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In re Application of American Water Resources, LLC

Supreme Court, New York County

September 26, 2013

In the Matter of the Application of AMERICAN WATER RESOURCES, LLC and the NEW YORK CITY WATER BOARD, Petitioners,
v.
JOHN C. LIU, as Comptroller of the City of New York, Respondent. Index No. 100404/2013 Mot. Seq. Nos. 001, 002

Unpublished Opinion

SCHLESINGER, J.:

On February 1, 2013, the Comptroller of the City of New York ("Comptroller") responded to a letter by William J. Coury, an attorney for the Subsurface Plumbers Association ("SPA"). In his initial letter dated October 12, 2012, Coury had inquired as to whether a recent contract executed by the New York City Water Board ("Water Board") with American Water Resources ("AWR") on July 31, 2012, that provided for plumbing repair work for owners of private residences, was covered under §220(3) of the Labor Law. In other words, was the work that was to be done pursuant to this contract subject to the prevailing wage requirements of that section?

The Comptroller, by his representative Constantine Kokkoris, Chief of the Bureau of Labor Law, said "yes". The rationale given for this determination was that the Agreement for Service Line Protection Program (the "SLPP contract") met the two- prong test set out in Labor Law §220. The test requires in the first instance that a public agency be a party to a contract that involves the employment of workers. Here, that requirement was met, as the Water Board was a Public Service Agency and the contract provided for plumbing and related work. No one disputes that point. The second prong is whether the contract concerns a "public works" project. The Comptroller here said it does but the Water Board and AWR, the sole signatories to the contract, insist that it does not.

That is the basis of the two Article 78 petitions brought by the Water Board and AWR challenging respondent's determination. Both petitioners seek to vacate and to set aside the Comptroller's February 1, 2013 decision.[2]

I do not wish to spend too much time here on the procedural aspects of this controversy. Essentially what occurred was that the two petitions were brought, and the Comptroller represented by outside counsel then moved to dismiss the Water Board's petition based on standing, or alternatively to consolidate the proceedings and file a single Answer. The matter then appeared before this Court. After oral argument, I issued an opinion on May 28, 2013, consolidating the two matters based on common questions of law and fact and setting a schedule for the Comptroller to answer and for petitioners to reply. It was clear that the Comptroller had not and was not moving against AWR on standing grounds. Therefore, to expedite the resolution of this controversy, I said that the Water Board's standing would be decided as part of my final decision, as it will be.

Finally, on July 17, 2013, I determined an Order to Show Cause filed by AWR on . or about May 22, 2013 (mot seq 003). This OSC had sought a temporary restraining order and preliminary injunction to enjoin the Comptroller from instituting a compliance investigation. A Stipulation to that effect signed by counsel for these parties on July 16, 2013 was so ordered by the Court.

After timely receipt of all the papers, which included a letter dated July 1, 2013 from Andrew Gelfand, counsel for the Water Board, I scheduled oral argument for the afternoon of August 8. The before-mentioned letter, a copy of which was sent to counsel, merely brought to my attention a recent Court of Appeals decision, Manuel De La Cruz v. Coddell Dry Dock & Repair Co., which had been decided only three days earlier, on June 27, 2013.

Oral argument was informative and valuable. Toward its conclusion, I thanked all counsel but also said that since I believed, on the basis of all that I had read and heard to date, that the Comptroller had an uphill battle, I would give its fine attorney the last word. Now, after reviewing the specific facts of this case, the relevant case law and the arguments, I must conclude that counsel was unsuccessful in convincing the Court that the Comptroller's position has merit. In other words, I find that the contract here at issue does not concern "public works" and therefore is not subject to the prevailing wage mandate found in §220 of the Labor Law.

This discussion must begin with events that occurred early in the year 2011, when DEP issued a press release announcing that the Water Board was making a Request for Expressions of Interest from companies interested in providing a water service line protection program to residential property owners in New York City. The idea was to provide a voluntary insurance plan to private homeowners. By paying a small charge each month to the Water Board, which would be added to the owner's monthly bill, the owner would receive professional repair services when there was a service line break.

Private homeowners own and are responsible for the maintenance of their own pipes and water service lines. It appears that they also own and are responsible for the lateral service line water pipes located outside their homes under the street which connect to the main water lines owned by the City. I use the term "appears" because, while counsel for the Comptroller argues that this ownership is still an open question, Ms. McLean from the Water Board insists that this point was conclusively established as far back as 1861 in a decision by the New York Superior Court entitled John R. Terry v The Mayor, etai, 8 Bosworth's Reports 504, and was re-established in 2005. Attached to the Reply Memorandum are three documents which address this topic.

The first is a copy of the 1861 decision, attached as Exhibit A to the Water Board's Reply Memorandum of Law. That case involved damage to the plaintiff's property from water leaking from defective service pipes in a building two doors away from plaintiff's building that was being used for a public school. It was clear that the City, who was the defendant, may have been the nominal owner of the building housing the school, but it had no right to buy or sell the land. A separate claim by the plaintiff was that the City was liable as the owners of the Croton Aqueduct where the water originated. The defect here was found in the lateral service pipes, which the court said (at p 510) had been "inserted in the main street pipes by private individuals at their own cost and risk, to bring the water into their own premises for consumption and they remain the property of such individuals". As an aside, the plaintiff lost his suit because no liability was found against anyone.

The other two documents were attached to Ms. McLean's affidavit and consisted of letters exchanged between the Deputy Chief of the City's Environmental Law Division on behalf of the Deputy Commissioner of DEP and officials of the New York State Department of Health. The issue there involved ownership of water service lines for a lead service line replacement program. The first letter, dated April 22, 2005, by Susan Amron (Exhibit G) clearly stated the City's position "that water service lines in the City are owned by and the responsibility of the owner of the property connected by the service line to the City's water main". This being the case, the City believed it should only be responsible for the lines that supply water to property owned by it, the City. The second letter (Exhibit H), dated June 22, 2005, referenced Ms. Amron's letter and accepted her position "that the information provided documents that the City owns or exercises direct control over only those service lines that supply water to City owned properties or facilities".

The above point has some importance here because of the central controversy between the parties. Petitioners argue that the contract between them is essentially one that benefits private homeowners who own and have all responsibility for both their own pipes and adjacent service pipes. To the extent that the public also benefits from the contract, as it provides a more effective and efficient way of dealing with leaking water pipes, petitioners urge that any such benefit is merely incidental to the program.

But the respondent Comptroller urges that the SLPP contract is a contract for public works because the Water Board is a public benefit corporation whose primary objective is to benefit the public. Its counsel then proceeds to point out all the public aspects of the contract. Counsel says that: "The public purpose for the SLPP contract is spelled out directly in the RFP" (p 4 in Respondent's Memorandum of Law in Opposition to the Consolidated Verified Petitions).[3]

The City Department of Environmental Protection ("DEP"), which is a public agency and the parent agency of the New York City Water Board, issued a statement which said that:

...such a program (for residential service line protection) would be in the best interest of the City, as the expeditious repair of leaking and broken service lines under the program would help prevent damage to City infrastructure, reduce response costs for the City, limit ...

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