Supplemental Conditions

Indicted Union Representatives Try Again to Revive Enmons

Posted in Unions

The Boston Globe reports that the Massachusetts AFL-CIO has filed a friend of the court brief seeking to have the indictment of five members of the Teamsters Union in Boston dismissed.  The Teamsters members are facing federal charges that they extorted non-union contractors and owners that employed non-union contractors.  The Massachusetts AFL-CIO is arguing that under the Supreme Court’s 1972 decision in U.S. v. Enmons the Teamsters alleged conduct was in furtherance of a legitimate union objective and, therefore, no illegal.

The move is a Hail Mary for unions.  Under Enmons, unions used to enjoy broad immunity from criminal prosecution for activities that would land anyone else in jail.  However, Federal Courts have repeatedly walked back the breadth of Enmons and recent prosecutions in New York and Pennsylvania show that Enmons does not provide unions protection from extortion claims when they seek to intimidate non-union contractors and real estate developers into giving work to union affiliate firms.

We should expect a decision from the federal court in Boston in a few months.  Hopefully, the court reaches the same result as the courts in New York and Pennsylvania.

Union Contractors Need to Read This

Posted in Unions

Earlier this year, I wrote about the indictment of the owners of a union construction company that was improperly operating a double breasted (a union firm and a related non-union firm) operation.  That indictment alleged that the owners of the union firm failed to pay union members fringe benefits and wages when the union employees worked for the non-union firm.  As I said in that post, it should be concerning that these allegations led to a criminal indictment because usually these types of allegations were dealt with in civil suits brought by the union.

This past week the U.S. Attorneys Office in Chicago announced the indictment of executives of a construction company for, among other things, failing to pay fringe benefits owed to union health, welfare, and pensions funds. This type of wrongdoing was also usually dealt with a civil lawsuit brought by the union health and welfare funds against the contractor that owed the money to the funds.

Union contractors with obligations to health and welfare funds need now need to worry that failing to pay the union funds could result in more than a simple collection action in federal court.  These two cases signal it could mean jail time.

AFFIRMED

Posted in Construction Law

Today, in a precedential opinion, the Third Circuit Court of Appeals, affirmed the District Court’s dismissal of a complaint against my client that alleged that a multi-family building was constructed in violation of the Federal Housing Administration’s (FHA) design and accessibility requirements for disabled persons.  A copy of the Opinion can be found here ( Opinion of 3rd Circuit. ) An adverse decision would have meant that my client could have been exposed to making several million dollars in alterations to its building.

A disabilities rights group filed a complaint against my client in the United States Federal District Court alleging that a multi-family (100+ units) building was constructed in violation of the FHA’s requirements for accessibility by disabled persons.  The project was a multi-million dollar renovation of an old abandoned warehouse into a state of the art apartment building.  The building was original constructed in 1912.  Although FHA and Department of Justice guidelines made clear that the FHA’s requirements did not apply to any building originally constructed before 1988, even if the property was original built and occupied for commercial purposes.  We filed a motion to dismiss the complaint which the District Court granted.  The rights group then appealed.

As the Third Circuit points out in the its opinion, there was no controlling case law on this issue, even though the FHA’s guidelines had existed for nearly 25 years.  The Third Circuit has now filed that void and issued a precedential opinion that says the FHA’s requirements indeed do not apply to building originally constructed before 1988 for any reason and then converted into residential use.

While the Court’s decision likely saved my client significant sums of money, it likely saved apartment developers and other building developers even more.

 

Jury Verdict Obtained in “Landmark” Case Against the City of Philadelphia

Posted in Public Contracts

Yesterday, in a case that attracted wide spread media attention (stories here and here), a jury in federal court ruled that the City of Philadelphia violated my client’s first amendment free speech rights when a Philadelphia City Councilperson blocked the sale of two city owned vacant lots to him in retaliation for my client challenging him for office.  The decision has been declared a landmark decision and the first of its kind.  It is humbling that the jury agreed with my argument and ruled in favor of my client.

The case involved an official custom and practice in Philadelphia known as Councilmanic Prerogative, which requires anyone wishing to acquire land owned by the City of Philadelphia to first obtain permission from the City Councilmember in whose District the property is located.  It then requires the same City Councilmember to introduce legislation approving the sale.  Obviously, this practices gives City Councilmembers a vast amount of power of land sales in their respective district.  If the City Councilmember does like you, you cannot acquire a parcel of land owned by the City.

In my case, my client was the highest bidder for two lots at a public auction for City owned land.  At the time, my client was was in a pitched election campaign against the City Councilmember in whose District the land was located. When it came time for the City Councilmember to introduce legislation approving the sale, the City Councilmember did something he has never done before (nor since) he refused to introduce the legislation.  After a two day trial, the jury agreed that the City Councilmember refused to introduce the legislation in retaliation against my client for engaging in protected political speech.

Some have asked if the jury’s verdict does away with Councilmanic Prerogative.  It does not.  However, it does mean that the City of Philadelphia can be held liable when it is used in an unconstitutional manner.

Of course, not everyone that is thwarted in an attempt to obtain City owned land happens to be a political candidate. But, the breadth of the jury’s verdict is not limited to that.  The First Amendment protects both our right to free speech and not to speak at all.   Although controversial, donating money to a campaign or using money for political purposes is a form of speech.  Conversely, not giving money to a political candidate or cause is also free speech.  In other words, you cannot be treated differently because you chose to remain neutral or disinterested.

Sadly, in the City of Philadelphia, the birth place of freedom, unequal treatment because of political affiliation and support is common place.  Campaign contributors have a better chance of obtaining City owned land from City Councilmembers because the Citycouncilmembers support them.  Under Councilmanic Perogative, if you have no support, you cannot obtain any land.

After yesterday, that is no longer possible.  If a Philadelphia City Councilmember treats a person that is NOT a campaign contributor differently than the way they treat someone that DOES contribute, then they have violated that non-contributor’s First Amendment right not to speak.  And, if they do the City will be liable for damages.

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.