Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Robert L. Hess, Judge Superior Court County of Los Angeles Super. Ct. No. BC 349716 Los Angeles County.
Kenneth S. Grossbart and Bruce D. Rudman, Abdulaziz, Grossbart & Rudman, for Appellant.
David M. Huff, Colin E. Barr and Marley S. Fox, Orbach, Huff & Suarez, for Respondent.
YEGAN, Acting P.J.
This case concerns the Prevailing Wage Law. Appellant, MBA Associates, Inc. (MBA), an electrical subcontractor failed to pay employee trust fund contributions to a local trade union on several public works projects. (Lab. Code, § 1720 et seq.) Project stabilization agreements between respondent Los Angeles Unified School District (District) and local trade councils required that project contractors and subcontractors pay prevailing wages which included "fringe benefits" in the form of trust fund contributions.
MBA sued District after MBA erroneously paid the fringe benefits to its employees instead of the International Brotherhood of Electrical Workers (IBEW). MBA appeals from the dismissal entered after the trial court sustained District's demurrer without leave to amend. We affirm.
Prevailing Wage Law
The California Prevailing Wage Law requires that contractors and subcontractors on public works projects pay their employees prevailing wages. (Lab. Code, § 1720 et seq.; State Building & Construction Trades Council of California v. Duncan (2008) 162 Cal.App.4th 289, 294-296.) "The duty to pay prevailing wages is mandated by statute and is enforceable independent of an express contractual agreement. [Citations.] Thus, while the obligation to pay prevailing wages arises from an employment relationship which gives rise to contractual obligations and claims [citation], the duty to pay the prevailing wage is statutory. [Citations]." (Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, 779.)
Labor Code section 1771.8 provides that the awarding body for a public works project may adopt a labor compliance program to ensure payment of prevailing wages. The labor compliance program must have certain components (Lab. Code, § 1771.5, subd. (b); Cal. Code Regs., tit 8, § 16421) before it is approved by the Director of the Department of Industrial Relations. (Cal,. Code Regs., tit 8, § 16427.) Section 16434, title 8 of the California Code of Regulations provides: "A Labor Compliance Program shall have a duty to the Director to enforce the requirements of Chapter 1 of Part 7 of Division 2 of the Labor Code and these regulations in accordance with the Precedential prevailing wage decision issued by the Director and in a manner consistent with the practice of the Labor Commissioner." (Emphasis added.)
The Project Stabilization Agreements
District's labor compliance program (LCP) was approved in 1996. To implement the LCP, District and local trade unions entered into a 1999 Project Stabilization Agreement (1999 PSA) and a successor agreement (2003 PSA) setting forth the responsibilities of District, contractors, and trade unions on public works school projects. The PSAs mandated that "covered employees" on public works projects be paid prevailing wages and fringe benefits.
The project stabilization agreements stated: "Fringe benefits are defined as the amounts stipulated for employer payments or trust fund contributions and are determined to be part of the required prevailing wage rate. Failure to pay or provide fringe benefits and/or make trust fund contributions on a timely basis is equivalent to payment of less than the stipulated wage . . . ."
Between 2000 and 2004, MBA performed electrical work on six new school and rehabilitation projects. The awarding body, District, required that contractors and subcontractors comply with the PSAs.
IBEW Federal Action
In 2005, IBEW sued MBA in federal court for trust fund contributions due and owing on the public works projects. (Trustees of the Southern California IBEW-NECA Pension Trust Fund v. MBA Associates, Inc. etc., U.S. Dist. Ct., Central District, Case No. CV 04-4187 PA (JWJx). MBA claimed that it was not required to pay trust fund contributions because non-union core/workforce employees were not "covered employees" under the PSAs. On August 8, 2005, a federal magistrate found that the obligation to make trust fund contributions applied to "all covered employees" including MBA's non-union core/workforce employees. MBA tried to settle the action after the federal magistrate ordered the court clerk to issue a $726,014.21 writ of attachment. A default judgment was entered after the federal court denied MBA's motion to file a cross-complaint against District for indemnity.
MBA's State Court Action
On March 28, 2006, MBA sued in state court based on the theory that District failed to advise MBA that the fringe benefits had to be paid to the IBEW trust fund. The trial court sustained demurrers to the first and second amended complaints.
MBA filed a third amended complaint for negligence, equitable indemnification, and declaratory relief. The third amended complaint, like the prior complaints, alleged that District was negligent and failed to discharge a mandatory duty.
District demurred again. MBA argued that District was "negligent because they [sic.] didn't enforce the agreement that they negotiated with the unions." The trial court sustained the demurrer without leave to amend, citing Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962.
Discussion
On review, we accept as true all properly pleaded factual allegations other than contentions, deductions or conclusions of law. (Landeros v. Department of Corrections (2002) 99 Cal.App.4th 271, 273.) The third amended complaint sounds in negligence but it is well settled that there is no common law tort liability for public entities in California. (In re Groundwater Cases (2007) 154 Cal.App.4th 659, 688.) Sovereign immunity is the rule and a public entity may be held liable only if there is a statute subjecting it to civil liability. (Ibid.)
Government Code section 815.6MBA argues that the action is based on District's failure to discharge a mandatory statutory duty. Government Code section 815.6 provides: "Where a public entity is under a mandatory duty imposed by an enactment that is designed to protect against the risk of a particular kind of injury, the public entity is liable for an injury of that kind proximately caused by its failure to discharge the duty unless the public entity establishes that it exercised reasonable diligence to discharge the duty." (Emphasis added.)
Lacking here is an "injury" which is defined by Government Code section 810.8. The injury must be "of such nature that it would be actionable if inflicted by a private person." (Ibid.) The Law Revision Comment to Government Code section 810.8 states in part: "The purpose of the definition is to make clear that public entities and public employees may be held liable only for injuries to the kind of interests that have been protected by the courts in actions between private persons."(Cal. Law Revision Com., com. 32 West's Ann. Gov. Code (1996) foll. § 810.8, p. 155.)
Government Code section 810.8 states: "'Injury' means death, injury to a person, damage to or loss of property, or any other injury that a person may suffer to his person, reputation, character, feelings or estate, of such nature that it would be actionable if inflicted by a private person."
MBA claims that District breached a mandatory duty under the Prevailing Wage Law to ensure that MBA paid the fringe benefits to the IBEW trust fund. In Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th 962 (Aubry) our Supreme Court rejected a similar argument, holding that a public hospital district could not be held liable under Government Code section 815.6 for failing to require its contractor to pay prevailing wages. There, the contractor sued for declaratory and injunctive relief, alleging that the Prevailing Wage Law did not apply to a hospital facility built for resale to the hospital district. California Division of Labor Standards Enforcement filed a cross-complaint against the hospital district for breach of a mandatory duty to insure that workers on the hospital project were paid prevailing wages. The trial court sustained hospital district's demurrer without leave to amend.
Our Supreme Court held that Government Code section 815.6 does not authorize an action against an awarding body that fails to comply with its responsibilities under the Prevailing Wage Law. (Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at p. 968.) The cross-complaint "alleges that as a result of the [public entity's] failure to perform its mandatory duties, the workers were paid less than the prevailing wage while engaged on a public work. This injury is one which by its very nature could not exist in an action between private persons; if the defendant awarding body was not a public entity, there would be no injury. As a result, the injury alleged in this case is not included within the Tort Claims Act's definition of injury. Accordingly, the District is not subject to liability under Government Code section 815.6 for any failure to carry out its responsibilities under the Labor Code's prevailing wage provisions." (Ibid.)
MBA is suing on a negligence theory but no facts are alleged that District breached a mandatory duty that resulted in a cognizable injury. (Gov. Code, § 815.6; Aubry, supra, 2 Cal.4th 967-969.) "Duty cannot be alleged simply by stating 'defendant had a duty under the law'; that is a conclusion of law, not an allegation of fact." (Searcy v. Hemet Unified School Dist. (1986) 177 Cal.App.3d 792, 802.)
Mandatory Duty to Enforce Prevailing Wage Law
MBA argues that District breached a mandatory duty under the Prevailing Wage Law to advise MBA that it was not making proper payroll and trust fund contributions. The Labor Code sections cited by MBA define "public works" (Lab. Code, § 1720) and provide that an awarding body may adopt an LCP to audit payroll records on its public works projects and withhold contract payments if payroll contributions are not made. (Lab. Code, § 1771.5.) Although District is charged with the responsibility of assisting the Division of Labor Standards Enforcement in the enforcement of the Prevailing Wage Law, it is not liable in tort where a contractor or subcontractor fails to pay prevailing wages. (Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at pp, 967-969.)
The Supreme Court in Aubry, supra, 2 Cal.4th at page 967 summarized an awarding body's duties under the Prevailing Wage Law: "Among its duties, an awarding body must obtain from the Director the prevailing wage rate in the locality for each craft, classification or type of worker needed to carry out the contract (Lab. Code, § 1773); it must then either specify in the call for bids, the bid specifications and in the contract itself what the prevailing wages are, or it must state that those rates are available at the public entity's office. (Lab. Code, § 1773.2.) The awarding body is also required to cause to be inserted into the contract stipulations that, in the event that the contractor fails to pay the prevailing wages, the contractor is liable for penalties and for the shortfall in wages. (Lab. Code, § 1775.)"
The third amended complaint alleges that District breached a mandatory duty under the LCP and the PSAs by not requiring MBA to pay fringe benefits to the union trust fund. District however, adopted the LCP and PSAs to ensure that the contractors and subcontractors paid prevailing wages and fringe benefits. (Lab. Code, § 1771.8.) Section IV, paragraph A.3 of the LCP is entitled "Responsibility for Subcontractors" and provides: "The prime contractor shall be responsible for ensuring that the labor standards provisions are followed by all subcontractors. Moreover, the prime contractor is responsible for the Labor Code violations of all subcontractors."
As a subcontractor, MBA cannot successfully sue on a third-party beneficiary theory. The LCP and the PSA were not intended to benefit MBA. (See e.g., Lundeen Coatings Corp. v. Department of Water & Power (1991) 232 Cal.App.3d 816, 834.) Under MBA's construction of the law, the LCP and PSAs trump the Prevailing Wage Law and protect subcontractors who fail to make trust fund contributions, even when fringe benefits are a component part of the prevailing wage. (See fn. 1, supra.)
Our Supreme Court has clearly stated that the duty to pay prevailing wages is mandated by statute and is enforceable independent of an express contractual agreement. (Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 986-987.) "The overall purpose of the prevailing wage law, as noted earlier, is to benefit and protect employees on public works projects. This general objective subsumes within it a number of specific goals: to protect employees from substandard wages that might be paid if contractors could recruit labor from distant cheap-labor areas; to permit union contractors to compete with nonunion contractors; to benefit the public through the superior efficiency of well-paid employees; and to compensate nonpublic employees with higher wages for the absence of job security and employment benefits enjoyed by public employees. [Citations.]" (Id., at p. 987.)
Stop Notice Statutes and the Claims Statute
MBA argues that District breached a mandatory duty under the stop notice statutes (Civil Code sections 3184 and 3187) to inform MBA that it was not making required trust fund contributions. Had District withheld funds pursuant to a stop notice, the fringe benefits would have been paid to IBEW.
The argument fails because there was no stop notice. Until a stop notice is served, a public entity owes no duty to a claimant to withhold payment to the contractor. (Pacific Employers Ins. Co. v. State of California (1970) 3 Cal.3d 573, 576; American Fidelity Fire Insurance Co. v. United States (N.D.Cal. 1974) 385 F.Supp. 1075, 1078; Cal. Mechanic's Liens & Related Construction Remedies(Cont. Ed. Bar 3rd ed. 2000) § 4.44, p. 231.) The stop notice statutes were designed to provide remedies for collection of money due persons furnishing labor or supplies on public property, not subcontractors who violate the Prevailing Wage Law. (See e.g., Southern California IBEW-NECA Trust v. Standard Indus. (9th Cir. 2001) 247 F.3d 920, 928 [action by union trust fund for delinquent contributions].)
The third amended complaint alleges, on information and belief, that IBEW filed a stop notice claim against unpaid funds not yet disbursed. The stop notice allegations do not appear in original complaint or first and second amended complaints. MBA, in opposing the demurrer, stated that the stop notice allegations were added to illustrate "the time frame" when District's "duty arises to inform MBA that it must pay, in addition to the fringe benefits it paid its own employees, those same fringe benefits to . . . IBEW." This is artful pleading and may be disregarded. (See e.g., Sinclair v. Arnebergh (1964) 224 Cal.App.2d 595, 597.)
More importantly, MBA failed to comply with the claims presentation statute before filing suit. (Gov. Code, § 905; Baines Pickwick Ltd. v. City of Los Angeles (1999) 72 Cal.App.4th 298, 300.) "[T]he claimant must present a claim to the public entity for any cause of action based on allegations of irregular disbursement procedures. . . ." (Cal. Mechanic's Liens & Related Construction Remedies, supra, (Cont. Ed. Bar) § 4.78, p. 247.) MBA's governmental claim states that it suffered damages "as a result of the District's actions, omissions, representations, and misrepresentations to MBA Associates regarding MBA Associates' obligations and rights under the Project Stabilization Agreement. . . ." It does not state that District failed to honor a stop notice.
The third amended complaint alleges that MBA asked whether it was required to pay IBEW trust fund contributions and that District "never provided MBA with any clarification . . . and never informed MBA whether or not it was in compliance with" the PSAs. The third amended complaint further alleges that District failed to monitor MBA's payroll to ensure that MBA paid the fringe benefits to IBEW. But that does not establish liability. A public entity is not liable for damages caused by its failure to enforce a law. (Gov. Code, § 818.2.) As discussed in Aubry, District is only liable for injuries "of such a nature that would be actionable 'if inflicted by a 'private person.' " (Aubry v. Tri City Hospital Dist., supra, 2 Cal.4th at p. 968.) Private persons are not "awarding bodies" and do not adopt LCPs or PSAs to ensure that prevailing wages are paid on public works projects.
Landeros v. Department of Corrections, supra, 99 Cal.App.4th 271, is illustrative. There, construction workers on a prison project were not paid prevailing wages and sued the awarding body, California Department of Corrections. Citing Government Code section 815.6, plaintiffs alleged that the Department of Corrections failed to discharge a mandatory duty to ensure compliance with the prevailing wage law. The Court of Appeal held: "Aubry . . . presents the greatest obstacle to plaintiffs. Because the quintessence of plaintiffs' claim is recovery of prevailing wages from a public entity, the claim is barred on its face under the holding in Aubry. To hold otherwise -- to permit a claim for prevailing wages to be asserted as a claim under Government Code section 815.6 -- would vitiate the holding in Aubry and allow it to be easily circumvented." (Id., at p. 276.)
The plaintiffs in Landeros also alleged they were third party beneficiaries to the contract between the Department of Corrections and the developer who agreed to pay prevailing wages. The Court of Appeal held that the developer, "Maranatha, not the Department, promis[ed] to pay prevailing wages to construction workers. The contract clearly provides that it is Maranatha's obligation to pay prevailing wages. The Department's only obligation was to comply with state law. If the Department failed in this respect, as discussed above, the Department could not be held liable for failing to discharge its mandatory statutory duty to ensure compliance with the prevailing wage law." (Id., at p. 277.)
If a contractor's employees cannot sue the awarding body for prevailing wages, neither can the contractor. To hold otherwise would vitiate the holding in Aubry. MBA agreed to pay fringe benefits as required by the PSAs but paid the fringe benefits to its employees rather than the union trust fund. There is no allegation that District defrauded MBA or represented that the work was not subject to the Prevailing Wage Law. (See Lab. Code, §§ 1726, subd. (c); 1781; see fn. 5 ante.) The trial court properly concluded that MBA could not sue for negligence or negligent breach of the LCP and PSAs.
Implied Equitable Indemnity
The third amended complaint alleges that if MBA is liable to the IBEW Trust Fund, District "is responsible for that liability "by reason of its primary and active negligence" and is "bound by implication of law" to indemnify MBA. District, however, cannot be sued for negligence and did not breach a mandatory duty within the meaning of Government Code section 815.6. Assuming, arguendo, that MBA can seek indemnification based on fraud or misrepresentation (see e.g., Lusardi Construction Co. v. Aubry, supra, 1 Cal.4th at p. 997; Rozay's Transfer v. Local Freight Drivers L. (9th Cir. 1988) 850 F.2d 1321, 1323), the cause of action is barred by the claims presentation statute. (Gov. Code, § 905; Van Alstyne, Cal. Government Tort Liability Practice (Cont.Ed.Bar 4th ed. 2008), § 5.11, p. 181; see e.g., C. A. Magistretti Co. v. Merced Irrigation Dist. (1972) 27 Cal.App.3d 270, 275-276 [tortious failure of awarding body to require contractor on a public works project to furnish labor/material bond barred by claims act].)
MBA's citation of Fanelli, Antuzzi, Bonacorsi Painting, Inc. v. Santa Clara Unified School Dist. (1983) 141 Cal.App.3d 686 is inopposite. There a painting contractor sued a school district for indemnity based on fraud and unjust enrichment. The painting contractor (FAB) alleged that that school district failed to comply with Labor Code provisions requiring notice to bidders of prevailing wage rates and "that District intentionally and with intent to deceive FAB [took] advantage of FAB's low bid. . . ." (Id., at p. 688.) Summary judgment was granted for the school district.
Declaratory Relief
The third amended complaint includes a cause of action for declaratory relief that incorporates all the negligence allegations. Demurrer is proper where declaratory relief is sought based on facts which have been found not to state a cause of action. (Mitchell v. National Auto & Casualty Ins. Co. (1974) 38 Cal.App.3d 599, 606; Levy v. Bellmar Enterprises (1966) 241 Cal.App.2d 686, 693.) MBA makes no showing that the pleading defects can be cured by amendment. (Aubry, supra, 2 Cal.4th at p. 967.)
The judgment is affirmed. Respondent (District) is awarded costs on appeal.
We concur: COFFEE, J., PERREN, J.
A similar fraud was alleged in Landeros v. Department of Corrections, supra, 99 Cal.App.4th 271 in which the Department of Corrections (the awarding body) allegedly concealed that the prison project was a public work and required that project workers be paid prevailing wages. (See California Construction Contracts, Defects and Litigation (Cont .Ed. Bar 2008) § 6.9, p. 414.) The Court of Appeal denied relief.
"In 2003, to redress the Landeros decision and similar cases involving potential fraud, and to ensure relief for contractors affirmatively advised in writing that prevailing wages will not be required on a work of construction, Lab C § 1726(c) was enacted. It provides that affected contractors may sue an 'awarding body' that has advised the contractor in writing that prevailing wages would not be required or that has concealed the fact that the Department of Industrial Relations has advised the awarding body that the project will require payment of prevailing wages. [¶] At the same time, Lab C § 1781 was added to provide a means of relief for contractors not specifically advised in bid specifications or contract documents that the work for which they were bidding and/or contracting would be a 'public work' under § 1771." (Id., at p. 414.)