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KING SHING CHAN v. CITY OF NEW YORK

June 5, 1992

KAM SHING CHAN, KAM TAI CHAN, JING YI CHEN, SHAN NON CHIU, BAK LOK CHU, KOK KUN CHU, ISRAEL GONZALEZ, SUI BIN HUANG, JIAN NING JIANG, KAM FAI KWOK, MOON SHUEN KWONG, WEI XIANG LEE, YANG I LEE, YOUNG SHI LEE, BING ZHAO LI, HAO HUI LI, KEI MAN LI, WAI TAI LI, CHI KWONG LIU, JACK YE LOUIE, SHENG HUA LU, TING GUANG MAI, CHEUK MING NG, KIN CHUNG NG, KIN HIN NG, SHUN GUO SHEN, TEN JEN SHEN, HAU WING SIN, VEIN DINH SINTRUONG, WING SHING TSE, WAI MAN WAN, KONG HTYAN WU, XU MING WU, GUO XUAN, YUE NAM ZHU, Plaintiffs,
v.
CITY OF NEW YORK, DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT OF THE CITY OF NEW YORK, and CHINESE-AMERICAN PLANNING COUNSEL, INC., Defendants.



The opinion of the court was delivered by: ROBERT J. WARD

 Chinese-American Planning Counsel, Inc. ("CPC") has moved to dismiss plaintiffs' First Amended Verified Complaint pursuant to Rule 12(b)(6), Fed. R. Civ. P., for failure to state a claim upon which relief can be granted. The City of New York ("the City") and the Department of Housing Preservation and Development of the City of New York ("HPD") (collectively "the municipal defendants") have moved to dismiss the First Amended Complaint pursuant to Rule 12(b)(1), Fed. R. Civ. P., for lack of jurisdiction over the subject matter and/or Rule 12(b)(6), Fed. R. Civ. P., for failure to state a claim upon which relief can be granted. *fn1"

 By order dated July 26, 1991, the motions were referred to the Honorable James C. Francis IV, United States Magistrate Judge, to hear and report pursuant to 28 U.S.C. § 636(b)(1)(B). On January 6, 1992, Magistrate Judge Francis filed a Report and Recommendation ("the Report"), in which he recommended that the motions to dismiss be granted in their entirety. Plaintiffs timely filed objections to the Report. For the reasons that follow, the Court denies defendants' motions in part, grants them in part, and modifies the magistrate judge's findings and recommendations in accordance with this opinion. *fn2"

 BACKGROUND

 Kam Shing Chan and the other plaintiffs seek to recover back wages, which they claim are due them under 42 U.S.C. § 5310 and applicable contracts, from CPC and the municipal defendants. *fn3" Plaintiffs also seek liquidated damages and attorneys' fees.

 According to plaintiffs, from 1986 to 1989, CPC entered into a series of three annual contracts with HPD (the "CPC/HPD Contracts") for the "performance of construction, repair and rehabilitation work on real estate owned by the City of New York". Complaint at P44. Plaintiffs are laborers that CPC employed to perform the work required under the terms of these contracts.

 The CPC/HPD Contracts were funded in whole or in part under Title I of the Housing and Community Development Act of 1974 ("HCDA"), 42 U.S.C. § 5301 et seq., which provides that "the primary objective of this [title] is the development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income." Id. § 5301(c).

 42 U.S.C. § 5310, which is part of Title I of the HCDA, provides, in relevant part, that:

 
All laborers and mechanics employed by contractors or subcontractors in the performance of construction work financed in whole or in part with assistance received under this chapter shall be paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor in accordance with the Davis-Bacon Act, as amended (40 U.S.C. 276a -- 276a-5). . . . The Secretary of Labor shall have, with respect to such labor standards, the authority and functions set forth in Reorganization Plan Numbered 14 of 1950 *fn4" (15 F.R. 3176; 64 Stat. 1267) and section 276c of Title 40.
 
[CPC] acknowledges that this Agreement is funded under a program providing direct financial assistance from the Federal government to the City and HPD and is subject to, and the Contractor shall comply with, the requirements of all applicable Federal Statutes, rules and regulations, including, but not limited to, those set forth in Exhibit F attached to this agreement.

 Included among the "applicable Federal Statutes" in Exhibit F were Title I of the HCDA, as well as the Davis-Bacon Act.

 Plaintiffs assert that they were not paid prevailing wage rates, as determined by the Secretary of Labor. In their Memorandum in Opposition to Motions to Dismiss Statutory Claims, plaintiffs state that municipal defendants issued a Request for Proposals ("RFP") and ultimately signed a contract with CPC which provided that the Person Day Rate applicable to the HCDA work could not exceed $ 90 per diem. *fn5" Plaintiffs argue that, once CPC's other expenses were deducted, the $ 90 cap on the Person Day Rate "ensured that each [laborer] would be paid at far below the prevailing wage rate." Id. at 4.

 DISCUSSION

 Defendant's motions present this Court with two distinct, yet related, areas of inquiry. First, the Court must determine whether 42 U.S.C. § 5310 creates a right of action under 42 U.S.C. § 1983. This inquiry turns on: (a) whether defendants were acting under color of state law; (b) whether 42 U.S.C. § 5310 creates an enforceable "right, privilege or immunity," as required under 42 U.S.C. § 1983; and (c) whether Congress intended to foreclose a 42 U.S.C. § 1983 right of action under 42 U.S.C. § 5310. Second, the Court must ascertain whether plaintiffs have an implied private right of action under 42 U.S.C. § 5310.

 Part (a) of the first inquiry requires a fact-specific analysis. Parts (b) and (c) of the first inquiry, as well as the second inquiry, present questions of statutory interpretation which are issues of first impression for the federal courts.

 After discussing the standards to be applied when reviewing a magistrate judge's report and recommendations and deciding a Rule 12(b)(1) or 12(b)(6) motion to dismiss, the Court will turn to these substantive issues.

 A. Standards for Reviewing a Magistrate Judge's Report and Recommendations

 To accept the Report and Recommendations of a magistrate judge to which no timely objection has been made, a district court need only satisfy itself that there is no clear error on the face of the record. See Rule 72, Fed. R. Civ. P., Notes of Advisory Committee on Rules (citing Campbell v. United States Dist. Court, 501 F.2d 196, 206 (9th Cir.), cert. denied, 419 U.S. 879 (1974)). 28 U.S.C. § 636(b)(1) affords the district court broad latitude in considering a magistrate judge's recommendation, even if no party objects to it. Grassia v. Scully, 892 F.2d 16, 19 (2d Cir. 1989). When timely objection has been made to a portion or portions of a magistrate judge's report, however, the district judge must "make a de novo determination . . . of any portion of the magistrate's disposition to which specific written objection has been made." Rule 72(b), Fed. R. Civ. P. See also, 28 U.S.C. § 636(b)(1). The judge may then accept, reject, or modify, in whole or in part, the magistrate judge's proposed findings and recommendations. 28 U.S.C. § 636(b)(1).

 A district court's obligation to make a de novo determination of properly contested portions of a magistrate judge's report does not require that the judge conduct a de novo hearing on the matter. United States v. Raddatz, 447 U.S. 667, 676 (1980). It is sufficient that the district court "arrive at its own, independent conclusion about those portions of the [magistrate judge's] report to which objection is made." Hernandez v. Estelle, 711 F.2d 619, 620 (5th Cir. 1983). To this end, the court must "exercise . . . sound judicial discretion with respect to whether reliance should be placed on [the magistrate judge's] findings." American Express Int'l Banking Corp. v. Sabet, 512 F. Supp. 472, 473 (S.D.N.Y. 1981), aff'd without opinion, 697 F.2d 287 (2d Cir.), cert. denied, 459 U.S. 858 (1982).

 B. Standards for Dismissal Pursuant to Rules 12(b)(1) and 12(b)(6)

 1. Rule 12(b)(1)

 Municipal defendants have moved to dismiss the First Amended Verified Complaint pursuant to Rule 12(b)(1), Fed. R. Civ. P., for lack of jurisdiction over the subject matter. When such a defense is asserted, "'the court should consider the Rule 12(b)(1) challenge first since if it must dismiss the complaint for lack of subject matter jurisdiction, the accompanying defenses and objections become moot and do not need to be determined.'" Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n., 896 F.2d 674, 678 (2d Cir. 1990) (quoting 5 C. Wright and A. Miller, Federal Practice and Procedure, § 1350, p. 548 (1969)).

 Plaintiffs claim subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337. Section 1331, which confers jurisdiction when there is a federal question, provides that, "the district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States." Inasmuch as this action arises under 42 U.S.C. § 1983, as well as under 42 U.S.C. § 5310, there is the requisite subject matter jurisdiction pursuant to 28 U.S.C. § 1331. *fn6"

 In accordance with this analysis, the portion of municipal defendants' motion made pursuant to Rule 12(b)(1) is denied.

 2. Rule 12(b)(6)

 In considering a motion to dismiss for failure to state a claim upon which relief may be granted, a court is required to accept the facts alleged in the complaint as true. Frasier v. General Electric Co., 930 F.2d 1004, 1007 (2d Cir. 1991) (citing Cooper v. Pate, 378 U.S. 546 (1964)). The complaint includes any written instrument attached to it as an exhibit and any statements or documents incorporated into it by reference. Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991), cert. denied, 112 S. Ct. 1561 (1992); Goldman v. Belden, 754 F.2d 1059, 1065-66 (2d Cir. 1985).

 In the instant case, the CPC/HPD Contracts and the RFPs were neither attached to the complaint nor incorporated into it by reference. It is undisputed by the parties, however, that these documents are properly before the Court on this motion to dismiss, because plaintiffs clearly had notice of these documents and relied upon them in framing the complaint. See Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d at 48; Memorandum of Law in Support of Municipal Defendants' Motion to Dismiss the Complaint at 4 n.2; Plaintiffs' Memorandum in Opposition to Motions to Dismiss Statutory Claims at 3 n.1.

 The court must read the complaint generously, and draw all reasonable inferences in favor of plaintiffs. Pross v. Katz, 784 F.2d 455, 457 (2d Cir. 1986). The complaint may be dismissed only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Branum v. Clark, 927 F.2d 698, 705 (2d Cir 1991). Thus, "the function of a [Rule 12(b)(6)] motion to dismiss 'is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.'" Ryder Energy Distribution Corp. v. Merrill Lynch Commodities Inc., 748 F.2d 774, 779 (2d Cir. 1984) (quoting Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980)). The Court now turns to the legal feasibility of plaintiffs' federal claims.

 C. Plaintiffs' § 1983 Claim

 The Court must determine whether 42 U.S.C. § 5310 provides plaintiffs with a cause of action pursuant to 42 U.S.C. § 1983, which provides, in relevant part,

 
every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State. . ., subjects, or causes to be subjected, any citizen of the United States or any other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or any other proper proceeding for redress.

 (emphasis added)

 In their motions to dismiss, defendants assert that plaintiffs cannot satisfy either the "state action" or the "rights, privileges or immunities" requirement. Further, defendants assert that there is no § 1983 right of action, because Congress intended to foreclose such a right of action under § 5310. The Court now turns to these arguments.

 1. Were Defendants Acting Under Color of State Law?

 To state a claim against a private actor under § 1983, the complaint must allege facts demonstrating that the private entity acted in concert with the state actor to commit an unconstitutional or unlawful act. Spear v. Town of West Hartford, 954 F.2d 63, 68 (2d Cir. 1992), petition for cert. filed, May 20, 1992. Defendants assert that plaintiffs' complaint fails to allege facts which would establish that CPC's alleged failure to pay prevailing wages was under color of state law. Plaintiffs bear the burden of proving that the acts of private entities constitute state action for purposes of § 1983. Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 155 (1978); Hadges v. Yonkers Racing Corp., 918 F.2d 1079, 1082 n.3 (2d Cir. 1990), cert. denied, 111 S. Ct. 1583 (1991).

 The Second Circuit has recently addressed the issue of when private conduct qualifies as state action for § 1983 purposes. In Hadges, the court was asked to decide whether the Yonkers Racing Corporation ("YRC"), as the private owner of a racetrack licensed by the State of New York to conduct parimutuel wagering on harness races, engaged in § 1983 state action when it denied Hadges' application to work at YRC's racetrack. Hadges contended that YRC's denial of his application amounted to § 1983 state action because YRC was subject to pervasive New York State statutory and regulatory control, and because it generated significant tax revenues for the State, received State tax credits, and held a monopoly over harness racing in the New York metropolitan area. Id. at 1080-81.

 The Court identified two independent tests for determining whether there is state action: the symbiotic relationship test and the close nexus test. Either test is ...


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