Wednesday, June 20, 2012

Judge says lawsuit filed over "sham" training program can proceed, with key claims remaining against Forest City and BUILD; other claims dismissed

In a preliminary victory in the case filed by by seven (of 36) participants in a pre-apprenticeship training program (PATP) promised as part of the Atlantic Yards Community Benefits Agreement (CBA), a federal judge this week agreed not to dismiss potentially costly claims that Forest City Ratner is responsible for failure to pay unpaid wages to the trainees for their entire training program, which plaintiffs' attorneys call a "sham.".

Federal Judge John Gleeson did dismiss several aspects of the case filed against Forest City, executives Bruce Ratner and Jane Marshall, BUILD (Brooklyn United for Innovative Local Development), and BUILD CEO James Caldwell, but he rejected a motion to dismiss key claims,  including the most contested claim during a court argument last month: whether Forest City and BUILD constituted "joint employers."

The argument concerned the plaintiffs' claim that, by signing the CBA, which promised the PATP, and funding and directing BUILD, that Forest City Ratner was responsible for the program. One plaintiff, recounting how he was promised a union card and a union job, said "I was robbed," when the case was announced last November.

An attorney for Forest City, BUILD, and their individual officers argued that the facts don't support "the economic reality test" as established in case law. But attorneys for the plaintiffs argued that this case was unusual, and Gleeson agreed, in his 19-page decision (below):
However, I cannot conclude at the pleadings stage that it was unreasonable, as a matter of law, for the Plaintiffs to rely on promises of union membership and jobs made to a small number of PATP participants by a major real estate enterprise that would employ tens of thousands of union workers.
To survive a motion to dismiss, a complaint must allege sufficient facts to state a claim to relief that is plausible on its face.

The legal process of discovery had already begun, and will continue, as plaintiffs' attorneys, who include Matthew Brinckerhoff, the chief lawyer on the Atlantic Yards eminent domain case, probe the relationship between Forest City and BUILD.

Plaintiffs' attorney Nicole Salk, who said Gleeson "really understood the main arguments," estimated that it would take at least six months before the next phase, which could be a motion for summary judgment, or a trial. Settlements in such cases are possible as well, though the plaintiffs this week just got more leverage.

Forest City Ratner had no comment, according to spokesman Joe DePlasco.

Update and correction on the breach of contract charges

I had previously written that Forest City Ratner aimed to dismiss potentially costly claims regarding breach of contract: lost earnings from a union career, not merely the lost wages from the summer 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.

However, Forest City had sought dismissal of breach of contract claims only against named officials Bruce Ratner and Jane Marshall, as well as BUILD CEO James Caldwell. (Orbin's officials, including Gausia Jones, also sought such dismissal.) Gleeson agreed to dismiss all those individual claims, but the claims against Forest City and BUILD had never been challenged.

Update and correction on the unpaid wages charges

I also had written that the plaintiffs sought compensation for unpaid wages for training at the Staten Island site run by Orbin's. However, Salk explained, the plaintiffs actually seek compensation for the entire training program, a potentially much larger sum, and, at least so far, liable to be paid by the developer under the Fair Labor Standards Act (FSLA).

Moreover, the other 29 people in the training program could join the suit, specifically on the unpaid wages charges. Unlike a class action suit, where those similarly situated must opt out, this case could become a collection action in terms of unpaid wages, when others similarly situated, after getting notice, can opt in, Salk said.

Gleeson wrote:
This case is somewhat unusual, since the Plaintiffs were not employees in the ordinary sense of the term. They were, rather, participants in a training program who ended up providing two months of unpaid labor. Thus, many of the factors traditionally applied in identifying employers, such as maintenance of employment records or control over rate and method of payment, are difficult to import into this case.
...The Plaintiffs have adequately alleged that the PATP was a joint enterprise of BUILD and the Forest City Defendants The CBA provides that the “Developers and BUILD shall initiate and coordinate a job training program."
The same conclusion applies to the individual Forest City Defendants, Ratner and Marshall. “[I]ndividual officers, directors, and executives of an entity may constitute ‘employers’ of an employee if they ‘possessed the power to control’ him or her.” ... They jointly endeavored to enroll PATP participants, find suitable space to operate the program, and obtain funding for it. Id. In addition, the Forest City Defendants actually funded the PATP and provided its facilities. Given the terms of the CBA, I conclude that the Plaintiffs have sufficiently alleged that the Forest City Defendants were their joint employers under the FLSA.
...While Ratner and Marshall are not alleged to have played a role in the day-to-day administration of the PATP, they exercised operational control.
 Consumer deception?

As stated in a press release from the plaintiffs' lawyers:
The court also found that the defendants may have engaged in deceptive acts or practices in violation of the New York General Business Law. The court based this determination on the allegations that the defendants recruited a large number of potential trainees with misleading promises of union membership and jobs. According to the decision, this constitutes a “sufficient public impact” to show a broad effect on consumers at large.
Gleeson acknowledged that some case law supports the defense position that "deceptive practices in the context of employment are not consumer oriented." However, he wrote:
The Plaintiffs were not strictly employees in the traditional sense, but consumers of a training program offered by the Defendants.

Here, the Plaintiffs provided their time and labor, rather than their money, in exchange for training. But they are consumers of a training program nonetheless.
Promissory estoppel

Gleeson agreed to only partially dismiss claims of promissory estoppel--charges there was an enforceable contract, even if unwritten. The defendants, he noted, "argue that any reliance on these statements was unreasonable because it was ultimately up to the union to determine who would be offered membership."

The judge said that, despite the defense argument that the claim duplicated the breach of contract claim, alternative theories are possible at the pleadings stage.

Though the defense sought dismissal of all charges, Gleeson agreed to dismiss claims regarding Bruce Ratner and the Jones defendants.

Other charges dismissed

Gleeson also dismissed the plaintiffs' claims regarding a fraudulent inducement to quit their jobs for the training program, saying such charges--which involve potential punitive damages--should not substitute for existing breach of contract charges without clear evidence that "they knew, or were recklessly indifferent as to whether, there would be no such jobs for them."

Gleeson agreed to dismiss the breach of contract claims against Ratner, Caldwell, Marshall and the Jones defendants, which were not addressed in the plaintiffs' papers. Such breach of contract claims, as noted above, remain against Forest City Ratner and BUILD.

Gleeson also agreed to dismiss other partial claims not addressed in the plaintiffs' papers: unjust enrichment claim against the Forest City and BUILD Defendants. Such claims will remain against Orbin's and Jones.

BUILD lawsuit, Gleeson decision, 6/18/12

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