Allied Construction Industries v. City Of Cincinnati
ORDER granting 52 Motion for Summary Judgment; denying 53 Motion for Summary Judgment; denying 55 Motion for Summary Judgment; granting in part and denying in part 65 Motion to Strike ; granting in part and denying in part 74 Motion to Strike. Signed by Judge Michael R. Barrett on 9/30/16. (ba)
UNITED STATES DISTRICT COURT.
SOUTHERN DISTRICT OF OHIO
ALLIED CONSTRUCTION INDUSTRIES,
CITY OF CINCINNATI,
) Case No.: 1:14cv450
) Judge Michael R. Barrett
This matter is before the Court on: 1) Plaintiff’s Motion for Summary Judgment (Doc. 52);
and 2) Defendant’s Motion for Summary Judgment (hereinafter referred to as the “City”) (Doc.
53); 3) Intervenor Local 265’s Motion for Summary Judgment (“Local 265”) (Doc. 55), 4) Local
265’s Motion to Strike (Doc. 65); 5) Defendant’s Motion to Strike (Doc. 74), and the responsive
memoranda thereto. This matter is now ripe for review.
I. FACTUAL OVERVIEW
The facts of this case are largely undisputed. Plaintiff Allied Construction Industries
(“ACI”) is a not-for-profit trade association comprised of over 500 member companies who
employ more than 25,000 individuals throughout the Greater Cincinnati area. (Doc. 52-2, PageID
421, ¶ 4).
Its members include general contractors, subcontractors, architects, engineers,
developers, material suppliers and service providers to the commercial construction industry,
proving construction services for both public and private projects in southwest Ohio. (Id., PageID
421-22, ¶ 4). Its members include both union and open-shop contractors. Id.
In 2012, The City of Cincinnati enacted CMC Chapter 320, commonly referred to as the
Responsible Bidder Ordinance (“RBO”); the RBO was amended to its current version in May
2013. Relevant to this case, the RBO affects the award of construction contracts for Greater
Cincinnati Water works (“GCWW”) and Metropolitan Sewer District of Greater Cincinnati
(“MSD”) projects valued over $400,000. ACI argues the Supremacy Clause, U.S. Const. art. VI §
2, and the preemption provision of the Employee Retirement Income Security Act ("ERISA"), 29
U.S.C. § 1144(a), prohibit the application of three provisions of the City's RBO when awarding its
water works construction contracts.
The three pertinent provisions concern apprenticeship
requirements, the pre-apprenticeship training fund, and two of the lowest-and-best bidder factors.
The apprenticeship requirements in Section 320-5 of the CMC require bidders and the
bidders' subcontractors to participate in an apprenticeship program for the primary
apprenticeable occupation on the project that has graduated at least one apprentice from the
apprenticeship program for each of the past five years.
requirement is inapplicable, however, a) if the construction contract is less than $400,000, and b)
to a subcontractor that is a registered small business enterprise with the MSD or is a small
business enterprise certified by the City, if the value of the subcontract with that subcontractor is
under $250,000. CMC 320-5, 320-1-C1.
The pre-apprenticeship training fund provision in Section 320-7 of the CMC requires
contractors 1 on GCWW and MSD projects to pay $.10 per hour per worker "for the purpose of
funding qualified pre-apprenticeship programs that will create a pipeline of opportunities from
recruitment to placement to retention." CMC 320-7. The payment "shall go into MSDGC Fund
701 where the project is managed by MSDGC and into water works Fund 101 where the project
"Contractor" is defined in the RBO as "any person or company that has entered into a Construction Contract with
the City." CMC 320-1C2.
is managed by water works." Id. The payments, however, may "not be taken from the fringe
benefits of the contractor's employees." Id.
The two lowest-and-best bidder factors in Sections 320-3(j) and (k) of the CMC require
bidders on Cincinnati GCWW projects and MSD projects to certify whether they provide a
health care plan and a pension or retirement program to their employees. CMC 320-3(j), (k).
Those provisions require that the contributions "be part of the employee's regular compensation
and not merely part of the employee's compensation during the period of time for which the
employee is performing work on the project." CMC 320-3(j), (k). Those certifications are
factors considered by the City in determining the lowest and best bidder for a construction
contract. CMC 320-3.
A bidder not in compliance with these provisions will not be awarded water works
construction contracts, as such a bid is considered unresponsive. (Doc. 52-2, PageID 423, ¶ 16).
On June 30, 2014, the Court granted ACI’s request for preliminary injunctive relief.
(Doc. 15). Consequently, the City was preliminarily enjoined from enforcing CMC 320-3(j) and
(k), CMC 320-5, and CMC 320-7 in connection with specifically named pending projects, as
well as other pending or future water works construction projections for which contracts had not
been awarded. Id. at PageID 188. Bond was set at $1 million dollars, which was posted on July
3, 2014. (Doc. 16). In accordance with the order, the parties came to certain agreements relating
to pending projects. (Doc. 18). Subsequently, on September 8, 2014, Local 265 sought to
intervene in this case. (Doc. 20). The Court granted Local 265’s Motion on November 24, 2014.
II. EVIDENTIARY ISSUES
Local 265 attaches to its Response to Plaintiff’s Motion a list of objections to the
affidavits of Terry Phillips and Steven Klinker. (See Docs. 64-30, 64-31). The City followed
suit, and filed a separate document titled “Defendant’s Evidentiary Objections to Plaintiff’s
Dispositive Motions.” (Doc. 71).
To be considered on a motion for summary judgment, an affidavit must satisfy three
requirements: 1) it “shall be made on personal knowledge, 2) it “shall set forth such facts as
would be admissible in evidence”, and 3) it “shall show affirmatively that the affiant is
competent to testify to the matters stated therewith.” Fed. R. Civ. P. 56(e).
Affidavits not in compliance with Rule 56(e) are subject to a motion to strike. Reddy v.
Good Samaritan Hosp. & Health Ctr., 137 F.Supp.2d 948, 954 (S.D. Ohio 2000). The Court
notes, however, that Local 265 and the City did not file motions to strike, but rather simply list
their objections to various paragraphs of each affidavit. Moreover, both parties provide little
argument, if any, to accompany their evidentiary objections. Because meeting the requirements of
Rule 56(e) is mandatory, the Court addresses the objections raised. The crux of their objections is
that the contested paragraphs are not based upon personal knowledge or are not relevant,
implicating two of the requirements under Rule 56(e).
“In resolving a motion to strike, the Court should use ‘a scalpel, not a butcher knife.’
Perez v. Volvo Car Corp., 247 F.3d 303, 315-16 (1st Cir.2001). Thus, it is appropriate for the
Court to strike portions of affidavits that do not satisfy the requirements of Rule 56(e).” Giles v.
University of Toledo, 241 F.R.D. 466, 469 (N.D. Ohio 2007) (citing 11 James Wm. Moore,
Federal Practice § 56.14[d] (Matthew Bender 3d ed.), n. 46 and 47).
First, evidence is relevant if it has “any tendency” to make a fact “of consequence” more or
less probable. Fed. R. Evid. 401. The threshold for relevance is low, and in fact the standard is
“extremely liberal.” Dortch v. Fowler, 588 F.3d 396, 400 (6th Cir. 2009). Under the liberal Rule
401 standard, the Court concludes that the information in both affidavits is relevant.
In addition, affidavits may only include facts based on personal knowledge. Fed. R. Civ. P.
56(e). Personal knowledge may be inferred from the content of the statements. Reddy, 137 F.
Supp.2d at 957 (citing 11 James Wm. Moore et al., Moore's Federal Practice § 56.14[c] (3d ed.
1999). However, inferences, thoughts and opinions must be based on first hand observations or
personal experience, substantiated by specific facts. See Harrah’s Entertainment, Inc. v. Ace
American Ins. Co., 100 Fed. Appx. 387, 394 (6th Cit. 2004). Further, conclusions of law found in
affidavits should not be considered on summary judgment. Id.
Turning to the present case, the affidavits of Phillips and Klinker each state that having
been “duly cautioned and sworn, and states under oath based on personal knowledge as follows…”
(Docs. 52-2, 52-3). Moreover, Phillips is the executive director of ACI, and Klinker is the former
president of ACI, now the executive vice president of Dugan & Meyers Construction Company. Id.
While the Court finds the majority of each affidavit in compliance with Rule 56(e), there are a few
issues to address. Because Local 265 and the City did not file motions to strike, the Court
addresses their objections only to the extent they are sustained. All other objections are overruled.
1. Affidavit of Terry Phillips
Paragraph 10 of the Phillips affidavit is stricken because he lacks personal knowledge to
know whether the City amended the Apprenticeship Ordinance at the urging of Laborer’s Unions.
His opinion is not substantiated by specific facts.
Paragraph 16 is partially stricken – namely, the phrase “[a]s a penalty.” The Court finds
this to be an unsubstantiated legal conclusion. The remainder of Paragraph 16 stands.
2. Affidavit of Steven Klinker
Turning to Klinker’s affidavit, Paragraph 14 is stricken for lack of personal knowledge.
His opinion that the vast majority of water works projects within the City limits exceed $400,000
may very well be based on first hand observations or personal experience. From the information
contained in the affidavit, however, the Court must conclude that this statement is not substantiated
by specific facts, which would allow the Court to make such an inference.
B. Motions to Strike
Local 265 and the City seek to strike four statements from the deposition of Plaintiff’s
expert, Andrew Jacobs, as legal conclusions that go to the ultimate issue in this case – whether
ERISA preempts the RBO. While the Court does not disagree that some of Mr. Jacobs’ opinions
embrace the ultimate issue, such a finding is not automatically grounds for exclusion. Federal
Rule of Evidence 704 states: “[a]n opinion is not objectionable just because it embraces an
ultimate issue.” Fed. R. Evid. 704. Thus, a Court may admit an expert opinion that embraces an
ultimate issue when it is helpful to the trier of fact.
Nevertheless, Local 265 and the City take issue with a statement in Mr. Jacobs’ deposition
in which he said he was retained to provide a legal conclusion. Expert testimony may embrace the
ultimate issue, but not provide an answer to the ultimate issue of law. Berry v. City of Detroit, 25
F.3d 1342, 1353 (6th Cir. 1994). Despite initially stating that he was retained to provide an expert
opinion on whether the contested provisions of the RBO are preempted by ERISA, ACI points out
that Mr. Jacobs was quick to clarify his statement:
Q: So you were asked to opine as to whether these statutes are preempted?
A: Well, actually, let me back off. I – I think I misspoke there. I was asked to opine as to
how these statutes would impact an ERISA plan in terms of its benefit structure and
otherwise, the impact of it. I was not necessarily asked to give a legal opinion on whether
or not ERISA preempted these statutes. I was asked to opine on the impact of these
statutes on the structure of the plans based on my experience working with plans over the
last 22 years and working with clients and developing and designing plans and operating
and administering them.
Jacobs Deposition, 17:10-22.
While the Court agrees that Mr. Jacobs may not opine as to whether the RBO is subject to
preemption, much of Mr. Jacobs’ testimony provides information about the policies, benefit
structures and objectives of ERISA. At times, he also explains how, in his opinion, the RBO
would impact existing ERISA plans. To the extent Mr. Jacobs ventures into the realm of providing
legal conclusions, the Court is capable of parsing through Mr. Jacobs’ testimony. Therefore, the
Court will disregard Mr. Jacobs’ opinion to the extent that he opines on whether the RBO is
preempted by ERISA.
Local 265 and the City next argue that Mr. Jacobs’ testimony is unhelpful because he
bases his opinion solely on his review of ACI’s Complaint and this Court’s prior opinion. They
also argue that Mr. Jacobs’ opinions are speculative. The Court finds that these arguments go to
the weight and sufficiency of the evidence, not admissibility. Accordingly, while the Court takes
these arguments into consideration when determining how much weight to give Mr. Jacobs’
testimony, the motions to strike are denied on these grounds.
III. MOTIONS FOR SUMMARY JUDGMENT
Federal Rule of Civil Procedure 56(a) provides that summary judgment is proper “if the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” The moving party has the burden of showing an absence of
evidence to support the non-moving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325
(1986). Once the moving party has met its burden of production, the non-moving party cannot rest
on his pleadings, but must present significant probative evidence in support of his complaint to
defeat the motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49
(1986). These standards upon which the court evaluates motions for summary judgment do not
change simply because the parties present cross-motions. Taft Broad. Co. v. United States, 929
F.2d 240, 248 (6th Cir. 1991).
ACI argues that the Supremacy Clause, U.S. Const. art. VI § 2, and the preemption
provision of ERISA, 29 U.S.C. § 1144(a), prohibit the application of the three aforementioned
provisions of the City's RBO when awarding its water works construction contracts. ERISA is a
federal law that regulates employee benefit plans. 29 U.S.C. §§ 1002-1461. "Congress enacted
ERISA to 'protect . . . the interests of participants in employee benefit plans and their
beneficiaries' by setting out substantive regulatory requirements for employee benefit plans and
to 'provid[e] for appropriate remedies, sanctions, and ready access to the Federal courts.'" Aetna
Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting 29 U.S.C. § 1001(b)) (alteration and
ellipses in original). The statute seeks "to provide a uniform regulatory regime over employee
benefit plans." Davilla, 542 U.S. at 208. To promote that uniformity, ERISA contains a broad
preemption provision that "shall supersede any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan" falling within the regulatory scheme. 29 U.S.C. §
1144(a). The "employee benefit plans" referred to therein include those plans, funds or programs
established or maintained by the employer or an employee organization, or both, for the purpose
of providing its participants or beneficiaries, among other benefits, "medical, surgical, or hospital
care or benefits," "apprenticeship or other training programs," and "pension" or "retirement
income." 29 U.S.C. § 1002(1)-(2).
Historically, it has been a challenging task for the courts to determine when a law "relates
to" ERISA for the purposes of preemption. See California Div. of Labor Standards Enforcement
v. Dillingham Constr. 519 U.S. 316, 324 (1997); New York State Conference of Blue Cross &
Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995); Shaw v. Delta Air Lines, Inc.,
463 U.S. 85, 96-99 (1983). The Supreme Court, however, has provided a general framework to
guide the analysis by defining a law that "relates to" an ERISA-covered plan as one that either 1)
"references" such a plan or 2) has a "connection with" the plan. Dillingham, 519 U.S. at 324-25.
To "reference" an ERISA plan, the law at issue must "act immediately and exclusively upon
[the] ERISA plan" or the ERISA plan must be "essential to the law's operation." Id. at 325. To
have the requisite "connection with" an ERISA plan, the law at issue must mandate (or
effectively mandate) something, and that mandate must fall within the area that Congress
intended ERISA to control exclusively. Associated Builders & Contrs. v. Mich. Dep't of Labor
& Economic Growth, 543 F.3d 275, 281 (6th Cir. 2008) (citing Dillingham, 519 U.S. at 325).
1. Market Participant Doctrine
The City and Local 265 first argue that the provisions at issue are not subject to
preemption because the City was acting as a market participant. The Court addresses this issue
first, because if the RBO is proprietary in nature, ACI’s arguments based on preemption fail.
The “market participant doctrine” was adopted in Boston Harbor and applied by the
Sixth Circuit in Michigan Bldg. & Const. Trades Council v. Snyder (“Snyder”), 729 F.3d 572
(6th Cir. 2013). Building & Construction Trades Council v. Associated Builders & Contractors
of Mass./R.I., Inc., 507 U.S. 218 (1993) ("Boston Harbor"). Under the doctrine, a public entity
acts as a market participant if its action: 1) is intended to address proprietary concerns; and 2) is
sufficiently tailored to address those concerns. Snyder, 729 F.3d at 577-82. The distinction
being that when the government meets both requirements under the doctrine, the government
entity is acting purchaser as opposed to a regulator.
The City and Local 265 argue that in passing the RBO, the City, as the proprietor of
water works projects, was acting to advance its goals of efficient completion and safe
construction with trained workers. (Doc. 55-1, PageID 685). To begin, the City and Local 265
cite. Assoc’d Builders and Contractors, Inc. v. New Castle County, 144 F. Supp.3d 633 (D. Del.
Nov. 17, 2015) in support of their argument that the City was acting as a market participant.
While the undersigned acknowledges that the facts in New Castle are similar, a District Court’s
decision in the Third Circuit is certainly not binding on this Court. When considering the City’s
actions in this case, the Court finds a different conclusion is warranted than that in New Castle.2
ACI argues that much of the case law cited by Local 265 is distinguishable. The Court
agrees. The first distinction ACI makes is actions taken by a municipality on a single project,
such as a project labor agreement (“PLA”), and actions taken by a municipality in its government
law-making authority. (Doc. 63, PageID 1281). In Boston Harbor, the independent government
agency was tasked with cleaning up the Boston Harbor. It hired an engineering company that
served as the project manager. The engineering company then negotiated a contract with the
contractors that required a PLA. The Court held that the PLA was not preempted by the NLRA
because the agency acted as a market participant rather than as a government regulator. In
reaching that conclusion, the Court noted various distinctions between market participants and
government regulators. Among those distinctions were that the State was acting as "a market
New Castle was decided on a motion for preliminary injunctive relief. 144 F. Supp.3d at 635.
participant with no interest in setting policy" and was performing a private role rather than a
characteristically governmental role.
Of importance, at issue in Boston Harbor was the
enforcement of one PLA negotiated by private parties for one specific project.
In Snyder, the Sixth Circuit found that the State of Michigan was acting as a market
participant when it made an “across-the-board determination” that its contractors were not
required to enter into PLAs for public construction projects. Snyder, 729 F.3d at 574. The Sixth
Circuit reasoned that because a private developer could make such a determination, the State of
Michigan was acting as a market participant when it made the same determination.
However, of significance, whether a contractor enters into a PLA does not preclude a contractor
from bidding on and receiving a construction contract. Rather, PLAs establish the conditions of
employment for each specific construction project. Snyder, 729 F.3d at 574. The Sixth Circuit
in Snyder also found the effect on public projects limited. Id. at 578. In fact, in Snyder, the
Michigan legislature specified that it intended the act to provide for fair and open competition.
Id. at 576.
Local 265 also cites the Fifth Circuit’s decision in Cardinal Towing & Auto Repair, Inc.
v. City of Bedford, Tex., 180 F.3d 686 (5th Cir. 1999), which has been adopted by the Sixth
Circuit. See Petrey v. City of Toledo, 246 F.3d 548 (6th Cir. 2001), abrogated on other grounds
by City of Columbus v. Ours Garage & Wrecker Serv., Inc., 536 U.S. 424, 122 S.Ct. 2226, 153
L.Ed.2d 430 (2002).
In that case, the Fifth Circuit posed two questions to answer when
determining whether a government entity was acting as a market participant: “First, does the
challenged action essentially reflect the entity's own interest in its efficient procurement of
needed goods and services, as measured by comparison with the typical behavior of private
parties in similar circumstances? Second, does the narrow scope of the challenged action defeat
an inference that its primary goal was to encourage a general policy rather than address a specific
proprietary problem?” 180 F.3d at 693.
Here, the would-be effect on public projects is far reaching – “tantamount to a
regulation,” as explained in Wisconsin Dept. of Industry, Labor and Human Relations v. Gould,
Inc., 475 U.S. 282, 289 (1986). That is, bidders must either follow the requirements of the RBO
or they will not receive contracts for all water works construction projects over a specified
value. 3 Consequently, the effect of the RBO reaches further than protecting the City's private
interests in the efficient use of its resources, as apparently intended by the City. Instead, it
controls the way in which contractors generally conduct their business, as discussed more fully
Moreover, because the RBO does not address a specific proprietary problem, but rather,
broad concerns regarding the City’s interest in the efficient use of its resources, the Court cannot
conclude that the City, in enacting the RBO, had no interest in setting policy, as the Supreme
Court found in Boston Harbor. For example, one intended purpose of the RBO, at least initially,
was to “ensure that the contractors hired to work on these projects are in compliance with all
federal, state, and local laws and that they provide their workers with fair compensation and
benefits. 4” (Doc. 55-3, PageID 706). Thus, although the City surely needs to procure goods and
services to complete its water works projects, the City’s actions do not defeat the inference that
its primary goal was to encourage a general policy.
It remains unclear from the evidence in the record to what extent projects valued below $400,000 exist, as the
Court declines to consider Paragraph 14 of Klinker’s Affidavit, as discussed above. The answer to this question,
however, is not determinative.
This language was removed when the RBO was amended to its current version.
Accordingly, the Court finds that the RBO is not narrowly tailored to address proprietary
concerns of the City. Thus, the City was not acting as a market participant when it enacted the
2. The RBO
ACI argues that the RBO is preempted because each provision has the requisite
“connection with” an ERISA plan. 5 The City argues generally that the RBO is an indirect
economic incentive because it does not mandate anything. The City further argues that even if
the contested provisions of the RBO are mandates, they are not areas that Congress intended
ERISA to control.
i. Apprenticeship Requirements (CMC 320-5)
The City first argues that apprenticeship regulations and thus, Section 320-5 fall within
the municipality’s traditional police powers. To begin, the Court must acknowledge that “States
have long regulated apprenticeship standards and training” and “fall well within [State’s]
traditional police powers.” Assoc’d. Builders & Contractors v. Michigan Dept. of Labor, 543
F.3d 275, 282 (6th Cir. 2008) (citing Cal. Div. of Labor Standards Enforcement v. Dillingham
Constr., N.A., Inc., 519 U.S. 316, 330–32, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997)). With that
said, however, there are a couple of issues specific to the RBO in this case that the Court finds
distinguishable from the Michigan statute at issue in Associated Builders.
ACI argues that the requirements of Section 320-5 preclude its members from effectively
bidding on water works construction contracts, and interfere with ACI's ERISA-compliant
apprenticeship plans so as to disturb the uniformity of its administration. With respect to the
ACI focuses its attention on the “connection with” requirement, and does not address whether the RBO
“references” an ERISA plan. Because the Court agrees that the RBO does not reference an ERISA plan, the Court
limits its analysis to whether each contested provision of the RBO has a connection with an ERISA plan. (See Doc.
mandate issue, ACI argues that Section 320-5 mandates a specific type of apprenticeship
program participation as a condition of being considered a responsible bidder. The City argues
that Section 320-5 mandates nothing, asserting that ‘simple noncompliance” is an option because
contractors face no penalty if they do not follow the apprenticeship requirements. In other
words, contractors may choose whether to bid on the City’s water works projects and thus, may
choose whether to follow Section 320-5.
The Court agrees with ACI’s argument that simply because a contractor can avoid these
requirements by not bidding on City projects does not relieve the RBO from its undesirable
classification, or instead, make it an incentive. Under the City’s theory, the City could enact any
local ordinance, requiring just about anything, and proclaim it not to be a mandate because
contractors are not obligated to do business with the City. Upon review of the record, the Court
rejects the City’s argument, and concludes that based upon the plain language of the RBO,
Section 320-5 is a mandate. Section 320-5 mandates something – namely, that bidders who seek
to obtain water works construction contracts with the city maintain and participate in an
apprenticeship program that satisfies the graduation requirement. The Court’s conclusion in this
case is in accord with the Sixth Circuit’s finding in Associated Builders that the ratio and
equivalency requirements of that statute with respect to apprentices “plainly contain mandates.”
Associated Builders, 543 F.3d at 282. The undersigned’s conclusion does not change when
considering that the provision at issue in this case is a city ordinance, rather than the state-wide
mandate in Associated Builders.
The City argues that even if it is a mandate—a classification in which it vehemently
denies—any connection with ERISA that the apprenticeship requirements might have is too
remote to warrant ERISA preemption. Dillingham, 519 U.S. at 330.
After this Court granted injunctive relief, the First Circuit addressed the issue of
preemption with respect to an exceptionally similar ordinance. Merit Const. Alliance v. City of
Quincy, 759 F.3d 122 (1st Cir. 2014). 6 The First Circuit found that an ordinance, which required
bidders on municipal public works projects to engage in a bona fide apprentice training program
was preempted by ERISA. The Court in Quincy addressed the same arguments raised by the
City, explaining as follows:
[The City] asserts that even if its Ordinance constitutes a mandate, that should not
be the end of the matter. In support, it suggests that ‘[t]he key distinction is
between a statute that mandates or effectively mandates an aspect of law with
which ERISA is concerned ... and a statute that does not.’ Assoc'd Builders &
Contrs. v. Mich. Dep't of Labor & Econ. Growth, 543 F.3d 275, 280 (6th
Cir.2008). ERISA is a statute concerned with funding, its thesis runs, and local
regulation of apprentice training standards is too remote to warrant ERISA
This assertion is true as far as it goes, but it does not take the City very far.
ERISA ‘has more than one purpose’” Simas v. Quaker Fabric Corp., 6 F.3d 849,
856 (1st Cir.1993). In addition to funding concerns, ‘[t]he uniformity of
regulation gained by employers under ERISA was assuredly part of the legislative
balancing of interests and trade-offs.’ Id.
The purpose of uniformity was reiterated in Davilla, when the Supreme Court explained
that ERISA seeks "to provide a uniform regulatory regime over employee benefit plans." 542
U.S. at 208. Specifically, impacting the uniformity of the structure and administrative practices
for ERISA plans is an area with which ERISA is concerned. Fort Halifax Packing Co. v. Coyne,
482 U.S. 1, 9-10 (1987).
With that guidance in mind, the Court turns to the present case. To begin, uniformity is a
concern in this case that was not present in Associated Builders, as the statute in question was a
Michigan statute that imposed certain statewide ratio and equivalency requirements for
Quincy relies, in part, on a case from the Eighth Circuit, Minnesota Chapter of Associated Builders & Contractors,
Inc. v. Minnesota Department of Public Safety, 267 F.3d 807 (8th Cir. 2001), that the Sixth Circuit declined to
follow and distinguished in its decision concerning apprenticeship standards and training in Associated Builders, 543
F.3d at 285. Accordingly, to the extent Quincy relies on the Eighth Circuit’s decision, it is afforded little weight.
apprentice electricians, and did not otherwise address areas with which ERISA is expressly
concerned. Assoc’d Builders & Contractors v. Michigan Dept. of Labor, 543 F.3d 276. Here, as
in Quincy, the City seeks to enact a citywide ordinance. The First Circuit explained with respect
to uniformity as follows:
The Ordinance plainly disturbs that balance. Let us offer an example. Although
the Ordinance requires the graduation of at least one apprentice within the
previous twelve months, see Quincy, Mass., Code § 15.26.010(C), Fall River's
counterpart ordinance required the graduation of at least two apprentices per year
for the three years prior to a bid, see Util. Contrs. Ass'n, 2011 WL 4710875, at *7.
Accordingly, compliance with the City's formula would not effect compliance
with Fall River's; and so the Ordinance would ‘requir[e] the tailoring of plans and
employer conduct to the peculiarities of the law of each jurisdiction.’ Ingersoll–
Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474
(1990). Such a result would be “fundamentally at odds with the goal of uniformity
that Congress sought to implement” through the enactment of ERISA. Id.
This Court shares the same concerns regarding uniformity. The City goes to great
lengths to distinguish the facts in this case from those in Sherfel v. Newsom, 768 F.3d 561 (6th
Cir. 2014) relied upon by ACI. It explains that in Sherfel, the Sixth Circuit found that the state
law at issue threatened national uniform plan administration. But the City fails to explain why
the requirement to comply with various city ordinances could not have the same effect on
uniformity of plan administration. Indeed, because the RBO is a local city ordinance, it requires
contractors who do business elsewhere to tailor their plans to comply with other citywide
ordinances enacted throughout the state of Ohio. This is particularly true when considering that
the RBO obligates more than what is required under Ohio law. Specifically, Ohio Revised Code
(“R.C.”) § 4139.06 provides that participation in apprenticeship programs “shall be entirely on a
voluntary basis.” Compare CMC 320-5 with Ohio Rev. Code § 4139.06. Accordingly, because
Ohio law does not require participation in apprenticeship programs, ACI contractors are
dependent upon the individual choices of apprentices to complete the program for five
consecutive years. (Doc. 52-3, PageID 428, ¶ 21).
The concern of uniformity in this respect becomes more than conjecture when
considering the undisputed testimony of Steven Klinker, president of Dugan & Meyers
Construction Company. He testifies that “[e]ven though our employees are based in different
states, Dugan & Meyers offers uniform compensation, including discretionary bonuses, health
benefits, retirement benefits and discretionary profit-share benefits to all employees across all of
our offices.” (Doc. 52-3, PageID 428, ¶ 5). Thus, if ACI’s members offer uniform plans to all
employees across different states, a city ordinance that has more stringent requirements
regarding apprenticeship programs could disrupt national uniform administration. For example,
if a contractor’s uniform plan is not sufficient under the RBO, and it wants to continue to offer
uniform benefits across all states, it would be forced to tailor its plan accordingly to bid on water
works projects. Therefore, such apprenticeship requirements differing from city to city within
the same state are not readily adoptable by some employers.
Moreover, Section 320-5 specifies a success rate of one graduate per year for each of the
past five years. Evidence on the effect of this provision is scant, but undisputed nonetheless.
ACI provides evidence that the apprenticeship program in which its members participate cannot
meet the five consecutive year graduation requirement due to its limited geographic area. (Doc.
52-2, PageID 423, ¶ 13-15); Doc. 52-3, PageID 428, ¶ 18). In fact, the undisputed evidence
provides that the Laborer’s Union apprenticeship program is the only apprenticeship program
that satisfies the requirements of the RBO. Id. at ¶ 19. As a result, Section 320-5 not only acts
as a time bar to programs of lesser duration, but also to programs with fewer participants by no
fault of their own. Those graduation requirements thus severely limit the choices employers
have for their apprenticeship programs, leaving only the Laborer’s Union apprenticeship
program. And the Laborer’s Union apprenticeship program—the only adequate choice under
Section 320-5’s requirements—is not open to open-shop contractors. (Doc. 52-3, PageID 430,
¶ 20). Accordingly, regardless of whether ACI members wish to comply with Section 320-5,
they are unable to do so in the RBO’s current form.
Further still, the effect of Section 320-5 is to effectively require a minimum number of
apprentices in the apprenticeship program.
A law that specifies a minimum benefit level
implicates ERISA concerns. See Retail Indus. Leaders Ass'n v. Fielder, 475 F.3d 180, 193 (4th
Cir. 2007). And while it was clear in Associated Builders that the purpose of the statute was to
promote workplace safety, it is not clear how the strict requirements of Section 320-5 further the
City’s intended purposes.
Accordingly, the Court finds that Section 320-5 impermissibly impacts the uniformity of
the structure and administrative practice for ERISA plans. The apprenticeship requirements are
more restrictive than those in Dillingham where employers were permitted to compete regardless
of which option they chose for their ERISA plans, even though the costs of competing were
dependent upon the option chosen. 519 U.S. at 332-34. Section 320-5 imposes requirements to
compete at all; there is no more expensive option from which to choose. As such, ERISA
preempts Section 320-5 of the RBO. ACI is entitled to summary judgment on this issue.
ii. Pre-apprenticeship Training Fund (320-7)
The RBO does not stop at mandating requirements for apprenticeship training programs.
It also requires contractors to pay $.10 per hour per worker into an MSDGC Fund 701 or Water
works Fund 101 for a pre-apprenticeship program, which are separate funds to support qualified
pre-apprenticeship programs. The payments, however, may not be taken from the fringe benefits
of the contractor’s employees. The City argues that the fund is not related to an ERISA plan.
Instead, it argues the fund is established and maintained by the City for purposes set by the City.
Again, for the same reasons discussed above, the Court concludes that Section 320-7
mandates something – specifically, the contractor’s payment of a specified amount into the fund
as well as the manner in which that payment to the fund shall be made. While the Court agrees
with the City that the RBO applies to ERISA and non-ERISA plans alike and thus, does not
reference an ERISA plan, the question remains whether the mandate has the requisite connection
to an ERISA plan and, if so, relates to something that ERISA intends to preempt.
The Sixth Circuit explained in Associated Builders that the existence of a separate fund to
support an apprenticeship training program triggers ERISA’s potential application. Assoc’d
Builders, 543 F.3d at 282. Moreover, Congress is concerned with the mismanagement of funds
accumulated to finance employee benefits. Dillingham, 519 U.S. at 326-27 (citing Morash, 490
U.S. at 115). While the undersigned acknowledges that Dillingham does not explicitly extend to
local apprenticeship funds, funds such as those required in Section 320-7 likewise threaten to
affect the uniformity of ERISA plans.
The undersigned raised several concerns with the requirements of Section 320-7 in its
Order granting preliminary injunctive relief; those concerns remain. First, the requirement that
the employer not make the payment out of fringe benefits precludes the employer from reducing
or otherwise changing the level of the benefit offered to its employees while mandating a
specified rate of additional cost for the benefit. In that vein, Mr. Klinker explained that”[i]n
recent years, we have decided to focus our compensation more on discretionary bonuses than on
profit sharing, but before the RBO we retained the discretion to change the amount of our
contribution either from year to year, or to vary the compensation mix by increasing one and
decreasing the other.” (Doc. 52-3, PageID 428, ¶ 8).
Moreover, if an employer is required by law to make a payment directly to a specified
benefit program out of funds other than its fringe benefits, it faces a potential quandary. Not
only could the provided benefit be duplicative of a benefit the employer already provides, but
integrating that benefit into an already-established ERISA plan would present obstacles given the
potential funding discrepancies. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 13-15 (1987).
For example, Mr. Klinker explained that under the requirements of Section 320-7, “if
every $1.00 in compensation paid by a contractor is divided so that seventy (70) cents of that
$1.00 are wages and thirty (30) cents of that $1.00 are retirement benefits and profit sharing,
CMC 320's pre-apprenticeship training fund requirement requires payment of an additional ten
(10) cents per hour per worker, and prohibits the contractor from taking that money out of the
thirty (30) cents of that $1.00 that are retirement benefits and profit sharing. Instead, CMC 320
requires additional compensation of ten (10) cents per hour per worker, which prevents the
contractors from exercising their discretion to reduce the voluntary contribution to the benefit
plan to cover the cost of the ten (10) cents mandated per hour per worker required by CMC 320
for the pre-apprenticeship training fund.” (Id. at ¶ 23). Thus, in order to comply with Section
320-7, Dugan & Meyers could not exercise its discretionary right to change the amount of its
contribution from year to year. This is precisely the harm that ERISA seeks to avoid. The City
cites no authority to the contrary.
Finally, as the Court previously explained, the fact that the payment is involuntary and at
a specified rate presents additional concerns about the impact of the provision on the structure
and administration of existing ERISA plans. Unlike in Dillingham, the employers are not
presented with a choice between adopting a structure and obtaining an economic incentive or not
adopting the structure and losing out on an economic incentive. Section 320-7 instead makes
that choice for the contractor. While a contractor could avoid the requirement by choosing not to
accept an award of the City's contract, the same issue would exist for each and every contractor
that accepted the contract award. The type of choice and economic incentive referenced in
Dillingham thus is not existent here.
Accordingly, the Court finds that Section 320-7 threatens to affect the uniformity of
ERISA plans. This provision is not as remote from ERISA’s regulatory scheme as the laws
upheld in Associated Builders and Dillingham. As such, Section 320-7 is preempted by ERISA.
iii. Lowest and Best Bidder Factors (320-3(j) and (k))
In addition to the apprenticeship requirements, the RBO also requires bidders on water
works projects to certify whether they provide a healthcare plan and a pension or a retirement
program to their employees. Moreover, the contributions to the plans are required to “be part of
the employees’ regular compensation and not merely part of the employees’ compensation
during the period of time for which the employee is performing work on the project,” CMC 3203(j). A bidder’s certification is used by the City to determine whether a bidder is the best bidder
on a contract. (Doc. 61-1).
The City argues that ACI “reads requirements into CMC 320-3(j) and 320(k) that are
simply not there.” (Doc. 61, PageID 1241). It asserts that there is no mandate and thus, these
provisions are reporting requirements that have no effect on the calculation or disbursement of
benefits. Specifically, the City argues that these reporting requirements are the type of tenuous,
remote and peripheral details that do not raise ERISA concerns. See Liberty Mut. Ins. Co. v.
Donegan, 746 F.3d 497, 507-08 (2d Cir. 2014) (recognizing that state reporting requirements
may withstand preemption when they impose no particular form of record-keeping, create
burdens so slight as to create no impediment to uniform benefit administration, and seek
information readily obtainable from the employer). Determining whether a law is a mandate or
incentive is not always a simple task. See Travelers, 514 U.S. at 668. Nevertheless, the Court
must answer the question.
Under Sections 320(j) and (k), those who wish to bid on City water works projects must
disclose information. Specifically, Sections 320(j) and (k) mandate that the contractor with gross
revenues of more than $2 million over the three preceding years certify whether it makes
contributions to a health plan and pension or retirement plan as part of the regular compensation
of the employees. The Court once again acknowledges that the "mandate" is not a state-wide
mandate applicable to all contractors as in Associated Builders. Nevertheless, it still requires
something of those that bid on the City contracts at issue and that satisfy the threshold gross
revenue requirement. Those who satisfy that requirement must comply with the provisions.
Application of these provisions thus rises to the level of a mandate. This, however, does not end
Having concluded that these provisions are a mandate, the Court must determine whether
the reporting and disclosure of the existence of a plan falls within the areas ERISA is intended to
control exclusively so as to be preempted.
This inquiry raises two considerations: the
reporting/disclosure requirement and the "regular compensation" requirement.
previously, ERISA is concerned with the uniformity in the structure and administration of
employee benefit plans. One area in particular to which the concern extends is reporting and
Dillingham, 519 U.S. at 330 (indicating that the areas with which ERISA is
expressly concerned include "'reporting, disclosure, fiduciary responsibility, and the like'")
(quoting Travelers, 514 U.S. at 661).
A provision is not preempted by ERISA, however,
whenever it contains some type of reporting or disclosure requirement. The Court must also
consider the objectives of ERISA and the effect of the requirements on an ERISA plan.
The reporting and disclosure requirements of ERISA stemmed from a concern about the
"mismanagement of funds accumulated to finance employee benefits and the failure to pay
employees['] benefits from accumulated funds."
Dillingham, 519 U.S. at 326-27 (quoting
Massachusetts v. Morash, 490 U.S. 107, 115 (1989)). Along with other requirements, the
reporting and disclosure requirements of ERISA were established "'to insure against the
possibility that the employee's expectation of the benefit would be defeated through poor
management by the plan administrator.'" Id. (quoting Morash, 490 U.S. at 115). Viewing that
concern together with the detailed reporting and disclosure obligations set forth in ERISA, it is
apparent that the financial security of the plan participants and beneficiaries is a primary aim of
the reporting and disclosure requirements. See 29 U.S.C. § 1021(a), (b); Dillingham, 519 U.S. at
The Court has already concluded that bidders are mandated to disclose or report whether
they makes contributions to a health plan and pension or retirement plan as part of the regular
compensation of the employees. And the answers to those questions impact whether a bidder is
considered the best bidder on a contract. Consequently, replacing the word that with the word
whether creates a distinction without a difference. 7 Regardless of the City’s word choice, the
Court finds that application of this requirement impermissibly affects the level of benefits
offered. If a contractor reports that it does not make contributions to the aforementioned plans,
A former RBO provision differed only in that it required certification “that” instead of “whether” the employer
maintained health care plans and pension or retirement programs for its employees.
despite being in compliance with ERISA, it will affect their chances of being awarded the
Of particular concern to the Court is the “regular compensation” requirement. While not
defined in the RBO, the language of the provision makes it abundantly clear that the benefits
must be provided all the time – not merely as part of the employees’ compensation during the
period of time for which the employee is performing work on the project. At the preliminary
injunction stage, however, the Court was unable to determine the effects upon the plan itself.
Mr. Klinker’s affidavit addresses the Court’s concerns, and in fact, confirms that the
Court’s concerns are indeed warranted. He avers that some general contractors have different
benefit structures for City and non-City jobs, and health and retirement benefits are not always
offered to employees working on non-City jobs. (Doc. 52-3, PageID 428, ¶ 11). So, for
example, if a contractor does not provide voluntary health and retirement benefits on non-City
jobs, it would face the arduous task of completely altering its benefit plan in order to bid on a
water works contract. Otherwise, the contractor would fail to meet the requirements of Section
320-3. This creates an impediment to uniform benefit administration, which ERISA seeks to
protect against. Accordingly, the Court finds that Sections 320(j) and (k) are preempted by
Consistent with the foregoing, it is hereby ORDERED:
3. The City and Local 265’s Motions to Strike (Docs. 65, 74) are GRANTED
IN PART AND DENIED IN PART;
4. ACI’s Motion for Summary Judgment (Doc. 52) is GRANTED; and
5. The City’s Motion for Summary Judgment (Doc. 53) and Local 265’s Motion
for Summary Judgment (Doc. 55) are DENIED.
This matter shall be closed and TERMINATED from the Court’s docket. The Clerk shall enter
IT IS SO ORDERED.
s/Michael R. Barrett
Michael R. Barrett, Judge
United States District Court
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