 (2d Cir. 1999))). See also Huang v. Johnson, 251 F.3d 65,
73-75 (2d Cir. 2001) (permitting a § 1983 claim to proceed where Plaintiff was
released from custody and could not pursue habeas relief).
Defendant is correct that the precise contours of the Heck bar are not
“definitively settled” in the Second Circuit, see Teichmann v. New York, 769
F.3d 821, 827-31 (2d Cir. 2014), but its related argument that Heck applies to
convictions secured through a guilty plea is inapposite. (Def. Reply 9). It
matters not how the conviction was entered; what matters for the Heck
analysis is whether the plaintiff has any recourse in a writ of habeas corpus.
See, e.g., Huang, 251 F.3d at 73-74 (declining to apply the Heck bar to a § 1983
action filed by a plaintiff who pleaded guilty and was no longer in custody).
And although the application of Heck to a § 1983 claim where a habeas remedy
is unavailable continues to cause “consternation” in this Circuit, Teichmann,
769 F.3d at 828 (Calabresi, J., concurring), Plaintiff’s case is a clear one. Even
after the en banc narrowing of the Heck bar in Poventud, this Circuit still
recognizes an exception to the favorable termination requirement where a
plaintiff, like Artec, was never in state custody, “that is, where an action under
§ 1983 was a diligent plaintiff’s only opportunity to challenge his conviction in
a federal forum.” Id. (Livingston, J., concurring).
The Plea Agreement between Plaintiff and DANY imposed a fine; because
Plaintiff is a corporate entity, Plaintiff was not sentenced to any term of
imprisonment. (Krueger Decl., Ex. D). And because Plaintiff was never, and is
not now, in state custody, Plaintiff could never challenge the propriety of its
conviction through a petition for a writ of habeas corpus. Accordingly, Plaintiff
may bring a claim under § 1983.
Plaintiff’s Claim That the City Enacted a De Facto Debarment
Claims brought under § 1983 must be made within three years of when
the plaintiff “knows or has reason to know of the harm.” Eagleston v. Guido, 41
F.3d 865, 871 (2d Cir. 1994) (internal quotation marks omitted). From this,
Defendant argues that Plaintiff’s claim based on an alleged de facto debarment
from HPD projects is time-barred, insofar as it accrued before November 9,
2012 — three years before the initial complaint in this action was filed in state
court. (Def. Br. 9-11). This argument, in turn, is predicated on Plaintiff’s
allegation in the SAC that responsibility for the alleged debarment shifted “at
some unknown point in 2012” from HPD to DOI, because “HPD was no longer
running the show.” (SAC ¶ 34; see also Def. Br. 10).
Defendant’s argument splits hairs. The initial Complaint in this matter
named HPD and DOI as defendants, but, following the Court’s February 27,
2017 Order (Dkt. #32), Plaintiff amended its pleading to name the proper
entity, i.e., the City of New York (Dkt. #33). Thus, for purposes of the instant
motion, the Court evaluates liability as to the City generally, rather than as to
HPD or DOI individually. As long as Plaintiff can show that its claim of a de
facto debarment as to Defendant accrued after November 9, 2012, its § 1983 on
those facts is timely.
Plaintiff argues that its claim for a de facto debarment did not accrue
until after November 2012. (Pl. Opp. 23-24). In so doing, Plaintiff seizes upon
Defendant’s acknowledgement that “[d]enial of a single contract or project is
insufficient to allege a de facto debarment.” (Id. (quoting Def. Br. 11)). Indeed,
Plaintiff alleges, by November 9, 2012, it was only aware of one HPD project —
the West Wind project — from which it had been barred. (SAC ¶ 48). It was
only in December 2012 that Plaintiff was barred from three more HPD
projects — Cypress Hill, Sugar Hill, and East Clarke Place — and in early 2013
from two more — Alembic/Cypress and Alembic/Broadway. (Id.).
The Court agrees with both parties that a denial of a single contract does
not a de facto debarment make. See Quadrozzi Concrete Corp. v. City of N.Y.,
No. 03 Civ. 1905 (LAP), 2004 WL 2222164, at *7 (S.D.N.Y. Sept. 30, 2004);
Housing Works, Inc. v. City of N.Y., 680 N.Y.S.2d 487, 492 (1st Dep’t 1998).
Accordingly, the Court finds that Plaintiff did not know or have reason to know
of the alleged de facto debarment until after November 9, 2012, which renders
its de facto debarment claim timely.
The Merits of Plaintiff’s Equal Protection Claims
Plaintiff claims that Defendant treated it differently compared to similarly
situated affordable housing developers because Plaintiff was (i) placed on HPD’s
Enhanced Review list, (ii) subjected to a de facto debarment from HPD projects,
and (iii) subjected to a criminal investigation. (SAC ¶¶ 33-35). In support of its
equal protection claims, Plaintiff proffers evidence of seven comparable
contractors — Mountco, Galaxy, Lettire, Procida, Lemle & Wolff, Mega, and
MDG (together, the “Comparators”) — all of which were on HPD’s Enhanced
Review list but were permitted to continue working on HPD affordable housing
projects and were not subjected to criminal investigation or prosecution. (Id. at
Before turning to Plaintiff’s “class of one” and “selective enforcement”
claims, the Court observes at the outset that Plaintiff cannot recover under
either theory for its claim that placement on the HPD Enhanced Review list
constituted an equal protection violation. (See SAC ¶ 33). 4 After all, both
“class of one” and “selective enforcement” claims require proof that the plaintiff
was treated differently from similarly situated comparators. Bizzarro, 394 F.3d
at 86. Each of the seven Comparators was also placed on the Enhanced
Review list, and thus was treated in the same way as Plaintiff. (SAC at ¶¶ 3844). Accordingly, the Court limits its analysis to Plaintiff’s claims that
Defendant impermissibly enacted a de facto debarment and participated in a
criminal investigation of Plaintiff.
The Court understands the SAC to raise a claim that Plaintiff was improperly placed on
the Enhanced Review list. (SAC ¶ 33). In its briefing, Plaintiff appears to build on a
passing reference in the SAC to Defendant’s refusal to remove Plaintiff from the
Enhanced Review list with the goal of expanding its claim to include an allegation that
Defendant improperly kept Plaintiff on the Enhanced Review list. (Id. at ¶ 46; Pl.
Opp. 9). To the extent that Plaintiff seeks to raise such a claim, the Court finds it has
not been adequately pleaded in the SAC and that, even if it had, it would fail on the
merits for the same reasons discussed in the text.
Claims Based on a Class of One Theory
To prevail on a “class of one” claim, Plaintiff must show that it was
treated differently than similarly situated comparators and that there was no
rational basis for the different treatment. Vill. of Willowbrook, 528 U.S. at 564.
Specifically, Plaintiff must establish that “(i) no rational person could regard
the circumstances of the plaintiff to differ from those of a comparator to a
degree that would justify the differential treatment on the basis of a legitimate
government policy; and (ii) the similarity in the circumstances and difference in
treatment are sufficient to exclude the possibility that the defendants acted on
the basis of a mistake.” Kusel, 626 F.3d at 140 (internal quotation marks and
Defendant raises what the parties agree is an issue of first impression in
this Circuit: whether the Supreme Court’s decision in Engquist — which
eliminated “class of one” claims for government employees — should be
extended to bar claims like Plaintiff’s that are raised in the government
contract approval context. (Def. Br. 18-19; Pl. Opp. 12). Because the degree
and type of government discretion used is central to an analysis of whether
Engquist bars Plaintiff’s claims, the Court takes each alleged government action
in turn, looking first at Plaintiff’s claim that Defendant effectively barred it from
working on HPD-funded projects and second at Plaintiff’s allegation that
Defendant impermissibly singled Plaintiff out for criminal investigation and
De Facto Debarment
Defendant argues that “when HPD approves contractors for the projects
it funds, just like with procuring contactors for City contracts, it is acting only
as a proprietor and manager, not as a regulator” and that, importantly, “HPD
wields virtually unfettered discretion over the selection process.” (Def. Br. 19).
Defendant further notes that “HPD must rely upon many subjective decisions
by agency experts to optimize the use of taxpayer-funded loans” and “could not
function as a lender or mortgagor if every subjective assessment were subject
to constitutional review.” (Id. at 20).
In opposition, Plaintiff makes much of the Second Circuit’s holding in
Kusel that “Engquist does not bar all class-of-one claims involving discretionary
state action.” (Pl. Opp. 12 (quoting Kusel, 626 F.3d at 142)). Plaintiff argues
that its claim should not be barred by Engquist because “HPD is essentially
acting as a regulator/lawmaker by adopting regulations to govern the
treatment of private contractors who desire to perform work on privately
negotiated contracts.” (Id. at 13). Moreover, Plaintiff contends, Defendant
acted pursuant to a de facto standard in its treatment of contractors placed on
Enhanced Review for suspected Prevailing Wage Law violations — a standard
that permitted those developers to continue working on HPD projects — which
HPD violated when it barred Plaintiff from further work. (Id. at 14-15).
Because Defendant’s actions were governed by this standard, they “were not
discretionary enough to bar [Plaintiff’s] ‘class of one’ claim.” (Id. at 15). 5
The Engquist Court was, at base, uneasy about imposing constitutional
liability for “forms of state action … which by their nature involve discretionary
decisionmaking based on a vast array of subjective, individualized
assessments,” and found that this concern “applies most clearly in the
employment context.” Engquist, 553 U.S. at 603. Presumably for this reason,
the Court was careful to confine its holding to that context, id. at 607, and
provided little guidance on how it might be extended. It is not surprising, then,
that Courts of Appeals have split on this question. See Kusel, 626 F.3d at
141-42 (describing circuit split).
While the Second Circuit conceded in Kusel that “there may be some
circumstances where Engquist is properly applied outside of the employment
context,” it spoke disapprovingly of certain district courts’ attempts to extend
the Engquist bar. Kusel, 626 F.3d at 141 (“Several district courts in this
Plaintiff also analogizes the government action in Kusel — which, that Court held, was
not so discretionary as to trigger the Engquist bar — to the decision to place Plaintiff on
the HPD Enhanced Review list, and Plaintiff argues that the Court should permit that
claim to proceed. (Pl. Opp. 12-13). Defendant counters that this analogy in fact
misreads the opening brief, in which Defendant argues that Engquist bars Plaintiff’s
claim that Defendant impermissibly disallowed Plaintiff from working on various HPDfunded projects. (Def. Reply 5). The Court agrees, but for a different reason. As noted
above, Plaintiff cannot recover on a “class of one” theory for its claim that Defendant
improperly placed it on the Enhanced Review list because Plaintiff is in a class of, at
least, eight. Shatney v. LaPorte, 634 F. App’x 53, 54 (2d Cir. 2016) (summary order)
(“[A] plaintiff who is in a ‘class of one’ may bring an equal-protection claim ‘where the
plaintiff alleges she has been intentionally treated differently from others similarly
situated and that there is no rational basis for the difference in treatment.’” (quoting
Vill. of Willowbrook v. Olech, 528 U.S. 562, 564 (2000) (per curiam))). Because the SAC
alleges that Plaintiff was treated identically to the Comparators in its placement on
HPD’s Enhanced Review list, this allegation cannot form the basis for any recovery, and
the Court will not probe Defendant’s decision to place Plaintiff on Enhanced Review.
Circuit have extended Engquist’s holding to require that plaintiffs seeking to
establish a class-of-one claim must show the difference in treatment flowed
from non-discretionary action, but they have done so without persuasive
analysis.”). By contrast, the Kusel Court found the reasoning in Alfaro v.
Labrador persuasive, which reasoning asked whether the government action at
issue “involve[s] discretion that is actually exercised on a day-to-day basis” or if
the action is “theoretically discretionary but — as a practical matter — actually
depend[s] on de facto standards.” Id. (citing Alfaro v. Labrador, No. 06 Civ.
1470 (JS), 2009 WL 2525128, at *9 (E.D.N.Y. Aug. 14, 2009)). Decisions in the
latter category, both courts agreed, were more likely to survive Engquist. Id.
Defendant argues that its discretion in deciding whether to permit a
contractor to work on an HPD-funded project falls into the former “day-to-day”
category. HPD issues loans to fund affordable housing construction and, as
part of its lending role, “manage[s] the administration of these projects in order
to ensure the quality of this public service.” (Def. Br. 19). One way in which
Defendant “manages” this process is by “approving contractors for private
contracts receiving loans.” (Id.).
Defendant may select a contractor for an HPD-funded project by “any
method permitted by Law which [HPD] determines will best meet the Project’s
objectives and the City Housing Goals, including, but not limited to, direct
negotiation, [Requests for Qualifications], [Requests for Proposals], competitive
bidding, public bidding, auction, selection by entities other than [HPD], and
application.” 28 R.C.N.Y. § 33-03(a). And, as Defendant notes, HPD can
“disapprove any contractor or subcontractor because of previous violations of
statutes, rules or regulations relating to discrimination, standards of
employment or labor standards, or because of inefficiency, abandonment of
duties, or disregard for creditors on prior jobs performed under this Program or
other programs of the City.” Id. § 2-06(a)(3). (See Def. Br. 20). The Rules
further provide that HPD “may reject any Applicant … at any time and for any
reason” including if HPD determines “at any time that good and sufficient
reasons exist why the City should not do business with an Applicant … or
should not allow such Applicant … to act as Sponsor for a Project,” while
making clear that the “Rules are not intended to confer rights or benefits upon
the general public or upon any individual or entity.” Id. §§ 33-08(a)(1), 3308(d). 6 Finally, HPD retains the right to pull funding or change the Sponsor of
a project “at any time prior to the execution of a Binding Agreement.” Id. § 3308(e).
Defendant’s discretion to approve applicants for HPD-funded projects is,
thus, nearly unfettered. More to the point, HPD’s power to choose which
contractors will work on its projects is far more discretionary than the process
that gave the Second Circuit pause in Kusel. There, a clinical testing lab
“Applicant” is defined as “any potential Sponsor of a Project, without regard to the
method used by the Agency to select the Sponsor for such Project, including, but not
limited to, any person or entity which has submitted or might potentially submit a
qualification statement, proposal, bid, application, or other submission.” 28 R.C.N.Y.
“Sponsor” is defined as “an Applicant or Selected Applicant, or an entity formed by an
Applicant or Selected Applicant and approved by the Agency, which has executed one or
more Binding Agreement(s) with the Agency.” 28 R.C.N.Y. § 33-01(a)(31).
complained that the New York State Department of Health (“DOH”) subjected it
to “an intense and unwarranted degree of regulatory scrutiny.” Kusel, 626
F.3d at 137. DOH investigated the lab numerous times over a period of several
years and “refused to renew [its] operating permit.” Id. at 138. Critical to the
Court’s analysis was the fact that “DOH [did] not possess unfettered discretion
in deciding whether to revoke, suspend or otherwise limit an existing license”;
DOH could not revoke a license without a hearing, and the decision could be
challenged in an Article 78 proceeding. Id. at 142; see N.Y. C.P.L.R. § 7801. In
sharp contrast, HPD possesses the ability to choose contractors through
whatever process it deems best and can elect not to work with a contractor if it
determines, in its discretion, that the City should not do business with that
entity. The Rules of the City of New York do not require HPD to explain its
choices, do not grant contractors the right to a given project, and do not afford
due process in the event of a rejection or removal. See generally 28 R.C.N.Y.
§§ 33-03, 33-08. Plainly, Defendant has broad discretion to approve or
disapprove an applicant for an HPD-funded project.
Significantly, however, the analysis does not end there. As Judge
Seybert noted in Alfaro — and as the Second Circuit found instructive in
Kusel — government decisionmaking that is “theoretically discretionary” can
“as a practical matter  actually depend on de facto standards.” Alfaro, 2009
WL 2525128, at *9; see also Kusel, 626 F.3d at 141. For purposes of this
motion, the Court must accept as true Plaintiff’s allegation that Defendant
employed what was, effectively, a “consistent pattern and practice” of allowing
contractors on the Enhanced Review list to continue to work on HPD-funded
projects. Alfaro, 2009 WL 2525128, at *9. (See SAC ¶¶ 38-44; Pl. Opp. 15).
And where the government acts pursuant to a standard, even where it is not
obligated to do so, its decisionmaking implicates the equal protection obligation
to treat “all persons similarly situated … alike.” City of Cleburne, 473 U.S. at
In light of Plaintiff’s policy allegations and the Second Circuit’s decision
in Kusel, the Court must conclude at this stage of the litigation that the
decisionmaking process at issue is not so discretionary as to trigger the
Engquist bar. Accordingly, the Court may consider the merits of Plaintiff’s
claim that Defendant’s de facto debarment put Plaintiff in an impermissible
“class of one.” But while Plaintiff overcomes this first hurdle, it falls at the
On the facts alleged in the SAC, the Court cannot find a basis for a “class
of one” claim regarding Defendant’s de facto debarment. To be sure, the SAC
pleads sufficient facts to show that Plaintiff was the only one of the
Comparators to be denied participation in HPD-funded projects while being on
Enhanced Review for suspected Prevailing Wage Law violations. (See SAC
¶¶ 37-44). But also according to the SAC, none of the Comparators was being
investigated for possible criminal conduct. (See id.). Given this rather
significant difference, the Court cannot say that Plaintiff alleges the “extremely
high degree of similarity” between Plaintiff and the Comparators that is
required to prevail on a “class of one” claim. Clubside, Inc. v. Valentin, 468
F.3d 144,159 (2d Cir. 2006).
Even assuming, for purposes of this motion, that Plaintiff were
sufficiently situated to the Comparators, its claim still fails because it cannot
prove that there is no rational basis for Defendant’s actions. Plaintiff asserts
that Defendant’s actions were “irrational” (SAC ¶ 77), but the Court does not
agree. 7 As Defendant notes, its decision to deny Plaintiff work on HPD-funded
contracts was reasonably related to a legitimate government interest in
ensuring that “workers on HPD projects receive prevailing wages.” (Def.
Br. 21). Plaintiff concedes Defendant’s interest in enforcing fair wage laws, but
claims nonetheless that there was no rational basis to bar Plaintiff from HPDfunded contracts while allowing other contractors that were suspected of
similar violations, because “there is nothing here to suggest that [Plaintiff’s]
alleged prevailing wage violations were more severe than the Comparators[’][.]”
(Pl. Opp. 11). But, of course, there was reason to single out Plaintiff:
According to the SAC, none of the Comparators was being investigated by
DOI — first with the EDNY and subsequently with DANY — for possible
criminal conduct. (SAC ¶¶ 26, 28-29, 38-44).
Plaintiff lost its first HPD contract in June 2011, lost three more in
December 2012, and lost two more in early 2013. (SAC ¶¶ 51, 53, 55, 57, 59,
61). Plaintiff became aware of DOI’s investigation in January 2012 (id. at ¶ 20),
Several of the parties’ rational basis arguments center on the propriety of Plaintiff’s
placement on the Enhanced Review list. (Def Br. 20-21; Pl. Opp. 8-9). As noted
throughout this Opinion, the Court will not consider these arguments.
and learned that the investigation was criminal in nature in March 2013 (id. at
¶ 26). On these facts, Defendant’s decision to bar Plaintiff from HPD-funded
projects during the pendency of an investigation is rationally related to a
legitimate government interest. In sum, Plaintiff has failed to plead sufficient
facts that, taken as true, show that “no rational person could regard the
circumstances of the plaintiff to differ from those of a comparator to a degree
that would justify the differential treatment on the basis of a legitimate
government policy.” Kusel, 626 F.3d at 140 (citing Neilson v. D’Angelis, 409
F.3d 100, 104 (2d Cir. 2005), abrogated on other grounds by Appel v. Spiridon,
531 F.3d 138 (2d Cir. 2008)). On these facts, its “class of one” claim cannot
The Criminal Investigation
The Court considers next whether Plaintiff’s “class of one” claim based on
Defendant’s participation in criminal investigations into Plaintiff’s alleged wage
violations is barred by Engquist and concludes that it is. The decisionmaking
applied by a prosecutor deciding which violations to investigate and what cases
to bring is the type of “day-to-day” government discretion that a “class of one”
claim cannot properly redress. See Vested Bus. Brokers Ltd. v. Cty. of Suffolk,
No. 16 Civ. 4945 (JMA) (SIL), 2017 WL 4122616, at *7 (E.D.N.Y. Sept. 15,
2017) (“[T]o the extent that [plaintiff] is challenging [defendant’s] investigation
and subsequent decision not to make an arrest, the actions and decisions
taken are discretionary, and not subject to a ‘class of one’ claim.”); Alfaro, 2009
WL 2525128, at *9 (“[W]here a law is selectively enforced (without clear
standards for enforcement) against some people but not others, a class of one
claim inappropriately interferes with the discretionary decision making process
that a law enforcement officer or body must engage in.”); see also United States
v. Armstrong, 517 U.S. 456, 464 (1996) (“In the ordinary case, so long as the
prosecutor has probable cause to believe that the accused committed an
offense defined by statute, the decision whether or not to prosecute, and what
charge to file or bring before a grand jury, generally rests entirely in his
discretion.”); United States v. Moore, 543 F.3d 891, 901 (7th Cir. 2008)
(applying the Engquist bar to a case challenging prosecutorial discretion
because “the discretion conferred on prosecutors in choosing whom and how to
prosecute is flatly inconsistent with a presumption of uniform treatment”).
While the Second Circuit clarified in Kusel that “Engquist does not bar all
class-of-one claims involving discretionary state action,” 626 F.3d at 142, it
could not have been that Court’s intention to hold that door ajar for a claim
like Plaintiff’s, which would grant a constitutional “class of one” claim to every
target of a criminal investigation and every defendant in a criminal
prosecution. The day-to-day work of a prosecutor necessarily involves the
selection of certain individuals to investigate and charge — this is the very type
of government discretion that the Supreme Court removed from equal
protection review in Engquist. Accordingly, the Court holds that Plaintiff’s
claim that Defendant placed it in a “class of one” through participation in
criminal investigations of it is barred under Engquist, and the Court will not
consider the merits of this claim.
Claims Based on a Selective Enforcement Theory
Alternatively, Plaintiff complains that Defendant’s de facto debarment of
Plaintiff from HPD-funded projects and criminal investigation of Plaintiff
effected equal protection violations on a theory of impermissible “selective
enforcement.” (SAC ¶¶ 33, 35, 70-74). To plead a viable selective enforcement
claim, Plaintiff must establish that “[i] compared with others similarly situated,
[Plaintiff] was selectively treated; and [ii] that such selective treatment was
based on impermissible considerations such as race, religion, intent to inhibit
or punish the exercise of constitutional rights, or malicious bad faith intent to
injure a person.” LaTrieste Rest. & Cabaret, Inc. v. Vill. of Port Chester, 40 F.3d
587, 590 (2d Cir. 1994). The Second Circuit has not settled the question of
whether the degree of similarity required to prevail in a “selective enforcement
claim” is less than that needed for a “class of one” claim, but, in any event,
Plaintiff must at least show that Plaintiff and the Comparators are “similarly
situated in all material respects.” Mosdos Chofetz Chaim, Inc. v. Vill. of Wesley
Hills, 815 F. Supp. 2d 679, 695-96 (S.D.N.Y. 2011) (discussing the varying
standards applied and collecting cases).
The Court accepts as true that Plaintiff was treated differently than the
Comparators, insofar as Plaintiff was the only one of the group to be denied
HPD-funded contracts and subjected to a criminal investigation. (SAC
¶¶ 36-64). But the Court need not accept as true Plaintiff’s legal conclusions
that it was similarly situated to the Comparators or that Defendant acted out of
malice. See Iqbal, 556 U.S. at 678. Defendant argues that Plaintiff has not
pleaded sufficient facts to show that it is similarly situated to the Comparators.
(Def. Br. 13 (“[T]he SAC is silent regarding whether the purported
[C]omparators were on Enhanced Review status at the time that HPD approved
them to work on projects; when, if ever, they were removed from Enhanced
Review; and if so, under what conditions.”)). Plaintiff weakly responds that it
cannot substantiate this claim until it receives discovery from Defendant. (Pl.
Opp. 7, 16). Even assuming that, with the benefit of discovery, Plaintiff could
show the required degree of similarity, its “selective enforcement” claim would
still fail, as the SAC does not contain sufficient allegations that Defendant
acted with a malicious intent to injure.
The crux of Plaintiff’s claim is that Defendant had an “axe to grind” with
Plaintiff following the UBC’s “smear campaign” (SAC ¶¶ 13-14), resulting in
Defendant vindictively barring Plaintiff from HPD-funded contracts and putting
Plaintiff through a criminal investigation (Pl. Opp. 16-19). Plaintiff contends
that this vindictive singling-out “evidences irrationality and demonstrates bad
faith or malice.” (Id. at 19). But in so arguing, Plaintiff conflates the two-prong
test for “selective enforcement.” Plaintiff must show that it was treated
differently than those similarly situated and that the different treatment was
due to a malicious purpose. LaTrieste Rest. & Cabaret, Inc., 40 F.3d at 590.
Plaintiff would have this Court find that different treatment is itself proof of a
malicious purpose. It is not.
There is nothing in the SAC, save Plaintiff’s conclusory assertion that
Defendant harbored a grudge because of the UBC’s campaign, to support a
finding that Defendant barred plaintiff from HPD projects or investigated
Plaintiff with a malicious intent. Plaintiff’s unsupported allegation does not
“nudge [Plaintiff’s] claims across the line from conceivable to plausible.”
Twombly, 550 U.S. at 570. What is more, the Court finds compelling
Defendant’s argument that a plausible, non-discriminatory reason for
Defendant’s decision to deny Plaintiff work on HPD-funded projects is readily
apparent — namely, that Plaintiff, unlike the Comparators, was being
investigated for possible criminal violations. And for the reasons stated above
with respect to Plaintiff’s “class of one” claim, the Court will not second-guess
the discretion of the DOI and the prosecutors’ offices that investigated Plaintiff
under a “selective enforcement” theory without any suggestion in the pleadings
of bad faith.
As set forth above, Plaintiff has not adequately pleaded any underlying
constitutional violations under § 1983. Accordingly, the Court need not reach
the question of whether Plaintiff’s allegations establish municipal liability
under Monell. See Segal v. City of N.Y., 459 F.3d 207, 219 (2d Cir. 2000)
(“Because the district court properly found no underlying constitutional
violation, its decision not to address the municipal defendants’ liability under
Monell was entirely correct.”).
For the foregoing reasons, Defendant’s motion to dismiss is GRANTED.
The Clerk of Court is directed to terminate all pending motions, adjourn all
remaining dates, and close this case.
November 28, 2017
New York, New York
KATHERINE POLK FAILLA
United States District Judge
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