The opinion of the court was delivered by: Trager, District Judge.
At its core, this case is about the clash between an employer's right,
under federal law, to replace striking workers, and a local governmental
policy, adopted allegedly for public safety reasons, that would
effectively nullify that right. The precise issue is whether the state
action at issue, refusing to conditionally certify workers who would act
as strike replacements, was pre-empted by federal labor law.
Plaintiffs, Paul and Isaac Dachs, are the principals of plaintiffs
Van-Go, Sterling Coach and Celebrity Transit, corporations in the
business of providing bus or van transportation services. In September
1988, Van-Go entered into a two year contract with the New York City
Board of Education ("BOE" or "Board") that was later extended through
June 30, 1996. Under the terms of that contract, Van-Go was to provide
severely disabled students, who lived in buildings without elevators and
who could not walk, with transportation services. The contract called for
the students to be carried from their apartments by two escorts to a
Van-Go van where a driver would be waiting to take them to school.
Van-Go Drivers and escorts were required to be "certified" pursuant to
Articles 40 and 41 of the Van-Go/BOE contract. Langford Dep., at Exh.B.
Before employees could be approved for certification, they were required
to undergo a background check, mental fitness report, drug test, training
course, and most relevant here, submit a "fingerprint record." Id. The
term "fingerprint record" is not defined in the contract. The
certification process often took three to six months to complete,
primarily because of the length of time it took to obtain an FBI
evaluation of a fingerprint record. See Angela Gill Dep., p. 93; Langford
Dep., p. 335. Plaintiffs allege that, because of the length of time
required by this last step in the certification process, BOE adopted a
"uniform practice and policy" of conditionally certifying new employees.
Compl., ¶ 18. Conditional certifications were approvals granted to
employees who had satisfied all of the BOE's other certification
requirements, but were awaiting the processing of their fingerprint
reports by the FBI. The Van-Go/BOE contract also required Van-Go to
supply "sufficient, qualified and approved personnel to enable the
Contractor to dispatch substitute escorts promptly if, when and where
necessary to ensure continuous, uninterrupted and punctual service in
each and every instance." Extension and Second Amendment of Contract,
§ (D) at 10.*fn1
In March 1994, Van-Go learned that Local 1181 planned to initiate a
strike against it in early April 1994, and notified BOE of the pending
strike by letter dated March 16, 1994. At first, BOE conditionally
certified potential replacement workers, but then, Kevin F. Gill,
Director of the BOE Office of Pupil Transportation ("OPT"), on behalf of
BOE informed Van-Go by letter dated April 7, 1994, that it would not
conditionally approve employees "`to act as strike breakers.'" Pl.App. in
Opp. to Mot. for Sum. J. ("Pl.App."), at Exh.40. Prior to the situation at
issue, no request for consideration of conditional certifications had
ever been refused. Nor was there any written policy then in effect
purporting to limit the number or percentage of an OPT contractor's
workers that could be conditionally certified. In July 1995, BOE
enunciated by letter a policy limiting to 20% the percentage of an OPT
contractor's workforce that could be conditionally certified. See Def.
Rule 56.1 Statement, p. 34 n. 19. Richard Langford, Deputy Director for
Contractual and Regulatory Affairs of the OPT, at his deposition
testified that the 20% policy had been in effect prior to April 7, 1994.
See Langford Dep., pp. 392-95. However, no such policy was mentioned in
the April 7 Gill letter.
On June 27, 1994, Local 1181 initiated a strike against Van-Go. As a
result of the strike, Van-Go was unable to perform its obligations under
the contract and was defaulted by Gill on behalf of the BOE. The default
was upheld following an administrative review. See Ltr. to Gill from
Arthur H. Avedon, Administrator, dated 7/1/94.*fn2
Plaintiffs then brought suit on June 30, 1995, alleging five causes of
action. Plaintiffs brought two counts under 42 U.S.C. § 1983,
alleging violations of federal labor law and due process. Plaintiffs also
alleged several violations of state law: breach of contract, breach of
duty of good faith and fair dealing, and defamation. Plaintiffs sought
damages, a declaratory judgment and a permanent injunction.
In 1995, defendants moved to dismiss portions of plaintiffs' complaint
for failure to state a claim upon which relief can be granted on the
grounds that: (1) the complainant fails to state a claim against
defendant New York City and defendant Scarpa; (2) the claim for
defamation fails to state a claim; and (3) damages in the form of lost
profits and to compel the award of contracts are unavailable as a matter
of law. At a motion hearing on April 16, 1996, defendants' motion was
denied as to plaintiffs' claims against defendants Scarpa and New York
City; plaintiffs' claims for contract and lost profits damages were
limited to Van-Go, as a matter of law; and decision on defendants' motion
for dismissal of the defamation claims was reserved.
Both parties subsequently submitted supplemental materials in support
of and in opposition to defendants' motion to dismiss the defamation
claims. Because both parties submitted materials beyond the complaint,
the remaining part of the motion was converted into a motion for summary
judgment. Upon notice to the parties of the conversion, and additional
oral argument, this remaining portion of the motion was granted in part
and denied in part on February 6, 1997. See Van-Go I, 971 F. Supp. 90
(E.D.N.Y. 1997). Following the completion of discovery, defendants moved
for summary judgment on all of plaintiffs' remaining claims.
BOE first argues that Van-Go's breach of contract and federal §
1983 claims are barred by a six-month contractual limitations provision
contained in the Van-Go/BOE contract, and that, therefore, defendants'
motion for summary judgment should be granted as to each of these
claims.*fn3 Van-Go contends that the contractual limitations provision
at issue bars neither its state nor its federal claims. That provision
No action . . . shall be maintained by the Contractor
[Van-Go], . . . against the Board on any claim arising
out of this Contract . . . unless such action shall be
commenced within six (6) months after the date of
filing of the voucher for final payment hereunder or
within six (6) months of the required completion date
for the services performed hereunder, whichever is
Van-Go/BOE Contract, ¶ 22. A voucher is a BOE record created by BOE's
Finance Department for each payment made to a vendor.
Here, the latter clause of the contractual provision is not at issue.
The complaint was filed in June of 1995, one year before the June 30,
1996 "completion date" for the contract, and, thus, well within six
months of the required contractual "completion date." Defendants
contend, however, that the first clause bars plaintiffs
from any recovery. Specifically, BOE asserts that the complaint was filed
more than six months after the "final payment" under the contract was
made. The term "final payment," however, is not defined anywhere in the
contract. BOE maintains that the "final payment" was a $161,937 payment
made by BOE to Van-Go on a voucher dated August 1, 1994. BOE asserts that
since this action was commenced by Van-Go on June 30, 1995, more than six
months after the August 1994 payment was made, all of plaintiffs' state
and federal claims arising out of the termination of the contract are
Plaintiffs argue that the breach of contract and § 1983 claims are
not time barred by the contractual limitations period because the August
1994 payment of $161,937 did not constitute the "final payment" under the
contract. Rather, Van-Go asserts that the "final payment" under the
contract was a payment of $320,378 made by BOE to Van-Go in August 1995.
Van-Go maintains that since the complaint in this action was filed in
June 1995, three months before the August 1995 payment was made, its
claims are not time barred by the contractual limitation period.
BOE does not dispute that an additional payment was made to Van-Go in
August 1995, but rather contends that the 1995 payment was a "cost
justification payment" and not a "final payment" within the meaning of
the Van-Go/BOE contract. BOE asserts that the cost justification payment
was a retroactive payment of monies owed to Van-Go due to an increase in
Van-Go's operating costs from 1990 to 1994. BOE maintains that this
retroactive payment does not extend the contractual limitations period
and, as such, Van-Go's breach of contract and § 1983 claims are time
As this recitation of the parties' contending positions makes evident,
there exists at least a question of material fact as to what constitutes
a "final payment" under the contractual limitations period set forth in
the Van-Go/BOE employment contract. It seems more likely that the parties
would have intended that the last payment received by Van-Go under the
Van-Go/BOE contract would constitute the "final payment" under that
contract. If BOE had intended otherwise, BOE, as drafter of the
contract, should have clarified any ambiguity in the meaning of that
term. It is well-settled that ambiguities in a contract should be
construed against the drafter, especially when the provision being
construed would cut off a party's right to obtain any remedy. See Uribe
v. Merchants Bank of New York, 91 N.Y.2d 336, 341, 670 N.Y.S.2d 393,
396, 693 N.E.2d 740 (1998).
Accordingly, for the reason that the meaning of "final payment" under
the Van-Go/BOE contract is ambiguous, that term will be construed against
BOE, the drafter. "Final" means "[f]orming or occurring at the end: LAST."
Webster's II: New Riverside University Dictionary 478 (The Riverside
Publishing Company 1988). "Payment" means "[t]he act of paying or state
of being paid." Id. at 864. BOE's last act of paying monies due under the
Van-Go/BOE contract to Van-Go occurred, and was also "vouchered," in
August 1995. Accordingly, Van-Go's action was timely brought.
Moreover, BOE's contention that Van-Go's § 1983 claims would have
been bared by the contractual limitations provision is wholly without
merit. As a general rule, contractual limitation provisions designed to
shorten the three year statutory time limit must explicitly state such
limitations. See Wright v. Universal Maritime Serv. Corp., 525 U.S. 70,
___, 119 S.Ct. 391, 396, 142 L.Ed.2d 361 (1998) (Supreme Court stated in
context of Americans with Disabilities Act that "we will not infer from a
general contractual provision that the parties intended to waive a
statutorily protected right unless the undertaking is `explicitly
stated.'") (quotation omitted). An agreement shortening the time period
in which to bring an action will be upheld if it
is reasonable and voluntarily agreed upon, but only if the intention to
establish a shorter period is clearly set forth. See Chase v. Columbia
Nat'l Corp., 832 F. Supp. 654, 660 (S.D.N.Y. 1993) (applying New York
Nowhere does the limitation provision in the BOE/Van-Go contract
express plaintiff Van-Go's intention to waive statutorily protected
federal rights. Instead, the provision merely states that "no action . .
. shall be maintained by the Contractor . . . on any claim based upon or
arising out of this contract." Van-Go/BOE Contract, ¶ 22. If the
parties to a contract intend for a provision to act as a bar to claims
brought under federal law, they must specifically refer to such federal
claims, and clearly express the intent to limit the period in which a
party could bring an action based upon federal claims. As the provision at
issue makes no reference to federal statutory rights, much less an
express waiver of such rights, it cannot bar Van-Go's § 1983 claims.
Accordingly, defendant's motion for summary judgment on the basis of the
contractual limitations provision is denied.
Turning to the merits, plaintiffs' strongest claim is that defendant
BOE's policy of refusing to conditionally certify replacements for
striking workers is in conflict with the, NLRA.*fn4 As the Supreme Court
has approved and reaffirmed on numerous occasions, it is "undisputed that
the NLRA preserves to employers the right to permanently replace economic
strikers as an offset to the employees' right to strike." Chamber of
Commerce of the United States v. Reich, 74 F.3d 1322, 1332 (D.C.Cir.
1996) (citing NLRB v. Mackay Radio & Tel. Co., 304 U.S. 333, 345-46, 58
S.Ct. 904, 910-11, 82 L.Ed. 1381 (1938)) (citations omitted). In this
case, defendants' policy, announced at a time when it was known to all
parties involved that a strike was imminent, effectively trumped plaintiff
Van-Go's ability to hire replacement workers. Whether this policy also
violated plaintiff's federal rights by regulating in an area pre-empted
by Congress can be determined only after reviewing the extensive body of
Supreme Court case law on the subject of NLRA preemption.
The Supreme Court has articulated two different types of NLRA
pre-emption. See Golden State Transit Corp. v. City of Los Angeles,
475 U.S. 608, 613, 106 S.Ct. 1395, 1398, 89 L.Ed.2d 616 (1986) ("Golden
State I") (citations omitted). The first has to do with the protection of
legislatively articulated federal rights, while the second deals with
Congress' express decision that generally no governmental regulation
interfere with the balance of power in union-management relations. The
first, the so-called Garmon pre-emption, "forbids state and local
regulation of activities that are `protected by § 7 of the [NLRA], or
constitute an unfair labor practice under § 8.'"*fn5
Building & Constr. Trades Council v. Associated Builders & Contractors of
Mass./R.I., 507 U.S. 218, 224, 113 S.Ct. 1190, 1194, 122 L.Ed.2d 565
(1993) ("Boston Harbor") (quoting San Diego Bldg. Trades Council v.
Garmon, 359 U.S. 236, 244, 79 S.Ct. 773, 779, 3 L.Ed.2d 775 (1959)). The
Supreme Court in Boston Harbor noted that "[t]his rule of pre-emption is
designed to prevent conflict between, on the one hand, state and local
regulation and, on the other, Congress' `integrated scheme of
regulation.'" Boston Harbor, 507 U.S. at 225, 113 S.Ct. at 1194-95
(quoting Garmon, 359 U.S. at 247, 79 S.Ct. at 781). Prior to Boston
Harbor, in Golden State I, the Supreme Court explained that "[t]he
Garmon rule is intended to preclude state interference with the National
Labor Relations Board's interpretation and active enforcement of the
`integrated scheme of regulation' established by the NLRA." Golden State
I, 475 U.S. at 613, 106 S.Ct. 1395 (quoting Garmon, 359 U.S. at 246, 79
In Garmon, the Supreme Court articulated two exceptions to the
pre-emption doctrine enunciated therein: the so-called "local interests"
exception, and the exception pertaining to "peripheral concerns."
Garmon, 359 U.S. at 243-44, 79 S.Ct. at 779. The "local interests"
exception allows States to "regulate conduct [that] touch[es] interests
so deeply rooted in local feeling and responsibility that, in the absence
of compelling congressional direction, we could not infer that Congress
had deprived the States of the power to act." Id. at 244, 79 S.Ct. at
779. See, e.g., Youngdahl v. Rainfair, Inc., 355 U.S. 131, 78 S.Ct. 206,
2 L.Ed.2d 151 (1957) (state court not pre-empted by NLRA from issuing
permanent injunction against persistent name-calling and verbal abuse by
striking employees, where such acts were calculated to provoke violence
and were likely to do so); United Automobile, Aircraft and Agricultural
Implement Workers, etc. v. Wisconsin Employment Relations Bd.,
351 U.S. 266, 76 S.Ct. 794, 100 L.Ed. 1162 (1956) (The general rule that
a State may not "enjoin conduct which has been made an unfair labor
practice under the federal statutes . . . does not take from the States
power to prevent mass picketing, violence, and overt threats of violence.
The dominant interest of the State in preventing violence and property
damage cannot be questioned. It is a matter of genuine local concern.")
(quotations and citations deleted). The second exception to Garmon
pre-emption applies where "the activity regulated was a merely peripheral
concern of the LMRA]." Garmon, 359 U.S. at 243, 79 S.Ct. at 779. See,
e.g., Belknap v. Hale, 463 U.S. 491, 103 S.Ct. 3172, 77 L.Ed.2d 798
(1983) (employees' state law breach of contract and misrepresentation
claims arising out of unfair labor practice strike not pre-empted by
Garmon preemption does not, however, appear to govern the resolution of
the pending dispute because Garmon applies only to governmental action
that interferes with rights articulated by § 7 of the NLRA, or
regulates conduct which constitutes an unfair labor practice under §
8, neither of which are at issue here. In any case, Van-Go relies solely
on the second branch of NLRA pre-emption, the so-called Machinists
pre-emption. See Lodge 76, Int'l Ass'n of Machinists & Aerospace Workers
v. Wisconsin Employment Relations Comm'n, 427 U.S. 132, 96 S.Ct. 2548, 49
L.Ed.2d 396 (1976) ("Machinists"). Machinists pre-emption "prohibits
regulation of areas that Congress intended to be left `unregulated and to
be controlled by the free play of economic forces.'" Chamber of
Commerce, 74 F.3d at 1334 (quoting Machinists, 427 U.S. at 144, 96 S.Ct.
at 2555). In Machinists, members of a union had engaged in a concerted
refusal to work overtime during negotiations for renewal of an expired
collective-bargaining agreement. See Machinists, 427 U.S. at 134, 96
S.Ct. at 2550. The Wisconsin Employment Relations commission ("WERC")
held that such refusal to work overtime, which was neither protected nor
by the NLRA, was an unfair labor practice under state law. Id. at 135, 96
S.Ct. at 2551. The Supreme Court held that the union member employees'
concerted refusal to work overtime did not constitute an. unfair labor
practice under the NLRA. Id. at 158, 96 S.Ct. at 2557. Therefore, the
Court concluded, WERC's decision to the contrary, based on state law,
impermissibly favored employer rights over union rights, and frustrated
Congress' intent to leave the area of employer-union relations
unregulated by the States. Id. The Supreme Court explained that to
"`sanction state regulation of such economic pressure'" would frustrate
Congress' intent to create a balance "`between the uncontrolled power of
management and labor to further their respective interests.'" Boston
Harbor, 507 U.S. at 226, 113 S.Ct. at 1195; and Golden State I, 475 U.S.
at 614, 106 S.Ct. at 1399 (quoting Machinists, 427 U.S. at 146, 150, 96
S.Ct. at 2556, 2558) (quotations omitted). Therefore, unless otherwise
expressly contemplated by Congress, "States are  prohibited from
imposing additional restrictions on economic weapons of self-help, such
as strikes or lockouts." Golden State I, 475 U.S. at 614-15, 106 S.Ct. at
1399. The Supreme Court reasoned that "[w]hether self-help economic
activities are employed by employer or union, the crucial inquiry
regarding pre-emption is the same: whether the exercise of plenary state
authority to curtail or entirely prohibit self-help would frustrate
effective implementation of the Act's processes." Id. at 615, 106 S.Ct.
at 1399 (quotations omitted).
There is, however, at least one recognized limitation on the
Machinists preemption doctrine, the so-called "market participant"
A State does not regulate  simply by acting within
one of the areas [protected by the NLRA]. When a
State owns and manages property, for example, it must
interact with private participants in the
marketplace. In so doing, the State is not subject to
pre-emption by the NLRA, because pre-emption doctrines
apply only to state regulation.
Boston Harbor, 507 U.S. at 227, 113 S.Ct. at 1196. The decisions of the
Supreme Court in this area support a distinction between the "government
as regulator and government as proprietor." Id. The Court has "held
consistently that the NLRA was intended to supplant state labor
regulation, not all legitimate state activity that affects labor." Id.
Drawing on this precedent, defendants contend that BOE acted in the
proprietary capacity of a market participant, and not in a regulatory
In Golden State I, the City of Los Angeles, in an effort to favor
striking workers over management, refused to renew the Golden State
Transit Corporation's taxicab franchise until management settled a labor
dispute. The Supreme Court "refused to permit the city's exercise of its
regulatory power of license nonrenewal to restrict Golden State's right
to use lawful economic weapons in its dispute with its union. Boston
Harbor, 507 U.S. at 227, 113 S.Ct. at 1196 (citing Golden State I, 475
U.S. at 615-619, 106 S.Ct. at 1398-1401). However, as the Court pointed
out in Boston Harbor, "a very different case would have been presented
had the city of Los Angeles purchased taxi services from Golden State in
order to transport city employees." Id.
Defendants attempt to anchor the case at bar within the safe haven
provided by Boston Harbor, while plaintiffs argue that the BOE strike
replacement worker policy at issue has no place in the harbor. See Def.
Mem. of Law, pp. 14-17. In Boston Harbor, the Massachusetts Water
Resources Authority ("MWRA"), an independent government agency, was
directed by federal court order to clean up Boston Harbor. See Boston
Harbor, 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993). MWRA
selected Kaiser Engineers, Inc. ("Kaiser"), as its project manager. As
project manager, Kaiser was to advise MWRA as to work site labor-relations
Kaiser suggested that it be permitted to enter into a collective
bargaining agreement with the Building and Construction Trades Council
("BCTC"), and MWRA agreed. The agreement included, among other
provisions, a requirement that all employees hired become union members
within seven days of their employment and a ten year ...