Tuesday, December 17, 2013

Is an Atlantic Yards "mod" like a dishwasher? Lawsuit over modular building plan goes to court today

The lawsuit over the city of New York’s approval of Forest City Ratner’s modular building plan--which involves offsite prefabrication without licensed plumbing and fire suppression work--goes to a hearing today less than a week after the developer started delivering modules (aka “mods”) to the building site.

(The hearing is at 11 am at state Supreme Court at 80 Centre Street, before Justice Eileen Rakower, Part 15.)

The timing suggests it’s highly unlikely a judge would stop construction of this building, which would be the world's tallest modular tower, though the case, if successful, may affect future towers. The lawsuit it wasn’t mentioned in the public statements regarding Forest City Ratner’s deal with the Chinese government-owned Greenland Group, so it doesn’t seem to loom as a huge risk.

Still, the case--according to the legal papers I read--raises questions about an apparently cozy relationship between the Department of Buildings (DOB) and Forest City Ratner, as well as a fundamental issue: is a module manufactured in a factory at the Brooklyn Navy Yard more like a dishwasher or water pump, something to be delivered to a building, or, as a section of a building, is it more like building?

The petitioners, the Plumbing Foundation and the Mechanical Contractors Association, say the latter, while the defendants say the former.

Modular assembly is not akin to manufacture of standard industrial products, the petitioners say, since such “listed” items may be installed if they have passed muster with a recognized third party, such as the American Society of Sanitary Engineering, which sets standards. By contrast, they say plumbing work is not built to a uniform standard, but rather custom designed and custom made.

The larger context

The Forest City Ratner affiliates that manufacture the components and own the B2 tower have also intervened in the suit, and the Real Estate Board of New York, which wants to encourage modular construction, has also filed papers to intervene. Some 60% of the building is constructed in the factory, speeding up the process and lowering costs, while reducing some of the community impacts.

“Respondents go to great lengths to turn this lawsuit into a political issue, arguing that by bringing the Petition, petitioners must be opposed to modular construction and the affordable housing benefits modular construction can create,” the petitioners state. “Nothing could be further from the truth. Petitioners wholeheartedly support modular construction, as well as any other innovation that makes construction safer and more affordable. But such innovation must happen in compliance with, and not disregard, the unambiguous standards set forth in the Code.

The city has tried to say the two business groups should not have standing to bring the suit. But the Plumbing Foundation and Mechanical Contractors Association say their members “will be compelled to join in work over which they have diminished control, completing the installation of partially pre-fabricated systems that they did not select or assemble.”

But the licensed firms will continue to be strictly liable for the work they do, they say, making them vulnerable to lawsuits.

The defense

According to the DOB, even if the petitioners have standing, the definition of “plumbing work,” “plumbing,” and “fire suppression piping work” are limited to work performed in or adjacent to a building.

Though petitioners argue that definition of a “building” and “structure” encompasses modular units assembled off-sate, DOB does not regulate construction of items like fences or tents, which it says is a  common sense interpretation.

Moreover, modular units assembled off-site are neither unregulated nor unsafe, the DOB says, as they must comply with the Construction Codes’ technical requirements and be overseen by a licensed professional engineer.

As to a draft DOB Bulletin that was never issued but would have required licensed plumbers and licensed master fire suppression contractors to be part of the modular fabrication process,  the DOB waves that aside, stating that “ultimately the proposed revisions that were never adopted are of no moment,”

Moreover, since the issue came up at a 1/22/13 City Council hearing, the Council has taken no action in response, and New York State Court of Appeals says that “failure to act may be deemed an acceptance.” (The petitioners respond that, when Council last revised the code, in 2008, DOB was years away from this interpretation.)

The bar to overturn an agency action is high, and the DOB argues that its oversight of modular assembly is “neither arbitrary nor capricious, and certainly has a rational basis.”

The intervenors

According to the memo filed by the Atlantic Yards B2 owner and FC+Skanska Modular LLC, the petitioners case would undermine innovation and increase construction costs, and require “absurd results,” in that that various objects, like dishwashers and water pumps, would have to built under supervision of licensed individuals.

Modular construction offers numerous advantages over conventional construction, including controlled conditions, less waste, safer work, and less disruption in neighborhood, the brief states.

The modules are not “entire apartments” but pieces of apartments--some 930 modules to create 363 apartments. No module contains a complete or functional plumbing or fire suppression system.

“They are much like dishwashers, washing machines, or any number of other, more complex, prefabricated components, such as boilers, fire pumps and backflow preventers,” the brief states.

The brief notes that petitioners have never challenged installation of prefab water reclamation system or fire pumps, all of which contain internal piping systems significantly more complex than the basic water supply and drainage piping in FCR’s modules.

Nor is factory fire suppression work the same as “fire suppression piping work,” since that work become subject to Code upon installation at the job site, according to the briefs.

A January 2012 meeting cited in the petitioners’ briefs was not to lobby DOB to revise the Draft Bulletin, the brief states, but rather a planning meeting to discuss documents FCR would be required to submit.

Details on B2

According to an affidavit from Forest City’s construction chief Bob Sanna, the 20-month construction timeline for B2 should be cut by four to six months compared to a conventional building.

Most apartments will be created from two to three modules fitted together, with 363 apartments and some 930 modules.

“The factory employs only union labor from unions affiliated with the Buildings and Construction Trades Council, including plumbers and electricians, who are specially trained in their assigned tasks and educated in Construction Code requirements,” Sanna says, without specifying that such union members do actual plumbing work. The factory expects to employ about 120 full-time union workers.

Sanna notes that DOB confirmed that fabrication work performed in the factory need not be performed by licensed electricians, master plumbers and master fire suppression piping contractors, but approval was conditioned on FCR’s agreement to engage an independent, licensed engineer to certify that factory work complied with all codes.

FC+Skanska anticipates that it can fabricate 35 modules per week at the factory, and B2 Owner expects to install approximately six to eight modules per day at the site, with completion in the fourth quarter of 2014, according to Sanna.

Petitioners' reply

In response, the petitioners say the city “Construction Code is absolutely unambiguous: all plumbing and fire suppression work done in connection with the construction of NYC’s buildings must be performed by employees under the direct supervision of highly-regulated licensed master plumbing and fire protection firms.”

They note that the respondents concede that work at issue here could be performed only by employees of licensed firms if performed at the final building site.

“By holding that exact same work to be exempt,” the brief states, “the DOB has ignored the plain language of the Code. Its decision will unlawfully permit the installation of plumbing and fire suppression systems in apartments, businesses, hospitals, schools, and any other building in the City.”

They argue that, the Code makes no distinction between on-site and off-site plumbing and fire suppression work, since these are “entire building segments.”

The respondents read the Code as saying licensed plumbers only need to do “final hookup,” according to the brief. But the language of the Code, “in connection with,” means “having to do with,” and there’s no dispute that conventional plumbing work at a job site requires a licensed plumbing firm, the brief states.

The petitioners argue that there no meaningful difference between plumbing work within a module and plumbing work done afterward: an imperfect weld could lead to a leak and explosion, and it would be difficult or impossible to locate the defect.

That DOB twist

The work at issue has historically been construed as “plumbing” and “fire suppression,” the petitioners argue, pointing out that DOB Commissioner Robert LiMandri and senior staff “unanimously acknowledged that plumbing and fire suppression work done in the factory in connection with modular units must be performed and supervised by the licensed firms,” and memorialized that in the revised draft Bulletin that was never issued.

One month after the FCR visit to DOB, according to the petitioners, Forest City obtained from its counsel and provided to DOB a legal memo seeking to justify different procedures at the factory. It stated, in part, “We [FCR]... have determined that a modular factory is exempt from plumbing licensing requirements...”

REBNY wants to be amicus

The brief by REBNY says innovation is essential to alleviate shortage of affordable housing and ever-rising construction costs, without sacrificing safety.

“If the economic and delivery goals of B2 are met as expected, the project’s success will likely spur other developers to pursue this innovative construction methodology,” states the brief, from attorney Jeffrey Braun of Kramer Levin, who regularly works for Forest City Ratner.

The petitioners, arguing against REBNY’s role, say REBNY’s interest, expertise, and point of view are identical to Forest City Ratner’s, and its arguments are already presented in the company's papers.

In a reply, REBY says the Court should consider the perspective of entire real estate industry, with 14,000 members. While its views may overlap with Forest City, the brief states, REBNY offers data and statistics that are not duplicative, including the state of New York City’s tight housing market.

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