CCASE:
Tom Rob, Inc.
DDATE:
19940621
TTEXT:
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WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of:
Tom Rob, Inc., et al. WAB Case No. 94-03
Prime Contractor
BEFORE: David A. O'Brien, Chair Ruth E. Peters, Member
DATED: June 21, 1994
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition of the
Administrator of the Wage and Hour Division of the Department of Labor
("DOL"), for review of a December 16, 1993 Decision and Order Granting
Respondents' Motion for Summary Judgment by Administrative Law Judge
("ALJ") Thomas M. Burke. That ruling dismissed the administrative
proceeding commenced by the DOL against Tom Rob, Inc., Prime Contractor,
et al. (collectively, "Rob" or "Respondents"), for the reason that the
DOL's delay of four years and eleven months in filing an Order of
Reference, referring this case to the Chief Administrative Law Judge,
denied Respondents due process of law in violation of the Fifth
Amendment.
The DOL alleged that Rob had violated the labor standards
provisions of the Housing Act of 1959, as amended (12 U.S.C. [sec]
1701q(c)(3)), the U.S. Housing Act of 1937, as amended (42 U.S.C.
[sec] 1437j), the Contract Work Hours and Safety Standards Act, (40
U.S.C. [sec] 327 et seq.)(Davis-Bacon Related Acts; [1]
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[2] "DBRA"), and the implementing regulations at 29 C.F.R. Part 5,
concerning the payment of prevailing wage rates and overtime, and the
keeping of payroll records. The DOL sought the imposition of
ineligibility sanctions, the repayment of back wages and the
disbursement of withheld funds. The ALJ dismissed the administrative
proceeding in its entirety and directed that the funds withheld from Rob
be released. For the reasons stated below, the ALJ's ruling is reversed
and the case is remanded for hearing.
I. BACKGROUND
A. Factual Background
Respondents entered into a contract on August 10, 1984 with the
United States Department of Housing and Urban Development ("HUD") and
the Youngstown Area Development Corporation for construction of public
housing at Plaza View III in Warren, Ohio. On September 28, 1984, Rob
entered into a second contract with HUD and the Cuyahoga Metropolitan
Housing Authority to build public housing at Oakwood Gardens and
Superior Terrace in Cleveland, Ohio. On July 12, 1985, Respondents
substantially completed the Plaza View III project. The Oakwood Gardens
project was completed on October 15, 1985 and the Superior Terrace
project was completed on December 28, 1985.
All three of the projects were subject to DBRA rules and regulations.
HUD conducted an investigation of Rob's performance on all three
projects. DOL investigated the subcontractors on the Superior Terrace
and Oakwood Gardens projects. DOL alleges that the investigation
revealed a substantial and systematic failure to pay prevailing wage
rates and overtime premiums on all three projects. In addition, DOL
alleges that Rob submitted certified payrolls which were falsified and
incomplete on all three projects.
The first notice of alleged violations was given to the Respondents
on October 14, 1985, and concerned the Oakwood Gardens project. On
February 18, 1985, Respondents were first informed of the intent to
withhold funds from the Oakwood Gardens project. On August 6, 1986,
$77,035 was withheld from payment on the Oakwood Gardens project. HUD
found that Rob failed to pay twelve employees the applicable prevailing
wage and failed to pay eight employees the overtime premium. Further
all of the subcontractors on the project -- Wayne Riggs Construction,
Care Free Homes, Inc., Joyce DeRusso Roofing, Boris Painting Company,
Reliable Construction Company, Miller & Adams Construction and HLM
Construction -- were accused of numerous violations of the DBRA.[2]
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[3] On March 12, 1986, Rob filed suit in United States District Court
seeking declaratory and injunctive relief. On September 11, 1986, Rob
made his first request for an administrative hearing regarding the
alleged DBRA violations on the Oakwood Gardens project. Just twelve
days later, on September 23, 1986, the lawsuit filed by Rob was
dismissed with prejudice.
On September 26, 1986, $29,961 was withheld from the Superior
Terrace project. The investigation revealed that Rob did not pay fifteen
employees the applicable prevailing wage and failed to pay seven
employees the overtime premium. Further, Rob allegedly directed its
subcontractors to falsify the certified payrolls and to pay employees
below the applicable prevailing wage. Again, all of the subcontractors
on the Superior Terrace project -- Wayne Riggs Construction, B. G. & R.
Construction, Boris Painting Company, Care Free Homes, Inc., and James
Marshall Builders -- were accused of DBRA violations. On October 23,
1986 Rob requested a hearing on the Superior Terrace allegations.
On May 28, 1987, the U.S. Attorney's office informed Rob that
$27,611 had been withheld for violations on the Plaza View project. The
investigation on that project showed that Rob failed to pay thirteen
employees the applicable prevailing wage and failed to pay the overtime
premium to six employees.
Wage and Hour's investigation of Superior Terrace and Oakwood
Gardens found that subcontractor Wayne Riggs Construction failed to pay
forty-six employees the applicable prevailing wage. The investigation
of Riggs also determined that the certified payrolls did not list the
names of all employees and failed to report all hours worked. The total
amount of backwages calculated as due just from subcontractor Wayne
Riggs Construction was $73,986. On January 26, 1990 Wayne Riggs
stipulated to the allegations against him, agreed to make full
restitution for the back wage liability and agreed to be debarred.
Throughout the time of the investigation by DOL and HUD a
corresponding criminal investigation was conducted. Wayne Riggs
ultimately pled guilty to criminal charges in a related proceeding.
Further, Robert R. Thompson, the President of Tom Rob, Inc. and
one of the respondents herein, pled guilty to criminal violations
relating, in part, to the Oakwood Gardens project. This fact was
stricken from the record and not considered by the ALJ in rendering
his decision on the motion for summary judgment.
On April 28, 1988, Rob filed a second lawsuit in state court seeking
recovery of withheld funds. Eight months later, on December 15, 1988,
that case was removed to federal court. On August 23, 1991, Thomas D.
Lambros, Chief Judge of the United States District Court for the
Northern District of Ohio, dismissed the federal court lawsuit for
failure to exhaust administrative remedies.[3]
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[4] On March 20, 1990, DOL and HUD concluded the investigation on all
three projects and a charging letter was sent. Excluding the $73,986
withheld for violations related to Wayne Riggs, the total backwages
computed on all three projects was $173,089. Of the original $290,000
withheld, $39,000 has been disbursed to employees on the Oakwood Gardens
project as a result of a compromise in the criminal proceeding against
Robert Thompson and $43,000 has been released to Rob. The total amount
currently withheld is $207,600. On April 17, 1990 Rob requested a
hearing on the allegations contained in the charging letter. One year
and three months later, on July 22, 1991, DOL referred the case to the
Chief Administrative Law Judge for hearing.
On February 26, 1993 Rob filed a second motion for summary judgment
before the ALJ. On March 26, 1993 DOL filed its response to the second
motion for summary judgment. On April 30, 1993 Rob moved to strike most
of DOL's response to the second motion for summary judgment. On October
8, 1993 the ALJ granted, in part, that motion to strike. On December
16, 1993 the ALJ granted Respondents' motion for summary judgment.
B. The ALJ's Decision and Order
Respondents' motion for summary judgment was sought on three separate
grounds. The ALJ declined to grant summary judgment on the first two
grounds and a cross-appeal has not been filed. Therefore, the only
issue remaining for review on appeal is the ALJ's decision to grant
respondents' summary judgment on denial of due process grounds.
The ALJ first held that Rob has a property and/or liberty interest
sufficient to trigger the due process requirements of the Fifth
Amendment. The case of Ames Construction Company v. Dole, 727 F. Supp.
502 (D. Minn.), was cited by the ALJ in support of his finding that Rob
had a property right in the withheld contract payments. The ALJ also
cited ATL, Inc. v. United States, 736 F.2d 677 (D.C. Cir. 1984), which
found that a citizen has no property interest in a federal contract, but
does have a liberty interest at stake if the charges against them are
based upon fraud and dishonesty. The ALJ also noted that since 29
C.F.R. [sec] 5.11 grants the right to a hearing the interest at stake
must be a protected property interest. The ALJ then turned to the issue
of withholding funds prior to hearing. The ALJ, citing Ames
Construction, found that due process of law permits a post-deprivation
hearing as long as the timing of the hearing is reasonably prompt.
Finally, the ALJ analyzed the length of the delay involved in this
case and found that DOL had violated Rob's due process rights by failing to
grant a hearing for four years and eleven months after the withholding
of funds. The ALJ applied the test set out in United States v. Eight
Thousand Eight Hundred[4]
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[5] and Fifty Dollars, 461 U.S. 555 (1983) and held that the
delay was too long, the DOL's reason for the delay was insufficient,
that Rob had asserted his right and that Rob was prejudiced by the
delay.
II. DISCUSSION
A. Burden of proof and scope of appellate review
29 C.F.R. [sec] 18.41 and Federal Rule of Civil Procedure 56 set out
the procedure for summary judgment. The code section states that "Where
no genuine issue of a material fact is found to have been raised, the
[ALJ] may issue a decision to become final as provided by the statute or
regulations under which the matter is to be heard." 29 C.F.R. [sec]
18.41. The U.S. Supreme Court has held that "the mere existence of
some alleged factual dispute will not defeat an otherwise properly
supported motion for summary judgment; the requirement is that there be
no genuine issue of material fact." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242 (1986).
The burden of demonstrating that there are no material facts in issue
is upon the moving party. If there is a question as to the existence of
an issue of fact, that issue must be resolved against the moving party.
United States v. Articles of Device, 527 F.2d 1008 (6th Cir. 1976).
Also, "the inferences to be drawn from the underlying facts . . . must
be viewed in the light most favorable to the party opposing the motion."
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986). Finally, "in making our determination, any doubts as to the
existence of a genuine issue of material fact must be resolved against .
. . the moving party." Board of Education v. Pico, 457 U.S. 853 (1982).
Rob alleges that the Wage Appeals Board must give much deference to
the ALJ's findings and not consider matters de novo. Factual findings of an
ALJ are generally given deference and not set aside absent a finding of
clear error. Permis Construction Corp., WAB Case No. 88-11 (July 31,
1991). However, the standard of review for decisions granting a motion
for summary judgment is different. In granting Rob's motion for summary
judgment the ALJ ruled as a matter of law. In ruling on matters of law,
such as grants of summary judgment, the applicable standard of review is
de novo. Baker v. Department of Navy, 814 F.2d 1381 (9th Cir. 1987).
Therefore, we proceed with a de novo review of this matter.[5]
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[6] B. Due Process Analysis
1. The Existence of a Constitutionally Protected Right
The Respondents argue that DOL has waived the right to raise the
issue concerning constitutionally protected rights on appeal. But, the
ALJ discussed this issue at length in his Decision and Order under the
heading "Property Interest in Withheld Funds." The issue has been
preserved.
The Fifth Amendment provides, in relevant part, that no person shall
be deprived of life, liberty, or property without due process of law.
The courts have generally agreed that "a citizen has no right to a
government contract and a bidder has no constitutionally protected
interest in such a contract." ATL, Inc. v. United States, 736 F. 2d
677, 683 (D.C. Cir. 1984). However, the courts are split in their
determination of the existence of property rights under existing
contracts. In Ames Construction Co. v. Dole, 727 F. Supp. 502 (D.
Minn. 1989), the court held that "plaintiff's contract for the
construction of I-394 conferred upon it property interests protectible
by due process." At 506. But, under similar factual circumstances in
Winzeler Excavating Co. v. Brock, 694 F. Supp. (N.D. Ohio), the court
stated that it "is hard pressed to find an unequivocal right to the
uninterrupted payment of contract funds." Id. at 366.
The other argument for the applicability of Fifth Amendment protections
for Rob is based upon an alleged deprivation of liberty. The ALJ found
that Respondents have a constitutionally protected liberty interest at
stake. This liberty interest has been found to apply "where a person's
good name, reputation, honor or integrity is at stake because of what
the government is doing to him." Board of Regents v. Roth, 408 U.S. 564
(1972). The Federal Circuit court has held that where a bidder has been
suspended based upon allegations of fraud or dishonesty the requirements
of due process come into play. ATL, Inc., supra, at 683.
Since it is not essential for the Board to decide the applicability of
the Fifth Amendment to this matter in order to issue a decision in this
case, we decline to do so. We will proceed to discuss the issues raised
by the ALJ in the constitutional context in which those issues were
raised. We do this because many of the same issues and a similar
analysis may apply on remand regardless of whether the issues are
discussed in a constitutional context, as laches, as administrative due
process, or in some other manner. We refer the litigants to section "II
D" (infra), for a discussion of the jurisdiction of the Board to decide
constitutional issues.[6]
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[7] 2. Delay in holding an administrative hearing
We agree with the legal conclusions of the ALJ in finding that due
process of law permits pre-hearing withholding of funds, but requires
that the timing of the hearing must be reasonably prompt. We also agree
that the test set out in the case Barker v. Wingo, 407 U.S. 514 (1927),
through the case of United States v. $8,850, 461 U.S. 555 (1983) is an
appropriate analytical framework for deciding an administrative delayed
justice due process claim. The Barker test, as applied in the $8,850
case, involves the weighing of four factors to determine if an
individual's due process rights had been violated in a civil proceeding
due to a delay in holding a hearing. The four factors are:
(1) the length of the delay;
(2) the reason for the delay;
(3) the defendants' assertion of her/his right; and
(4) prejudice to the defendants.
The delay between the withholding of funds and the referral for hearing
was four years and eleven months. Rob made numerous attempts to invoke
the right to an administrative hearing. DOL has conceded that the delay
was significant and that Respondents did assert their rights. Statement
in Support of Petition for Review, p. 13.
a. The reason for the delay
The DOL's primary argument relies on the second factor of the
Barker test dealing with the cause of the delay. The DOL summarizes its
position by noting that "this case is voluminous, the procedural history
is complex and Tom Rob has engaged in obstructionist tactics." The ALJ
analyzed each of the reasons for the delay proffered by the DOL, but the
analysis appears to be one based upon a post-hearing review, as opposed
to rendering a judgment as a matter of law. Simply put, the ALJ did not
follow the basic rule that in deciding a motion for summary judgment all
material factual issues and any reasonable inferences to be drawn
therefrom, must be resolved in favor of the non-moving party.
The ALJ's decision states that "the facts alleged by Respondents in
support of their third ground . . . are not contested and are verified
by affidavits and Respondents Exhibits `A' through `X."' On the
contrary, the DOL clearly asserts that "facts are in dispute" in its
response to Rob's second motion for summary judgment. The facts alleged
to be in dispute by the DOL with regard [7]
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[8] to the procedural and investigative history of this case include
matters from which a reasonable factfinder could infer that much of the
long delay was caused by the actions and tactics of the Respondents.
The DOL alleges that much of the delay in prosecuting this case was
caused by the following:
(1) two criminal actions arising out of the contracts herein;
(2) an appeal to this Board prior to the filing of the Order of
Reference; and
(3) two separate civil suits filed by the Respondents in an attempt
to circumvent the administrative process.
The fact that this matter involved the varied procedural complexities
identified above is not disputed by Respondents. Perhaps these matters
did not, in fact, significantly delay the prosecution of this case.
However, the DOL has clearly raised a genuine issue of material fact as
to the cause of the delay based upon these allegations.
Just for example, the DOL alleges that part of the delay was caused
by what the Respondents admit were prematurely filed lawsuits. Prime
Contractor's Motion for Summary Judgment, p. 24. The ALJ dismisses this
so called "circular argument" by noting that "had DOL referred
Respondents' request for hearing to the Chief Administrative Law Judge,
Respondents would not have had the exigency for seeking relief from the
District Court." The undisputed record reveals that the first notice of
intent to withhold funds occurred on February 18, 1986 and the first
request for a hearing occurred on September 11, 1986. Respondent's
Exhibits K, O. Rob filed the first lawsuit on March 12, 1986, just 22
days after the initial notice of intent to withhold funds and six months
before Respondents first made a request for an administrative hearing.
The ALJ's finding that both civil suits filed by Rob were necessitated
by the inaction of the DOL is without support in the record, at least as
far as the first lawsuit is concerned.
The record indisputably reflects that Respondents were seeking redress
outside of the administrative process for three years and ten months out
the four year eleven month delay. The first lawsuit was filed on March
12, 1986 and dismissed more than six months later on September 23, 1986.
The second lawsuit was filed on April 28, 1988 and dismissed nearly
three years and four months later on August 23, 1991. We believe a fact
question has been generated as to the cause of the delay during which
time the Respondents were seeking redress outside of the appropriate
administrative process.[8]
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[9] b. Prejudice to Rob
Assuming arguendo that the reason for the delay cannot be attributed
to Rob, the next step in the analysis is to determine what, if any,
prejudice has resulted. The ALJ found that Respondents were prejudiced
by the delay because they alleged that "witnesses might have died or
their memories might have faded and evidence may no longer be
available." (Emphasis added). But, these mere allegations are not
sufficient to find that Respondents were prejudiced by the delay.
Respondents must show actual prejudice, not just allege potential
prejudice. Gemini Construction Corporation, WAB Case No. 91-23 (Sept.
21, 1991). The only way to determine whether or not Rob has actually
been prejudiced by the delay is to proceed with a hearing on the merits.
C. Respondents' Motion to Strike
On October 8, 1993 the ALJ issued an order granting, in part,
Respondents' motion to strike. That order, although not directly on
appeal in this matter, struck from the record potentially admissible
evidence. For example, the ALJ struck from the record any allegation
that Respondents' President pled guilty to criminal charges involving
the Oakwood Gardens project. The ALJ noted that DOL had only alleged
that the criminal action against Robert R. Thompson had caused a
"slight" delay in the administrative proceedings. The ALJ found it
difficult to understand how the criminal proceeding could have caused a
delay in the administrative process. But, in deciding a motion for
summary judgment all issues of material fact must be resolved in favor
of the non-moving party and against the moving party. In deciding the
motion to strike the ALJ failed to resolve all fact issues in favor of
DOL. Therefore, we must review that order as it relates to the summary
judgment ruling.
The Wage Appeals Board is troubled by the whole idea of granting a
motion to strike in an administrative proceeding. Certainly, some of
the material stricken in the ALJ's order of October 20, 1992 may have
been irrelevant and/or prejudicial and therefore, inadmissible. But,
some of the material may be admissible if the proper foundation is laid
and/or the matter is opened up by the Respondents on direct examination.
It is virtually impossible for an ALJ to commit reversible error by
receiving incompetent evidence, whether objected to or not. The Wage
Appeals Board will not reverse an ALJ because of the admission of "
incompetent evidence, whether objected to or not, unless all of the
competent evidence is insufficient to support the judgment, or unless it
affirmatively appears from the record that the incompetent evidence
complained of was relied upon by the trial court and induced the court
to make an essential finding which would not otherwise have been made."
Thompson v. Carley, 140 F.2d 656 (8th Cir. 1944 ).[9]
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[10] The more prudent course is to take objections, motions to strike, or
motions in limine under advisement. The Eight Circuit stated the basic
rationale for this technique as follows:
[E]xperience has demonstrated that in a trial or hearing
where no jury is present, more time is ordinarily lost in
listening to arguments as to the admissibility of evidence
and in considering offers of proof than would be consumed
in taking the evidence proffered. . . . One who is capable
of ruling accurately upon the admissibility of evidence is
equally capable of sifting it accurately after it has been
received, and, since he will base his finding upon the evidence
which he regards as competent, material and convincing, he
cannot be injured by the presence in the record of testimony
which he does not consider competent or material.
Builders Steel Co. v. Commissioner of Internal Revenue, 179 F.2d 377
(8th Cir. 1950).
D. Determination of Constitutional Issues
The last issue we wish to discuss was first raised by the DOL in
its petition for review. Respondents argue that matters not brought up
before the ALJ are waived on appeal. However, we have previously
established that the appropriate scope of review of this matter is de
novo. Further, the issue raised concerns the subject matter
jurisdiction of this Board, which can be raised at any point in a
proceeding including on appellate review. Therefore, we will proceed to
discuss the jurisdiction of this Board to resolve constitutional issues.
The Wage Appeals Board has previously held that "as an
administrative tribunal [it] is not the appropriate forum for resolution
of constitutional issues." ICA Construction and Tropical Builders, Inc.,
WAB Case No. 91-31 (Dec. 30, 1991). Clearly, the Board is entitled to
refrain from deciding constitutional claims. Motor and Equipment
Manufacturers Association, Inc. v. E.P.A., 627 F.2d 1095, 1115 (D.C.
Cir. 1979). Just as clearly, the Board is entitled to hear and decide
constitutional claims germane to the proceedings before it, as long as
this does not include declaring the Board's governing statute
unconstitutional. Plaquemines Port v. Federal Maritime Commission, 838
F.2d 536.544 (D.C. Cir. 1988) and Robinson v. U.S., 718 F.2d 336 (10th
Cir. 1983).
The failure to hear constitutional issues at the administrative
level does not bar the claimant from raising those same issues in
federal district court. Motor and Equipment, supra. Exhaustion of
administrative remedies is required if there is a possibility that the
agency will decide in the litigant's favor on non constitutional
grounds. Public Utilities Commission v. U.S., 355 U. S. 534, 539-[10]
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[11] 40 (1948). Exhaustion of administrative remedies is not required
"where the petitioners have exhausted the possibility that the agency
will decide in their favor on non constitutional grounds." Motor and
Equipment, supra.
Under the appropriate circumstances, the Board may elect to consider
some constitutional claims. However, this case does not present the
appropriate circumstances. First of all, the case was decided as a
matter of law. Therefore, we have no idea whether or not the case could
be decided in favor of Rob on non constitutional grounds. A hearing
must be held in order to make that determination./FN1/ The rule that
constrains the federal judiciary from deciding cases on constitutional
grounds when non constitutional grounds are available, Alma Motor Co. v.
Timken Co., 329 U.S. 129 (1946) and Tung Chi Jen v. Immigration and
Naturalization Service, L.A., Cal., 566 F.2d 1095 (9th Cir. 1977),
applies with greater force to administrative tribunals.
Further, the decision of the ALJ in this case is based solely on
constitutional grounds and is therefore, particularly ill suited for
administrative decision. Resolving a litigant's claim based entirely on
a constitutional right is singularly suited to a judicial forum. Downen
v. Warner, 481 F.2d 642 (9th Cir. 1973). In this case, Rob has
attempted to circumvent the administrative process by filing two
separate lawsuits based upon constitutional grounds. Each of those
cases was dismissed for failure to exhaust administrative remedies.
Unfortunately, administrative remedies have yet to be exhausted in this
case. If this case should have been decided in summary fashion on
constitutional grounds the United States District Court for the Northern
District of Ohio, certainly could have so decided. The federal district
court found that to make such a determination prior to a hearing by an
ALJ would be premature. We agree.
For all the reasons stated above the decision of the ALJ is reversed
and the case is remanded for hearing consistent with this opinion. The
administrative proceedings below shall be completed within 180 days.
BY ORDER OF THE BOARD:
David A. O'Brien, Chair
Ruth E. Peters, Member [11]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
FOOTNOTES
/FN1/ The Board has pending another case involving the question of
administrative delay, Public Developers Corp., WAB Case No. 94-02, which
is set for oral argument on June 29, 1994. In that proceeding below,
the ALJ issued a decision on timeliness grounds after a full evidentiary
hearing.
