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Lawsuit aims to reverse DOB approval of Forest City's cost-saving modular plan; agency charged with compromising safety after backing off pledge to require licensed trades in factory

The New York City Department of Buildings (DOB) bent the rules and compromised safety for developer Forest City Ratner's ambitious, innovative modular construction plan, allowing offsite prefabrication for the first Atlantic Yards tower to proceed without licensed plumbing and fire suppression work, according to a lawsuit filed yesterday.

The lawsuit, filed by two professional groups--the Plumbing Foundation and the Mechanical Contractors Association--against the DOB and its commissioner Robert LiMandri takes off from a City Council hearing last January, where Committee Chair Erik Martin Dilan suggested that the DOB's posture suggested "clear non-compliance" with the city's building code.

The lawsuit builds on such charges, pointing to a draft DOB document that would have required such licensed specialists at the modular factory, where some 60% of the first Atlantic Yards tower, the 32-story B2--the world's tallest modular tower--is being built. That draft was never issued, despite a reported statement by LiMandri that he supported such a change.

The lawsuit requests that the court invalidate the DOB's policy statements, compel the agency to enforce the code, and to enjoin DOB from issuing building permits that violate the code. The modular factory is up and running, and modules are supposed to be delivered to the B2 site at Flatbush Avenue and Dean Street by late summer, with the building's completion about a year later.

While the labor unions associated with this work are not part of the lawsuit, their leaders did sign affidavits that bolster some factual claims. 

As with the hearing, the lawsuit suggests a split in the labor movement. The larger Building and Construction Trades Council, after initially expressing misgivings about the modular plan, eventually gave it their blessing, agreeing that such projects likely wouldn't go forward without lower-cost labor in the factory.

Forest City intervention?

The lawsuit, with only circumstantial evidence, suggests intervention by Forest CIty Ratner, whose representatives met with DOB shortly after the draft document was circulated and whose 16-tower project has been supported steadily by Mayor Mike Bloomberg. Like some others, he considers the modular project a potential game-changer for cities.

"Most troublingly, it appears" that DOB was part of "a transparent effort to accommodate the cost-cutting needs of a single developer, Forest City Ratner," the lawsuit charges.

(At the hearing in January, the Plumbing Foundation's Stewart O'Brien quoted "some of our contractors" as saying Forest City had reported, "We took care of that at the Department of Buildings. Only the site work has to be done by employees of licensed firms." Such hearsay does not appear in the lawsuit.)

Savings and safety

While the lawsuit focuses on safety, it's clearly also about money. The contractors, as well as the unions they work with, do specialized, well-compensated work. Forest City Ratner's use of prefab techniques, with cross-trained non-specialist union workers, eliminates higher-paid positions and aims to both speed construction and save money.

If successful with B2, Forest City would build the rest of the Atlantic Yards towers using the modular technique, and potentially extend modular factory work--part of a joint venture with Skanska at the Brooklyn Navy Yard--to other construction projects, both its own and those of other developers.

While a Forest City executive in January suggested that the factory wage, $36/hour with benefits, was "probably 10 or 15% less than if the person were employed on site," a Plumbers union rep said the difference was actually 70%.

The lawsuit includes supportive affidavits from two former DOB Commissioners. "Allowing non-licensees to complete plumbing and fire suppression work is not only in gross derogation of the Construction Code, it also subjects citizens of New York to safety and health hazards that the licensing provisions of the Construction Code were designed to alleviate," stated Charles M. Smith, Jr., an architect, consultant, and DOB Commissioner from 1984-90.

Rudolph Rinaldi, Smith's successor as DOB Commissioner, through 1993, signed a similar affidavit.

DOB comment: manufacturing is different

The DOB issued a statement that backed the current policy, focusing on the role of licensees at the job site, not the factory:
Licensed plumbers and fire suppression contractors in New York City are responsible for installing these systems at a construction site, not the manufacturing or assembly of these systems before they reach the site. For any modular project, the Department requires the on-site installation of plumbing or fire suppression systems to be performed by a licensed tradesman, and those systems must meet the standards in the City’s Construction Codes -- regardless of where the parts are assembled.
Forest City comment

Forest City is not a named defendant, but the company issued a statement along the same lines, though more pugnacious:
It is simply outrageous that anyone would suggest that FCRC would violate the building code and do anything to compromise safety. It is false and they know it. The work in the factory is completed by union labor and approved by a licensed engineer, all according to City building codes. The units are then delivered to the building and installed and all plumbing connections are made by licensed plumbers.
Indeed, Forest City is not violating the building code because the code wasn't changed. And the petitioners believe that approval by a licensed engineer, as opposed to a specialist, is insufficient.

Petitioners' comments

"It's a dangerous path we walk down when the city appears to be willing to circumvent the clear words of the law so that wealthy and influential developers can make a few extra dollars by using lower paid and untrained assembly line workers," the Plumbing Foundation's O'Brien told the Daily News, which broke the story.

“We don’t begrudge anyone from making a profit, but we take exception when the building code is circumvented in order to do it,” said Tony Saporito, of the Mechanical Contractors Association in a statement to the Post.

Lawsuit background

Though the Uniform Fire Prevention and Building Code sets minimum building and fire safety standards for each municipality in New York State, the city has developed and modified its own Construction Code, which went into effect on 7/1/08. This Construction Code includes four technical codes, Plumbing Code (PC), Building Code (BC), Mechanical Code (MC), and Fuel Gas Code (FGC).

The lawsuit notes that the Construction Code states that, while different materials, methods or other requirements are allowable, "the most restrictive shall govern,"

Plumbing work, the suit notes, goes beyond unclogging toilets and fixing leaky pipes.

"To ensure property oversight over and accountability for the plumbing work done in New York City, as well as skilled work and adherence to professional standards," the suit states, "the Construction Code requires that plumbing work--including connections to the domestic water supply, gas piping, medical lines, and back-flow devices in medical facilities--be performed only by a person who is a licensed master plumber or working under the direct and continuing supervision of a licensed master plumber."

Fire suppression work is regulated similarly, according to the suit, and a licensed fire suppression piping contractor is required.

"Nothing in the careful and precise definitions of plumbing and fire suppression in the Code suggests any intent to limit the Code's applicability or alter the definitions provided in the Code based on the physical location within the City where the work takes place," according the suit.

Who regulates prefab?

So, is modular construction governed by the Construction Code? The lawsuit notes the the Construction Code is applicable to all residential and commercial buildings beyond two stories, though there's an exception for manufactured homes two stories or smaller. Thus, modular construction is covered, according to the suit.

"The modular construction work done in the factory requires the same plumbing and fire suppression work that would be done at the jobsite in a traditional construction project," the lawsuit asserts, citing the affidavit of a professional engineer.

Temporary rules

On 4/14/11, at a time when Forest City Ratner's modular plans had surfaced but not come to any fruition, the DOB issued a Buildings Bulletin (bottom) that "purportedly established 'temporary guidelines for approval of fabricators in accordance with the 2008 NYC Construction Codes."

However, the Bulletin "treats all prefabricated buildings... as fabrication types," or materials, rather than buildings, even though that's clearly contrary to the uniform code, the lawsuit says. And while that Bulletin includes "limited monitoring of construction work at a fabrication site," it does not require that it be monitored or performed by those under the "direct and continuing supervision of licensed plumbers and licensed fire suppression contractors."

The only role for such licensees would be at the building site.

"In sum, the April 2011 Bulletin represents a sweeping end-run around fundamental Code licensing requirements," according to the suit. "The 'inspections' required by the April 2011 Bulletin, by a non-licensed person with no liability for work performed, are no substitute for the time-tested, detailed licensure, supervision, and certification requirements of the Code. This compromise regarding safety is exactly what the Code was intended to prevent."

The professional groups protested to LiMandri in July 2011, pointing out the inconsistencies between the Bulletin and the Construction Code.

Revising the rules?

DOB officials met in December 2011 with O'Brien and Saporito, as well as professional colleagues and representatives of the Plumbers Local 1 and Steamfitters Union 638, which represent plumbers and fire suppression workers.

LiMandri said he agreed with the complaints, blamed a drafting oversight, and promised that DOB would make clear that plumbing or fire suppression work done in factories must be performed by licensees or their direct employees, according to affidavits from eight of those attendees.


On 1/17/12, Alan Price, Director of DOB's Office of Technical Certification and Research, circulated a revised Draft Bulletin, which, according the the lawsuit, would have required licensed plumbers and licensed master fire suppression contractors to be part of the modular fabrication process. (See graphic at right.)

The Draft Bulletin was never issued, however.

The reason is not explained, but some circumstantial evidence, based on a Freedom of Information Law request, is cited: on 1/23/12, three top Forest City executives--Executive VP MaryAnne Gilmartin, construction chief Robert Sanna, and senior VP Roger Krulak--and modular consultant Amy Marks visited DOB.

Over the next few months, no new policy guidance emerged, but Forest City's modular plans proceeded.

Moving forward

On 11/28/12, Forest City issued a press release announcing its plan to build B2, involving some 930 units. The suit points out that modular construction "uses the same construction materials as conventionally constructed buildings."

"Far from minor 'installations,' the modular units to be fabricated... are elaborate, comprehensively built structures, well within the scope of the code," the lawsuit states, as they measure 35' x 14' x 10' and contain kitchens, bathrooms, plumbing, flooring, and walls.

The workers hired to build the modules would not be licensed master plumbers or fire suppression contractors, nor wold they be supervised by such, according to the suit.

Another protest

A day after the announcement, on 11/29/12, the Plumbing Foundation wrote to LiMandri, saying Forest City's plans would violate the Construction Code, and asked if the DOB had offered Forest City an "exemption."

The letter suggested a potentially larger challenge, noting that other developers plan "to construct high rise modular hospital units and that future modular factories may be located out of state," which not only "raises serious safety concerns but also permits developers to move construction jobs out of NYC."

The DOB did not immediately reply. It did issue a permit for Forest City to proceed.

Council hearing

At the 1/22/13 Council Hearing, the DOB's Fariello, the lawsuit notes, "compared the construction of modular units, which include everything from kitchens and bathrooms to entire apartments, to the assembly of a 'small scale' project, like a 'Jacuzzi tub [which] has plumbing piping around it, has some electric motors, has a pump'."

DOB General Counsel Mona Sehgal and Fariello, according to the suit, "attempted to allay the Council members' fears by pointing to provisions in the April 2011 Bulletin that require that 'somebody has to certify to us that the work that is being done offsite meets the technical requirements.'" However, according to the lawsuit, no licensed tradespeople are required.

Unmentioned in the lawsuit is the following exchange At the hearing in January, Brooklyn Council Member Brad Lander, asked about a revision to the temporary rule announced in April 2011: "Will the rule look differently or more thoroughly at the possibility of high-rise modular?"

"Yeah,"  Fariello replied. "When the bulletin was created, there was no one contemplating high-rise to us. So, as we evolve as a department, as new ideas come to us, new projects, we're certainly going to have that in mind." (Note that, if Forest City had not formally presented plans for modular in April 2011, they had surfaced in the press.)

DOB stands firm

Despite Fariello's words, no new guidance emerged. In fact, a day after the hearing, on 1/23/13, Sehgal responded to the 11/29/12 letter from the Plumbing Foundation, saying DOB had not issued any exemptions and that the code did not apply to work done offsite.
The organization then asked DOB for a final determination as to whether plumbing and fire suppression work performed offsite was in compliance with the code.

On 4/9/13, Fariello issued that Final Determination (right), confirming Seghal's letter,

It stated that the "direct and continuing supervision requirements" don't apply because "modular or prefabricated assembly performed at a location other than the jobsite is not plumbing or fire suppression work as those terms are defined in the Admin. Code."

Lawsuit terms

The lawsuit charges that the Final Determination is wrong as a matter of law because:
  • it's contrary to the code's plain language 
  • there's no exemption for prefab homes above two stories 
  • it contradicts the requirement to adopt the "most restrictive" interpretation 
  • it's arbitrary and capricious, since the work is identical to what would be done at the jobsite 
  • it's contrary to the history and intent of the code 
The petitioners say they didn't need to go to the Board of Standards and Appeals, because this is a purely legal claim.

Second cause

The lawsuit also charges that the DOB has improperly permitted code violations, since LiMandri in December 2011 told industry reps that permitting workers to do plumbing and fire suppression work without licensed tradespeople would be a violation.


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