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District of Columbia v. Department of Labor

United States District Court, District of Columbia

March 31, 2014

DISTRICT OF COLUMBIA, Plaintiff,
v.
DEPARTMENT OF LABOR, et al., Defendants. CCDC OFFICE LLC, Plaintiff,
v.
U.S. DEPARTMENT OF LABOR, et al., Defendants.

MEMORANDUM OPINION

AMY BERMAN JACKSON UNITED STATES DISTRICT JUDGE.

This case poses the question of whether the “CityCenterDC” project, the redevelopment of the old Washington Convention Center site, is a “public work” for purposes of the Davis-Bacon Act, 40 U.S.C. § 3141 et seq. (“DBA” or “the Act”). The District has entered into a series of agreements to lease the land to private developers to construct a mixed-use development that will feature condominium and apartment buildings, two office buildings, a hotel, retail establishments, and some public open spaces. Although the project will sit on a parcel of land owned by the District of Columbia, it will be entirely privately funded, occupied, and maintained for the duration of the developers’ ninety-nine year leases with the city.

Despite the predominantly private nature of this development, the Department of Labor’s Administrative Review Board (“ARB”) has concluded that CityCenterDC constitutes a “public work” within the meaning of the Davis-Bacon Act.[1] This designation requires that workers on the project be paid prevailing wages as determined by the Department of Labor (“DOL” or “the Department”) under the Act.[2] The ARB found the project to be a “public work” because of the District’s involvement in planning and oversight, and in light of the public benefits expected to flow from the development, including employment opportunities for District residents, a set of affordable housing units, new sidewalks, pedestrian friendly areas, and increased lease and tax revenue for the District.

Plaintiffs the District and CCDC Office LLC (“CCDC”) filed this action to challenge the ARB’s determination. They argue that the decision to apply the DBA to CityCenterDC conflicted with the plain language of the DBA, was arbitrary and capricious, and should be set aside under the Administrative Procedure Act (“APA”), 5 U.S.C. § 706. Defendants contend that the term “public work” is ambiguous and that the agency’s decision rested on a permissible interpretation of the Act and the Department’s own regulations. A labor organization and several individual workers have intervened as defendants and brought a counter-claim against plaintiffs, arguing that plaintiffs’ failure to implement the ARB’s ruling constitutes a deprivation of their rights. All parties have moved for summary judgment.

This appears to be a case of first impression. The parties acknowledge that the Act has never before been applied to a development that is entirely privately financed and constructed, and built primarily for private use. It may be true that the District has been more involved in this project than in a typical condominium or hotel construction project, but that is a feature of the size and mixed-use nature of the project and the fact that the District owns the land. When one considers the plain language of the Davis-Bacon Act and the history and purpose of the statute, it becomes clear that Congress did not intend the term “public work” to embrace a large-scale private development like CityCenterDC, which will be neither built nor used by the government or the public. This conclusion is also consistent with the Department’s own administrative decisions interpreting the Act.

At bottom, there are two signature elements of a public works project: public dollars going into the project, and a public facility coming out of the project. CityCenterDC has neither. It is being privately financed by for-profit entities, and it will result in the creation of condominiums, apartments, office space, retail space, and a hotel that will be privately owned and operated. The fact that the project is expected to give rise to incidental public benefits – such as employment opportunities, increased tax revenue, and even a certain amount of open space – does not transform it into a public work; these are the goals of every urban development project. And the fact that the District has imposed certain requirements – even some at the level of particularity of the width of the sidewalks – does not alter the essence of the finished product. The ARB’s reliance on these details ignores the big picture: that the project is not being built by the government, for the government, or for the people the government represents.

The CityCenterDC development may be a laudable and exciting public-private partnership, and it may entail a more comprehensive level of urban planning and cooperation than the ordinary project, but the exercise will result in the creation of an enclave of private facilities. What is being constructed will be no more for the use and benefit of the population of the District than any other condominium or hotel: members of the general public will be welcome to enjoy the surrounding sidewalks, and possibly the lobby, and they can spend their dollars in the nearby shops and restaurants, but at the end of the day, they will not be permitted to go upstairs. CityCenterDC is not a public work of the District of Columbia, and the ARB’s decision to the contrary cannot be sustained.

BACKGROUND

I. The CityCenterDC Development Project

In July 2001, a District-convened task force recommended that the site of the old Washington Convention Center be transformed “into a mixed-use urban neighborhood.” AR 2603. With the approval of the Council of the District of Columbia (“City Council”), the city issued a “Request for Proposals for a Development Partner” (“RFP”) in September 2002, seeking a master developer to undertake the project. Id. The District sought “to identify a potential partner with whom it could collaborate over a protracted period of time to develop the area with a mix of appropriate civic, residential, cultural, retail, and entertainment offerings” and who “shared the same vision as the District” as to the use of the site. AR 2705. The RFP included a document called “Envisioning the Site: A Preliminary Design Guideline.” AR 2603.

After considering the responses to the RFP, the District executed an “Exclusive Rights Agreement and Land Disposition Agreement” (“ERA”) with its chosen master developer, Hines Interests Limited Partnership and Archstone-Smith Operating Trust (“Developers”), in May of 2005.[3] See AR 2603-99 (ERA document). The ERA required Developers to prepare a “master plan” for development of the site. AR 2627. The master plan was to include a “Development Program” specifying the “nature and scope of all uses” of the land, including:

• Common areas designed “to be a one-of-a-kind pedestrian friendly destination with extensive public art, signage, landscaping, street furnishings, fountains, pedestrian lighting and inviting spaces for programmable community events and gatherings, ” as well as “[a] public plaza of approximately one acre.” AR 2629-30. These areas were to feature “the highest quality, above market standard finishes, streetscapes and fountains, ” comparable in quality and expense to “Rockefeller Center, Bethesda Row and Beursplein Promenade in Rotterdam.” AR 2632.
• Rental and for-sale residential units. The District specified the number of each kind of residence and the approximate percentage mix of efficiency, one-bedroom, and two-bedroom units. It also set aside a specific percentage of units as affordable housing. AR 2630.
• Approximately 300, 000 square feet of retail space, which the District had the “sole discretion” to reduce on certain parcels of land. AR 2630-31.
• A “boutique hotel” to be built “[a]t the District’s option.” AR 2631.
• A “Convention Center Headquarters Hotel” to be built “[a]t the District’s option.” Id.
• A central library to be built “[a]t the District’s option.” AR 2632.
• Public parking “of approximately 850 spaces.” Id.

The District retained the right to approve “[a]ny architects, planners, engineers, landscape architects, attorneys and other professionals or consultants that actively and substantially participate in the Master Plan process, ” with the exception of certain “Key Professionals, ”[4] and with the caveat that District approval would not be withheld unreasonably. AR 2633. The ERA also provided that the “Development Agreement [would] address the extent to which Davis-Bacon Act requirements appl[ied] to the construction” of the project. AR 2681.

The City Council approved the ERA on June 7, 2005. AR 1651. As part of that process, it also passed a resolution that day, declaring that the site of the old Washington Convention Center was “no longer required for public purposes.” Ex. 2 to Pl.’s Mot. for Summ. J. [Dkt. # 22-4] (“District’s Mot.”). Thereafter, the District approved Developers’ final “Master Plan.” AR 2112.

In December 2007, the District and Developers entered into an “Amended and Restated Development Agreement and Land Disposition Agreement” (“RDA”), which superseded all previous agreements. AR 2076-2177. Under the RDA, the District reserved the right to:

• Approve in writing certain architects and design professionals not already pre-approved. AR 2128.
• Approve certain design documents, including “Schematic Drawings, ” “Design Development Drawings, ” “[c]onstruction drawings, ” “[b]id documents, ” and “[p]re-approved for-construction Plans and Specifications.” AR 2128-29. The District would also participate in monthly meetings with Developers during the preparation of these documents. AR 2129.
• Approve in writing “Significant Changes to Plans and Specifications or Permits agreements approved by [the] District, ” with the caveat that approval would not be withheld unreasonably.[5] AR 2133.
• Review and approve the choice of general contractors and general construction contracts for the office, residential, common area, and parking elements of the development project, with approval not to be withheld unreasonably. AR 2134.
• Enter and inspect the project site on two business days’ notice during regular business hours, at any time after an uncured “Event of Default” by a Developer party, or in case of emergency. AR 2135.
• Use, at the District’s expense, “a construction manager or other consultant to assist District” in reviewing the construction and development-related materials and with inspections of the development and construction process. AR 2136.
• Receive monthly progress reports from Developers. Id.
• Inspect or audit Developers’ books and records for the ...

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