Supplemental Conditions

City of Philadelphia Slapped for Unconstitutional Behavior

Posted in Construction Law

Sadly, the City that gave birth to the Constitution repeatedly runs rough shot over the liberties it affords individuals and businesses.  In the latest rebuke to the City of Philadelphia’s malfeasance towards the Constitution, the United States District Court for the Eastern District of Pennsylvania, has ruled that the City’s publicly owned gas utility, Philadelphia Gas Works, violated landlords’ due process rights by slapping liens against properties for unpaid gas service debts incurred by tenants.

In a Memorandum decision dated March 17, 2016, Judge Curtis Joyner ruled that PGW’s process of filing liens against residential and commercial properties did not afford landlords adequate process to challenge the liens before the lien was filed.  As Judge Joyner rightly pointed out, it is well settled that before the government can deprive an individual or business of property, it must afford an adequate opportunity for an individual or business to challenge the proposed property deprivation.  Simply put, the Court found that PGW had not done this when it placed liens on landlord’s properties.

In the past few years, the Eastern District has been a staunch defender of the Constitution from City’s assaults on it. The decision striking down PGW’s unconstitutional lien scheme follows several similar cases involving the City of Philadelphia, including:

  • Bullard v. City of Philadelphia, 847 F.Supp. 711 (E.D. Pa. 2012).  In a case handled by my firm, the Eastern District granted summary judgment to a real estate developer whose property was demolished without affording the developer to contest the decision to demolish the property.  The Court ruled, like in the PGW case, that the City had violated the developer’s due process rights.
  • Sourovelis v. City of Philadelphia, 103 F.Supp.3d 694 (E.D. Pa. 2015).  In this case the Eastern District allowed to proceed a claim that the Philadelphia District Attorneys Office’s civil asset forfeiture program violated the due process rights of individual property owners.
  • Cradle of Liberty Council, Inc. v. City of Philadelphia.  In this highly publicized case, a federal jury returned a unanimous verdict against the City for violating the freedom of association rights of the Boy Scouts.  The City was required to pay the attorneys fees that the Boy Scouts incurred and also damages to the Boy Scouts.

If violating the Constitution is not bad enough, the taxpayers of the City of Philadelphia (which is already broke) are left on the hook to pay the attorneys fees that the City incurs in defending these actions and in paying settlements. Maybe the City will eventually learn that following the Constitution is free.

Is the Philadelphia Proposed Affordable Housing Impact Fee Constitional

Posted in Construction Law

WHYY is reporting that affordable housing advocated in the City of Philadelphia are demanding that City Council impose an impact fee of $4.80 a square foot on all new market rate developments and rentals that would go towards funding the City’s Housing Trust Fund.  The story reports that City Council members and Mayor Kenney have committed to considering the impact fee for expanding the Housing Trust Fund.

If City Council were actually foolish enough to pass such legislation, it would hopefully face a constitutional challenge.  Under established Supreme Court precedent, the demanded impact fee there has to be a nexus between the new construction and affordable housing.  In other words, the City would have to show that new construction is causing a decrease in affordable housing options in the City.  Moreover, the demanded fee would have to bear some proportionality to the impact it seeks to mitigate.

While leftist politicians and affordable housing advocates frequently complain that new developing is pricing long time residents out of certain neighborhoods,  like all straw man arguments, there is little to no empirical evidence to support such a claim.  Furthermore, the story does not mention how the affordable housing group arrived at the $4.80 figure it asks Council to impose and whether it bears any proportionality to the alleged impact on affordable housing that new development causes.

Councilman Johnson Tries to Shut Down Skynet

Posted in Construction Law

terminatorIn the Terminator movie franchise, the government develops a software system called Skynet.  The purpose of Skynet is to prevent human error in starting a nuclear holocaust. Instead, Skynet becomes self-aware and when programmers try to shut it down it perceives the human race a threat and tries to exterminate us and then it creates a bad-ass cyborg that looks like Arnold Schwarzenegger to help do that.

Registered Community Organization (RCO’s) are like Skynet less cyborgs and actual intelligence (artificial or otherwise). Like Skynet, the government (Philly City Council) created RCO’s for altruistic purposes.  However, rather than preventing nuclear war, RCO’s were created to prevent real estate developers from developing projects inconsistent with the character of the surrounding neighborhood (which, ironically, many RCO’s often treat like a nuclear apocalypse). Just like Skynet, the originally well intended RCO’s have taken on a life of their own and often terminate many job creating construction projects.

The out of control nature of RCO’s was recently on full display at a community meeting in Point Breeze where members of the RCO hurled anti-Semitic remarks towards developers proposing a project in the neighborhood.  In response, Councilman Kenyatta Johnson, whose district covers Point Breeze, contacted the Human Relations Commission (which is a public body that handles complaints related to discrimination in housing and employment but who the Councilman — perhaps not surprisingly — thinks are the thought and speech police).  He also said he would be introducing a bill establishing an RCO “code of conduct.”   

Councilman Johnson’s decision to reign in RCO’s is ironic because he has been a chief antagonistic in stoking the anti-gentrification flames through the RCO’s.  Only now, those same RCO’s have gotten out of control and threaten to kill their creators.  In fact, he recently joined with the very RCO he is now chastising, Concerned Citizens of Point Breeze, in appealing a project located in Point Breeze.  Essentially, he wants to kill the monster he has created.

Irony aside, real estate developers should cheer Councilman Johnson’s bill, however probably not for the reasons he thinks.  Apparently, the Councilman has now gone on record that RCO’s “have an official relationship with the City of Philadelphia, so we must ensure that they operate with a level of decency and order.”  This is good to know because as state actors or agents of the government both the United States and Pennsylvania Constitutions would apply to them and so do fun things like procedural and substantive due process rights (to name a few).  (I note that if the Councilman reported a group for making anti-Semitic remarks to a Commonwealth agency, I doubt he spends much time thinking about the Constitution).  When those two minor documents apply, RCO’s can then be sued and held liable for violating the rights contained in those documents.

Alas, the Councilman’s bill might not get too far.  The problem – ironically – the pesky Constitution.  The same document that provides for procedural due process rights also prevents the government from regulating the speech related conduct of organizations like RCO’s.  Unless of course Councilman Johnson’s bill wants to clarify that RCO’s are indeed official government organizations.  In that case, regulate away.

Is Local 98’s Drone Legal?

Posted in Unions

Phillymag.com has a story up about IBEW Local 98’s use of a drone to record footage of a picket line at a Philadelphia construction project.  Local 98 even posted a nifty video of its drone footage to youtube, which is embedded below, complete with cheesy music.

Local 98 says that the drone will be used to rebut false claims by construction site owners about picket line tomfoolery.  I wonder if it will also videotape the many immigrant workers that are performing work on these jobs who are here because of immigration policies championed by politicians that Local 98’s union dues go to support. Local 98’s union members exclusively fund the campaigns of left wing politicians that favor open borders.  Many of the workers that Local 98 has an issue with are beneficiaries of this open border policy.  So, Local 98 is supporting its own demise.  However, that is the logic of Big Labor.  But, I digress.

The bigger issue is whether Local 98, or any other union with drone fantasies, is violating the National Labor Relations Act by using a drone.  Under the National Labor Relations Act,  workers have a right not to be a member of a labor union.  (Indeed, many immigrant construction workers come from former Marxist and Communist countries and want nothing to do with organized labor.)  The National Labor Relations Board has held that photographing and recording non-union employees can violate the Act when “coupled with abusive remarks or other conduct having a reasonable tendency to instill fear of retribution in the minds of the targeted employees.”  Of course, that never happens when a union pickets or protest a project in Philadelphia.

Construction Company Executives Indicted for Running Double Breasted Operation

Posted in Unions

The United States Attorney for the District of Massachusetts announced that it indicted two construction company executives for running what the Department of Justice calls  “a fraudulent “double breasted shop” scheme.”   The DOJ charged Christopher Thompson and Kimberly Thompson on 18 counts of mail fraud, one count of benefit fund embezzlement, and 18 counts of filing false documents with an ERISA fund.  A copy of the indictment can be found here.

The facts set forth in the indictment are not ground breaking.  One company, Air Quality Experts, Inc., was an asbestos abatement contractor established in 1987.  Air Quality was not a signatory to any collective bargaining agreement.  In 2005, the owners of Air Quality set up the creatively named AQE, Inc., which signed a collective bargaining agreement with the Massachusetts Laborers District Council.  According to the indictment, AQE operated out of the same office, used the same equipment, operated under the same management, and, critically, used the same employees, as Air Quality.  However, AQE did not submit fringe benefits for the members of the Laborers Union for the work they performed for the non-signatory entity, Air Quality.

While the facts of this indictment are not groundbreaking, the fact that the Department of Justice indicted the owners of the improperly established and maintained double breasted operation is tremendous.  Normally, an improperly established and maintained double breasted operation would result in a civil lawsuit by a union seeking to recover fringe benefits owed for work performed by the non-union entity.  While the civil liability in those cases can be significant, it never meant jail time for the owners of the double breasted firms.  Therefore, this case significantly ups the ante for firms that have double breasted operations, but who fail to properly maintain them.

There is nothing wrong or illegal about a double breasted operation per se.  In fact, both firms can even have common ownership.  However, they never can have common employees, common equipment, and common management.  That is what apparently did in the owners of AQE and Air Quality.

SOCIETY HILL PLAYHOUSE OF THE ABSURD

Posted in Construction Law

monorail-425x272The saga involving Toll Brothers’ Society Hill Playhouse project shows that something is rotten in the state of Philadelphia’s development process.  This rottenness has resulted in a project that is ultimately worse practically and aesthetically for the neighborhood.  Even worse, apparently the neighborhood is fine with this.

This story begins with Toll Brothers’ plans to demolish the Society Hill Playhouse and replace it with apartments.  The current zoning of the property allows Toll Brothers to build a four story multifamily building by right.  This means Toll Brothers does not have to request a variance from the Zoning Board of Adjustment to construct a four story building.  But, more on that later.  The economics of a four story building mean that it cannot have a dedicated on-site parking garage.  So, Toll Brothers sought to build a five story structure with indoor parking.  However, a five story structure would require a variance.  The process to request a variance is where the absurdity of this story unfolds.

Years ago, Philadelphia established a system that required developers to meet with neighbors to receive input on proposed development.  The reason for this was two-fold.  First, the City’s long outdated zoning code required almost all modern projects to obtain a zoning variance.  Rather than turning the ZBA hearing into even more of a circus than it already is, officials decided that it would be a good idea for developers to address concerns directly with neighbors before coming before the ZBA for a variance.  Second, in theory, it prevented developers from running rough shot over neighborhoods.  However, the road to hell is paved with good intentions.

A well intentioned process to have developers meet with neighbors about development has spawned a quasi-governmental leviathan known as “registered community organizations.”  RCO’s, as they are known, are the key to obtaining a zoning variance.  Many RCO’s are well-organized and come complete with their own zoning committees and zoning boards.  Many RCO’s require developers to present their projects before these zoning committees before it will support a project.  The problem with RCO’s is that they are beholden to no one and are not required to follow any established procedures.  RCO officials are not elected so they cannot be held accountable at the ballot box.  Moreover, RCO meetings are not required to follow any sort of established procedures.  If you feel you are treated unfairly or unequally before an RCO, too bad.

While the law does not explicitly require the support of a RCO in order to obtain a variance, economics does.  This is because our system allows anyone with an axe to grind to appeal a decision of the ZBA.  So, even if a developer is successful in obtaining a variance for a project from the ZBA, the RCO or any neighbor can file an appeal with the Court of Common Pleas which asks the Court to overturn the ZBA’s decision.  If the RCO is not successful at the trial court level, it can appeal it to the Commonwealth Court and from there the Pennsylvania Supreme Court.  This process can take years and a project is held in limbo while the matter works its way through the system.  Therefore, it is important for a developer to propose a project that the RCO agrees with.  This is where the problem lies.

Toll Brothers presented its five story project that included indoor parking to the Washington Square West RCO.  However, neighbors raised objections to the plan because of the height of the proposed structure.  Toll Brothers tried to work with the neighbors to ally their concerns, however, the neighbors (who are probably opposed to any development in any form)knowing the power they hold still objected.  So, rather than have its proposed five-story project held up on appeal for years, Toll Brothers decided to simply build what it was allowed to do by right.  The absurd mentality of the anti-development luddites is best summed up by this quote from Jared Brey’s story about the project:

“I support the city’s goal of reducing the cars, the congestion and the terrible expense of maintaining the roads and everything that goes with that,” she said. “Full disclosure: we have a parking space. But if we didn’t have a parking space we wouldn’t have a car.”

In other words, it’s ok for me to have parking and a car, but not you, so I will object to your project. (I bet this person also supports laws restricting “carbon emissions” but has Bigfoot sized carbon footprint.)  As a result, 80 new cars will be added to the on street parking in the community, which lies just North of already congested South Street.  Furthermore, the new project does away with a setback and more aesthetically pleasing brick façade cladding.

Ultimately the neighborhood fell victim to the runaway power of RCO’s and neighbors to arbitrarily stop a project they do not agree with for any reason.  Toll Brothers tail is not isolated and the result here will repeat itself unless the process is fixed.

So what can be done?  First, RCO officials must become elected officials who must answer at the ballot box for their decisions.  Second, the City must establish formal written rules of procedure that apply to RCO meetings regarding development project.  Third, the hurdle to appealing a ZBA variance needs to be raised substantially and we need to consider requiring an unsuccessful appellant to pay for a developer’s attorneys fees in defending the appeal.  Only then can some sanity be brought to the way properties are developed in the City.

Court Affirms Injunction Against Mass Picketing …. For Now

Posted in Picketing, Unions

The Pennsylvania Superior Court gave general contractors and non-union real estate developers a early Christmas gift and a bit of positive news going into the New Year in a recent decision that upheld (for the most part) a trial court’s preliminary injunction enjoining labor unions from engaging in mass picketing and gate blocking of a construction site.

In Turner Construction v. Plumbers Local 690 (the case name contains a hyperlink that will take you to a copy of the opinion), the Pennsylvania Superior Court was asked to consider whether a preliminary injunction that prohibited picketing within twenty-five feet of the entrance to a construction site and limited the number of picketers to five was overly broad.  In short, the Superior Court held that the twenty-five feet restriction was a reasonable condition to prevent the picketers from blocking ingress and egress to the site.  However, the Court held that the restriction that limited the number of picketers to five was an unreasonable restriction on the picketer’s First Amendment rights.

The case is important for general contractors using both union and non-union subcontractors and real estate developers for two reasons. First, it reaffirms when a trial court may issue an injunction against a labor union’s picketing activity.  Second, it provides guidance on how far a trial court may go in restricting a union’s picketing.

An abbreviated version of the facts is as follows.  Turner was the general contractor on a project owned by Children’s Hospital of Philadelphia that was being built in Montgomery County.  Turner subcontracted with both union and non-union subcontractors.  However, its plumbing subcontractor was a non-union firm.  Members of Plumbers Local 690 began picketing the site to “protest” the horror of a non-union firm performing work on the project.  One day the Plumbers held a rally at the site which blocked anyone from entering the project, prevented deliveries, erected the ubiquitous inflatable rat, and trespassed onto the project. The local police were called and responded. (However, they did not do much concerning activity that would have landed you or me in jail.)  Turner immediately filed a complaint with the Montgomery County Court of Common Pleas seeking an injunction preventing such activity.  As usually, the union had no defense to its clearly illegal activity and agreed to a stipulated preliminary injunction.  That injunction prohibited picketing within 25 feet of the project’s entrance and limited the Plumbers to five total picketers.

Typically, the Plumbers ignored the court’s injunction.  Then, the Plumbers held a “rally” with two other unions, the Sprinkler Fitters and Insulators.  The rally had over 180 participants.  The 180 participants blocked the project’s entrances and prevented deliveries.  The participants even struck a festive tone and erected a tent with a cooler and food right in front of the entrance (Note: I have noticed that the refreshment tent is a picketing trend.  The coffee tends to be very good and the pretzels fresh.  Also, why not replace the rat with a band?)   The local police and Montgomery Sheriff’s Department were called to intervene but they would not dampen the revelers’ mood and the project ground to a halt.

Thereafter, Turner moved to amend its complaint to include the two unions who participated in the rally and sought a preliminary injunction against them as well. After a hearing on the matter, the trial court entered an injunction against the the Sprinkler Fitters and Insulators unions.  That injunction extended the original injunction to those unions.  In doing so, it limited the total number of picketers from all three unions to 5 (or as the Superior Court expressed 1.66 picketers per union).   The unions appealed.

On appeal, the Superior Court addressed the following issues:

1.  Did the union’s activities amount to a “seizure” under Pennsylvania’s Anti-Injunction Act?

2.  Was the injunction overly broad in violation of Pennsylvania’s Anti-Injunction Act?

Injunctions Under the Pennsylvania Anti-Injunction Act

Under Pennsylvania’s Anti-Injunction Act, courts are prohibited from issuing injunctions enjoining activities arising out of a labor dispute, unless one of the enumerated exceptions applies.  One exception is when a labor union “seizes” an employer’s plant.  Commonwealth Courts have repeatedly held that a seizure occurs when a labor union’s actions block lawful ingress and egress into a project.  Relying on a body of case law, the Superior Court ruled that the unions’ actions amounted to a seizure of the project thus excepting the matter out of Pennsylvania’s Anti-Injunction Act.  Given the well settled law in this area, this part of the Court’s decision was not a surprise.

However, the Court then clarified what is an apparent area of confusion.  It held that when obtaining an injunction against mass picketing that blocks access to a project, the court should apply general equity rules rather than the more stringent rules from an injunction set forth in the Anti-Injunction Act.

Moreover, and perhaps more importantly, the Superior Court held because the Anti-Injunction Act does not apply to mass picketing injunctions, the restrictions of when an injunction can apply listed in Section 206f also do not apply.

The Breadth of the Injunction

The Court then addressed whether the injunction’s prohibition on picketing within twenty five feet of a gate and limitation on the number of picketers unnecessarily impinged on the union’s free speech rights.  First Amendment considerations are always present when seeking to enjoin picketing.  Court’s must balance a party’s right to protest a grievance, albeit through unsavory and annoying means, with a party’s property and personal rights.  Thus, any injunction must be narrowly tailored to achieve the purpose of maintaining order.  As to the distance restriction, the Court held that it was narrowly tailored and reasonably necessary to prevent the unions from blocking access to the project.  However, as to the number of picketers, the Court held that it was overly broad and unnecessary restricted the union’s free speech rights.  The Court did not dissolve the injunction.  Rather, it remanded the case to the trial court to tailor a less restrictive number of picketers to achieve its goals.  The Court does not state the minimum number of picketers necessary to pass the restrictive test.

The Future of the Decision

While this decision is important, it may be short lived.  The unions have already asked the Superior Court to rehear the case, en banc, that means in front of all 9 Judges instead of 3.  If that request is denied or if the en banc panel reaches the same decisions as the 3 judge panel, then the unions will no doubt appeal it to the Pennsylvania Supreme Court.  That is where things get interesting.  This week 3 new justices will be sworn in to the Pennsylvania High Court which will tilt the balance of power on the Court 4-3 in favor of Democrat judges.  The 3 new Justices were heavily supported by organized labor in their election efforts.  What impact, if any, on an appeal of this case will have to be seen, but it cannot be ignored.

The Take Away (for now)

  • Pennsylvania courts can issue injunctions prohibited picketing that blocks entry to a project.
  • Pennsylvania courts can limit the scope and location of the picketing to achieve the goal of maintaining access to the project.
  • Normal equity rules apply in deciding to issue a preliminary injunction enjoining mass picketing at project gates rather than the more restrictive test articulated in the Anti-Injunction Act.

 

Is Philadelphia’s New (and Old) Ban the Box Ordinance Constitutional?

Posted in Construction Law

A twitter follower recently posted an interesting question “How is Philadelphia’s new ‘ban the box’ law constitutional?”  So called “ban the box” laws, prohibit employers from asking job applicants about criminal convictions during the job interview process.  In 2011, Philadelphia passed a “ban the box” law that prohibited private employers from asking applicants about or requiring applicants to disclose any criminal convictions in the application process or during the first job interview.  The law only applied to employers of 10 or more.

Last week, Mayor Nutter signed into law a bill expanding the breadth of Philadelphia’s “ban the box” law.  First, the new law applies to virtually all employers because it applies to any employer of “one or more” employees.  Second, in addition to banning an employer from asking questions about prior convictions during the initial interview, it bans employers from asking about convictions until after a conditional offer of employment is extended.  Moreover, employers must ignore convictions occurring more than seven years ago.  (So, say hello to the rapist in the next cubicle, just don’t ask him about his rape conviction!)  For a complete run down of the new rules, check out the blog post from employment law gurus Littler.

Philadelphia is one of several municipalities and states that have passed “ban the box” ordinances in the last few years.  However, I am not sure any go quite as far as Philadelphia’s new ordinance.  Proponents of these laws claim they are anti-poverty initiatives aimed at bringing felons into the workforce and offering them employment. Opponents believe that these rules are simply the by product of the left wing mindset that refuses to confront uncomfortable truths and refuses the see the world as it is.

But I digress, back to the constitutional question.  Employers have the same First Amendment right to free speech as individuals.  Prohibiting an employer from asking certain questions is a restriction on speech.  Whenever a law seeks to restrict a fundamental constitutional right, like free speech, Courts will apply a strict scrutiny test to the law. Under that test the law will survive only if it is narrowly tailored to advance a compelling state interest.  If the Philadelphia’s ban the box law were ever challenged, it may not survive strict scrutiny because the City would bear the burden of showing that its restrictions actually would advance its interest in gaining employment for criminals. Moreover, the law is not narrowly tailored in that it prohibits a wide range of speech during the application and interview process.

We will have to see if a brave employer challenges Philadelphia’s new law or if Philadelphia will be permitted to treat the Bill of Rights as a menu of rights it can choose from rather than a collection of rights guaranteed to all citizens.

 

House Passes Game Changing Bill for Vet Owned Construction Firms

Posted in Disadvantage Business Enterprises (DBE)

Yesterday, the House of Representatives – by a wide margin-  passed the “Fairness to Veterans for Infrastructure Investment Act of 2015.” Simply put, the Bill amends the DOT DBE regulations to include veteran owned small businesses (VOSB) within the definition of disadvantaged businesses.  If this Bill is signed into law, this means that VOSB’s could be used towards a prime contractors DBE hiring goal on projects receiving any form of DOT funding assistance.

This change in the law is something I have long petitioned for.  This Bill opens the door to lucrative subcontracts to veteran owned businesses.  By creating a new pool of eligible firms, the Bill also helps prime contractors, who often struggle to meet qualified minority and women owned firms, in meeting their DBE subcontractor goals.

While the federal government has long maintained rules giving preference to veteran owned firms, the breadth of those rules was limited mainly to construction projects owned by the Veteran’s Administration.  This Bill gives veteran owned firms preference on any project receiving some form of funding through the DOT.  These project include airports, transmit systems, and highway projects.

UPDATE – City Council Revises Bill Requiring Notification to RCO’s

Posted in Construction Law

In my previous post, I discussed proposed legislation that would require notification and meetings with RCO’s even when a “by-right” permit is issued.  I understand that the Bill has been amended.  (A copy of the revised bill is available here: Bill No. 15064301, As Amended (1).)  Under the amended Bill, developers will NOT be required to meet with an RCO even for by right permits.  However, the Bill still requires L&I to:

“Send by email to all Registered Community Organizations and
all councilmembers a notification of the zoning permit that
includes the date of issuance, the name of the permit holder, and
the address, zip code, and council district of the permitted
property.”

While this is significantly better than requiring a meeting with the RCO, the problem still remains that an RCO or City Councilmember can unnecessarily hold up a by right permit by filing an appeal with the Court of Common Pleas.  Therefore, the Bill remains superfluous.  The RCO and City Councilmember are still involved with the by right permit.  If so what is the purpose of the zoning code?  Does by right mean by right or just by not having to go to the ZBA?