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COUTU v. UNIVERSITIES RESEARCH ASS'N, INC.
595 F.2d 396 (1979)
Stanley E. COUTU et al., Plaintiffs-Appellants,
v.
UNIVERSITIES RESEARCH ASSOCIATION, INC., Defendant-Appellee.
No. 78-1165.
United States Court of Appeals, Seventh Circuit.
Heard December 6, 1978.
Decided April 4, 1979.
Robert Jay Nye, Oak Park, Ill., for plaintiffs-appellants.
Robert E. Mann, Chicago, Ill., for defendant-appellee.
Before CASTLE, Senior Circuit Judge, and CUMMINGS and PELL, Circuit Judges.
CUMMINGS, Circuit Judge. This action was brought by plaintiff, an electronics technician,1 and his class seeking $5,000,000 in damages and other relief on the ground that defendant did not pay them the prevailing wages required by the Davis-Bacon Act (40 U.S.C. § 276a et seq.) for their construction work. Defendant is a not-for-profit consortium of universities formed to facilitate scientific research and to design, construct and operate the Fermi National Accelerator Laboratory in Batavia, Illinois. This facility is a 6800-acre
Kane County site containing laboratories, research offices, related facilities, and the world's largest proton accelerator system. It is used to carry out research in the field of high-energy physics by numerous scientists from institutions located throughout the world. (App. 50 n. 3.) The Davis-Bacon Act requires government construction contracts to contain a provision stating that the minimum wages to be paid various classes of laborers and mechanics shall be based upon the wages to be determined by the Secretary of Labor to be prevailing where the work is to be performed. 40 U.S.C. § 276a(a). We held in McDaniel v. University of Chicago,512 F.2d 583 (7th Cir. 1975), reaffirmed on remand, 548 F.2d 689 (7th Cir. 1977), certiorari denied, 434 U.S. 1033, 98 S.Ct. 765, 54 L.Ed.2d 780, that employees have an implied private right of action to sue for wages due under the Act. Our decision in the present case flows directly from the McDaniel opinions. The complications arise only from the procedural posture of the case and from defendant's renewed attempts to establish an exhaustion requirement. Plaintiff and his class alleged in their "First Cause of Action" (hereinafter "Count I") that defendant violated the Davis-Bacon Act by not paying members of plaintiff's class the minimum wages "required to be paid pursuant to the said contract and the prevailing wage determinations of the Secretary of Labor and the Davis-Bacon Act" (App. 2). Count I was dismissed in an unreported October 8, 1975, memorandum opinion and order of Judge McGarr. However, that order did not dismiss the remaining six Counts of the complaint. On August 10, 1976, Judge Leighton, to whom the class action had been transferred, certified the plaintiff class.2 Discovery was apparently stayed in February 1977.3 In March 1977, defendant filed a motion for summary judgment. In November 1977, Judge Leighton handed down a memorandum order granting that motion. The court dated that in Count II the plaintiff class alleged that the contract fell within the purview of the Davis-Bacon Act and that the contract by its terms provides for "payment to members of plaintiff class at the legal wage rate applicable to work actually performed." In this memorandum order, the district court noted that no Davis-Bacon Act stipulations requiring the payment of prevailing wages were ever made a part of the contract between defendant and the United States.4 The court said that the plaintiff class was relying on Article XXXIII of the contract providing that the contract did not contemplate the performance of work by defendant with its own employees "which the Commission [now the Energy Research and Development Administration (ERDA)5] determines is subject to the Davis-Bacon Act" and that such work was to be procured by subcontracts containing "the [Davis-Bacon] provisions relative to labor and wages required by law." The court then held that the contract failed to contain the "requisite Davis-Bacon Act specifications for maintenance of the claims stated in Count II" and accordingly dismissed that Count. Counts III through VII of the complaint
were based on state claims, and the district court declined to assert pendent jurisdiction over them "due to the legally insubstantial nature of the federal claims." Therefore, the complaint was dismissed in its entirety. No notice of appeal was filed with respect to Judge McGarr's dismissal of Count I of the complaint, so that the principal question before us is whether Count II, asserting that defendant breached contractual obligations to the members of plaintiff class, was properly dismissed. At the outset, the parties disagree on what was decided by Judge McGarr and therefore what remained to be decided by Judge Leighton. The defendant insists that only two narrow fact questions were left open by Judge McGarr: (1) whether the contract actually contained Davis-Bacon Act stipulations and, if so, (2) whether Davis-Bacon Act work was performed by members of the plaintiff class. If this were all that was left for Judge Leighton to decide, the affidavit that there were no Davis-Bacon Act stipulations (n.4 supra) might require affirmance of the summary judgment. However, we do not believe that Judge McGarr reduced the suit to a simple case of whether express wage stipulations in the contract had been breached. On the contrary, in dismissing Count I Judge McGarr held only that if the contract was not a Davis-Bacon Act contract plaintiff could not recover.6 Clearly if a contract contains the required wage stipulations, this would show that it was a Davis-Bacon Act contract. Judge McGarr apparently recognized, however, and we agree, that clauses in the contract other than the wage stipulations may reveal that the contract was one for Davis-Bacon Act work (App. 25). Thus two theories of recovery remained open to the plaintiff class after Judge McGarr's dismissal: (1) there may have been Davis-Bacon Act stipulations in the contract or (2) there may have been other evidence that the contract was one for Davis-Bacon Act work, in which case the required stipulations arguably become a part of the contract by operation of law. Judge Leighton's grant of summary judgment was based on the affidavit (n.4 supra) tending to disprove only the first of these two theories. We hold that summary judgment was improperly entered against plaintiff and his class because the required wage stipulations were incorporated by operation of law. The Davis-Bacon Act Applies to Construction, Alteration or Repair Work Performed by Defendant
1. Plaintiff was employed by defendant at the Fermi National Accelerator Laboratory from 1972 until he resigned three years later. 2. The class was described as follows:
"All `mechanics and/or laborers' employed by defendant pursuant to Contract No. AT (49-8)-3000 between defendant and the United States of America `for construction, alteration and/or repair, including painting and decorating, of public buildings and public works of the United States' who have been paid wages less than `the wages * * * determined by the Secretary of Labor to be prevailing for the various classes of laborers and mechanics * * * in the city, town, village, or other civil subdivision of the State' in which the work was performed, all as stated and defined in the Davis-Bacon Act, 40 U.S.C. § 276a, et seq." 3. Plaintiff apparently relies on Judge Leighton's minute order of February 18, 1977, stating "P/T completed" to show discovery was thereby stayed. Defendant's brief nowhere disputes the stay. An earlier discovery stay was ordered by Judge McGarr on December 22, 1975. 4. In this respect, the court relied on an affidavit of John R. Frazier, chief legal counsel for the Fermi National Accelerator Laboratory. As will be seen, this affidavit does not resolve the controversy. 5. ERDA is the successor to the Atomic Energy Commission. 6. There is some support for the proposition that if work covered by the Davis-Bacon Act happens to be performed under a contract which did not intend that such work be performed by anyone, it is not covered by the Act. 40 Comp.Gen. 565 (1961). This interpretation, however, raises the additional question of who is to decide whether a contract is subject to the Act. Judge McGarr appeared to accept defendant's contention that authority to make this determination was accorded exclusively to the executive departments so that their decisions in this regard are not subject to judicial review (App. 23). We note in addition that even if such administrative action is reviewable, there may be an exhaustion requirement. We do not decide any of these questions, since they are not before us. 7. The applicable clause of the McDaniel contract between the University of Chicago and the Atomic Energy Commission provided:
"26.5 Davis-Bacon and Other Labor Provisions for Construction Subcontracts. "The University and the Commission have agreed upon a procedure under which the Commission will determine when work to be undertaken at the Laboratory Facilities is covered by the Davis-Bacon Act. When it is determined that the Davis-Bacon Act does cover a particular work project, the University shall procure by subcontract the covered work. Any subcontract entered into under this section shall contain the provisions relative to labor and wages required by law to be included in contracts for the construction, alteration and/or repair, including painting and decorating, of a public building or public work. When requested by the Commission, any such subcontract shall be submitted for Commission approval. * * * * * * "Supplement No. 16, Appendix D." (quoted at p. 1a of the Solicitor General's amicus curiae brief on petition for a writ of certiorari from the Supreme Court in University of Chicago and Argonne v. McDaniel, 434 U.S. 1033, 98 S.Ct. 765, 54 L.Ed.2d 780.) 8. See, e. g., Ogden v. Saunders, 25 U.S. (12 Wheat.) 212, 6 L.Ed. 606 (1827); Wood v. Lovett,313 U.S. 362, 370, 61 S.Ct. 983, 85 L.Ed. 1404; G. L. Christian & Associates v. United States,312 F.2d 418, 160 Ct.Cl. 1, 320 F.2d 345, 160 Ct.Cl. 58 (1963), certiorari denied, 375 U.S. 954, 84 S.Ct. 444, 11 L.Ed.2d 314; United States v. New Orleans Public Service Inc.,553 F.2d 459, 469 (5th Cir. 1977); Compagnie Générale Transatlantique v. American Tobacco Co.,31 F.2d 663, 666 (2d Cir. 1929); City of Tullahoma v. Coffee County,204 F.Supp. 794, 800 (E.D.Tenn.1962); 3 Corbin on Contracts, § 551; 4 Williston on Contracts, § 615 at p. 621; Dees and Ginsberg, Contract Interpretations and Defective Specifications (Government Contracts Monograph No. 4, 1975 ed., George Washington University) 1-4.
United States v. Joseph A. Holpuch Co.,328 U.S. 234, 66 S.Ct. 1000, 90 L.Ed. 1192, on which defendant relies, is not to the contrary. It did not concern the question whether applicable statutory terms must be read into government contracts. International Association of Machinists v. Hodgson, 169 U.S.App.D.C. 142, 515 F.2d 373 (1975), cited by defendant at oral argument, is also consistent with our holding. That case involved the Secretary of Labor's decision to exercise his discretion not to issue a wage determination under the Service Contract Act. The Davis-Bacon Act, however, confers no such discretion on him. 9. See 43 F.R. 11379-11383 containing the introductory notice to a recent compilation of the Secretary's wage determinations and decisions specifically applicable to government project work in Kane County. 42 F.R. 30108-30111, 35522, 39847-39848 contain examples of such decisions. 10. See p. 12 of supplemental brief for defendants-appellees in McDaniel v. University of Chicago,548 F.2d 689 (7th Cir. 1976), certiorari denied, 434 U.S. 1033, 98 S.Ct. 765, 54 L.Ed.2d 780. 11. Enforcement through contract termination and debarment from future contracts is provided for. 40 U.S.C. § 276a-1; 29 C.F.R. § 5.7(d); 29 C.F.R. § 5.6(b)(1). Additionally, the regulations provide for suspension of payments under the contract if the agency (here ERDA) determines the contractor has failed to "comply with labor standards stipulations * * *" (29 C.F.R. § 5.9). This remedy seems inadequate to assure the employees of a full recovery in the present case for three reasons: (1) it is based on the assumption that there are stipulations in the contract, (2) it provides for withholding payment only until the violations are discontinued or (apparently in the agency's discretion) enough has been withheld to compensate the employees, and (3) withholding funds is hardly feasible in this case since, as counsel for defendant advised us at oral argument, the defendant is merely a conduit for federal funds. It is thus not clear that such a contractor can or should be required to make restitution out of its own unrelated funds.
Finally, the regulations provide that "[t]he Agency Head may, in appropriate cases * * request that restitution be made * * *." (29 C.F.R. § 5.10.) Apart from the fact that the precatory language of this regulation gives employees no sure means of redress, this would not seem to be an "appropriate case" for such restitution in view of the defendant's self-styled conduit nature. to assure the employees of a full recovery in the present case for three reasons: (1) it is based on the assumption that there are stipulations in the contract, (2) it provides for withholding payment only until the violations are discontinued or (apparently in the agency's discretion) enough has been withheld to compensate the employees, and (3) withholding funds is hardly feasible in this case since, as counsel for defendant advised us at oral argument, the defendant is merely a conduit for federal funds. It is thus not clear that such a contractor can or should be required to make restitution out of its own unrelated funds. Finally, the regulations provide that "[t]he Agency Head may, in appropriate cases * * request that restitution be made * * *." (29 C.F.R. § 5.10.) Apart from the fact that the precatory language of this regulation gives employees no sure means of redress, this would not seem to be an "appropriate case" for such restitution in view of the defendant's self-styled conduit nature. 12. See n.11 supra and 41 C.F.R. §§ 9-18.701, 9-18.704, 9-18.740. 13. The Disputes clause contained in Article XIX of the contract with respect to the resolution of controversies between the contracting parties is inapplicable because it relates only to questions of fact whereas the question before us is essentially one of law, viz., whether the provisions of the Davis-Bacon Act apply to construction, alteration or repair work performed by defendant's employees, and because this is not a controversy between the contracting parties. 14. North Georgia Building & Construction Trades Council v. Department of Transportation,399 F.Supp. 58 (N.D.Ga.1975); Framlau Corporation v. Dembling,360 F.Supp. 806 (E.D. Pa.1973); In re Stanford Linear Accelerator Center, 16 Wage-Hour Cases 851 (Wage Appeals Board, Department of Labor 1965). 15. International Union of Operating Engineers v. Arthurs,355 F.Supp. 7 (W.D.Okl.1973), affirmed, 480 F.2d 603 (10th Cir. 1973). 16. Section 4 of the Act provides:
"Effect on other Federal laws "Sections 276a to 276a-5 of this title shall not be construed to supersede or impair any authority otherwise granted by Federal law to provide for the establishment of specific wage rates." 17. There is other evidence that ERDA is not authorized to set wage rates that do not comply with the Davis-Bacon Act. Executive Order 10789, pursuant to 50 U.S.C. § 1431, authorizes the Secretary of the Atomic Energy Commission (predecessor to ERDA) to enter into contracts containing certain limitations. Paragraph 13 of that Order specifically states that nothing in the Order shall be construed to allow the Secretary to set aside the requirements of the Davis-Bacon Act. If he already had that power by federal law, this provision in the Executive Order would be both superfluous and unavailing.
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