No. 01-559
IN THE SUPREME COURT OF THE STATE OF MONTANA
2004 MT 10
LAMOYNE HERRMANN and
SHERMAN TALKS DIFFERENT,
Plaintiffs and Appellants,
v.
WOLF POINT SCHOOL DISTRICT,
Defendant and Respondent.
APPEAL FROM: District Court of the Fifteenth Judicial District,
In and for the County of Roosevelt, Cause No. DV-00-38
The Honorable John C. McKeon, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Lawrence A. Anderson, Attorney at Law, Great Falls, Montana
For Respondent:
Robert J. Savage, Savage Law Firm, Sidney, Montana
Submitted on Briefs: March 13, 2003
Decided: January 27, 2004
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 LaMoyne Herrmann and Sherman Talks Different (Workers) sued the Wolf Point
School District (WPSD or School District) for negligence and breach of contract for failing
to include in construction project-related documents provisions requiring payment of
prevailing wages under the Davis-Bacon Act (DBA or the Act). The School District moved
to dismiss on the grounds that the District Court lacked subject matter jurisdiction. The
Fifteenth Judicial District Court of Roosevelt County dismissed the Complaint. Workers
appeal. We reverse and remand.
ISSUE
¶2 Restated, the sole issue on appeal is whether the District Court erred in granting
WPSD’s Motion to Dismiss the Workers’ Complaint.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 The WPSD and the Wolf Point High School (High School) embarked on a project to
construct an addition to the High School, which is located on the Fort Peck Indian
Reservation. The project was financed by WPSD funds and Federal Impact Aid funds, with
the majority of the funds coming from the federal program. The WPSD hired Braden-Pehlke
Construction Company as the principal contractor and Hulsing and Associates as the
architect for the project. One of these entities hired the House of Color, Inc., a North Dakota
flooring and tile contractor licensed to do business in Montana, as a subcontractor on the
project. Workers were employees of the House of Color.
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¶4 At some time prior to December 1, 1999, the Workers contacted the Montana
Department of Labor and Industry (DOLI) apparently complaining that they were not being
paid DBA prevailing wages. The Montana DOLI compliance specialist responded with a
letter saying that it “appeared” that the High School project was subject to the Federal DBA
rather than Montana’s “Little DBA,” and suggested that Workers contact the U.S.
Department of Labor (DOL) with any questions they had regarding the DBA requirements.
The letter’s author explained that she had spoken with the Superintendent of the WPSD who
confirmed the use of Federal Impact Aid funds but who could not state, with certainty, what
wage provisions were inserted in the contracts. The author further explained that, upon the
recommendation of the Superintendent, she had contacted Mr. Hulsing, the architect, who
stated that because his firm “was never able to obtain a definitive ruling as to whether the
federal rates were to be included,” they were not. There is no evidence in the record that
Workers contacted the U.S. DOL.
¶5 In March 2000, Workers filed a “Little DBA” claim in the Fifteenth Judicial District,
Roosevelt County. On May 2, 2000, they voluntarily dismissed their Complaint without
prejudice. Workers subsequently filed the case currently on appeal on June 9, 2000, alleging
that the WPSD, as owner of the federally-funded project, negligently failed to incorporate
DBA prevailing wages into either the bid specifications or the contracts between it and its
contractors (construction contracts). The complaint also alleged that WPSD failed to monitor
the contractor and subcontractor(s) to assure that they paid their laborers prevailing wages.
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The Workers sought recovery of an amount equal to retroactive DBA wages and penalties
under § 39-3-206, MCA, and attorney fees under § 39-3-214, MCA.
¶6 The WPSD filed a Motion to Dismiss for 1) lack of subject matter jurisdiction,
arguing the DBA did not give Workers a private right of action; 2) lack of personal
jurisdiction over the School District; 3) failure of the Workers to give notice to the contractor
and its surety under the Miller Act; 4) improper defendant; and 5) failure to sustain the
burden of establishing the required elements for a class action suit.
¶7 Workers responded to the Motion by arguing, among other things, that 1) this is not
a DBA claim but a negligence claim; 2) it cannot be a DBA claim because the DBA was not
incorporated into the construction contracts; and 3) Workers have no Miller Act claim
because no entity of the federal government is a party to the construction contract nor owner
of the project, and the contractor was not contractually obligated to pay DBA prevailing
wages, thus precluding Workers from a Miller Act remedy.
¶8 After a hearing on April 24, 2001, the court determined that under State Med. Oxygen
v. Amer. Med. Oxygen (1988), 230 Mont. 456, 750 P.2d 1085, the Workers did not have the
right to bring a private state action against a landowner stemming from the alleged violation
of the federal DBA. The court also concluded that a claim for negligence per se was
inapplicable because the DBA was not intended to regulate owners of public buildings or
public works, and that, therefore, a violation of the DBA by the WPSD would not subject
it to a negligence per se cause of action. Lastly, the District Court held that a common law
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negligence claim could not stand because the “foreseeability” factor was absent. The court
thereafter granted the WPSD’s Motion to Dismiss. The District Court did not address the
Workers’ breach of contract claim. Workers filed a timely appeal.
STANDARD OF REVIEW
¶9 As indicated above, the issue before us on appeal is whether the District Court erred
in granting the WPSD’s Motion to Dismiss. We have held previously that “[m]otions to
dismiss should not be granted unless it appears beyond doubt that the plaintiff can prove no
set of facts in support of his claim which would entitle him to relief.” Favel v. American
Renovation and Constr. Co., 2002 MT 266, ¶ 8, 312 Mont. 285, ¶ 8, 59 P.3d 412, ¶ 8
(citations omitted). “In considering such motions, the complaint is construed in the light
most favorable to the plaintiff and all allegations of fact contained therein are taken as true.
The District Court’s determination that it did not have jurisdiction over this case is a
conclusion of law.” Favel, ¶ 8 (citations omitted). “We review a district court’s conclusions
of law to determine whether the court’s interpretation of the law is correct.” Favel, ¶ 8
(citations omitted).
DISCUSSION
¶10 Once again we are asked to determine whether the District Court has subject matter
jurisdiction to hear and determine workers’ common law claims stemming from alleged
violations of the wage standards established by the Federal Davis-Bacon Act. In Favel, we
exhaustively analyzed and interpreted the DBA as it applied to the facts in that case. It is
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unnecessary to repeat that comprehensive analysis here because the issues decided in Favel
are distinguishable from those presented by the District Court’s Order dismissing the case
before us. Favel may provide relevant guidance, however, as this case progresses after
remand.
¶11 As did the defendant in Favel, the WPSD argued, among other things, that because
the Workers’ claims were based on failure to pay wages established by the DBA, Workers
are limited to Davis-Bacon-prescribed remedies through either a Miller Act claim or other
administrative relief procedures. The WPSD maintained that the District Court did not have
jurisdiction over Workers’ claims because there is no “private right of action” under the
DBA. Moreover, the WPSD submitted that the Workers’ Complaint should be dismissed
for failure to satisfy the four-prong test set out in State Med. Oxygen, 230 Mont. at 460, 750
P.2d at 1087.
¶12 The District Court was unpersuaded by WPSD’s argument that the Workers’ remedy
existed either administratively or in the Miller Act rather than in state court. We are likewise
unpersuaded albeit for different reasons. Unlike in Favel, the construction contracts in this
case did not incorporate reference to the DBA, much less provide for the payment of DBA
wages. Moreover, there was not even a federal contracting party to these contracts. The
remedy provisions of the Davis-Bacon regulations contemplate both the presence of a federal
wage provision and a federal contracting party. 40 U.S.C.S. § 3142(a). Lacking both, the
Workers could invoke no federal regulatory remedy. Given the circumstances, it was
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therefore logical for the Workers to pursue their remedies in state court.
¶13 The District Court recognized that the Montana Constitution and statutory law vests
the district courts with jurisdiction to hear “all civil matters and cases at law and in equity.”
Art. VII, Sec. 4, Mont. Const. Moreover, under § 27-1-202, MCA, an aggrieved party has
the right to recover damages in state courts from persons at fault. The court concluded,
however, that these rights were not without limitations and, relying on State Med. Oxygen,
determined that before the Workers could maintain their private cause of action in state court
for the alleged violation of the federal DBA, the following four-prong test must be satisfied:
1. Does the DBA create a federal right in favor of the plaintiff?
2. Is there any indication in the DBA that Congress intended, either explicitly
or implicitly, to create such a remedy or to deny one?
3. Is it consistent with the underlying purposes of the DBA to imply such a
remedy for the plaintiff?
4. Is the cause of action one traditionally relegated to state law, in an area
basically the concern of the States, so that it would be inappropriate to infer
a cause of action based solely on federal law?
¶14 The District Court determined that the first prong of this test was met and that the
DBA expressly created a right to prevailing wages in favor of the Workers. It then
concluded, however, that the second and third prongs were not met. The court explained that
“[t]here is no indication in the Davis-Bacon Act that Congress intended to create a remedy
against the owner of the public works project. Further, it is not consistent with the
underlying purposes of the legislative scheme of the Davis-Bacon Act to imply such a
remedy.”
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¶15 We disagree with the court’s analysis and conclusion on this issue because it stems
from the court’s mistaken conclusion that the Workers are seeking a remedy under the DBA.
As explained above, no DBA remedy was available to them. Therefore, analysis under
State Med. Oxygen is unnecessary and inappropriate.
¶16 It appears to be undisputed that the Workers were entitled to claim DBA wages. It
is further undisputed that the WPSD, as a federal-fund recipient, was subject to the DBA
wage provisions. 29 C.F.R. § 5.5(a). Lastly, the WPSD does not dispute that it was
contractually obligated by its contract with the federal funding agency (the funding contract)
to assure that DBA wage provisions would be included in its construction contracts with
contractors and subcontractors.1 WPSD failed, however, to incorporate any reference to
DBA wages into its bid specifications or the ensuing construction contracts. It is this failure
that resulted in a limitation on Workers’ remedies. Thus, the fact that their Complaint stems
from non-payment of DBA wages does not, and indeed cannot under the facts here, convert
the Workers’ claims to administrative or Miller Act causes of action.
¶17 The Workers maintain that the WPSD, as a recipient of federal funds, had a statutory
and contractual duty to incorporate the DBA wage provisions into its construction contracts
and that its failure to do so constituted negligence and breach of contract under state law.
They assert that as a result of the WPSD’s negligence and breach, the contractors and
subcontractors were not required to pay DBA wages and, therefore, did not. Moreover, they
1
Unfortunately, the funding contract was neither entered into evidence nor reviewed by
the District Court prior to its dismissal of the Workers’ Complaint.
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argue that as a result of the WPSD’s negligence and breach, the Workers have no remedy
under the DBA and may only seek relief under state law. For the reasons set forth above,
we agree.
¶18 In addition to analyzing the Workers’ Complaint under State Med. Oxygen, the
District Court also performed a common law negligence and negligence per se analysis. The
court recited the four essential elements of a negligence claim: 1) existence of a duty;
2) breach of the duty; 3) causation; and 4) damages. The court then concluded that
“foreseeability” as an element of “duty” was lacking and without it, there was no duty, and
thus, no negligence. The District Court explained that the WPSD “could not have foreseen
any damages to [Workers]. Under the Davis-Bacon Act, [the WPSD] could reasonably
expect any wage claim would be covered by funds withheld by the Comptroller General or
through the contractor’s surety bond.” However, the Workers had no DBA remedies
precisely because the WPSD failed to perform its legal duty as recipient of federal funds,
i.e., it failed to take the necessary steps to ensure that its contracts required the payment of
prevailing wages to its laborers. Thus, the underpinning of the District Court’s foreseeability
analysis, premised as it was on the Worker’s ostensible rights to pursue DBA remedies, was
flawed. For the same reason, the court’s analysis of the Workers’ negligence per se claims--
and its’ dismissal of those claims--was flawed as well.
¶19 Lastly, Workers also stated a claim for breach of contract, presumably under a third
party beneficiary theory. Workers claim that the WPSD breached its funding contract by
failing to contractually obligate contractors and subcontractors to pay prevailing wages. The
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District Court did not address this claim in its Order dismissing the case. Moreover, as
indicated above, the District Court dismissed this case under Rule 12, M.R.Civ.P., before
a substantive record could be developed. As noted above, the funding contract was not even
in the record presented to this Court. As a result, we cannot determine the parameters of
WPSD’s contractual obligation under its funding contract to include DBA wages in its
construction contracts, whether it breached this contract, and/or whether it was negligent in
failing to perform its obligations as a recipient of federal funds. These determinations must
be made following development of the record upon remand.
¶20 At the time the District Court issued its Order in this case, we had not yet issued our
ruling in Favel. Upon remand, the District Court and the parties will have the benefit of
Favel and any guidance it may provide.
¶21 Construing the Workers’ Complaint in their favor and based upon our interpretation
of their claims, we conclude the allegations contained in the Complaint are sufficient to
survive the WPSD’s request for dismissal and to vest the District Court with subject matter
jurisdiction.
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CONCLUSION
¶22 We hold that the District Court incorrectly concluded that it lacked subject matter
jurisdiction over the Workers’ Complaint. Therefore, we reverse and remand to allow the
Workers to proceed with their negligence and breach of contract action against the WPSD.
/S/ PATRICIA O. COTTER
We Concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
/S/ JIM REGNIER
/S/ JIM RICE
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