Saturday, May 12, 2012

Inconclusive court argument over lawsuit against BUILD/Forest City: can case proceed with claims against deep-pocketed developer regarding promise of union cards and union jobs?

In the annals of Atlantic Yards battles, the half-hour argument in Brooklyn federal court yesterday was relatively undramatic. It concerned the lawsuit filed by seven (of 36) participants in a pre-apprenticeship training (PATP) program run by Atlantic Yards Community Benefits Agreement (CBA) signatory BUILD (Brooklyn United for Innovative Local Development) .

Nor was it conclusive, as U.S. District Judge John Gleeson gave no indication of where he was leaning on the motion to dismiss most but not all of the multiple charges, nor when he'd rule. Nor did the audience include any of the plaintiffs, who charged they were promised union cards and jobs at the Atlantic Yards site after entering the coveted program, or any of the defendants.

But the legal jousting concerned a significant issue: if the case stands as filed, it will concern damages that represent lost earnings from a union career, and paid potentially by deep-pocketed Forest City Ratner and two of its executives. And it will concern one of the big public promises behind Atlantic Yards, that the CBA would bring significant benefits to at least some people in the "community."

If the motion to dismiss is successful, the case will be reduced to an argument about smaller sums that represent unpaid wages from the training program, paid by less-established defendants BUILD and Orbin's Green Machine, the firm that conducted the training at a Staten Island site, and their officials.

The motion to dismiss must treat the factual allegations as true, but argue that, as a matter of law, they are not valid.

Plaintiffs' attorney Matthew Brinckerhoff, who represented plaintiffs in the Atlantic Yards eminent domain case and thus knows the Atlantic Yards saga well, made a point to say that, however Gleeson's ruling may narrow the case, they shouldn't change the scope of discovery, the pre-trial effort to unravel the relationship between BUILD and Forest City.

"Joint employers"?

The key argument concerned the plaintiffs' claim that, by signing the Community Benefits Agreement (CBA), which promised the PATP, and funding and directing BUILD, that Forest City Ratner was responsible for the program.

"They're claiming they're joint employers," argued Harold Weinberger, attorney for Forest City, BUILD, and their individual officers. However, he said, the facts don't support "the economic reality test" as established in case law.

For example, does the alleged employer possess the power to hire and fire, or control work schedules or conditions of employment? There was no evidence of that, said Weinberger, from Forest City's longtime firm Kramer Levin.

He said the plaintiffs were claiming that, because Forest City "engaged BUILD," funded it in larger part, and wanted the program to succeed, "that somehow that makes them an employer."

He pointed to a 2010 case known as Diaz v. Consortium for Worker Education (CWE), in which CWE contracted with other firms to administer home loan modification services on its behalf.

The plaintiffs alleged that they were employees of CWE, but the court granted CWE’’s motion to dismiss, holding that, even though the two firms administered the program on behalf of CWE, they didn't meet the "economic reality test," as CWE had not direct role in managing the plaintiffs.

Plaintiffs: this case different

Plaintiffs' attorney Nicole Salk, of South Brooklyn Legal Services, countered that Diaz didn't apply. "This is different from any other case," she said, noting that, in Diaz, the two contracting entities had not been created by CWE.

By contrast, BUILD, "we're alleging, was created by the developer," Salk said. "In other words, they were going to be collectively responsible for the PATP."

She pointed to language in the CBA (indicated at right), which shows that Forest City was to assist BUILD in the job graining program, in finding space for the program, and in finding funding for the program. BUILD got money from Forest City to buy MetroCards for the students

Moreover, PATP classes were held at both BUILD and Forest City offices, and Forest City was supposed to issue reports on the number of community residents in the program. (That hasn't happened, as the developer has yet to hire the promised Independent Compliance Monitor for the CBA.)

"BUILD was created by Forest City to see Atlantic Yards into fruition," Salk said. "They [Forest City] had an interest in seeing this training program happen."

(Note that, should the case proceed, Forest City likely will argue that BUILD was created by Assemblyman Roger Green. Still, early meetings were held at Forest City's offices and the organization was always seen more as a partner than an adversary in negotiations.)

Salk added that BUILD CEO James Caldwell told plaintiffs, according to the lawsuit, that he and Forest City CEO Bruce Ratner spoke regularly and that BUILD was "under Forest City." Also, Caldwell had said that Ratner had personally approved the Staten Island worksite run by Orbin's.

As the plaintiffs' brief states:
Thus, unlike CWE in Diaz, the Forest City Ratner Defendants clearly exercised sufficient control over the PATP and the Plaintiffs to be considered "employers" within the meaning of the FLSA [Fair Labor Standards Act].
Weinberger responded, "Whether Forest City was instrumental in creating BUILD is not relevant." The  question, he said, is whether the PATP participants were employees.

Plaintiffs as consumers?

Defense lawyer Weinberger also argued that the plaintiffs were trying to have it both ways, contending that they were employees subject to the FLSA but at the same time alleging they were "consumers" and thus hoodwinked by false promises regarding the training program, leading to claims under the General Business Law.

"The conduct has to relate to consumers" at large, he said.

Brinckerhoff countered that the defense was saying that, because the job training was unpaid, it was not directed at consumers. However, the program was advertised publicly, and hundreds of people showed up for an information session.

"This is activity that's directed at consumers," he said, and they were injured, because they gave up jobs, or opportunities for jobs, because they were led to believe this was a career path.

Duplicative claims?

Weinberger also challenged the plaintiffs' claim that they were both victims of both a breach of contract and  of "fraudulent inducement."

"You can't make a fraud claim out of a contract claim," he declared.

Brinckerhoff agreed that, "in normal circumstances," the plaintiffs wouldn't make such a dual claim. In this case, however, there were ambiguous oral agreements, he said.

And while the defense had found a case to suggest that its argument was on point, Brinckerhoff contended that other cases indicate that, when the contract is in doubt, such seemingly duplicative claims can be pled.

Justin Sher, who represents Orbin's Green Machine and its president Gausia Jones, added that claims of fraudulent inducement against his clients shouldn't stand. After all, his clients didn't get involved in the PATP until after the plaintiffs decided to participate.

He said the lawsuit referred to only one promise alleged by Jones that the plaintiffs would get union cards. "That's not enough for fraudulent inducement," Sher said.

False promises?

Weinberger also argued for dismissal of claims of promissory estoppel--essentially promises without a formal contract. The plaintiffs, he said, are not parties to the CBA and thus do not have rights under it.

Beyond that, he said, the unions were not a party to the CBA, and the defendants did not have the power to grant union jobs.

Brinckerhoff countered that it was reasonable to rely on the CBA, that Forest City builds projects with union labor, and that unions showed up to rally for the project. Thus, he said, it was reasonable for the plaintiffs to believe promises that they would get union jobs.

Scope of complaint

Salk argued that the lawsuit involved not just the work at the Staten Island site but "the whole thing," the time the plaintiffs spent in the training program.

Weinberger pointed out that the lawsuit, in its second paragraph, focuses on the two months spent at the Orbin's site. Indeed it does, though it also describes other events related to the PATP.

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