Livingston v. Shore Slurry Seal, Inc.

Citations: 98 F. Supp. 2d 594; 2000 WL 709086Docket: CIV. A. 00-773(JEI)

Court: District Court, D. New Jersey; May 31, 2000; Federal District Court

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Plaintiffs Peter C. Livingston, David W. Livingston, Victor Polizzotti, and David R. Mauroff, former or current employees of Shore Slurry Seal, Inc. and Shore Microsurfacing Systems, Inc., filed a complaint on February 22, 2000, citing violations of the Davis-Bacon Act, RICO, and state prevailing wage laws. The defendants include the corporations and several individuals alleged to have supervisory roles over the plaintiffs. The plaintiffs contend they were not paid the prevailing wages required for various road construction projects performed for federal and state governments, though they did not specify the time, location, or details of these projects.

The court is considering the defendants' motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a claim. The court must accept the complaint's allegations as true but will not assume the existence of unalleged facts. The plaintiffs specifically allege conspiracy to violate the Davis-Bacon Act, which mandates that laborers on federal projects be paid at least the locally prevailing wage, with the Secretary of Labor having the authority to determine wage rates without judicial review. The court's analysis will focus on whether the plaintiffs have sufficiently stated a claim that warrants relief.

The Act establishes a comprehensive administrative framework for addressing violations related to prevailing wage laws. If a contractor fails to pay the mandated prevailing wages, the Government contracting officer is authorized to withhold necessary accrued payments to cover the difference owed to laborers and mechanics (40 U.S.C. 276a(a)). The Comptroller General can directly disburse these withheld payments to the affected workers (40 U.S.C. 276a-2). Should these funds be inadequate, workers retain the right to pursue action against the contractor and their sureties under the Miller Act (40 U.S.C. 276a-2(b)). Additionally, failure to pay the required minimum wages can lead to contract termination and a three-year debarment from government contracts (40 U.S.C. 276a-2(a)). However, claims brought under the Davis-Bacon Act lack a private right of action, as established in Weber v. Heat Control Co., which invoked precedent from United States v. Capeletti Bros. Inc. Thus, any conspiracy claims related to violations of the Act must be dismissed (In re Orthopedic Bone Screw Prod. Liab. Litig.). 

In the context of RICO, plaintiffs assert claims under 18 U.S.C. 1962(c), which prohibits individuals associated with an enterprise from conducting its affairs through a pattern of racketeering activity. The plaintiffs allege that the defendants committed mail and wire fraud as predicate acts (18 U.S.C. 1341, 1343), requiring evidence of a fraudulent scheme and the use of mail or interstate wires connected to that scheme. It is noted that the mailing itself doesn't need to be fraudulent, but the overall scheme must involve deceptive practices (Schmuck v. U.S.; Kehr Packages, Inc. v. Fidelcor, Inc.). Plaintiffs assert that the defendants underpaid them compared to the required prevailing wages under both state law and the Davis-Bacon Act.

Claims of mail and wire fraud supporting a RICO violation must comply with the heightened pleading standards of Fed. R. Civ. P. 9(b), which requires that fraud or mistake be stated with particularity. While malice, intent, and knowledge can be pleaded generally, the rule aims to provide defendants with notice of the specific misconduct alleged against them and to deter unfounded claims. Courts are advised to apply Rule 9(b) flexibly, allowing for less stringent requirements in cases where details may be concealed by defendants. Plaintiffs are not obligated to specify the exact date, place, or time of the fraud as long as they provide alternative methods to inject precision into their allegations.

In **Seville Indus. Mach. v. Southmost Machinery**, the plaintiff's claims of fraudulent inducement regarding industrial machinery were initially dismissed for lack of particularity. However, the Third Circuit reversed this decision, finding that the plaintiff had sufficiently detailed the fraudulent acts, including a specific list of the machinery involved, which clarified the nature of the alleged misrepresentations. In contrast, in **Saporito v. Combustion Eng'g**, the Third Circuit upheld the dismissal of RICO claims due to insufficient detail in the allegations, specifically noting the lack of information about who made the representations and who received them. Similarly, in **Rolo v. City Investing Co. Liquidating Trust**, allegations of mail and wire fraud were deemed vague, with the court highlighting the plaintiffs' failure to provide a clear account of the defendants' intentions regarding land development.

Prospective purchasers were misled by the defendant into believing that a real estate tract would be fully developed, targeting particularly unsophisticated individuals, including non-native English speakers. They were invited to 'investment seminars' where the defendant claimed that property values consistently appreciated, there was a strong resale market, and the investments were sound. The plaintiffs allege that critical information was withheld, such as the low resale values of the lots, inflated initial sale prices, and high default rates among buyers, enabling the defendant to repeatedly resell the same properties. The Third Circuit noted that, despite detailing the fraudulent scheme, the plaintiffs' complaint lacked specific allegations about the misrepresentations made to the named plaintiffs, including the details of presentations and mailings. Consequently, it affirmed the district court's dismissal of the plaintiffs' RICO claims for failing to meet the specificity requirements of Rule 9(b).

Additionally, the plaintiffs asserted that they worked for the defendant corporations on public contracts requiring the payment of prevailing wages. They claimed that certain individuals conspired to underpay them, violating the Prevailing Wage Act, the Davis Bacon Act, and the Portal to Portal Pay Act by mailing paychecks that did not reflect the required wages. While plaintiffs do not need to detail the exact timing of the alleged fraud, they must provide sufficient facts for the defendants to understand the charges against them. The plaintiffs' assertion that the paychecks violated the Prevailing Wage Act does not establish fraud, as mere violations of wage laws do not equate to fraudulent behavior.

Defendants' aggressive business practices are relevant to a tortious interference claim but do not fulfill the specific requirements of mail and wire fraud statutes. In the case of Blount Financial Services, it was established that mere misrepresentation in a financial statement does not constitute mail fraud without intentional fraud allegations. The mail fraud statute does not encompass all unsatisfactory business practices or contractual breaches. Although plaintiffs claim that defendants conspired to violate wage acts, they fail to identify any specific fraudulent misrepresentation, the individuals responsible for such misrepresentation, or the victims involved. 

The complaint's vague references to "defendants" do not meet the specificity required by Rule 9(b), which necessitates clear attribution of fraudulent conduct. Furthermore, the complaint lacks details about the presentations made to plaintiffs, such as who conducted them and the context. Plaintiffs primarily allege that they were paid below the prevailing wage; however, violations of wage statutes do not constitute predicate acts for RICO claims. Without clear allegations of fraud or deceit, plaintiffs cannot convert their claims into a federal RICO action.

Past rulings indicate that some form of deception must be alleged to invoke RICO’s severe remedies. The plaintiffs' Amended Complaint fails to meet Rule 9(b) standards, and given that they have already amended their complaint, leave to amend is unlikely to be granted again. Consequently, the court will dismiss counts I and III with prejudice, as well as counts II and IV regarding conspiracy to violate RICO, due to the absence of a viable claim under RICO section 1962(c). Even if plaintiffs had satisfied Rule 9(b), their RICO claims could not be based on alleged violations of the Davis-Bacon Act.

The Act establishes an exclusive administrative remedy for wage underpayment related to federal construction projects. In Danielsen v. Burnside-Ott Aviation Training Ctr., the court addressed a RICO claim from employees alleging wage violations by Navy contractors. It highlighted that the Service Contract Act (SCA) was designed to extend labor protections similar to those under the Davis-Bacon Act and included a detailed enforcement mechanism for federal workers. The court ruled that allowing a private RICO suit would undermine this administrative framework, as individuals would bypass the SCA's remedies in favor of potentially more lucrative private claims. This reasoning is supported by other cases, where courts similarly dismissed RICO claims for being preempted by established administrative procedures under various statutes, such as the Social Security Act and the National Labor Relations Act. The court concluded that the plaintiffs' claims of underpayment under the Davis-Bacon Act must be addressed solely through the SCA's administrative remedies, and thus dismissed the RICO claims related to wage underpayment in the Amended Complaint.

The Court has not addressed counts VI through X of the plaintiffs' Amended Complaint, which are solely based on state law. Following the dismissal of all federal claims, the Court typically declines to exercise supplemental jurisdiction over state law claims, as established in United Mine Workers of America v. Gibbs. Consequently, the Court will dismiss the state law claims without prejudice. Counts I through V are dismissed with prejudice, while Counts VI through X are dismissed without prejudice. An appropriate Order will follow.

Additionally, the plaintiffs' motion to amend their original Complaint to correct clerical errors has been granted, and the Amended Complaint will be used for the current motion to dismiss. Plaintiffs' claim of being unaware of project details is deemed illogical since they are involved in the projects central to their claims. The plaintiffs previously cited federal statutes, including RICO laws and the Davis-Bacon Act, to establish federal question jurisdiction, but the Court has dismissed these claims. The statutes mentioned do not create independent causes of action beyond the administrative remedies provided under the Davis-Bacon Act, and thus cannot support federal jurisdiction.