ALI v. DLG DEVELOPMENT CORP.

MEMORANDUM

ANITA B. BRODY, District Judge.

I. INTRODUCTION

This case addresses whether state law claims with an embedded federal issue involving the Davis-Bacon Act "arise under" federal law. Based on the test laid out in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing., 545 U.S. 308, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), the Davis-Bacon issue is not substantial. Thus, there is no federal question jurisdiction. The Supreme Court has likened jurisprudence in this area to a Jackson Pollock painting. Gunn v. Minton, 568 U.S. 251, 258, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013). Today, in an effort to clarify the image, I add another brush stroke.

On February 24, 2016, Plaintiff Haroon Ali filed a class action complaint in the Philadelphia County Court of Common Pleas on behalf of himself and other similarly situated individuals. The complaint pled state law claims against Defendants Dale Construction,1 DLG Development Corporation, Evette Smith, David Gross, and Eric Smith.2 Plaintiff later joined the Philadelphia Housing Authority ("PHA") as a defendant. All parties were residents of Pennsylvania, and the complaint alleged only state law claims with no reference to federal law. On March 31, 2017, Ali filed a Motion for Class Certification that made clear — for the first time — that his prior state law claims relied on the Davis-Bacon Act. On April 5, 2017, Defendants removed to federal court based on federal question jurisdiction. On May 4, 2017, Ali filed a Motion to Remand. For the reasons stated below, I will grant Ali's motion and remand the case to state court.3

II. BACKGROUND4

Ali worked as a laborer on a Philadelphia Housing Authority ("PHA")5 development project called Oakdale. On the project, he was directly employed by DLG Development, a subcontractor for Dale Construction. Ali worked for DLG from April 1, 2014 through April 10, 2015. Compl. ¶ 13, ECF No. 1-1. During his employment his wages were reduced from $48.65 per hour to $25.65 per hour. Compl. ¶ 18. The money subtracted from his wages — $23 per hour — was paid to the union, ostensibly to provide fringe benefits to workers. See Compl. ¶¶ 18-20. Ali could not benefit from those payments to the union because he was not a union member. Compl. ¶ 22.

On August 17, 2015, the PHA's Wage Compliance Unit ("WCU") issued a citation to Dale and DLG for a violation of the Davis-Bacon Act ("DBA")6 on the Oakdale project. See August 17, 2015 Citation Notice to Dale Corporation, ECF 11-14 [hereinafter August 17, 2015 Citation]. The citation concluded that Dale and DLG owed back wages to six individuals — including Haroon Ali. See August 17, 2015 Wage Compliance Review 3, ECF No. 11-14. The citation stated that Dale and DLG had submitted part of the six individuals' prevailing wage to the Laborer's District Council Benefits Fund ("Fund") to pay for fringe benefits. August 17, 2015 Citation. Those individuals, however, were not members of the union and therefore had "no access to the fringe benefits through the Fund." Id. To remedy the Davis-Bacon Act violation, the citation instructed Dale and DLG to pay the fringe benefit portion of the prevailing wages directly to the six individuals. Id. Three more citations were issued on similar Davis-Bacon violation grounds. In response, Dale issued additional checks to the Fund rather than to the individuals. See Pl.'s Mot. Class Certification 1-2, ECF No. 7-2, at 20. Ali was never paid the additional wages.

On February 24, 2016, Ali filed a class action complaint in the Philadelphia County Court of Common Pleas seeking the money from DLG and Dale that he was owed. The complaint makes no reference to the Davis-Bacon Act or the citations issued by the PHA.7 Instead, Ali merely alleged that Oakdale was a "Prevailing Wage assignment" — entitling him to a "Prevailing Wage" — with no mention of federal law. Compl. ¶¶ 15-16. Based on that entitlement, Ali asserted claims for a violation of the Pennsylvania Wage Payment & Collection Law (PWPCL), a violation of the Pennsylvania Minimum Wage Act (PWA), and conversion. See Compl. ¶¶ 31-51. The complaint is vague as to the exact source of the prevailing wage entitlement and how that entitlement fits into Ali's state law claims.

The case was litigated in state court for over a year. During that time the parties conducted extensive discovery, including depositions. On March 31, 2017, Ali filed a motion for class certification. The motion refers to the PHA citations against Dale and DLG, and the Davis-Bacon Act is the only statutory source of law it discusses to establish a prevailing wage entitlement. See Pl.'s Mem. Class Certification 1-4, ECF No. 7-2, at 27. The allegations in the motion mirror the findings made by the PHA in the April 2015 citation. The motion also mentions that class members had tried to access the Fund but were denied for various reasons. See id. at 2 n.13. Therefore, the motion brings into clarity for the first time that Ali, in his original complaint, was seeking direct payment for the fringe benefits that Dale and DLG had paid into the Fund, and that those benefits were guaranteed as part of the prevailing wage under the Davis-Bacon Act.

Once Dale realized that Ali's claims were predicated on the Davis-Bacon Act, it removed to federal court. On April 5, 2017, Dale, with the consent of the other Defendants, filed for removal.8 On May 4, 2017, Ali filed a motion to remand.

III. DISCUSSION

Ali presents two arguments in favor of remand. First, he argues that Dale's removal was untimely. Second, he argues that Dale9 has failed to raise a sufficient federal issue to merit federal question jurisdiction. Although Dale's removal was timely, Ali's motion to remand will be granted.

A. Timeliness of Removal

Ali argues that because Dale's notice of removal was filed more than thirty days after his complaint was filed in state court, the removal was untimely. Ali is correct that typically a notice of removal must be filed within thirty days after the defendant receives the complaint. 28 U.S.C. § 1446(b)(2)(B). But, the removal statute allows an exception. If a subsequent "amended pleading, motion, order or other paper" establishes that a case can be removed, then a defendant may remove thirty days from receipt of the subsequent material. 28 U.S.C § 1446(b)(3) (emphasis added).

Here, although Ali's original complaint made no reference to federal law or the Davis-Bacon Act, his subsequent motion for class certification squarely presented the federal issue. The motion for class certification stated that "Mr. Ali is pursuing claims for failure of the Defendants to pay him the fringe benefit portion of the prevailing wage." Pl's Mem. Class Certification 9. The motion argues that Dale and DLG were obligated to make the fringe benefit contributions in cash as part of "the prevailing wage under [the Davis-Bacon Act]." Id. at 8. The motion makes clear that Ali is asserting his state law claims based on a violation the Davis-Bacon Act. Defendants were not on notice of this federal issue until the Motion for Class Certification. Thus, Dale had thirty days from that point to remove. On March 31, 2017, Ali filed the motion. On April 5, 2017, Dale filed the notice of removal. Therefore, Dale's notice of removal was timely.10

B. Federal Question Jurisdiction

Ali next argues that his state law claims — that are premised on a violation of the Davis-Bacon Act — do not confer federal question jurisdiction. "Federal courts are courts of limited jurisdiction." See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). A defendant may remove a case to federal court only if that court would have had original jurisdiction. 28 U.S.C. § 1441(a). Here, Dale asserts removal based on federal question jurisdiction. Federal question jurisdiction exists when an action "aris[es] under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The federal issue must be raised in the plaintiff's "well-pleaded complaint." New Jersey Carpenters & the Trustees Thereof v. Tishman Constr. Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014) (citing Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Tr. for S. Cal., 463 U.S. 1, 8, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)).11

A case can arise under federal law in two ways.12 First, federal law can create the cause of action asserted. Gunn v. Minton, 568 U.S. 251, 257, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013). Federal causes of action "account[] for the vast bulk of suits that arise under federal law." Id. (citing Franchise Tax Bd. of State of Cal., 463 U.S. at 9, 103 S.Ct. 2841). Second, and relevant here, there is a "special and small category" of cases where federal jurisdiction exists although the asserted claims originate under state law. Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006). The test for these types of cases was laid out by the Supreme Court in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), and refined in Gunn.13

Federal jurisdiction will lie over a state law claim if the "federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn, 568 U.S. at 258, 133 S.Ct. 1059 (citing Grable, 545 U.S. at 313-14, 125 S.Ct. 2363). Only when all four of these requirements are met is it proper for a federal court to exercise jurisdiction over this "slim category" of cases. Id. Additionally, in the context of removal, all doubts regarding whether a case fits into the "slim category" should be resolved in favor of remand. See Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990). In this case, the federal issue — the Davis-Bacon Act — is necessarily raised and actually disputed, but it is not substantial. Without a substantial federal issue, the fourth prong on federal-state balance need not be addressed. Accordingly, there is no federal question jurisdiction to support removal.

1. Necessarily Raised

A federal issue is necessarily raised when resolution of the issue is required for the plaintiff to prevail. See Gunn, 568 U.S. at 259, 133 S.Ct. 1059. In other words, the federal issue "is a necessary element of one of the well-pleaded claims." See In re Lipitor Antitrust Litig., 855 F.3d 126, 143 (3d Cir. 2017), as amended (Apr. 19, 2017). Based on Ali's Motion for Class Certification it is apparent that Defendants' alleged failure to provide Ali with the federally mandated prevailing wage undergirds each state law claim. In that motion, Ali only discusses Defendants' duties under federal law — making the necessity of the federal issue clear.

2. Actually Disputed

The federal issue is actually disputed. While some facts are in dispute, the main allegation is that Dale and DLG did not pay Ali the prevailing wage that he was owed under the Davis-Bacon Act. Although the prevailing wage rate itself is undisputed, Dale argues that the Davis-Bacon Act violation was properly remediated — eliminating its liability. Thus, the federal issue is disputed.

3. Substantial

Dale's arguments against remand fail because the Davis-Bacon issue is not substantial. "[I]t takes more than a federal element `to open the "arising under" door.'" Empire Healthchoice Assurance, Inc., 547 U.S. at 701, 126 S.Ct. 2121 (quoting Grable, 545 U.S. at 313, 125 S.Ct. 2363). To establish federal jurisdiction, the federal issue must be substantially important to the "federal system as a whole." Gunn, 568 U.S. at 260, 133 S.Ct. 1059. Supreme Court case law suggests three factors to consider to determine if a federal issue is substantial: (1) whether the issue will have broad impact on the Federal Government, id. at 260, 133 S.Ct. 1059; (2) whether the issue presents a pure legal question, Empire Healthchoice Assurance, Inc., 547 U.S. at 700, 126 S.Ct. 2121; and (3) whether federal law underlying the issue provides for a federal cause of action, Grable, 545 U.S. at 318, 125 S.Ct. 2363. Here, all of the factors weigh against substantiality.

If the resolution of a federal issue would have a broad impact on the Federal Government, then the issue may be substantial. Municipality of Mayaguez v. Corporacion Para el Desarrollo del Oeste, Inc., 726 F.3d 8, 14 (1st Cir. 2013) (quoting Gunn, 568 U.S. at 260, 133 S.Ct. 1059); see also Grable, 545 U.S. at 315, 125 S.Ct. 2363 ("The Government ... has a direct interest in the availability of a federal forum to vindicate its own administrative action...."). In Grable, the plaintiff brought a state law claim to quiet title. 545 U.S. at 311, 125 S.Ct. 2363. The property in question had been seized from the plaintiff by the Internal Revenue Service five years prior to the lawsuit. Id. at 310-311, 125 S.Ct. 2363. The plaintiff claimed — in an action against a third party that had purchased the property — that the IRS had failed to comply with federal notice requirements, thus rendering the seizure invalid and the plaintiff's title superior. Id. at 311, 125 S.Ct. 2363. Because the resolution of the federal issue would have had a direct impact on the actions taken by a federal agency, the Court determined that the issue "belong[ed] in a federal court." Id. at 315, 125 S.Ct. 2363; see also Smith v. Kansas City Title & Tr. Co., 255 U.S. 180, 199, 41 S.Ct. 243, 65 S.Ct. 577 (1921) (finding the federal issue to be substantial in a state law action questioning the constitutionality of the issuance of bonds by the Federal Government). Therefore, in Grable, the Court focused primarily on the "broader significance of the notice question for the Federal Government" and not on "the interests of the litigants themselves." See Gunn, 568 U.S. at 260-61, 133 S.Ct. 1059 (discussing Grable).

In this case, there is no broad impact on the Federal Government because the Davis-Bacon issue does not directly affect actions taken by federal actors. The federal issue here relates to actions taken by private actors and a local agency. Either Defendants' actions violated the Davis-Bacon Act or they did not. The resolution of that question will impact the Defendants, but nothing about the decision will have a direct impact on prior actions taken by federal actors. The future actions of the Department of Labor may be impacted to a slight degree based on a precedential resolution of this issue, though the impact would occur only if the agency decides to seek guidance from a state court opinion on how to administer the Davis-Bacon Act in a particular factual scenario. Any hypothetical future actions of the DOL, however, would be "much farther removed [from this case] than the Internal Revenue Service's were from plaintiff's claim in Grable." Municipality of Mayaguez, 726 F.3d at 15. Therefore, there is no broad impact here. Cf. One & Ken Valley Hous. Grp. v. Maine State Hous. Auth., 716 F.3d 218, 224 (1st Cir. 2013) (finding federal question jurisdiction when the state law claims raised disputes in contracts "approved by a federal agency and signed by a federal official").

The next factor that can demonstrate that a federal issue is substantial is if the issue presents a "nearly `pure issue of law,' one `that could be settled once and for all. ...'" Empire Healthchoice Assurance, Inc., 547 U.S. at 700, 126 S.Ct. 2121 (quoting R. Fallon, D. Meltzer, & D. Shapiro, Hart and Wechsler's The Federal Courts and the Federal System 65 (5th ed. 2003)). Conversely, a "fact-bound and situation-specific" issue will not warrant federal jurisdiction. Id. at 701, 126 S.Ct. 2121. Grable is once again instructive. In Grable, the federal issue of whether the IRS gave the plaintiff proper notice was a "genuine disagreement over federal tax title provisions." 545 U.S. at 315, 125 S.Ct. 2363. There was no dispute that the plaintiff received actual notice by certified mail. Id. at 311, 125 S.Ct. 2363. The case turned on the plaintiff's assertion that federal tax law required personal service of notice. Id. Therefore, there were no issues of fact to decide and the resolution of the legal question was determinative. See id. at 315, 125 S.Ct. 2363.

This case is much more "fact-bound and situation-specific." As the removing parties, Defendants bear the burden of showing jurisdiction exists. Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990) (citation omitted). After one year of discovery and almost two years of litigation, Defendants are unable to boil the case down to a pure legal question that could resolve the Davis-Bacon issue. Dale attempts to do so by stating that it "remediated DLG's [Davis-Bacon Act] violations" by putting money into the Laborer's District Council Benefit Fund. See Def.'s Mot. Judgment on the Pleadings 3. Dale implies that determining the legal sufficiency of its alleged action will resolve the entire case. However, Dale does not indicate how its actions affect the liability of other Defendants or why Ali never received from the Fund the money he claims he is owed. Other class members claim to have tried to access the money but were denied. Pl's Mem. Class Certification 2 n.13. Therefore, the question is more than a pure legal determination of whether Dale's actions fulfilled its duty under the Davis-Bacon Act; the question is whether all Defendants fulfilled their duty in light of their specific actions and the specific actions taken by Ali. Because, the specific actions taken by the parties are not clear from the record, the determination of the Davis-Bacon Act violation is fact-bound and situation-specific — providing a strong argument against federal jurisdiction. See Ramos v. Wal-Mart Stores, Inc., 202 F.Supp.3d 457, 470 (E.D. Pa. 2016) ("When a case [is fact-bound and situation-specific], the federal issue is not as substantial, because resolving the federal dispute will be primarily of value to the parties rather than to the federal system as a whole.").

It is important to note that the possibility that the state court may make the "wrong" decision in this fact-intensive case, does not affect the exercise of federal jurisdiction. As a preliminary matter, state courts are highly competent to answer questions of federal law. See Tafflin v. Levitt, 493 U.S. 455, 458, 110 S.Ct. 792, 107 L.Ed.2d 887 (1990) (discussing the deeply rooted presumption in favor of concurrent state and federal court jurisdiction for federal causes of action). Nevertheless, even if a state court were to err in interpreting federal law, that alone is insufficient to trigger federal jurisdiction. See Gunn, 568 U.S. at 263, 133 S.Ct. 1059.14 Therefore, because of the limited impact and fact-bound nature of this case, the possibility of an incorrect state court determination is not enough to make the issue substantial.

Lastly, a lack of a private right of action under federal law is further evidence against federal jurisdiction. See Grable, 545 U.S. at 318, 125 S.Ct. 2363 (stating that a lack of a private right of action is "worth some consideration in the assessment of substantiality"). While not dispositive, the absence of a private right of action can demonstrate evidence of the "`sensitive judgments about congressional intent' that § 1331 requires." Id. (quoting Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 810, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986)). Thus, the absence of a private right of action is a "missing welcome mat" for state claims that raise federal issues. Id.15

Here, the Davis-Bacon Act does not provide for a private right of action. Weber v. Heat Control Co., 579 F.Supp. 346, 348, (D.N.J. 1982), aff'd, 728 F.2d 599, 599 (3d Cir. 1984). The absence of the right provides evidence that Congress did not intend federal courts to grant jurisdiction to state law claims that include a Davis-Bacon issue. Based on the above analyses, the Davis-Bacon issue is not substantial. Accord McClean v. Philadelphia Hous. Auth., No. 12-CV-4706, 2013 WL 787032, at *4 (E.D. Pa. Mar. 1, 2013) (dismissing, for lack of jurisdiction, state contract claims seeking wages owed under the Davis-Bacon Act).16

Because the federal issue here is not substantial, it is unnecessary to consider the fourth prong of the analysis to determine possible disruption of the federal-state balance.

IV. CONCLUSION

For the reasons set forth above, federal question jurisdiction does not exist here and thus cannot provide a basis for removal. Therefore, I will grant Plaintiff's motion to remand this case back to the Philadelphia County Court of Common Pleas.