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Star Service Corp. v. ABM Janitorial Services-Northeast, Inc.

United States District Court, D. Massachusetts

March 27, 2017

STAR SERVICE CORP., Plaintiff,
v.
ABM JANITORIAL SERVICES-NORTHEAST, INC., Defendant.

          MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          Judith Gail Dein United States Magistrate Judge

         I. INTRODUCTION

         In December 2010, the defendant, ABM Janitorial Services - Northeast, Inc. (“ABM”), entered into an agreement with the Massachusetts Convention Center Authority (“MCCA”) to provide janitorial and cleaning services for the Boston Convention & Exhibition Center and the Hynes Convention Center. ABM, in turn, entered into a Subcontract Agreement (the “Agreement”) with the plaintiff, Star Service Corporation (“Star”), to provide the janitorial services at these sites. As part of the parties' arrangement, Star also agreed to be bound by ABM's contract with SEIU, Local 615, the Union that represented employees performing janitorial and cleaning services at MCCA sites.

         While Star was performing the services called for under the Agreement, the Massachusetts Department of Labor determined that Star was paying its employees at the Convention Centers less than the prevailing wage for state cleaning contracts. While Star did not dispute that it was not paying the prevailing wage, it argued that it was paying its employees in accordance with the contract with the Union. A dispute arose between Star and ABM as to whether Star's failure to pay the prevailing rate constituted a breach of the Agreement. In addition, ABM claimed that Star had wrongfully failed to carry workers' compensation insurance, as a result of which it had to pay an injured employee's claim, and that an audit conducted by ABM revealed that Star had billed for work that had not been performed. ABM then terminated the Agreement “for cause, ” and withheld in excess of $318, 000.00 due to Star under the Agreement. Star brought suit against ABM for the amounts withheld and other damages, and ABM responded by asserting various counterclaims against Star.

         This matter is before the court on “Defendant ABM Janitorial Service-Northeast, Inc.'s Motion for Summary Judgment.” (Docket No. 38). By this motion, ABM is seeking judgment in its favor on all of Star's claims, as well as on its own counterclaims. Star has opposed the motion on the grounds that material facts are in dispute.

         For all the reasons detailed herein, ABM's Motion for Summary Judgment (Docket No. 38) is ALLOWED IN PART and DENIED IN PART as follows:

         As to the Complaint:

         Count I - Breach of Contract: Allowed as to the claims based on Star's failure to maintain workers' compensation insurance, and ABM's claim that Star overbilled ABM; denied as to the claim that Star breached the Agreement by failing to comply with the prevailing wage law.

         Counts II-V: Allowed.

         As to ABM's Counterclaim:

         Count I - Breach of Contract; Count IV - Indemnity: Allowed as to the claims based on Star's failure to maintain workers' compensation insurance, and ABM's claim that Star overbilled ABM; denied as to the claim that Star breached the Agreement by failing to comply with the prevailing wage law.

         Counts II, III & V: Denied.

         II. STATEMENT OF FACTS[1]

         ABM is a California corporation with a principal place of business in Texas. DF ¶ 2. It provides a variety of services, including janitorial and cleaning services, at various facilities. Id. ¶ 3. In December 2010, ABM entered into an agreement with MCCA to provide janitorial and cleaning services for the Boston and Hynes Convention Centers. Id. ¶ 4. That agreement provides for the payment of specified hourly rates for certain employees, including operations supervisors, utility workers and cleaners. ABM Ex. A ¶ 3.2. ABM was obligated to pay “not less than the wage rates” specified in the agreement, but could pay higher wages if it saw fit to do so. Id. ¶ 3.5.

         ABM, in turn, entered into the Subcontract Agreement with Star in December 2010. DF ¶ 5. Star is a Massachusetts corporation, with a principal place of business in East Boston, Massachusetts, and had been working at the Boston and Hynes Convention Centers before ABM was retained. Id. ¶¶ 1, 5. The parties agree that ABM retained Star's services in order to satisfy the MCCA's minority-owned business contracting requirements. Id. ¶ 5. Pursuant to the Agreement, Star consented to be bound by the terms of the Agreement as well as the specifics of the contract between ABM and MCCA. Id. ¶ 15; ABM Ex. B (Agreement) ¶ 1(a). In addition, Star agreed to be bound by ABM's contract with the Union (the “Union Contract”), “which provided additional terms governing Star's relationship with its workers” at the Convention Centers. DF ¶ 16. Star provided services beginning at the Hynes on January 1, 2011, and at the Boston Convention Center on January 8, 2011, and ending at both places on November 29, 2013. Id. ¶ 26. ABM terminated Star's services “for cause” by letter dated December 2, 2013. DF ¶ 74; ABM Ex. W. ABM withheld $318, 791.91 from amounts allegedly due to Star under the Agreement. DF ¶ 71.

         The Obligation To Pay Wages

          Article VI of the Union Contract, entitled “Wages, ” provides that “Wages, during the term of this Agreement, shall be paid as set forth in ‘Appendix A', attached hereto and made part of this Agreement.” ABM Ex. C (Union Contract) Article VI. Appendix A lists what appears to be an hourly rate for employees in “Category A, ” “Category B & C, ” and “Category D.” Id. Appendix A. These categories are defined in the Union Contract as follows:

Category A - Regularly scheduled employees of over 29 hours
Category B - Regularly scheduled employees of between 16 and 29 hours, inclusive
Category C - Regularly scheduled employees of under 16 hours
Category D - Daily cash employees

Id. Article IV.

         In addition, for employees who fell within Categories A-C under the Union Contract, Star was obligated to make certain payments to the Boston Building Service Employees Trust Fund and the Massachusetts Service Employees Pension Fund (the “Funds”), and was then able to take a credit for such payments. See id. Articles XIV & XV; DF ¶ 21; PR ¶ 21. These payments are included in the determination whether the prevailing wage is being paid. DF ¶¶ 49-50.

         Star contends that in order to fulfill its contractual obligations with ABM, it was obligated to pay workers at the Convention Centers “in accordance with the wage sched- ules set forth in Article [VI] (Wages) of the Agreement between ABM and SEIU, ” including Appendix A thereto. PR ¶ 17. Star also argues that it complied with its obligations under the Union Contract.[2] Therefore, according to Star, it does not matter if it paid the prevailing wage rate since it satisfied its contractual obligations with ABM by satisfying its obligations under the Union Contract. ABM, on the other hand, argues that for purposes of this motion for summary judgment, it does not matter whether Star met its obligations under the Union Contract because it had an independent obligation under its Agreement with ABM to pay its workers “the state prevailing wage rate, which is required under M.G.L. c. 149, § 27F, the Massachusetts Prevailing Wage Law for state cleaning contracts (the ‘PWL').” DF ¶ 17. In support of its position, ABM relies on paragraph 4 of the Agreement. That paragraph provides as follows:

4. COMPLIANCE WITH APPLICABLE LAWS. Contractor [ABM] is an equal employment opportunity and affirmative action employer. Contractor does not discriminate in employment of persons or awarding of subcontracts based on an individual's race, sex, age, religion, national origin, sexual orientation, gender identity, veteran or disabled status. Subcontractor [Star] affirms that it is an equal employment opportunity employer and affirms that it does not discriminate against any person based on age, race, sex, color, religion, national origin, sexual orientation, gender identity, veteran or disabled status. Subcontractor hereby acknowledges and affirms its obligation to comply with all federal, state and local laws, regulations and ordinances governing labor and employment of its employees and all other matters related to the performance of the Services under this Agreement including but not limited to Executive Order 11246, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Rehabilitation Act of 1973, 41 CFR 60-741, the Americans with Disabilities Act, the Vietnam Era Veterans Readjustment Assistance Act of 1974, 41 CFR 60-25, and Executive Order 11625 (Minority Business Enterprise) together with all amendments thereto, the Immigration Reform and Control Act of 1986 (IRCA), the Williams-Steiger Occupational Safety and Health Act of 1970, the federal Fair Labor Standards Act, state and local wage and hour laws, and all laws, rules and regulations regarding the filing of reports and payment of social security, withholding and income taxes. Subcontractor shall, upon request, provide express certification and evidence of compliance with such laws and that all required filings and governmental payments have been made.

ABM Ex. B ¶ 4 (emphasis added). Star admits that it paid its employees less than the prevailing wage under the prevailing wage law. PR ¶ 40.

         The Commonwealth of Massachusetts, Department of Labor and Workforce Development, Department of Labor Standards (“DLS”) is responsible for making determinations about whether contracts for cleaning of state buildings are covered by the prevailing wage law. DF ¶ 18. If so, DLS issues prevailing wage rates for cleaners, janitors, and porters. Id. It appears that in September 2010, DLS issued prevailing wage rates for cleaners, janitors and porters at the Boston and Hynes Convention Centers. See ABM Ex. C-1. Star denies that it knew about “the rates and method by which PWL applied to the work covered by the agreement between SEIU and ABM for work performed at the” Convention Centers. PR ¶ 20. ABM has offered no support for its assertion that Star knew about these rates. See Gallo Decl. ¶¶ 8, 11; DF ¶ 20.

         The Attorney General's Investigation

          In contradiction to Star's contention that it complied with its obligations under the Union Contract, by no later than March 2013, the Funds were asserting that Star was not meeting its obligations under the Union Contract to pay benefit contributions. DF ¶ 45. The Massachusetts Attorney General notified ABM that it had investigated a complaint concerning work at the Convention Centers, and was considering an enforcement action against Star, under which it would seek to hold ABM jointly liable for Star's failure to pay the minimum prevailing wage under the prevailing wage law. Id. ¶ 46. The Attorney General also informed ABM that the Massachusetts Division of Unemployment Assistance had placed a lien on Star's payroll in the amount of $400, 000.00. Id. ¶ 47.[3]

         On May 9, 2014, the Attorney General informed ABM that it had determined that from March 2012 through September 2013, Star had reported in excess of $959, 000 in deductions from 160 workers for health, welfare and pension fund contributions that were never made. Id. ¶ 49. Since these contributions are relevant to whether the prevailing wage was paid, the Attorney General also informed ABM that as a result of Star's actions, Star had failed to pay its employees the required minimum prevailing wage. Id. ¶ 50. In addition, ABM was informed that the Attorney General's Office intended to take enforce-ment action pursuant to Mass. Gen. Laws ch. 149, § 27C, under which it would seek to hold both Star and ABM jointly liable for approximately $959, 000 due to Star's employees. Id. ¶ 51.

         On September 5, 2014, ABM entered into a settlement with the Attorney General. Id. ¶ 52. As detailed therein,

E. In or around August of 2011, the Attorney General received complaints from the SEIU Local 615 (the “Union”), the exclusive bargaining agent for employees performing janitorial and related services at the MCCA sites, that Star had failed to pay its employees the minimum state prevailing wage, by improperly taking credit for deductions from the employees' pay for contributions to the employees' pension fund and for health and welfare plans.
F. The Attorney General, in response to this complaint, undertook an investigation through which the Attorney General concluded that, at relevant times between January 2011 and December 2013 (the relevant time period), Star failed to pay some or all of its employees the required minimum prevailing wage rate for cleaning services at the MCCA pursuant to Mass. Gen. L. c. 149, §§ 27H and 150 and it submitted claims to ABM for payment for services provided at the [Boston Convention & Exhibition Center]. Star made no payments to the relevant pension fund, and insufficient payment to the health and welfare funds, and it did not provide the minimum prevailing wage payments directly to its employees.

ABM Ex. G. As part of the settlement, ABM agreed to pay $300, 000.00, to be distributed only to Star employees and the Massachusetts Service Employees Pension Fund. Id. at ¶ 1; DF ¶ 52. ABM made the payment in a timely manner on October 1, 2014. DF ¶ 53.

         The Attorney General then pursued an action against Star for failing to pay the appropriate prevailing wage at the Convention Centers. Id. ¶ 54; ABM Ex. I. As a result of the $300, 000 settlement payment made by ABM, the Attorney General reduced the total amount Star was ordered to pay as restitution from approximately $959, 000.00 to $659, 899.64. DF ¶ 55. Star was also ordered to pay a penalty, for a total of $758, 884.64.

         Id. ¶ 54. There is nothing in the record to indicate how the amounts due were calculated, or whether Star had submitted invoices to, and been reimbursed by, ABM for these amounts during the normal course of their business relationship. See ABM Ex. I.

         Star appealed the Attorney General's citation to the Commonwealth of Massachu-setts Division of Administrative Law Appeals (“DALA”) on the grounds that it was “excused from paying the prevailing wage because [Star was] required to pay the wage set in the collective bargaining agreement, which was a lower rate than the prevailing wage.” DF ¶ 56; ABM Ex. J at 6. The Administrative Magistrate affirmed the Attorney General's citation, and rejected Star's argument. Id.[4] Thus, DALA affirmed the Attorney General's finding that Star had failed to pay its 160 workers the prevailing wage after taking deductions for health, welfare and pension fund contributions that it never made. DF ¶ 57. Star did not appeal the DALA decision to the Massachusetts Superior Court, and the time to do so has expired. Id. ¶ 59.

         ABM contends that Star must indemnify it for the $300, 000.00 it paid to the Attorney General's Office, plus the attorneys' fees it incurred in resolving the Attorney General's dispute. In so arguing, ABM relies on paragraph 18 of the Agreement, which provides in relevant part as follows:

18. INDEMNIFICATION. To the fullest extent permitted by law, Subcontractor [Star] shall, at its sole cost and expense, indemnify, defend and hold harmless Contractor [ABM], ... from and against any and all claims, demands, losses, liability, lawsuits, liens and judgments, including all attorneys' fees, costs and expenses (collectively “Claims”) which arise out of, are alleged to arise out of or result, in whole or in part, directly or indirectly, from or in connection with ... (iv) Subcontractor's relationship with its employees or agents (including but not limited to a failure to comply with paragraph 4 hereof); (v) any act or omission by Subcontractor, its employees, agents or sub-subcontractors; (vi) any Claims for which any of the Indemnitees and Subcontractor may be jointly or severally liable ....

ABM Ex. B ΒΆ 18. Star disputes that it is obligated to indemnify ABM for wages that ABM independently owed to the employees, especially since Star had allegedly complied with the terms of the Union Contract. As detailed below, this court finds that there are disputed ...


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