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Thelen Reid Brown Raysman & Steiner LLP
Montana's Wolf Point School District sought to construct an addition to a high school located on Indian lands. The federal government provided a majority of the project's funding, with the balance coming from the district.
While construction was under way, workers employed by the flooring subcontractor alerted the Montana Department of Labor and Industry that they were not being paid prevailing wages. After learning from the state's compliance officer that the project was subject to the federal Davis-Bacon Act rather than to Montana's own "Little DBA," the workers voluntarily dismissed a prevailing wage claim they had brought under state law in state court.
The workers then brought a new suit, also in state court, alleging that the school district had negligently failed to require compliance with federal prevailing wage law in either the project specifications put out for bid or in the contract for construction of the project.
Before the District Court, the school argued that the workers' claims for prevailing wages arose under the federal Davis-Bacon Act and should be dismissed because the state court had no jurisdiction over the dispute. The workers argued that their claims did not arise under the federal Davis-Bacon Act but under state law of contracts and negligence.
The District Court dismissed the workers' claims. The workers appealed to the Montana Supreme Court. The Supreme Court reversed. Herrmann v. Wolf Point School District, 319 Mont. 231, 84 P.3d 20 (2004).
The Supreme Court concluded that the District Court had incorrectly engaged in an analysis of whether the workers could enforce rights arising from the federal Davis-Bacon Act in a state court action.
Rather, the Supreme Court found, the workers had no rights or remedies under the federal Davis-Bacon Act. They had no rights or remedies because the school district failed to contractually require that contractors on the project comply with the Davis-Bacon Act.
Accordingly, the Supreme Court held, the District Court had jurisdiction over the worker's state law causes of action for breach of contract and negligence against the school district based on the district's failure to require, in project documents, that Davis-Bacon prevailing wages be paid.
The Supreme Court also found that there appeared to be no dispute that the workers were entitled to claim Davis-Bacon prevailing wages. And, the Supreme Court found that the school district, as a recipient of federal funds, was subject to the Davis-Bacon Act prevailing wage provisions and that its contract with the federal funding agency required the school district to ensure that Davis-Bacon Act wage requirements were included in construction contracts so as to bind general contractors and subcontractors. Because the district failed to include such provisions in its construction contracts, the workers lost their federal Davis-Bacon Act remedies.
The Supreme Court noted that the workers asserted the school district was negligent and breached its funding contract in failing to include Davis-Bacon wage requirements, costing them Davis-Bacon rights and remedies. The Supreme Court held that these claims were matters of state law. Accordingly, the Supreme Court held that the District Court had subject matter jurisdiction to decide the case.
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-369-7229 or at pwberning@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2005 Thelen Reid Brown Raysman & Steiner LLP
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