DECISION AND ORDER
This case is before the Court on Defendants' Motion for SummaryJudgment, requesting that this Court summarily affirm thedetermination of the Administrative Review Board of the UnitedStates Department of Labor, Case Numbers 00-032 and 00-033,issued on May 30, 2003.1 Plaintiffs, in turn, have movedfor Further Relief and Review, seeking reversal of theAdministrative Review Board's decision.
Parties and Background
In January 1990, Plaintiff developer Phoenix-Griffin Group II,Ltd. (hereinafter "Phoenix-Griffin") entered into a contract with the Providence Housing Authority (hereinafter "PHA") underthe terms of which Phoenix-Griffin agreed to construct 92 unitsof low-income housing in Providence, Rhode Island, for ascattered-site housing project called the Turnkey Project. TheTurnkey Project was funded by the United States Department ofHousing and Urban Development ("HUD"), pursuant to the HousingAct of 1937, 42 U.S.C. § 1437 et seq.
Phoenix-Griffin contracted with Plaintiff prime contractor LTGConstruction Company, Inc., (hereinafter "LTG") to build theunits, and LTG contracted with Plaintiff Gatsby HousingAssociates to clean the units prior to their tender to theHousing Authority. Lloyd T. Griffin was the president ofPhoenix-Griffin, LTG and Gatsby Housing Associates and, until hisdeath in November 1999, was also a plaintiff in this lawsuit.These entities will be referred to collectively as "Plaintiffs"in this decision.
In November of 1990, the Wage and Hour Division of theDepartment of Labor instituted an investigation into possiblewage violations on the Turnkey Project. In March 1991, on thecompletion of that investigation, the Wage and Hour Divisiondetermined that Plaintiffs had willfully violated the Departmentof Labor's wage provisions, and ordered that HUD withhold$500,000 from the Project's funds. At that time, fifty-two of thehousing units had been completed and conveyed to the PHA. Thirty-five additional units were nearlycompleted, and work on five more had just commenced. With nofunds to continue construction on the project, Plaintiffs wereforced to shut down the operation, and never resumed work on theTurnkey Project. This lawsuit, including its proceduralforebears, ensued.
The Davis-Bacon Act and other statutory wage provisions
The Davis-Bacon Act, 40 U.S.C. § 3141 et seq. (formerly §276a), enacted by Congress in 1931, requires that workers ongovernment construction projects be paid wages in accordance withprevailing wage rates determined by the Secretary of Labor.Prevailing wage rates are the prevalent rates for similar work inthe same locality. The Act requires that contracts coveringgovernment-funded work "shall contain a stipulation that thecontractor or his subcontractor shall pay mechanics and laborersemployed directly upon the site of the work [the prevailingwage]." Building & Constr. Trades Dept. v. Dept. of Labor,932 F.2d 985, 987 (D.C. Cir. 1991). The United States Supreme Courtexplained the purpose of the Davis-Bacon Act: "The language ofthe Act and its legislative history plainly show that it was notenacted to benefit contractors, but rather to protect theiremployees from substandard earnings by fixing a floor under wageson Government projects." United States v. Binghamton Const.Co., 347 U.S. 171, 176-177 (1954). Since the enactment of the Davis-Bacon Act, several relatedacts have addressed government contracts in specific areas, suchas the Federal-Aid Highway Act, 23 U.S.C. § 101. The Housing Actof 1937, 42 U.S.C. § 1437 et seq., ("the Housing Act"), isanother Davis-Bacon Related Act ("DBRA"), incorporating, interalia, the prevailing wage requirements. Expanding on the "siteof the work" language found in the Davis-Bacon Act, the HousingAct requires that government-funded contracts contain a provisionguaranteeing that not less than the prevailing wage be "paid toall laborers and mechanics employed in the development of theproject . . ." 42 U.S.C. 1437j (1994).
Pursuant to the authority granted to it by Congress through theReorganization Plan No. 14 of 1950 (5 U.S.C. App.), theDepartment of Labor has promulgated regulations designed tointerpret and enforce the terms of the Davis-Bacon Act. See29 C.F.R. § 5. The Reorganization Plan No. 14 of 1950, whilegranting the Department of Labor the authority "to prescribeappropriate standards, regulations, and procedures," also chargesthe various federal agencies with overseeing compliance with theregulations when those agencies enter into contracts. Inaccordance with this responsibility, HUD — no doubt in an effortto simplify the regulatory thicket for contractors — publishedits own handbook, "Federal Labor Standards Compliance in Housingand Community Development Programs Handbook," 1344.1 Rev. 1 (1986), (hereinafter "HUD Handbook"). The standards outlined inthe HUD Handbook limit the scope of the wage provisions,following more closely the "site of the work" language from theDavis-Bacon Act and the regulations encoded in 29 C.F.R. § 5, andallowing for more narrow coverage than the Housing Act's "alllaborers . . . employed in the development of the project."
This Court has already determined, and the parties agree, thatthe terms of the Housing Act govern the prevailing wage issues onthe Turnkey Project. However, whether the terms of the HousingAct should be interpreted according to the Department of Labor'sbroad interpretation, or according to the HUD Handbook's morelimited scope, has been a major focus of the litigation, and willbe addressed further herein.
There have been three categories of workers whose wages were indispute. These include the employees of Gatsby HousingAssociates, cleaning personnel who cleaned the housing unitsprior to their tender to the Housing Authority. Plaintiffs havedropped their request for review on this issue and haveauthorized the release of $12,263.59 in funds to the Wage andHour Administrator for distribution to the Gatsby employees.Consequently, this category of workers, though a live issuethroughout much of the litigation, will not be addressed indetail in this opinion. A second category of workers is the so-called workingsubcontractors. The issue concerning these workers, who performedconstruction work at the various sites, is whether they wereemployees of LTG, in which case they should receive theprevailing wage, or whether they were bona fide independentcontractors, i.e., owners of a construction business, in whichcase, under some interpretations, they are exempt from theprevailing wage coverage. The HUD Handbook, at section 7.3, setsforth indicia for identifying bona fide contractors, such as aregistered trade name, a separate phone listing, liabilityinsurance or a subcontractor's bond. The Handbook goes on to warnthat, "Contractual relationships between contractors and allegedsubcontractors (who perform mechanic's work) which are formed forthe purpose of evading the application of prevailing wagerequirements are expressly prohibited and may provide a basis fordebarment." HUD Handbook § 7.3.
In contrast, the regulations promulgated by the Department ofLabor state that any laborer or mechanic on a Davis-Bacon coveredproject "is employed regardless of any contractual relationshipalleged to exist between the contractor and such person."Griffin v. Reich, 956 F.Supp. 98, 105 n. 7 (D.R.I. 1997),citing 29 C.F.R. § 5.2(o). The Wage and Hour Division, inaccordance with the Department of Labor interpretation,determined that Phoenix-Griffin had committed wage violations by failing to pay these workers the prevailing wage.
The third category of workers, whose wages constitute themajority of the disputed funds, are LTG employees who worked at asmall plant, fabricating modular housing panels that were theninstalled on foundations at the scattered sites. The plant waslocated at 388 Veazie Street in Providence, adjacent to some ofthe building site lots, on property that Lloyd Griffin hadcontracted to purchase. (The sale was never completed.) Prior toentering into the contract with PHA, Plaintiffs sought guidancefrom HUD as to whether these workers would be subject to theprevailing wage provisions. With the backdrop of shiftinginterpretations of Davis-Bacon's "site of the work" languagewhich has taken place in courts around the country, it wasunclear what actually constituted the site of the work for ascattered site housing project. On the other hand, under theHousing Act, these workers were certainly "employed in thedevelopment of the project" and so might be covered by the wageprovisions.
When it received Plaintiffs' inquiry, PHA sent a letter to themanager of HUD's Providence office, asking for confirmation oftheir understanding that the Veazie Street workers would not besubject to prevailing wage requirements. Michael J. Dziok, theDirector of Housing Management, replied on September 19, 1989: In response to your letter dated September 15, 1989, Davis Bacon Wage Rates do not apply to the fabrication of building components unless conducted in connection with and at the site of the project, or in a temporary plant set up elsewhere to supply the needs of the project and dedicated exclusively, or nearly so, to the performance of the contract or project.
This response follows closely the language of the HUD Handbook,which states: The precutting of parts and/or the prefabrication of assemblies are not covered unless conducted in connection with and at the site of the project, or in a temporary plant set up elsewhere to supply the needs of the project and dedicated exclusively, or nearly so, to performance of the contract or project.HUD Handbook § 7.12.
Phoenix-Griffin proceeded to sign the contract with PHA,establish the fabricating plant and hire workers to make thepanels at Veazie Street, paying them less than the prevailingwage. The Wage and Hour Administrator, following itsinvestigation, determined that these workers should have receivedthe prevailing wage and are due approximately $250,000 in backpay.
Following the Department of Labor's order withholding $500,000of HUD money in the spring of 1991, Plaintiffs' first move was tofile suit in the United States District Court for the District of Rhode Island seeking to enjoin its enforcement. In aneffort to allow the Turnkey Project to continue, Judge Raymond J.Pettine of this Court ordered HUD to pay Plaintiffs the $500,000and then held HUD in contempt for its failure to comply. ProjectB.A.S.I.C. v. Kemp, 768 F.Supp. 21 (D.R.I. 1991). However, theFirst Circuit reversed the contempt order. Project B.A.S.I.C. v.Kemp, 947 F.2d 11 (1st Cir. 1991). The money was not released toPlaintiffs, and work did not resume on the Project.
In August 1991, the Wage and Hour Division issued findings ofadditional violations committed by Plaintiffs, and ordered theirdebarment from government contracts for a period of three years.These additional violations, which included intentional actionssuch as falsified payroll records, were characterized by the Wageand Hour Division as "willful or aggravated."
Plaintiffs sought a hearing before an Administrative Law Judgeto challenge the Wage and Hour Division's findings. Following atwenty-four day hearing, Administrative Law Judge David DiNardiissued a decision on July 1, 1993, upholding the determination ofthe Wage and Hour Division in every respect, including thethree-year debarment.2 This decision was then affirmed inits entirety in December 1994 by the Wage Appeals Board, the appellate administrative board.3
Plaintiffs sought judicial review of the Wage Appeals Board'sdecision in this Court, pursuant to the Administrative ProcedureAct, 5 U.S.C. § 701 (1994) et seq. Defendants, in turn, movedfor summary judgment. See Griffin v. Reich, 956 F.Supp. 98(D.R.I. 1997).
Griffin v. Reich
Plaintiffs argued before this Court that the standardspublished in the HUD Handbook should control wage requirements onthe Turnkey Project, because HUD had led them to believe thatthose standards were reliable statements of the law. Moreover,Plaintiffs argued, the Department of Labor's interpretation ofprevailing wage provisions had been called into question when theD.C. Circuit Court found the regulations at 29 C.F.R. § 5.2(1)(2)to be in conflict with the terms of the Davis-Bacon Act. SeeBall, Ball & Brosamer, Inc. v. Reich, 24 F.3d 1447 (D.C. Cir.1994).
This Court, however, deferred to the wisdom of the SupremeCourt as expressed in Chevron, U.S.A., Inc. v. Natural ResourcesDefense Council, 467 U.S. 837 (1984), which states thatinterpretations of an agency concerning statutes it administersare entitled to extreme deference. This Court wrote, "Under Chevron, a court may alter an agency interpretation only if itcontravenes clear Congressional intent or, if the statute is`silent or ambiguous,' and the interpretation is not `based on apermissible construction of the statute.'" Griffin v. Reich,956 F.Supp. at 105. Consequently, this Court has previouslyacknowledged that in this case "the Department of Labor is thefinal arbiter of the Housing Act's interpretation with respect toDavis-Bacon coverage." Id. at 105.
The Department of Labor's interpretation of the Housing Act'swage provisions follows the statute's clear language that alllaborers and mechanics "employed in the development of theproject" must be paid the prevailing wage. 42 U.S.C. § 1437j. TheHousing Act defines "development" as "any or all undertakingsnecessary for . . . construction . . . in connection with alow-income housing project." 42 U.S.C. § 1437a(c)(1) (1994). Thisinterpretation, therefore, is the law of the case, and pointsclearly to the conclusion that all workers employed by Plaintiffson the Turnkey Project should have been paid the prevailing wage.
However, in Griffin v. Reich, this Court also recognized thatPlaintiffs had been the victims of a "bureaucratic whipsaw"created by the differing advice they received from HUD, throughits officials and its Handbook, and the interpretation of theHousing Act later imposed by the Wage and Hour Division of theDepartment of Labor. Although the doctrine of equitable estoppel is not frequently applied against the government, and itsapplication had been summarily rejected by the Administrative LawJudge and the Wage Appeals Board, this Court suggested that itmight be appropriate in this particular situation: . . . [I]n the present case, the regulatory and statutory scheme expressly contemplates that HUD, the contracting agency, has authority to monitor compliance with labor standards provisions. Indeed, HUD signed the contract between PHA and PGG [Phoenix-Griffin] and was responsible for the continued supervision of the Turnkey Project. In short, this Court opines that if ever there was a case where equitable estoppel should explicitly apply against the government, this is it, provided the factual predicates are found to exist.956 F.Supp. at 108.
Consequently, this Court stayed Plaintiffs' debarment andretained jurisdiction of the case, but remanded it to theDepartment of Labor for further consideration and findings.Specifically, this Court ordered the agency's adjudicator toreview all predicate facts relevant to the application ofequitable estoppel, in order to determine whether HUD'srepresentations constituted affirmative misconduct, whetherPlaintiffs relied on HUD's guidance and complied with it, and ifthat reliance was reasonable. 956 F.Supp. at 107, citing Akbarinv. INS, 669 F.2d 839 (1st Cir. 1982). A finding of affirmativemisconduct on the part of HUD, along with reasonable reliance onthe part of Plaintiffs, would operate to preclude — or estop — the Wage and Hour Administrator from enforcing the otherwiseapplicable wage provisions on the Turnkey Project.
Subsequent administrative review
Following the remand, the Building and Construction TradesDepartment of the AFL-CIO was permitted to intervene as aninterested party. On December 7, 1999, a second AdministrativeLaw Judge issued an opinion in this case.4 Judge DiNardiordered the case reassigned to another administrative law judgeafter denying Plaintiffs' motion that he recuse himself.
Two days of testimony, as well as additional documentaryevidence, was presented to Administrative Law Judge Daniel F.Sutton in November 1998. Judge Sutton noted that Judge DiNardi'sfindings of fact were, with few exceptions, undisturbed by thisCourt and now represented the law of the case. Therefore, JudgeSutton confined his inquiry to an examination of "whether theRespondents reasonably relied on affirmative misrepresentationsby HUD and whether the Respondents, in fact, complied with HUD'spolicies." Slip opinion at p. 7.
The ALJ determined that Plaintiffs had failed to comply withthe HUD Handbook in paying the working subcontractors and thecleaning personnel, and that, consequently, equitable estoppelwas not available to them in connection with these categories of workers. Based on these conclusions, and the affirmation of JudgeDiNardi's finding that Plaintiffs "engaged in a pattern ofactivity to evade the DBRA by various schemes," Judge Suttonupheld the debarment penalty as well. Slip op. at p. 27.
However, in his re-examination of the payment issues concerningthe workers at the Veazie Street fabrication plant, Judge Suttondetermined that the Department of Labor was estopped from findingPlaintiffs in violation of the wage provisions, based on theguidance given to Plaintiffs from HUD officials and theguidelines set forth in the HUD Handbook.
Plaintiffs had been instructed by HUD that it need not pay theprevailing wage to the workers creating pre-fabricated panels,"unless conducted in connection with and at the site of theproject, or in a temporary plant set up elsewhere to supply theneeds of the project and dedicated exclusively, or nearly so, tothe performance of the contract or project." Judge Suttondetermined that this statement of the law, found in both theletter from a HUD official and the HUD Handbook, was anaffirmative misstatement. Furthermore, Judge Sutton found thatPlaintiffs had reasonably relied on the statement and had set upthe Veazie Street plant in such a way as to comply with thisexception: Evidence introduced at the first hearing and at the hearing on remand shows that Mr. Griffin created the Veazie Street plant with the intention of supplying prefabricated building panels for use in housing construction projects throughout the Providence area, including Phase 1 of the Turnkey Project, a second planned phase of the Turnkey Project as well as another scattered site housing project known as Barbara Jordan III. Indeed, Mr. Griffin's envisioned use of the plant extended beyond the efficient production of building components; he recruited and hired chronically unemployed or underemployed people, as well as individuals with societal problems, for training and work. The Veazie Street plant has been also been used for other activities, such as the fabrication of cabinets, door frames and other materials for maintenance and repairs on Barbara Jordan I and II, completed housing projects now under Phoenix-Griffin's management; and the facility continued in operation as of the date of the hearing on remand. However, the only housing panels fabricated at the Veazie Street facility to date were those used in the Turnkey Project.Slip op. at p. 8, (citations to the record omitted). Based onthis analysis, the ALJ concluded that the Department of Labor wasestopped from prosecuting Plaintiffs for violations of the wageprovisions at the Veazie Street plant. As stated above, JudgeSutton determined that violations of wage provisions had takenplace in connection with the working subcontractors and thecleaning personnel, and as a result, the debarment wasreinstated.
The Administrator for the Department of Labor, thePhoenix-Griffin Plaintiffs, and the Building and ConstructionTrades Department of the AFL-CIO all filed Petitions for Review,and the dispute was sent to the Administrative Review Board of theDepartment of Labor (formerly constituted as the Wage AppealsBoard).
The Administrative Review Board ("ARB") issued its decision onMay 30, 2003.5 It affirmed the decision of AdministrativeLaw Judge Sutton on the issues of the working subcontractors, thecleaning personnel and the debarment, but reversed on the issueof the Veazie Street fabrication plant workers, holding thatthese workers were also entitled to the prevailing wage.
On the issue of the working subcontractors, the Administratorfor the Department of Labor reiterated its argument that the Wageand Hour Division considered even bona fide subcontractors to becovered by the prevailing wage provisions when performingDavis-Bacon covered work on a Davis-Bacon covered project. Slipop. at p. 5. As for the equitable estoppel issue, theAdministrator argued that Plaintiffs failed to show that they hadrelied on the HUD Handbook guidelines, or that this reliance hadled them to violate the wage provisions. The ARB concurred thatestoppel was not available to Plaintiffs on the issue of paymentto the working subcontractors.
The ARB cited the findings of the first ALJ that, "Mr. Griffinknew the purported subcontractors were not bona fide and, of course, that the `subcontractors' did not have any of theHUD-required proof to document status as legitimatesubcontractors. Further . . . Mr. Griffin participated in ascheme to avoid payment of prevailing rates to the fraudulentsubcontractors and encouraged the preparation and submission offalse certified payrolls to HUD to conceal the underpayments."Slip op. at p. 6.
Over Plaintiffs' objections, the ARB stated that its review ofthe entire administrative record showed that the pertinent factsfound by the first ALJ "were properly and adequately based on theevidence of record and the second ALJ was correct in adoptingthese facts." Slip op. at p. 7.
The ARB likewise determined that the defense of equitableestoppel was unavailable to Plaintiffs in connection with itspayments to the cleaners employed by Gatsby Housing Associates.Although Plaintiffs had tried to argue that the cleaning work waspost-construction and therefore, pursuant to the HUD Handbook,not covered by the prevailing wage provision, the ARB cited thefirst ALJ's findings that Griffin's testimony at the hearing onthis issue was not credible. In contrast, the testimony of one ofthe cleaners who stated that he performed construction-relatedtasks, such as scraping tile adhesive from floors and layinggrass, was credible and persuaded the ALJ, and the ARB in turn,that the cleaners should be paid the prevailing wage. As explained earlier in this opinion, Plaintiffs have since concededthis point.
Between the filing of the petitions for review and the ARB'sdeliberations, the Board was notified of the death of LloydGriffin. Acknowledging that all plaintiff corporations served asGriffin's alter egos, the Administrator dropped its claim fordebarment, and the ARB vacated the previous debarment orders.
Both the Administrator and the Building and Trades Division ofthe AFL-CIO filed petitions for review of ALJ Sutton'sdetermination that the Administrator was estopped from enforcingthe wage provisions on behalf of the Veazie Street fabricationplant employees.
The Administrator argued before the ARB that HUD did not inducePlaintiffs to violate the Housing Act's wage provisions throughthe misrepresentations of the law contained in its Handbook. Infact, had Plaintiffs actually complied with the Handbook'sguidelines, as well as the other advice offered by HUD, therewould have been no violation. The ARB agreed with theAdministrator's analysis.
To further illuminate the concepts informing the HUD Handbook,the ARB cited the relevant Department of Labor regulation whichgoverned off-site fabrication facilities at the time of Turnkey'sconstruction: Except as provided in paragraph (1)(3) of this section [providing exemption for permanent offsite facilities operated by a covered contractor], fabrication plants, mobile factories, batch plants, borrow pits, job headquarters, tool yards, etc., are part of the site of the work provided they are dedicated exclusively, or nearly so, to performance of the contract or project, and are so located in proximity to the actual construction location that it would be reasonable to include them.29 C.F.R. § 5.2 (1)(2) (1993). Under the terms of this regulatorylanguage, an off-site fabrication facility like the Veazie Streetplant would be covered by the prevailing wage regulation as longas its production was dedicated to the Davis-Bacon-coveredproject it was serving. As the ARB points out, this isessentially the same advice provided to Plaintiffs by HUD, in theHandbook, the September 9, 1989, letter, and a verbalrepresentation made by HUD employee Louis Azar. Griffin testifiedthat when he asked about the Veazie Street plant, Azar looked inthe Handbook and told him, "Well, if you want to do this forTurnkey, you have to have more than one project that you aregoing to service from Veazie Street."
After reviewing the prior administrative proceedings, the ARBconcluded "that all of the pertinent record evidence demonstratesbeyond doubt that the Veazie Street prefabrication plantexclusively served the scattered site project." Slip op. at p.11. The ARB continued: This single finding of fact alone should have served as an absolute bar to the ALJ's conclusion of law on remand that Griffin committed the Veazie Street violations as the result of relying on misleading HUD advice. The ALJ's reasoning on remand improperly focused on Griffin's intent to supply prefabricated panels to other endeavors and also on certain HUD regional office workers' knowledge of Griffin's intent. Mr. Griffin's intent and HUD's knowledge of his intent are simply not legally relevant. See United Constr. Co., Inc., WAB No. 82-10, slip op. at 8-9 (Jan. 14, 1983) (actual, rather than intended, use of off-site asphalt batch plant determinative of DBA coverage). Griffin's failure to actually supply other projects or buyers meant that he failed to comply with any of the three pieces of HUD advice.Slip op. at p. 12.
Just as the ARB dismissed Phoenix-Griffin's intended plans forthe fabrication plant, it also dismissed the evidence thatPhoenix-Griffin's bid was based on labor costs below theprevailing wage: . . . the purported basis for Griffin's bid is not relevant. It is relevant that HUD advised Griffin that the Veazie Street panel fabrication plant could be exempt if not used solely for scattered sites project. Griffin's failure to meet this HUD criterion caused the violations, in retrospect rendering its purported "basis" a bad business decision in light of its subsequent failure to follow the HUD advice.Slip op. at p. 13.
Consequently, the matter returns to this Court. Plaintiffs havefiled a Motion for Further Relief and Review, and Defendants havefiled a motion for summary judgment, seeking to have the decision of the ARB affirmed.
Standard of review
The matter reaches this Court on Plaintiffs' petition forreview of the final determination of the Secretary of Labor,through her Administrative Review Board, pursuant to theAdministrative Procedure Act, 5 U.S.C. § 706. The Act authorizesthe reviewing court to decide questions of law and interpretstatutory provisions. However, the reviewing court may set asidean agency action, including its findings and conclusions, only ifthey are found to be: (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional rights, power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; (D) without observance of procedure required by law; (E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or (F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.5 U.S.C. § 706. Elaborating on these standards, the United StatesSupreme Court has written that "de novo review is appropriateonly where there are inadequate factfinding procedures in anadjudicatory proceeding . . ." Camp v. Pitts, 411 U.S. 138, 142(1973). Otherwise, the "arbitrary and capricious" language from § 706 (2)(A) provides the standard.
In applying that standard, the focal point for judicial review should be the administrative records already in existence, not some new record made initially in the reviewing court.411 U.S. 138, 142.
Under this narrow standard, the Supreme Court has instructedfurther, a reviewing court may not set aside an agency rulingthat is rational, based on consideration of the relevant factors,and within the scope of the authority delegated to the agency bythe statute. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto.Ins. Co., 463 U.S. 29, 43 (1983). The United States Court ofAppeals for the First Circuit described the standard as follows:"It is well established that this standard of review is highlydeferential, whereby the reviewing court presumes the agencyaction to be valid." Conservation Law Foundation, Inc. v.Secretary of Interior, 864 F.2d 954, 957-958 (1st Cir. 1989).
While Plaintiffs have moved for review of the agency ruling,Defendants have moved for summary judgment. Their memorandumstates that it is also in opposition to Plaintiffs' Motion forFurther Relief and Review, which Defendants have treated as amotion for summary judgment. When ruling on a motion for summaryjudgment, the court must look to the record and view all thefacts and inferences therefrom in the light most favorable to thenonmoving party. Continental Casualty Co. v. Canadian Universal Ins. Co., 924 F.2d 370, 373 (1st Cir. 1991). Once this iscomplete, Rule 56 (c) requires that summary judgment be grantedif there is no issue as to any material fact and the moving partyis entitled to judgment as a matter of law. To win summaryjudgment, the moving party must show that "there is an absence ofevidence to support" the non-moving party's claim. Celotex Corp.v. Catrett, 477 U.S. 317, 325 (1986). In response, the nonmovingparty cannot rest on its pleadings, but must "set forth specificfacts demonstrating that there is a genuine issue for trial" asto the claim that is the subject of the summary judgment motion.Oliver v. Digital Equipment Corp., 846 F.2d 103, 105 (1st Cir.1988).
This approach is not appropriate for the review of a finalagency action. According to the standard set forth by theAdministrative Procedure Act, the Court must defer to thefactfinding of the Administrative Review Board, "unless `therecord evidence would compel a reasonable factfinder to make acontrary determination.'" Guzman v. INS, 327 F.3d 11, 15 (1stCir. 2003), quoting from Aguilar-Solis v. INS, 168 F.3d 565,569 (1st Cir. 1999). It is not proper for this Court to view thefacts in a light favorable to the nonmoving party.
The United States District Court for the District of Coloradoaddressed this issue in Lodge Tower Condominium Ass'n v. LodgeProperties, 880 F.Supp. 1370 (D. Colo. 1995), and this Court concurs with its approach: . . . [A] motion for summary judgment under Rule 56 of the Federal Rules of Civil Procedure — especially a motion for partial summary judgment — makes no procedural sense when a district court is asked to undertake judicial review of administrative action. Such a motion is designed to isolate factual issues on which there is no genuine dispute, so that the court can determine what part of the case must be tried to the court or a jury. Nickol v. United States, 501 F.2d 1389, 1392 (10th Cir. 1974). Agency action, however, is reviewed, not tried. Factual issues have been presented, disputed, and resolved; and the issue is not whether the material facts are disputed, but whether the agency properly dealt with the facts. Only recently, the United States Court of Appeals for the Tenth Circuit has followed Nickol and cautioned, "When acting as a court of appeal, it is improper for a district court to use methods and procedures designed for trial." Olenhouse v. Commodity Credit Corp., 42 F.3d 1560, 1564 (10th Cir. 1994).880 F.Supp. 1370, 1374-1375.
In accordance with this approach, this Court will treatDefendants' motion for summary judgment as a petition to affirmthe agency action, employing the standard articulated in theAdministrative Procedure Act, 5 U.S.C. § 706.
The Court is charged with reviewing the decision of theAdministrative Review Board concerning Plaintiffs' allegedviolations of the wage provisions of the Housing Act in theirpayments to two categories of workers employed in building the low-income housing project known as the Turnkey Project. Thecategories of workers whose wages are in dispute are theemployees of the Veazie Street fabrication plant and theso-called working subcontractors.
In addition, Defendants, as well as Intervenor Building andTrades Division of the AFL-CIO, seek to have the Court reconsiderits earlier holding in Griffin v. Reich, 956 F.Supp. 98 (D.R.I.1997), concerning equitable estoppel. In Griffin v. Reich, thisCourt decided to remand the case for factual findings on theissue of whether or not equitable estoppel may lie against theDepartment of Labor because of the varying representations of theprevailing wage laws provided by HUD and the Wage and HourDivision of the Department of Labor. On remand, theAdministrative Review Board ruled that equitable estoppel was notavailable to Plaintiffs as a defense to the charges of wageviolations in connection with either category of workers. Becausethis Court herein affirms the decision of the AdministrativeReview Board, the issue of the applicability of equitableestoppel to this case will not be revisited.
To assess the viability of an equitable estoppel defense,courts in the First Circuit must review the facts to determinewhether there has been "reasonable reliance" on "`affirmativemisconduct' attributable to the sovereign." Griffin v. Reich, 956 F.Supp. 98, 107 (D.R.I. 1997), quoting United States v.Ven-Fuel, Inc., 758 F.2d 741, 761 (1st Cir. 1985). The FirstCircuit has established a two-part test to aid in theidentification of affirmative misconduct: (1) was thegovernment's action error? and (2) did the government'smisconduct induce the petitioner to act in a way he or she wouldnot otherwise have acted? Akbarin v. INS, 669 F.2d 839, 843(1st Cir. 1982).
Phoenix-Griffin has maintained that it relied on guidelines setforth in the HUD Handbook in establishing wage rates for thecategory of construction workers known as the workingsubcontractors. The operative section of the Handbook, Section7-3, reads: Contractual relationships between contractors and alleged subcontractors (who perform mechanic's work) which are formed for the purpose of evading the application of prevailing wage requirements are expressly prohibited and may provide a basis for debarment. Where there is any doubt as to the bona-fide nature of a self-employed subcontractor who has no other employees, the following must be checked: 1. Does the subcontractor have a registered trade name and is there a telephone listing under that name? 2. Does the subcontractor have a license? 3. Does the subcontractor have liability insurance or a subcontractor's bond? 4. Federal Tax Identification Number. Any of these criteria in conjunction with a signed contract containing HUD Federal Labor Standards Provisions from each such subcontractor should be sufficient to establish that he or she is a bona-fide subcontractor. Such a subcontractor will submit payrolls indicating only that he/she is the owner, the hours worked and the classification. The phrase "self-employed owner" shall be written under the name, address, and Social Security Number . . . Nonbona-fide self employed contractors must be carried as employees on the payroll of the contractor who engaged him/her, and must be paid the prevailing wage rate for the classification of work performed.
To support its determination that the underlying facts areinsufficient for Phoenix-Griffin's invocation of equitableestoppel, the Administrative Review Board cites the findings ofboth administrative law judges. The first ALJ, who conducted a24-day hearing, found that Lloyd Griffin knew that thesubcontractors were not bona fide, and that none had any of therequired proof of legitimacy. On remand, the second ALJ foundthat Griffin had engaged in a scheme to avoid paying theprevailing wage to the purported subcontractors, and that Griffinhad encouraged his employees to collude in the scheme bypreparing and submitting falsified payroll records to HUD.
Furthermore, the Administrative Review Board determined thatthe facts found by the first ALJ were "properly and adequatelybased on the evidence of record," and that no evidence wasoffered in the proceedings on remand that was inconsistent withthe initial findings. Slip op. at p. 7.
The Administrative Review Board concluded that Plaintiffs failed to comply with the guidelines set forth in the HUDHandbook, and so cannot claim to have relied upon thoseguidelines to their detriment. This conclusion is supported bysufficient evidence; it is not arbitrary or capricious, orviolative of any law or statute. Consequently, this Court upholdsthe Administrative Review Board's determination on the subject ofthe working subcontractors.
Veazie Street plant workers
The remaining issue to be resolved by this Court is thequestion of whether or not Plaintiffs reasonably relied on theadvice from HUD officials and guidelines in the HUD Handbook, andwhether or not that reliance induced them to commit violations ofthe Department of Labor's prevailing wage requirements. In itsexamination of this issue, the Administrative Review Board firstreviewed the Department of Labor's regulation, in effect at thetime of the Turnkey Project, that addresses the issue of off-sitefabrication plants, 29 C.F.R. § 5.2 (1)(2) (1993).6 Thelanguage of this regulation is essentially the same as the guidelines setforth in the HUD Handbook, and the advice repeated to Griffin,verbally and by letter, by HUD officials. Citing the ALJ'sfindings that all the wall panels produced at the Veazie Streetplant were used by the Turnkey Project, corroborated by Griffin'sown testimony that he never once sold or distributed anywhereelse, as well as the absence of any evidence to the contrary, theAdministrative Review Board stated, "This single finding of factalone should have served as an absolute bar to the ALJ'sconclusion of law on remand that Griffin committed the VeazieStreet violations as the result of relying on misleading HUDadvice." Slip op. at p. 12. The Court agrees with theAdministrative Review Board's reasoning on the issue of theVeazie Street workers.
As the Department of Labor is charged with interpreting andenforcing the requirements of the Davis-Bacon Act, a further lookat its regulations is helpful in shedding light on the issue ofoffsite fabrication plants. The paragraph following the onequoted above in footnote six states: (3) Not included in the "site of the work" are permanent home offices, branch plant establishments, fabrication plants, and tool yards of a contractor or subcontractor whose locations and continuance in operation are determined wholly without regard to a particular Federal or federally assisted contract or project. In addition, fabrication plants, batch plants, borrow pits, job headquarters, tool yards, etc., of a commercial supplier or material man which are established by a supplier of materials for the project before opening of bids, and not on the project site, are not included in the "site of the work." Such permanent, previously established facilities are not a part of the "site of the work," even where the operations for a period time may be dedicated exclusively, or nearly so, to the performance of a contract.29 C.F.R. § 5.2(1) (1998).
Paragraph (2) of that regulation attempts to describe what kindof offsite facilities are considered part of the "site of thework," and paragraph (3) describes what kinds of offsitefacilities are not part of the "site of the work." Looking atthe two paragraphs together, it seems clear that the VeazieStreet fabrication plant is not the kind of "permanent,previously established" facility whose location and operation aredetermined "wholly without regard to a particular Federal orfederally assisted contract or project" that is described inparagraph (3). Employing one's powers of deduction, the fact thatthe Veazie Street plant does not fit the definition of theoffsite plants that are not considered "site of the work"buttresses the conclusion that it more closely resembles the kindof plants that are part of the site of the work.
The Veazie Street plant was established near the variousTurnkey sites, on a site adjacent to sites originally earmarkedas building sites, in a building that Griffin contracted to buy at the time he entered into the contract with the PHA. The plantwas established in order to make wall panels for the TurnkeyProject. The evidence demonstrates that the only wall panels madeby the plant were used by Turnkey; it was in fact "dedicatedexclusively, or nearly so, to the performance of the contract."
Griffin testified that he intended to continue using the plantto make wall panels for other projects. The credibility ofGriffin's best intentions are undermined by the earlier findingsthat he engaged in willful violations of the prevailing wage lawsin connection with other employees. But regardless of thesincerity of his intentions (or lack thereof), his intentions arenot controlling. The Administrative Review Board wrote, "Mr.Griffin's intent and HUD's knowledge of his intent are simply notlegally relevant. See United Constr. Co., Inc., WAB No.82-10, slip op. at 8-9 (Jan. 14, 1983). Griffin's failure toactually supply other projects or buyers meant that he failed tocomply with any of the three pieces of HUD advice." Slip op. atp. 12.
In a case decided by the Wage Appeals Board in 1985, OntarioPipeline, Inc. & Farmington Concrete Products, Inc., WAB CasesNos. 81-12 & 81-13 (January 28, 1985),7 it was determinedthat a mobile fabrication facility manufacturing concretemanholes was dedicated exclusively to the project — anEPA-financed sewage system. In its determination, the WageAppeals Board took into consideration the fact that the facility was established at theonset of the construction project and moved to a differentlocation at the completion of the project. While established nearthe sewage project, the manufacture sold approximately 93% of itsproduct to the prime contractor, and 6% to another contractor onthe same project. The manufacturer testified that it located theplant in the area intending it to be permanent because itanticipated an ongoing demand for its manholes. The plant wasrelocated only when that business failed to develop. The Boardrejected this argument, stating that the manufacturer's intentwas not legally relevant.
The Board further supported its decision with evidence that theprime contractor and the manhole manufacturer were owned by oneholding company, with at least three common officers. This factindicated that the manufacturer was not "a bona fide materialsupplier." Slip op. at p. 4.
In the usual instance, a bona fide material supplier will provide the materials (whether they are pipe, asphalt, concrete mix, gravel, or in this case, manholes) to several contractors at the same time. If this is the supplier's method of operation, he is not considered to be a subcontractor, and, if the contract is federally financed or assisted and is thereby subject to the Davis-Bacon Act labor standards provisions, the supplier's employees are not subject to the prevailing wage rates contained in the applicable wage determination. However, if the supplier does not operate in this manner and it appears from the facts that is devoting all of his supply to one project, he runs the risk of being labelled a subcontractor, and as such, his employees are provided the protection of the labor standards provisions and must be paid the predetermined wages along with the employees of all the other subcontractors and the general contractor on the Federal project.Slip op. at p. 3.
At the time that the Veazie Street plant was established, andwhen the Wage and Hour Division conducted its investigation ofpayment practices there, the Department of Labor had relied formany years on a two-pronged functional and geographic test toanalyze offsite temporary plants as described by 29 C.F.R. § 5.2(1). As the language in the regulation in effect at the time isthe same as the language in the HUD Handbook, it is worthwhile toexamine some of these cases.
In Mayfair Construction Co. of Douglass, Kansas, W.A.B. CaseNo. 81-19 (April 18, 1983),8 a Titan II missile siloexploded at the McConnell Air Force Base. While some of therebuilding took place at the Air Force Base, damaged acousticalmodules were repaired at Mayfair's warehouse nine miles away,then transported back to the silo for installation. A disputearose concerning the proper wages to be paid to the warehouseworkers.
The Wage Appeals Board held that the warehouse workers were entitled to the prevailing wage, explaining that "functionalismcontrols the Board's decision on these facts," Slip. Op., p. 4,as the work at the warehouse was performed exclusively for themissile repair project. As for the geographic issue, the Boardstated it was not controlling because, "It is apparent thatpracticality and convenience dictated that the repairs could notbe performed in the silo and that this was the nearest locationwhere the work could be performed." Slip op. at p. 3. See also,Atco Construction, Inc., WAB Case No. 86-01 (August 22,1986).9
A common sense review of all the factual circumstancessurrounding the Veazie Street plant and its workforce leads tothe conclusion that the plant was an integral part of theconstruction of the Turnkey housing units, not a separatecommercial entity. The Veazie Street plant never made any morewall panels after the abrupt termination of the Turnkey Project,and none of the wall panels made there were sold to any otherbuyer besides LTG. The Veazie Street plant was established andoperated by Lloyd Griffin, who was also the principal ofPhoenix-Griffin and LTG. According to testimony before the ALJ,Veazie Street employees routinely transported completed wallpanels to the housing sites, where they installed the panels onthe foundations. In addition, construction workers were sometimessent from the housing sites to make wall panels at the fabrication plant.10
Moreover, Griffin started the process of purchasing the VeazieStreet building when he entered into the contract for the TurnkeyProject, but abandoned the plan when the Turnkey Project wasterminated. The Veazie Street plant was not a "permanent,previously established" facility "whose location and continuancein operation are determined wholly without regard" to theparticular Federal project. 29 C.F.R. § 5.2 (1)(3).
Furthermore, while Griffin may have intended the plant as anindependent ongoing operation, for various reasons, this is notwhat materialized. As stated above, his intent is not controllingwhen analyzing the applicability of the law. Ontario Pipeline,Inc. & Farmington Concrete Products, Inc., WAB Cases Nos. 81-12& 81-13, and United Construction Co., Inc., WAB Case No. 82-10.
The findings of Administrative Law Judge DiNardi are importantand entitled to great deference. ALJ DiNardi found thatPhoenix-Griffin engaged in various schemes that constituted apattern of activity aimed at evading the wage provisions of theDBRA. One of these schemes involved the workers at the VeazieStreet plant, who were paid below the prevailing wage when theyworked at Veazie Street because, according to Griffin, they were employees of a separate manufacturing facility. However, whenthese same employees traveled to the housing sites and workedthere, they were treated as independent contractors, and alsopaid below the prevailing wage. The Veazie Street plant workersalso testified that they engaged in other construction tasks,such as laying linoleum, while at the housing sites. It appearsincontrovertible that these workers were employees of LTG,engaged in all phases of construction, and that the workperformed at the Veazie Street plant was integral to, anddedicated exclusively to, the Turnkey Project.
All of these facts taken together support this Court'sdetermination that the Veazie Street plant establishment does notfit into the fabrication plant exception outlined in the HUDHandbook, and that Plaintiffs accordingly failed to comply with,and therefore did not rely upon, the guidelines provided in theHUD Handbook, and the other advice offered by HUD to Griffin.With the defense of equitable estoppel no longer available toPlaintiffs, the Housing Act, and its wage provisions, controlthis case and, consequently, the prevailing wage provisions mustbe applied to the Veazie Street workers.
Because Plaintiffs failed to comply with the guidelines setforth in the HUD Handbook in connection with either the workingsubcontractors or the Veazie Street employees, Plaintiffs cannot invoke equitable estoppel as a defense against the Department ofLabor's enforcement of the wage provisions of the Housing Act.This Court affirms the conclusions of the Administrative ReviewBoard in Lloyd T. Griffin, et al. v. Secretary of Labor, ARBCase Nos. 00-032, 00-033. The Department of Labor is entitled toobtain the back wages withheld by HUD and pay them to theaffected workers. The Clerk shall enter judgment for theDefendants, as indicated, forthwith.
It is so ordered.
1. This case is captioned Lloyd T. Griffin, et al., v.Secretary of Labor. The Westlaw citation for this decision is2003 WL 21269140 (DOL Adm. Rev. Bd).
2. The decision of the ALJ is identified as Cases Nos:91-DBA-64/89/90/91/92, 91-DBA-93/94/95, 92-DBA-29/30/31/32.
3. The decision of the Wage Appeals Board is marked WAB CaseNo. 93-15, and can be found on Westlaw at 1994 WL 764105 (DOLW.A.B.).
4. This case is identified as ARB Case No.: 1988-028, ALJ CaseNo.: 1991-DBA-00094.
5. This decision is designated as ARB Case Nos., 00-032,00-033 (formerly ARB No. 98-028); ALJ Case No. 91-DBA-94. It maybe found through Westlaw at 2003 WL 21269140 (DOL Adm.Rev.Bd).
6. The regulation reads: "Except as provided in paragraph(1)(3) of this section [providing exemption for permanent offsitefacilities operated by a covered contractor], fabrication plants,mobile factories, batch plants, borrow pits, job headquarters,tool yards, etc., are part of the site of the work provided theyare dedicated exclusively, or nearly so, to performance of thecontract or project, and are so located in proximity to theactual construction location that it would be reasonable toinclude them." Slip op. at p. 10. (The "reasonable proximity"language from the final phrase of this definition was amended byCongress in 2000 to "adjacent or virtually adjacent to the siteof the work," following the Circuit Court of the District ofColumbia's decision in Ball, Ball & Brosamer, Inc. v. Reich,24 F.3d 1447 (D.C. Cir. 1994).
7. This decision may be found at 1985 WL 167219 (DOL W.A.B.).
8. 1983 WL 144670 (DOL W.A.B.).
9. 1986 WL 193113 (DOL W.A.B.).
10. When construction workers from the sites were sent to theplant to help with the wall panels, they were instructed not toreveal their rate of pay to the Veazie Street workers.