10 N.Y.3d 592 (2008)
When a contractor agrees with a public housing authority to pay prevailing wages as required by the U.S. Housing Act, the workers can sue as third-party beneficiaries under state law to enforce that promise.
Summary
This case addresses whether workers can sue contractors for failing to pay prevailing wages on public housing projects. The New York Court of Appeals held that workers could sue as third-party beneficiaries of contracts between the New York City Housing Authority (NYCHA) and the contractors. These contracts stipulated that workers would be paid prevailing wages, as mandated by the U.S. Housing Act and the Davis-Bacon Act (DBA). The Court reasoned that while no federal private right of action exists under the DBA or Housing Act, this doesn’t preempt state law contract claims. The Court emphasized that the Housing Act is silent on remedies, and therefore, state law fills the gap, allowing workers to enforce their rights as intended beneficiaries.
Facts
Two separate cases were consolidated on appeal, both involving contractors hired by NYCHA for construction work on public housing projects. The contracts between NYCHA and the contractors included provisions requiring the payment of prevailing wages to laborers and mechanics, in accordance with the Davis-Bacon Act, as required by the U.S. Housing Act. The workers claimed that the contractors failed to pay them the prevailing wages as stipulated in the contracts.
Procedural History
In Cox v. NAP Construction Co., the Supreme Court initially dismissed the workers’ breach of contract, quantum meruit, and unjust enrichment claims, but upheld their Labor Law claims. The Appellate Division affirmed, overruling prior precedent that barred private rights of action to enforce Davis-Bacon Act prevailing wages. In Araujo v. Tiano’s Construction Corp., the Supreme Court granted summary judgment dismissing the workers’ claims for breach of contract, quantum meruit, and unjust enrichment. The Appellate Division affirmed, adhering to the prior precedent. The Court of Appeals granted permission to appeal in Cox and heard the appeal as of right in Araujo, consolidating the issues.
Issue(s)
Whether workers can bring a state law claim for breach of contract as third-party beneficiaries to enforce prevailing wage provisions in contracts between a public housing authority and a contractor, when those provisions are required by the U.S. Housing Act.
Holding
Yes, because the U.S. Housing Act does not preclude state law claims; therefore, workers can sue as third-party beneficiaries under state law to enforce prevailing wage provisions in contracts between NYCHA and the contractors.
Court’s Reasoning
The Court reasoned that under New York law, the workers were clearly third-party beneficiaries of the contracts between NYCHA and the contractors. Citing Fata v. S.A. Healy Co. and Strong v. American Fence Constr. Co., the Court emphasized that when a contractual provision is inserted to comply with a statute for the benefit of a group (like laborers), that group has a right to enforce it. The critical question was whether federal law preempted such state law claims. The Court found no preemption. While the DBA and Housing Act do not create an implied federal private right of action for workers, neither do they prohibit or preempt state claims. The Court stated that the “default assumption, absent a showing to the contrary, is that Congress intended neither to create a new federal right of action nor to preempt existing state ones.” The Housing Act is silent on remedies, and there is no conflict between state and federal law. As such, New York’s common-law remedies are not preempted. The Court also dismissed the argument that workers needed to exhaust administrative remedies, because the relevant Department of Labor regulations provided no mechanism for workers to initiate enforcement proceedings. The Court emphasized, “The present law affords superior protection by leaving the matter of breach of its stipulations to be treated like a breach of any other stipulation of the contract.”