Non-Union Contractor Lacks Standing to Challenge PLA, Court Says

, New York Law Journal

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Justice Egan

ALBANY - The propriety of "project labor agreements" that steer public works projects toward union contractors, and may disadvantage minority and women firms, remains unresolved in the wake of an appellate court ruling that shot down a challenge for lack of standing.

In a unanimous decision Dec. 26, the Appellate Division, Third Department, held that since Lancaster Development Inc. declined to submit what almost certainly would have been a losing bid, it cannot complain about a process that it and amici claim is discriminatory.

"Inasmuch as the harm purportedly suffered by Lancaster was occasioned not by its failure to secure the winning bid for the project but, rather, by its entirely voluntary decision to forgo submitting a bid at all, we are not persuaded that Lancaster has suffered an injury in fact distinct from the public at large," Justice John Egan Jr. (See Profile) wrote for the court.

Lancaster Development v. McDonald, 516540, centers on a huge highway construction project in Orange County that was put to bid by the state Department of Transportation. The bid specification required the bidder to abide by a project labor agreement, or PLA, that would ensure that the bulk of the work went to union contractors.

Initially, Lancaster was awarded the $68 million contract when it offered to reconstruct Exit 122 of Route 17 for $4.5 million less than its nearest competitor. The company promised to subcontract 16 percent of the work to minority-owned and women-owned enterprises. However, since it refused to submit to the PLA, the state withdrew its approval and awarded the contract to another company. That company agreed to give 85 percent of the job to union contractors, with 10 percent spread among minority and women-owned businesses.

Supreme Court Justice Joseph Teresi (See Profile) voided the contract and ordered a rebidding. However, Lancaster declined to bid in the second round and instead opted to challenge the PLA in an Article 78 proceeding. But Supreme Court Justice Henry Zwack of Troy said the company and its co-plaintiffs—Empire State Association of the Associated Builders and Contractors, a trade group of non-union shops, and Lori Florian, president of Alpha Drilling and Blasting, a certified women-owned business—lacked standing.

Last week, the Third Department agreed.

"[N]either the alleged illegality of the PLA itself (an issue we do not address) nor its inclusion in the 2012 bid specifications deprived Lancaster of the opportunity to bid on the project," Egan wrote. "Lancaster may have elected not to submit a bid because, as a nonunion shop, it considered the PLA to be inconsistent with its business model and practices or because the inclusion of the PLA otherwise made the project less attractive, but the PLA itself did not preclude Lancaster from bidding altogether."

Also on the panel that heard arguments Nov. 19 were justices Robert Rose (See Profile), Edward Spain (See Profile) and Elizabeth Garry (See Profile).

The case had attracted amicus briefs from the National Black Chamber of Commerce, the Black Chamber of Commerce of New York City and the Black Chamber of Commerce of Western New York, all urging the court to convey standing and permit litigation on the underlying issue, as well as the New York Building & Construction Trades Council, which took the opposite position (NYLJ, Oct. 22).

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