Skip to main content

In federal lawsuit filed by trainees “promised” Atlantic Yards construction jobs, judge leaves Forest City on potential hook; plaintiffs' lawyer claims victory

The 20 plaintiffs who sued Forest City Ratner, Community Benefits Agreement (CBA) signatory BUILD (Brooklyn United for Innovative Local Development) regarding promises of construction jobs and union cards, got a significant—if incomplete—victory from U.S. District Judge John Gleeson, who refused to dismiss key aspects of the case.

Gleeson, in a ruling (bottom) issued yesterday, did agree to remove from the case Forest City Ratner Chairman Bruce Ratner, who had only an indirect connection to the pre-apprenticeship training program (PATP), but would not, as a matter of law, remove executive Jane Marshall and the company.

Thus, if a jury finds for the plaintiffs, Forest City, the deepest-pocketed defendant, could be liable for millions of dollars in projected wages that the plaintiffs didn’t get—though that also depends on a highly-contested calculation of the earning potential of each plaintiff.

Notably, Gleeson would not agree to delink BUILD CEO James Caldwell, who admitted making extravagant promises of jobs to the trainees but said it was not authorized, from Forest City.

“The question whether Caldwell was an agent of the Forest City Defendants cannot properly be resolved as a matter of law,” Gleeson wrote, saying the issue should go to a jury that could evaluate his testimony.

“It’s a complete victory for everything that matters,” plaintiffs’ attorney Matthew Brinckerhoff commented. “All of these plaintiffs are going to have their day in court, and have a jury determine whether they were lied to by Forest City Ratner as well as BUILD, and whether they’re entitled to millions of dollars in damages. We’re looking forward to that day.”

A gloomy denouement

The case represents the gloomy denouement of one of the most valuable aspects of the CBA, a program to put 36 people on the path to rewarding construction careers. It was the only aspect of the CBA that carried with it a cash payment—in this case, $500,000 to BUILD—if was not enacted.

The suite was filed in November 2011. BUILD a year later went out of business. Documents and depositions in the lawsuit revealed a previously fraught relationship between BUILD and Forest City, its main funder and a major factor in its creation. While Caldwell publicly hailed Forest City, behind the scenes he pressured the company to get the PATP started, while Forest City's Marshall, in a message to colleagues, called BUILD "snakes."

In my coverage of the July hearing in this case, I suggested it was unlikely to go to trial, once Gleeson narrowed the case allowing the parties to have a better sense of the case's value, and revisit the issue of settlement. But who knows.

I don't think Forest City would want Caldwell to go on the stand and face cross-examination for his series of conflicting statements. Some of the plaintiffs, who in depositions displayed fuzzy or untrustworthy memories, may not be the best witnesses, either, which makes going to trial a calculated bet for both sides.

Atlantic Yards has always been unpredictable, so it’s possible that Forest City will spend additional resources on legal fees—a significant chunk of a settlement figure?—to get itself and an executive off the hook.

That would leave trainees--a few of whom who gained union jobs on their own, but many who are struggling--to try to collect from the defunct BUILD and the not wealthy Caldwell. (Forest City is paying for BUILD’s defense, though BUILD and Forest City do not necessarily have the same interests.)

Gleeson put off to a later date a motion by the defense to preclude expert testimony that they say exaggerates the earning potential of the trainees. He also said it was too late for one additional former trainee to join the lawsuit.

Narrowing charges of unpaid wages

The plaintiffs also charged that they should have been paid for participating in the training program, especially some ten weeks of unpaid construction work at a site in Staten Island run by Gausia Jones, an instructor for BUILD whose company, Orbin’s Big Green Machine, had been hired to do a $20,000 job.

Gleeson partly narrowed those charges, saying it could not be said at this point that Forest City and BUILD were not joint employers under the Federal Labor Standards Act (FLSA). The potential recovery for unpaid wages likely would be significantly less than that for the lack of unionized construction work.

Wrote Gleeson:
Stripped of hyperbole, the plaintiffs’ argument that the Forest City Defendants and BUILD were joint employers for the purposes of the FLSA and the NYLL [New York Labor Law] relies on numerous interactions, joint actions, and shared motivations among those defendants. The plaintiffs have adduced facts that reasonably support the inferences that the Forest City Defendants created and funded BUILD; that together they created the PATP program; that the Forest City Defendants were intimately involved in the design, administration and implementation of that program; and that BUILD and the PATP program, and the goodwill they were created to generate, were an integral component of the success of the Atlantic Yards project, which at the time was facing strong opposition from some segments of the surrounding communities. A rational jury could find from the facts advanced by the plaintiffs that the economic reality was the Forest City Defendants and BUILD were joint employers of the plaintiffs.
He agreed to remove Ratner as a potential joint employer, but not Marshall, which means a jury will have to assess how much operational control Forest City had.

BUILD argued that it was exempt from the FLSA because it was a not-for-profit organization. However, wrote Gleeson:
But a jury could reasonably find that the Forest City Defendants had such control over the creation, operation and existence of BUILD that, in essence, BUILD and the PATP program and goodwill they were intended to foster in the local communities were integral to the commercial success of the Atlantic Yards project itself, that is, that their activities were performed for that common business purpose.
He did, however strike the classroom training portion of the PATP as not compensable under the FLSA. Similarly, according to the NYLL, the BUILD Defendants cannot be liable for the first 10 weeks of the 15-week PATP, because state law says the first ten weeks of a program classify participants as “learners.”

He agreed that Jones and Orbin’s were not joint employers, and thus not responsible for back wages.

Nor could Jones and Orbin’s be liable for additional charges of unjust enrichment, because PATP participants agreed to “participate in an unpaid internship.”

While the plaintiffs argued that the contract was unenforceable, Gleeson agreed that “lack of compensation is allowable where the ‘work’ in question was preliminary to but not integral or indispensable to other principal work activities, and added the plaintiffs’ complaint was based on earlier promises of union membership for their participation.

Charges continue

The whole case was not in jeopardy of dismissal. There was been no attempt to dismiss breach of contract claims against Caldwell and BUILD, as well as the contract claims of eight plaintiffs who claimed that they had heard promises from Marshall.

Forest City, however, tried to dismiss claims made by 11 plaintiffs who either don’t remember or don’t say they received promises from Forest City that they would get union jobs after completing the program.

The plaintiffs argued those claims should continue, because Marshall allegedly made such promises at a session at which they were present, while Caldwell did so too, and acted as an agent of Forest City. And that, said the judge, should go to a jury.

The press release


Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…