At hearing in case over promises of jobs to trainees, judge expresses skepticism about tying BUILD to Forest City; plaintiffs' lawyers point to atypical situation and unreliable witness
The plaintiffs are trying to recover significant damages for promises of construction union cards and careers--whose CEO, James Caldwell, readily admitted he made promises--as well as unpaid training in the program and at a work site on Staten Island.
(There are 20 plaintiffs listed in legal papers, from a program that enrolled 36, but discussion in court referenced a total of 19. Background on case here.)
To recover any significant damages in this civil lawsuit, the plaintiffs must tie BUILD, now defunct, to its deep-pocketed patron as "joint employers," while lawyers representing Forest City seek to narrow the case via motions for summary judgment.
Tying BUILD to Forest City?
U.S. District Judge John Gleeson, who has a dry and measured style, wondered how a company could be responsible for a non-profit it funded, suggesting it might set a dangerous precedent. "You're saying BUILD's promise was the principal's promise?" he asked plaintiffs' attorney Matthew Brinckerhoff.
"This is not a typical situation in which a for-profit creates a not-for-profit," responded Brinckerhoff, trying to point to the questionable specifics surrounding Atlantic Yards, just as he did in the uphill and ultimately unsuccessful battle representing property owners and renters in the Atlantic Yards eminent domain litigation.
"None of our clients believed BUILD had the power to give them apprenticeships," Brinckerhoff said, regarding the coveted first-run placement in a construction union. "The entity that had the power to make good on the promise... was Forest City."
Gleeson said he was looking for a "limiting principle," asking of there's anything BUILD could have done that could be seen as not being an agent of Forest City.
Brinckerhoff suggested that, if Forest City had given BUILD money for its offices rather than free rent, "nobody would think Forest City Ratner was responsible for the lease. This is why the history does matter."
"There's a certain black-heartedness attributed to Forest City Ratner," mused Gleeson. "But there are political sins and there are legal sins."
It was the money quote in the hearing, which lasted a little more than an hour in federal court in Downtown Brooklyn. None of the plaintiffs or defendants--or executives from defendant Forest City Ratner--were in the audience.
Brinckerhoff countered that the distinction between the two entities was more blurred than is typical: "What was not happening here is that Forest City Ratner was engaging in some philanthropic endeavor, contracting with an established not-for-profit." Rather, he and plaintiffs' lawyers point out, BUILD was set up to support Atlantic Yards.
Can witness be trusted?
Another key issue, and one on which the plaintiffs surely felt stronger ground, was whether former BUILD CEO James Caldwell was "strong-arming" Forest City Ratner to change the rules for PATP graduates, as he contends in his deposition, or whether he felt had the authority to make the promises.
(Despite authorizing a pre-apprenticeship training program, Forest City asserts that BUILD's PATP was merely supposed to feed additional pre-apprenticeship training programs. But it willingly funded construction skills training, though executives said BUILD's program was supposed to only cover "life skills.")
Brinckerhoff noted that, in March 2010, before the PATP began, "a person spies on" Caldwell for a Forest City Ratner contractor and reported that Caldwell was publicly promising union jobs. The contractor conveyed it to executive Sonya Covington. "What did Ms. Covington do? Absolutely nothing," Brinckerhoff said.
He scoffed at defense counsel Harold Weinberger's claim that it was offensive to question Caldwell because he's now being paid (and defended) by Forest City. "That matters," Brinckerhoff said, detailing Caldwell's history of inconsistent testimony regarding the program.
"They're saying in June  he was told he couldn't make those promises," Brinckerhoff declared. "He can say that all he wants, but we're certainly entitled to have a jury hear it. The reality is: why would he be lying if the result was going to be so catastrophic?"
That thought lingered: if Caldwell was knowingly lying to students when promising them jobs and union cards, he may not have been over-optimistic about whether he could get Forest City to ensure an on-ramp to the unions but also taking the risk of crushing the hopes of desperate people.
The PATP was a big deal, the only part of the Community Benefits Agreement that, if not funded, would trigger a specific payment of damages, $500,000 by Forest City. Caldwell's colleague Marie Louis began trying to get the PATP off the ground in 2005, the same year the CBA was signed.
It was stalled for years, and both Louis and Caldwell expressed frustration. Finally discussions get serious in March 2010, the time the arena groundbreaking began. A contract was signed in June or July 2010. The 15-week program began in August, including "life skills" classes, construction skills classes, and an ill-fated--and aborted--off-site hands-on training at a house in Staten Island.
Stretching the law to fit the case?
Though BUILD was seen as a Forest City dependent--one Forest City executive, in an email, peevishly said "THEY WORK FOR US"--at issue are the nature of their ties. Did the training program serve a "business purpose"? Could the two could be considered "joint employers"?
Defense lawyer Weinberger--representing Forest City, BUILD, Caldwell, and Forest City executives Bruce Ratner and Jane Marshall--suggested that the latter two claims were stretches.
BUILD did not perform any business purpose or gain profit, so it thus was exempt from the Fair Labor Standards Act (FLSA), the federal law that requires payment for work. New York State law, he noted, has an exemption for paying "learners" that covers ten weeks, so if the claim for wages applies, it can only cover five weeks.
"We believe the plaintiffs have not come remotely close" to proving the "joint employer" relationship, he said. Despite "a lot of rhetoric" over BUILD's history, the question, he said, was, "Did Forest City exercise functional or formal control over these plaintiffs? I think the evidence is very clear."
Yes, Forest City "hired BUILD in essence" to run the training program, Weinberger acknowledged. "But they didn't tell them how to do it."
"Obviously, Forest City wanted to make sure they were getting what they paid for," he said, "They did some quality checks." But that doesn't make them joint employers, he said.
Unmentioned was that the "quality checks," according to the record, rather inadequate.
Though plaintiffs' attorneys have tried to use a case known as Enterprise, in which a parent company was alleged to be a joint employer of wholly owned subsidiaries, Weinberger said there was no comparison. "Here we have two entities that have no legal relationship," he continued. "If funding a not-for-profit amounts to being a joint employer, that will mean a pretty dramatic change in not-for-profit law."
He noted that Forest City knew nothing about what was going on at the Staten Island site and had not been involved in choosing it. (He didn't mention that Forest City was supposed to provide space for the program, so the Staten Island site--a house where contractor Gausia Jones and his company, Orbin's Big Green Machine, were supposed to create a basement apartment--was an ad hoc decision.)
The individual defendants
"For Bruce Ratner, they allege virtually nothing," Weinberger said, noting that one meeting cited had nothing to do with the PATP.
Later, plaintiffs' attorney Nicole Salk, of South Brooklyn Legal Services, strained to suggest that Ratner "had operational control of getting community support."
Marshall, said Weingerber, "was more involved, but at the level of insuring Forest City was getting what it paid for." (That was an odd statement, given that Marshall approved a budget that included construction skills.)
Salk later responded that Marshall and her subordinate, Covington, made decisions about implementation of the PATP.
Salk said "we think evidence shows the primary beneficiary" was Forest City.
Weinberger said eleven of the plaintiffs don't have a claim against Marshall and Forest City for promises of union jobs, because they admit they don't remember what Marshall said at the PATP orientation or even whether she was at the meeting.
He acknowledged there's "a lot of confusion about language" in the contract. He said that Forest City had negotiated to deliver people from BUILD's program to 200 slots in established union pre-apprenticeship programs. But if the BUILD program was actually a pre-pre-apprenticeship, they didn't use that term.
The Jones defense
Michael Tremonte, representing Jones and his company, also argued for summary judgment. Jones and his company were not employers, Tremonte said, since he was an at-will employee of BUILD who had no role in operating the PATP.
In fact, he said, BUILD unilaterally decided to end the hands-on training prematurely, after complaints from the students.
Regarding claims of unpaid wages under the Fair Labor Standards Act (FLSA), he said, an employer must have $500,000 in annual revenue, and Jones's company falls way short. Though plaintiffs try to conflate revenue from Orbin's and BUILD with that of much larger Forest City Ratner, that would require "operational interdependence," he said.
Beyond that, he said Jones had not been unjustly enriched, since plaintiffs had no expectation of compensation but rather had expectation of union cards.
In response, Salk said Jones did supervise the Staten Island worksite and gained by not paying the trainees, who did work that his (dismissed) workers would have done.
What was BUILD for?
Responding to Weinberger's argument, Salk said it was "very much disputed" that BUILD not-for-profit criteria, since it was "essentially created and funded for the purposes of this project. We would argue that it absolutely had a business purpose... to get the Atlantic Yards project built."
Forest City, she noted, employed Randall Touré, who recruited Caldwell to support the project and join the fledgling, unincorporated BUILD.
She gained some ground by noting that defense attorneys "seem to ignore their own evaluation" by consultant Ritchie Tye, hired by Forest City, which found, as noted in legal papers, "that it appeared that FCRC financially compensated the organizations for their potential to secure community support for the Atlantic Yards project, and not for their capacity to fulfill the programmatic goals in the CBA."
At this point, Gleeson first said he was "having a little trouble identifying a limiting principle," since funding a not-for-profit surely doesn't make the two entities joint employers.
"It is all about control," Salk said, pointing to Forest City's close role in the minutiae of the PATP, denying a stipend in the budget and helping shape the curriculum. "It's not like other cases where they can do what they want to do," she said.
After Caldwell's promises backfired, she added, Forest City was very involved in trying to find jobs--albeit not union construction jobs--for the trainees.
Who to trust?
Weinberger tried to undermine the claims that Caldwell had reason to believe he was authorized to make promises of union jobs and careers. "You can't have stronger evidence that Mr. Caldwell's testimony" denying that, he said.
The response that Caldwell's lying, he added, is not enough to defend against a motion for summary judgment.
Brinckerhoff countered that the defense entire motion "is premised on Mr. Caldwell's testimony." And while case law does say belief that someone's lying is not enough, the plaintiffs have far more evidence, he said.
"He is all over the place in terms of what he believed at the time," Brinckerhoff said, pointing to Caldwell's signing in June of a contract that said participants would leave the PATP for apprenticeships. (Contract language is murky.)
That led to Gleeson's question about whether BUILD's promise could be Forest City's promise, and the exchanges with Gleeson noted above.
Brinckerhoff closed by saying that "we have other impeachment evidence" that would cut into Caldwell's credibility. He cited a video, which appeared on this blog a day after the case was filed in November 2011 and again on Thursday, in which Caldwell flatly denied he made promises--even though he later admitted doing so.
Weinberger, given a few moments for rebuttal, noted that Salk didn't address the issue of Forest City controlling the employees.
Nor, he said, was there evidence Forest City had told Caldwell to make the promises.
Going to a jury?
Brinckerhoff, at one point, expressed incredulity that a jury wouldn't get to "hear any of this."
And, given that defense lawyers are not trying to dismiss claims against BUILD, he noted that at least part of the case would be going to a jury.
As I wrote, it's unlikely the case will ultimately go to trial. Once Gleeson narrows the case--either slightly or significantly--the parties will have a better sense of the case's value, and revisit the issue of settlement, an issue they've already discussed.
It's hard to imagine that Forest City would want Caldwell to go on the stand and face cross-examination for his series of conflicting statements. And some of the plaintiffs, who in depositions display fuzzy or untrustworthy memories, may not be the best witnesses, either.