Pascazi v. Rivera
Filing
23
OPINION AND ORDER re: 17 MOTION to Dismiss filed by Peter M. Rivera. For the foregoing reasons, Defendant's motion to dismiss is GRANTED. The Court respectfully directs the Clerk to terminate the motion at ECF No. 17 and to close this docket. SO ORDERED. (Signed by Judge Nelson Stephen Roman on 2/26/2015) (mml)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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MICHAELS. PASCAZI,
Plaintiff,
13-cv-9029 (NSR)
-againstOPINION & ORDER
PETER M. RIVERA in his official capacity as
NEW YORK STATE COMMISSIONER OF
LABOR,
Defendant.
-------------------------------------------------------------- ){
NELSONS. ROMAN, United States District Judge
Attorney Michael S. Pascazi ("Pascazi") brings this lawsuit prose to enjoin enforcement
of two administrative orders against him. Defendant Peter M. Rivera, New York State
Commissioner of Labor (the "Commissioner") moves to dismiss on the grounds ofres judicata
and failure to state a claim upon which relief may be granted. For the following reasons, the
Commissioner's motion to dismiss is GRANTED.
BACKGROUND'
Pascazi brings this action to enjoin the enforcement of two administrative orders (the
"Determinations") finding that his company, Fiber Optek Interconnect Corp. ("Fiber Optek"),
willfully violated New York's Prevailing Wage Law, N.Y. Labor Law Art. 8, §§ 220-224 (the
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s the Court is required to do on a motion to dismiss, the Court takes the factual allegations in the First Amended
mplaint as true. Furthermore, the Comt takes judicial notice of the documents attached as exhibits A-E and G-J
he Declaration of Seth Kupferberg, ECF No. 18, to establish the facts of the proceedings reflected therein, what
s argued, and what was held, but not for the truth of the matters asse1ted in those proceedings. See LaF/eur v.
itman, 300 F.3d 256, 267 (2d Cir. 2002) ("A court may take judicial notice of a document filed in another comt
for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and
ted filings."); see also Combier-Kapel v. Biege/son, 242 F. App'x 714, 715 (2d Cir. 2007).
“PWL”). (Def.’s Mem. at 1, ECF No. 19.)
Pazcazi was the president and 50% owner of Fiber Optek at all relevant times prior to its
dissolution. 2 Fiber Optek performed cable installation work on both private projects and public
work projects. In 1999 and 2001, one or more Fiber Optek employees complained to the Bureau
of Public Work (the “Bureau”) of the New York Department of Labor (the “NYDOL”) about
their wages for public work projects, prompting the Bureau to commence an investigation into
whether Fiber Optek had violated the PWL with respect to eight projects. (Kupferberg Decl. Ex.
A app. at 12-13, ECF No. 18-1 [hereinafter Determination 1]; Kupferberg Decl. Ex. B app. at
3-4, ECF No. 18-2 [hereinafter Determination 2].)
At the conclusion of the investigation, two hearings were conducted. (Determination 1
app. at 1-3; Determination 2 app. at 1-4.) The first hearing focused on one project and took place
on seven hearing days between September 17, 2003 and December 15, 2003. (Pl.’s Opp. at 4,
ECF No. 22.) The second hearing focused on all eight projects and took place on 16 hearing
days between August 7, 2006 and March 10, 2010. (Id.) Pascazi personally appeared at the
hearings, presented evidence, and submitted post-hearing written argument. (Determination 1
app. at 3; Determination 2 app. at 2.)
Prior to the conclusion of the hearings, Pascazi filed two actions in the Southern District
of New York to enjoin the NYDOL proceedings, see Fiber Optek Interconnect Corp. v. N.Y.S.
2
Although this fact is not expressly set forth in Pascazi’s pleadings, Pascazi has admitted this fact in representations
to the Court during a pre-motion conference (Tr. of Mar. 20, 2014 Proceedings before Hon. Nelson S. Román at
8:6-17, ECF No. 10), has made arguments in his opposition papers that presume his past ownership (see Pl.’s Opp.
at 17-18, ECF No. 22), and has failed to dispute his past ownership despite the Commissioner’s repeated
characterizations of him as such. Furthermore, there may be other, independent bases for the Court’s judicial notice
of this fact because Pascazi has admitted his ownership in numerous filings in Fiber Optek’s bankruptcy proceeding.
See, e.g., Landow v. Wachovia Sec., LLC, 966 F. Supp. 2d 106, 119-20 (E.D.N.Y. 2013) (citing cases establishing
that judicial notice may be taken of a party’s admissions in prior proceedings that contradict that party’s assertions
of fact under certain circumstances). The Court also notes that if Pascazi were to dispute this fact, litigation of the
fact would be precluded by collateral estoppel for the reasons indicated in Part I, infra.
2
Comm’r of Labor, No. 03-cv-7374 (S.D.N.Y. filed Sept. 19, 2003); Pascazi v. Angello, No.
04-cv-8896 (S.D.N.Y. filed Nov. 10, 2004), one of which he appealed to the Second Circuit, see
Pascazi v. Angello, No. 06-5108-cv (2d Cir. filed Nov. 3, 2006), and a lawsuit in New York
Supreme Court for a judgment in the nature of prohibition, see Fiber Optek Interconnect Corp. v.
N.Y.S. Comm’r of Labor, Index No. 5942/2003 (N.Y. Sup. Ct. filed Dec. 3, 2004). Also during
the pendency of the proceedings, Pascazi caused Fiber Optek to go into bankruptcy, see In re
Fiber Optek Interconnect Corp., No. 05-30045-cgm (Bankr. S.D.N.Y. filed Feb. 16, 2005), and
moved the bankruptcy court to hold the NYDOL in contempt for continuing with the
administrative hearings purportedly in violation of the automatic bankruptcy stay, see In re Fiber
Optek Interconnect Corp., Nos. 09-cv-8827, 09-cv-9123, ECF No. 13 (S.D.N.Y. Sept. 28, 2010).
All of Pascazi’s attempts to delay or enjoin the administrative hearings failed.
The Determinations found that Fiber Optek had paid workers less than the applicable
prevailing wages on seven of the eight 3 projects in violation of the PWL. (Determination 1 app.
at 23-25; Determination 2 app. at 14.) Accordingly, the Determinations found Fiber Optek liable
for the total amount of unpaid wages on certain projects, plus statutory interest at 16% from the
date of each underpayment. (Determination 1 app. at 23-25; Determination 2 app. at 14.) The
Determinations also found that Fiber Optek’s violation was “willful” because the Bureau advised
Pascazi personally of the proper employee classifications and applicable wage rates, but Pascazi
disregarded the advice. (Determination 1 app. at 11.) It was further established that Fiber
Optek’s certified payroll records falsely reported a rate that was different than the rate actually
paid to individuals. (Id. app. at 19.) The Determinations found that Pascazi managed the offices
and books of Fiber Optek, made hiring and firing decisions, set workers’ pay rates, and was
3
The hearing officer determined that one of the projects was not a public work project subject to the PWL.
(Determination 1 app. at 12-13.)
3
responsible for verifying the accuracy of time cards. (Id. app. at 10; Determination 2 app. at
6-7.)
At the conclusion of the administrative proceedings, Pascazi initiated a proceeding under
Article 78 of the New York Civil Practice Law and Rules (“CPLR”) to review the
Determinations (the “Article 78 proceeding”). See Pascazi v. Gardner, 966 N.Y.S.2d 528 (App.
Div.), appeal dismissed, 996 N.E.2d 907 (N.Y. 2013). Pascazi raised a wide range of arguments
at the Article 78 proceeding including that:
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the federal Telecommunications Act preempts the PWL;
Pascazi was denied a constitutional right because the FCC was the only tribunal
that could hear his preemption argument based upon the Telecommunications
Act;
the federal Labor Management Relations Act (the “LMRA”) preempts the PWL;
the PWL violates the Dormant Commerce Clause;
Pascazi did not receive due process because the hearing officer purportedly
applied a “substantial evidence” standard;
Pascazi did not receive due process because the hearing officer was substituted;
there was insufficient evidence to support the Determinations;
the proceedings were untimely;
the interest award was arbitrary and capricious because the Determinations failed
to set forth precise calculations;
certain projects were nonpublic projects to which the PWL does not apply.
(See Kupferberg Decl. Ex. C, ECF No. 18-3.)
The Appellate Division rejected Pascazi’s arguments and confirmed the Determinations,
see Pascazi, 966 N.Y.S.2d at 532, Pascazi appealed, and the New York Court of Appeals
summarily dismissed the appeal on the ground that no substantial constitutional question was
directly involved, see Pascazi, 996 N.E.2d at 907.
The Commissioner has not yet sought to enforce the Determinations against Pascazi.
Such enforcement is governed by N.Y. Labor Law § 220-b(2)(g), which provides:
When a final determination has been made in favor of a complainant and the
contractor or subcontractor found violating this article has failed to make payment
4
as required . . . the fiscal officer[ 4] may file a copy of the order of the fiscal officer
containing the amount found to be due with the county clerk of the county of
residence or place of business of any of the following:
...
(ii) . . . any of the five largest shareholders of the contractor or subcontractor, as
determined by the fiscal officer; or
(iii) any officer of the contractor or subcontractor who knowingly participated in
the violation of this article.
N.Y. Labor Law § 220-b(2)(g). Such a filing has the “full force and effect of a judgment duly
docketed in the office of such clerk” and can be enforced pursuant to the CPLR provisions for
enforcing money judgments. Id.
Pascazi seeks to enjoin prospectively enforcement of the Determinations against him.
His First Amended Complaint asserts numerous purported bases for his requested relief, styled as
four “counts.” (See Am. Compl. ¶¶ 94-115.) Count 1 sounds in statutory construction. It argues
that § 220-b(2)(g) should be construed such that it excludes from enforcement past shareholders
who no longer hold shares of the contractor. (Id. ¶¶ 94-97.) Count 2 argues that enforcement of
the Determinations against Pascazi would violate the Due Process Clauses of the U.S. and
N.Y.S. Constitutions because of the lack of pre-deprivation process, vagueness, and overbreadth.
(Id. ¶¶ 98-104.) Count 3 argues that enforcement would impose upon Pascazi a sanction in
violation of the Excessive Fines Clauses of the U.S. and N.Y.S. Constitutions. (Id. ¶¶ 105-12.)
Count 4 asserts a cause of action under 42 U.S.C. § 1983 for the aforementioned purported
constitutional violations. (Id. ¶¶ 113-15.) Finally, Pascazi’s opposition papers assert the
additional claims not raised in the First Amended Complaint that the purported use of a
“substantial evidence” standard during the administrative hearings denied him due process (Pl.’s
Opp. at 24-25) and that the PWL is preempted by the Employee Retirement Income Security Act
(“ERISA”) (id. at 11-15).
4
The “fiscal officer,” in all respects relevant to this action, is the Commissioner.
5
STANDARD OF REVIEW
To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must provide grounds upon
which their claim rests through “factual allegations sufficient ‘to raise a right to relief above the
speculative level.’” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, the complaint
must allege “enough facts to state a claim to relief that is plausible on its face.” Starr v. Sony
BMG Music Entm’t, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Twombly, 550 U.S. at 570). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009).
In applying this standard, a court should accept as true all well-pled factual allegations,
but should not credit “mere conclusory statements” or “[t]hreadbare recitals of the elements of a
cause of action.” Id. A court should give “no effect to legal conclusions couched as factual
allegations.” Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007)
(citing Twomblv, 550 U.S. at 555).
DISCUSSION
All of Pascazi’s claims must be dismissed because they are barred by res judicata, and, in
the alternative, because they are wholly lacking in merit.
I.
Res Judicata 5
Under the full faith and credit doctrine, federal courts must accord final judgments of
state courts the same preclusive effect that such judgments would have in the state courts. See 28
U.S.C. § 1738. Under New York law, “once a claim is brought to a final conclusion, all other
5
The Court uses the phrase res judicata to refer to the concept of claim preclusion, distinct from issue preclusion or
collateral estoppel.
6
claims arising out of the same transaction or series of transactions are barred, even if based upon
different theories.” O’Brien v. City of Syracuse, 429 N.E.2d 1158, 1159 (N.Y. 1981).
Successive litigation based on the same or connected transactions is barred “if (i) there is a
judgment on the merits rendered by a court of competent jurisdiction, and (ii) the party against
whom the doctrine is invoked was a party to the previous action.” People v. Allied Card Sys.,
Inc., 894 N.E.2d 1, 12 (N.Y. 2008). Even in a § 1983 case, preclusive effect is given to statecourt judgments as to both issues that were “actually litigated” and issues that “could have been
raised but were not actually raised.” Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75,
81-82 (1984); Allen v. McCurry, 449 U.S. 90 (1980). The instant action and Pascazi’s Article 78
proceeding obviously concern the same transactions, and Pascazi was a party to the Article 78
proceeding. 6
Pascazi’s response is two-fold. First, Pascazi argues that he could not have raised a
challenge to § 220-b(2)(g) at the time of the administrative hearings or the Article 78 proceeding
because it was unclear whether the Commissioner was going to enforce the Determinations
against Pascazi. This argument does not withstand scrutiny. At least as early as the Article 78
proceeding, Pascazi knew or should have known that, with Fiber Optek in bankruptcy, the only
avenue available to satisfy the Determinations would be § 220-b(2)(g) enforcement against Fiber
Optek’s 50-50 owners—Pascazi and Frank Zarzeka, Jr. Cf. N.Y.S. Elec. & Gas Corp. v. Saranac
Power Partners L.P., 117 F. Supp. 2d 211, 244 (N.D.N.Y. 2000), aff’d, 267 F.3d 128 (2d Cir.
6
Although the Second Circuit has in some circumstances concluded that the doctrine of claim preclusion does not
apply when an unsuccessful Article 78 plaintiff seeks § 1983 relief in federal court because “a state court
entertaining an Article 78 proceeding does not have the power to award the full measure of relief available in
subsequent section 1983 litigation,” Vargas v. City of New York, 377 F.3d 200, 205 (2d Cir. 2004) (citing Davidson
v. Capuano, 792 F.2d 275, 278 (2d Cir. 1986)), this argument applies only “if the initial forum did not have the
power to award the full measure of relief sought in the later litigation,” Davidson, 792 F.2d at 278. Here, because
Pascazi does not seek damages, the Article 78 proceedings could have provided all the relief sought. Johns v.
Rampe, 333 F. App’x 644, 646 (2d Cir. 2009). Thus, it is appropriate to analyze claim preclusion in the case at bar.
7
2001) (rejecting plaintiff’s argument that preclusion should not apply because plaintiff could not
have raised the issues in a prior proceeding, reasoning: “It is apparent that [the parties] were
always aware of the risk that [plaintiff] might find itself in the very circumstances confronting it
today. It is only the degree to which the risk has manifested itself that is new.”). Moreover,
were Pascazi’s argument valid, this very lawsuit would be unripe because the Commissioner has
still taken no action to enforce the Determinations against Pascazi. As the Commissioner points
out, the issue of Pascazi’s liability was no less ripe at the time of the hearings than the issue of
Fiber Optek’s liability.
Furthermore, there is no reason to believe that the hearing officers in the administrative
proceedings could not have decided Pascazi’s arguments because they are based on the U.S. or
N.Y.S. Constitutions. The hearing officer in one of the Determinations devoted pages of
discussion to Pascazi’s constitutionally based LMRA preemption, Telecommunications Act
preemption, and Commerce Clause arguments. 7
Likewise, the Appellate Division certainly could have heard Pascazi’s arguments.
Individuals who bring Article 78 proceedings to challenge determinations against them are free
to raise constitutional claims in such proceedings. See, e.g., Solnick v. Whalen, 401 N.E.2d 190,
194-95 (N.Y. 1980); Press v. County of Monroe, 409 N.E.2d 870, 872-74 (N.Y. 1980); see also
In re Chaitan, 517 B.R. 419, 430 (Bankr. E.D.N.Y. 2014) (“An Article 78 petition and hearing
7
Pascazi cites Patrick Dev. Inc., Prevailing Rate Case 06-05913 (N.Y.S. Dep’t of Labor Oct. 29, 2009), purportedly
for the proposition that an administrative hearing officer cannot decide issues relating to § 220-b(2)(g). Patrick
Development simply does not stand for the proposition Pascazi submits. In that case, the parties had asserted
arguments concerning the willfulness of respondents’ officers’ conduct. Although the parties framed these
arguments in terms of § 220-b(2)(g), willfulness is also relevant to whether a respondent should be barred from
public work projects under a different subsection, § 220-b(3)(b)(1). The hearing officer acknowledged this
imprecision and noted that it would consider the parties’ willfulness arguments in the context of § 220-b(3)(b)(1), as
the question of enforcement under § 220-b(2)(g) was not before it. This is a far cry from holding that a genuine
challenge to § 220-b(2)(g)—other than with respect to willfulness—would be outside of the hearing officer’s
jurisdiction.
8
could have resolved [petitioner’s] constitutional complaints by granting mandamus relief.”). In
fact, Pascazi advanced three preemption arguments, several due process arguments, and a
Commerce Clause argument in the Article 78 proceeding. Moreover, some of Pascazi’s present
arguments are identical to arguments that the Appellate Division heard and rejected—for
example, that the substantial evidence standard violates due process and that the Determinations
are deficient because they fail to set forth precise calculations of interest. Cf. Hayden v. Hevesi,
No. 05-CV-294S, 2011 WL 4962262, at *5 (W.D.N.Y. Oct. 18, 2011). “This is the situation—
the relitigation of claims already decided under constitutionally adequate circumstances—that
the Full Faith and Credit Statute seeks to avoid.” Giakoumelos v. Coughlin, 88 F.3d 56, 61 (2d
Cir. 1996).
Second, Pascazi argues that the administrative hearings and Article 78 proceeding should
have no preclusive effect because Pascazi faced a higher burden of proof in those proceedings.
Pascazi submits that the Commissioner was required to prove his administrative case by
“substantial evidence.” By contrast, here Pascazi must establish his case by a “preponderance of
the evidence,” which is less onerous than opposing a substantial evidence burden.
Analyzing the leading New York Court of Appeals cases on issue preclusion, the Second
Circuit has concluded that even “a shift in the burden of proof is not dispositive as to whether
collateral estoppel can be applied.” Constantine v. Teachers Coll., 448 F. App’x 92, 94-95 (2d
Cir. 2011); Kosakow v. New Rochelle Radiology Assocs., P.C., 274 F.3d 706, 732 (2d Cir. 2001).
Courts in this Circuit routinely give preclusive effect to the decisions of Article 78 courts in
similar circumstances. See, e.g., Genova v. Town of Southampton, 776 F.2d 1560, 1561 (2d Cir.
1985) (rejecting appellant’s argument that “he is not . . . precluded . . . because he was in a
‘defensive’ posture in the Article 78 proceeding, but is in an ‘offensive’ posture in his § 1983
9
law suit”); Latino Officers Ass’n v. City of New York, 253 F. Supp. 2d 771, 787 (S.D.N.Y. 2003).
The different standard of proof argument is particularly unpersuasive here, because Pascazi
asserts purely legal arguments, not factual disputes that would be subject to evidentiary
standards. Accordingly, the instant claims are barred by res judicata.
II.
Merits
Even if this Court were to find res judicata inapplicable, the Court would still grant the
Commissioner’s motion to dismiss on the merits.
A.
Count 1: “Plaintiff is Not a Top Five Shareholder”
Pascazi’s first Count alleges that § 220-b(2)(g) is “not impressible upon Plaintiff”
because Pascazi “is not a top five shareholder” or “an officer . . . found . . . to have knowingly
participated in a violation.” (Am. Compl. ¶¶ 95-97 (emphasis added).) The relevant language of
that subsection provides that the Determinations may be filed in the county clerk’s office in the
county in which “any of the five largest shareholders of the contractor or subcontractor, as
determined by the fiscal officer,” reside. Pascazi claims that he falls outside of this definition
because he is not currently a top five shareholder—Fiber Optek no longer exists—despite his
50% ownership of Fiber Optek in the past.
Such a construction, however, is unreasonable. The statute conspicuously does not
invoke any timeframe for assessing shareholder status—neither the time of violation nor the time
of enforcement—an omission this Court finds significant. See Walker v. Town of Hempstead,
643 N.E.2d 77, 79-80 (N.Y. 1994); Patrolmen’s Benevolent Ass’n of the City of N.Y. v. City of
New York, 359 N.E.2d 1338, 1340-41 (N.Y. 1976) (“[W]here as here the statute describes the
particular situations in which it is to apply, an irrefutable inference must be drawn that what is
omitted or not included was intended to be omitted or excluded.” (internal quotation marks
omitted)). And even if the Court were to construe the statute to imply a particular point in time
10
(which is unnecessary), the time of enforcement would be a dubious construction, because it
would incentivize controlling shareholders to sidestep liability by bankrupting the entity (as
Pascazi has done), dissolving the entity by some other means, or otherwise disposing of their
holdings. See Robinson v. Shell Oil Co., 519 U.S. 337, 346 (1997) (rejecting a proposed
statutory construction in part because it would have created perverse incentives inconsistent with
the purpose of the provision); In re Osei, 389 B.R. 339, 355 (Bankr. S.D.N.Y. 2008).
If the Commissioner were to enforce the Determinations against Pascazi, Pascazi would
meet the definition of “any of the five largest shareholders of the contractor” because he was, at
all relevant times, 50% owner of Fiber Optek. Accordingly, Count 1 must be dismissed. 8
B.
Count 2: “Violation of Due Process”
Count 2 alleges that enforcing the Determinations against Pascazi would deprive him of a
property interest (1) “without a modicum of legal process afforded Plaintiff,” and (2) pursuant to
a statute that is unconstitutionally vague.
1.
Procedural Deficiencies
Pascazi’s second claim, that enforcement would result in deprivation without “a modicum
of legal process,” does not withstand scrutiny. Pascazi alleges that the filing of the
Determinations against him under § 220-b(2)(g) would deprive him of a property interest
because they would encumber his property as a lien. Assuming this is a protectable property
interest, the remaining question is “what process [is] his due.” Logan v. Zimmerman Brush, Co.,
455 U.S. 422, 428 (1982); Rosu v. City of New York, 742 F.3d 523, 526 (2d Cir.) cert. denied sub
nom. Rosu v. City of New York, N.Y., 135 S. Ct. 710 (2014). To answer this question the Court
8
N.Y. Business Corporation Law § 1006(b)—which Pascazi baldly mischaracterizes as relieving shareholders of
liability for any corporate liabilities that “attached” after dissolution unless such attachment was a “foregone
conclusion” prior to dissolution (see Pl.’s Opp. at 17-18)—is not to the contrary. The claims here existed before
dissolution and “New York law is clear that shareholders can be held liable for claims against dissolved
corporations.” Hartley v. Esposito, 479 B.R. 635, 640 (S.D.N.Y. 2012) (internal quotation marks omitted).
11
turns to the following factors: “(1) the private interest affected by the official action; (2) the risk
of erroneous deprivation under the challenged governmental course of action and the probable
value of providing additional procedural safeguards, and (3) the government’s interest.” Rosu,
742 F.3d at 526; see also Mathews v. Eldridge, 424 U.S. 319, 335 (1976).
Sections 220(8) and 220-b(2)(g) of the PWL, together with the N.Y. State Administrative
Procedure Act §§ 301-308 and the N.Y. Compilation of Codes, Rules & Regulations, Title 12,
§§ 701.1-701.13, set forth the procedural framework governing determinations of contractors’
compliance with the PWL. Section 220(8) provides that the Commissioner must hold a hearing,
of which notice must be served upon “any person affected thereby.” N.Y. Labor Law § 220(8).
Service must be made by personal service or by mail, at least 30 days before the hearing
“whenever possible,” and must state inter alia the date and time of the hearing, the name of the
hearing officer, the nature of the charges, and the applicable sources of law. N.Y. Comp. Codes
R. & Regs. tit. 12, § 701.4; N.Y. A.P.A. § 301(2). Limited pre-hearing document discovery is
available to the employer. N.Y. Comp. Codes R. & Regs. tit. 12, § 701.6. Parties are “accorded
full opportunity to present evidence and written and oral argument,” have the right to call,
examine, and cross-examine witnesses, and may request that the hearing officer issue nonparty
subpoenas for testimony or documents. Id. § 701.9; N.Y. A.P.A. §§ 301(4), 304(2)-(3), 306.
Next, “any party aggrieved” by a decision of a hearing officer may seek Article 78 review
directly in the Appellate Division of the New York Supreme Court. N.Y. Labor Law § 220(8).
After all appeals are concluded, § 220-b(2)(g) authorizes the Commissioner to file an order with
the county clerk in inter alia the county of residence of any of the “top five shareholders.” Id.
§ 220-b(2)(g). Within five days of such a filing, the Commissioner must “provide notice thereof
to the . . . top five shareholders,” any of whom “may contest the filing on the basis that [he or
12
she] is not a . . . top five shareholder.” Id. That section goes on to require the fiscal officer to
withdraw the filing in the event that the person contesting the filing is not subject to
§ 220-b(2)(g). Id.
Pascazi attended 23 days of hearings and submitted evidence and written argument.
Pascazi had ample opportunity to contest Fiber Optek’s liability as well as his own status as a top
five shareholder, as both issues were required to be adjudicated, and were actually adjudicated,
in the proceeding. Pascazi also had the benefit of an Article 78 proceeding in the Appellate
Division. Finally, if and when the Commissioner files the Determinations against Pascazi,
Pascazi will have yet another opportunity to contest his status as a top five shareholder. Pascazi
contends that due process requires an additional hearing after the Article 78 process is complete,
but before the Order is filed in the county clerk’s office, to provide Pascazi the opportunity to
contest his status as a shareholder and to collaterally attack the Determinations. Not so. Because
Pascazi has already had the benefit of extensive procedural process, 9 an additional hearing would
be of very little value and the risk of erroneous deprivation is minute. “Generally, due process
requires that a state afford persons ‘some kind of hearing’ prior to depriving them of a liberty or
property interest.” DiBlasio v. Novello, 344 F.3d 292, 302 (2d Cir. 2003) (quoting Hodel v. Va.
Surface Mining & Reclamation Ass’n, 452 U.S. 264, 299 (1981)). The sum total of process that
Pascazi has and will receive far exceeds constitutional mandates. 10 See CNP Mech., Inc. v.
Alund, No. 04-CV-6593, 2007 WL 3565587, at *6 (W.D.N.Y. Nov. 15, 2007) (finding that the
administrative hearing and Article 78 proceeding provided for in the PWL afforded adequate
9
To emphasize this point, the Court notes that it has not even factored into this analysis the substantial amount of
additional process that Pascazi extracted over the history of this dispute, including four separate actions in which he
raised various arguments challenging the NYDOL’s proceedings.
10
To the extent that Pascazi advances other supposed constitutional infirmities associated with the post-deprivation
review process (e.g., Am. Compl. ¶¶ 59-63), any such infirmities are irrelevant because the pre-deprivation
procedures standing alone satisfy due process.
13
procedural due process protection of any implicated property or liberty interest). Even if, under
some remote readings of the PWL’s procedural framework, a hypothetical shareholder might one
day be afforded less pre-deprivation process, Pascazi is not that shareholder.
2.
Vagueness
Pascazi’s vagueness arguments are that § 220-b(2)(g) “does not inform a purported top
five shareholder what is required of him/her such that he/she may act accordingly to avoid
coming within the ambit of the section,” and that the provision fails to guide the Commissioner
sufficiently to protect against arbitrary or discriminatory enforcement. Respectfully, this is
nonsense. The PWL and regulations promulgated thereunder offer contractors very clear
instruction on how to pay their workers. 11 Likewise, § 220-b(2)(g) details with specificity who
may be held liable for an unpaid determination. The Court fails to see the risk of arbitrary or
discriminatory enforcement of which Pascazi forewarns.
Pascazi’s remaining vagueness arguments appeal to several hypothetical scenarios that
are so far removed from the facts at issue that they, paradoxically, underscore the
appropriateness of the Commissioner enforcing the Determinations against Pascazi personally in
this case. Section 220-b(2)(g) is not unconstitutionally vague as applied. 12
11
This argument is nonsensical for the additional reason that § 220-b(2)(g) imposes liability based on shareholder
status, and not conduct. Strict liability is not categorically unconstitutional. (This observation also disposes with
Pascazi’s argument that he will be held liable without “proof of any wrongdoing” in violation of due process, and
his derivative argument that the statute is unconstitutionally overbroad because it imposes liability upon persons
who committed no wrongdoing.)
12
Pascazi also argues that the Orders should not be enforced against him because they fail to set forth precise
calculations for the interest amounts payable by Fiber Optek. At the outset, Pascazi cites no authority for this
argument, and the Appellate Division rejected it in his Article 78 proceeding. Calculation of interest is ministerial.
Prevailing wage orders routinely leave interest to be calculated by the Bureau. E.g., Astro Air Corp., Prevailing
Rate Case No. 2011008760 (N.Y.S. Dep’t of Labor May 5, 2014); Conklin’s Tech-Mech., Inc., Prevailing Rate Case
No. 2010002963 (N.Y.S. Dep’t of Labor Mar. 25, 2014); Piazza Bros., Inc., Prevailing Rate Case No. 98006536
(N.Y.S. Dep’t of Labor Mar. 12, 2014). Indeed, the precise amount of interest will be unknown until the date of
payment because interest continues to accrue while the liability is outstanding.
14
C.
Count 3: “Violation of Excessive Fines Clauses”
A sanction violates the Excessive Fines Clause if it is “grossly disproportional to the
gravity of [the] offense.” United States v. Bajakajian, 524 U.S. 321, 339-40 (1998). But not all
types of sanctions implicate the Excessive Fines Clause. “The Excessive Fines Clause was
intended to limit only those fines directly imposed by, and payable to, the government.”
Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 268 (1989); see also
Dep’t of Hous. & Urban Dev. v. Rucker, 535 U.S. 125, 136 n.6 (2002). Furthermore, the
Excessive Fines Clause applies only to punishment—i.e., civil sanctions “that cannot fairly be
said solely to serve a remedial purpose, but rather can only be explained as also serving either
retributive or deterrent purposes.” Austin v. United States, 509 U.S. 602, 621 (1993). That said,
the Supreme Court recently found that a restitution award to be paid by one criminal defendant
for losses collectively caused by thousands of independent actors may implicate the Excessive
Fines Clause despite the fact that “[t]he primary goal of restitution is remedial or compensatory,”
not punitive. Paroline v. United States, 134 S. Ct. 1710, 1726 (2014). The Paroline Court
reasoned that the restitution award in that instance was “imposed by the Government at the
culmination of a criminal proceeding and require[d] conviction of an underlying crime.” Id.
The Determinations awarded three forms of relief: back pay to the aggrieved employees;
interest on that back pay, also payable to the aggrieved employees; and a civil penalty of 25% of
back pay plus interest to be deposited in the New York State Treasury. (Determination 1 app. at
24-25; Determination 2 app. at 14-15.)
Interest has traditionally been characterized as compensatory, not punitive. Citibank,
N.A. v. Barclays Bank, PLC, 28 F. Supp. 3d 174, 184 (S.D.N.Y. 2013) (referring to prejudgment
interest). Interest is not for the purpose of punishing a wrongdoer, but to “compensate . . . for the
loss of use of money [a party] was owed during a particular period of time.” NML Capital v.
15
Republic of Argentina, 952 N.E.2d 482, 494 (N.Y. 2011). The circumstances that led the
Paroline Court to conclude that the restitution award in that case may have implicated the
Excessive Fines Clause are not present here—there has been no criminal prosecution or
conviction, nor are there a multiplicity of independent actors other than Pascazi whose wrongful
conduct caused the losses at issue. The Court concludes that the interest portion of the award
here is solely compensatory in nature and, accordingly, outside of the scope of the Excessive
Fines Clause. See, e.g., United States v. Davis, 648 F.3d 84, 96 (2d Cir. 2011) (finding the
Excessive Fines Clause did not apply to a forfeiture that “was not part of a criminal prosecution,”
but was rather “a civil in rem proceeding” brought under customs law, which is “traditionally
viewed as non-punitive”). By the same token, the back pay portion of the award is obviously
compensatory.
Although the civil penalty is fairly characterized as punitive, Pascazi’s Excessive Fines
claim still must be dismissed in its entirety because the 25% penalty is not “grossly
disproportional” to the offense. The penalty here is literally a fraction of the total amount of
money that Fiber Optek kept from its employees, adjusted for the time value of money. As 50%
shareholder of Fiber Optek at all relevant times, Pascazi received the benefit of wages that Fiber
Optek kept from its employees. Furthermore, to the extent that Pascazi argues that a penalty in
any amount would be disproportional because there was “zero finding of offensive conduct”
attributable to Pascazi (Pl.’s Opp. at 23-24), that claim is belied by the Commissioner’s findings
that Pascazi set wage rates, was responsible for the accuracy of time cards, which resulted in
falsified certified payroll records, and was personally advised by the NYDOL of the applicable
16
rates but disregarded that advice. 13 Indeed, Pascazi’s conduct formed the basis for the hearing
officer’s conclusion that Fiber Optek’s violations were “willful.” Although it was not necessary
to decide the legal issue of Pascazi’s individual culpability, the hearing officer implied that, were
it necessary to reach the issue, he would have found that Pascazi willfully violated the PWL.
(See Determination 1 app. at 20 (“Were it necessary to find willful participation, I note that Mr.
Pascazi was the corporate officer of Fiber Optek whom the Bureau specifically advised that
electrician rates were the proper rates to be paid on the projects addressed herein.”).)
D.
Count 4: Violation of 42 U.S.C. § 1983.
Count 4 alleges that Defendant, under color of state law, is depriving and will continue to
deprive Pascazi of his constitutional rights as set forth in the Counts 1-3. Because there has been
no violation of Pascazi’s “rights, privileges, or immunities secured by the Constitution and
laws,” see supra Parts II.A-C, there can be no claim under § 1983, see 42 U.S.C. § 1983.
E.
Additional Arguments 14
1.
ERISA Preemption
Pascazi’s argument that the PWL is preempted by ERISA ignores clear, controlling
Second Circuit precedent to the contrary. Pascazi argues that the PWL is preempted because it
permits the Commissioner to pursue a company and its shareholders for failure to pay employees
prevailing wages and supplements—which may in some circumstances include contributions to
an ERISA plan. The Second Circuit in Burgio & Capofelice, Inc. v. N.Y.S. Department of Labor,
107 F.3d 1000 (2d Cir. 1997), held that ERISA preemption does not apply where the NYDOL
13
For clarity, the Court here takes judicial notice only insofar as the administrative record roundly disproves
Pascazi’s contention that there was no finding of offensive conduct attributable to Pascazi. The Court may do so for
the reasons explained in footnotes 1-2, supra.
14
The Court notes that these theories are not pleaded in the First Amended Complaint. To the extent that Pascazi
might be seeking to further amend the Amended Complaint in order to properly plead these theories, leave to amend
is denied as futile for the reasons set forth in this Part. Roth v. CitiMortgage Inc., 756 F.3d 178, 183 (2d Cir. 2014)
(“[L]eave to amend need not be granted where the proposed amendment would be futile.”).
17
pursues a “total package enforcement” policy, whereby the employer is ordered to pay a total
amount of compensation to workers, in any form. 107 F.3d at 1007-11 (distinguishing the total
package approach from the “line item approach,” which the Second Circuit had previously
rejected in General Electric Co. v. N.Y.S. Department of Labor, 891 F.2d 25, 28-30 (2d Cir.
1989), because it prescribed the type and amount of an employer’s contributions to a plan, the
rules and regulations under which a plan operated, and the nature and amount of the plan
benefits); see also HMI Mech. Sys., Inc. v. McGowan, 266 F.3d 142 (2d Cir. 2001). There is no
suggestion that the NYDOL is pursuing anything but a total package enforcement policy, as
approved by the Second Circuit, in this case. Accordingly, the enforcement of § 220-b(2)(g)
against Pascazi does not violate the preemption provisions of ERISA.
2.
Substantial Evidence Standard
Pascazi argues that the hearing officers’ purported use of the substantial evidence
standard, 15 rather than the preponderance of the evidence standard, denied him due process. The
Court notes that the Appellate Division heard, considered, and rejected this precise argument in
Pascazi’s Article 78 proceeding. The substantial evidence standard has been upheld as
constitutional in other contexts, see, e.g., Superintendent, Mass. Corr. Inst. v. Hill, 472 U.S. 445,
454, (1985) (“some evidence” standard constitutionally sufficient to support decision to revoke
good time credits for prisoner); Lefford v. McCall, 916 F. Supp. 150, 155 (N.D.N.Y. 1996)
(“substantial evidence” standard constitutionally sufficient to support decision to revoke
disability pension). Pascazi’s argumentation in his opposition brief is wholly conclusory, and the
Court finds that the sanction involved here—a temporary ban from bidding on public work
15
For the reasons set forth in the Commissioner’s brief in the Article 78 proceeding (see Kupferberg Decl. Ex. D, at
27, ECF No. 18-4), it is unclear whether Pascazi is correct in asserting that the hearing officers even applied the
substantial evidence standard.
18
contracts—does not raise the constitutional concerns of a “stigma-plus” case, as Pascazi argued
in the Article 78 proceeding, compare Miller v. DeBuono, 689 N.E.2d 518, 520, 522 (N.Y. 1997)
(finding the preponderance standard constitutionally mandated because the sanction at issue
“publicly brand[ed] petitioner a patient abuser,” banning her from employment in the residential
health care industry and potentially preventing “future employment opportunities in any arena”);
Valmonte v. Bane, 18 F.3d 992, 1004 (2d Cir. 1994) (registration as child abuser); and Lee TT. v.
Dowling, 664 N.E.2d 1243, 1246 (N.Y. 1996) (same) with Agnew v. N. Colonie Cent. Sch. Dist.,
787 N.Y.S.2d 521, 522 (App. Div. 2005) (no stigma where teacher’s aide was discharged for
stealing money from a kindergarten classroom); Williams v. Niccoletti, 743 N.Y.S.2d 160, 161
(App. Div. 2002) (no stigma where discharge was for failing a drug test); Malloch v. Ballston
Spa Cent. Sch. Dist., 671 N.Y.S.2d 845, 847 (App. Div. 1998) (no stigma where school bus
driver was discharged for reckless driving); and Suitor v. Keller, 684 N.Y.S.2d 454, 455 (App.
Div. 1998) (no stigma where police officer was discharged for misconduct). Although not
precisely on point, at least one court in this circuit has dismissed as a matter of law a stigma-plus
claim brought by a contractor that was banned from public work contracts for “willful” PWL
violations and falsifying payroll records. See CNP Mech., 2007 WL 3565587, at *6. Pascazi
was not denied due process.
19
CONCLUSION
For the foregoing reasons, Defendant's motion to dismiss is GRANTED. The Court
respectfully directs the Clerk to terminate the motion at ECF No. 17 and to close this docket.
D ated:
f!,-
February r&, 2015
White Plains, New York
SO ORDERED:
NELSON S. ROMAN
United States District Judge
20
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