OCTOBER TERM, 2000
Syllabus
LUJAN, LABOR COMMISSIONER OF CALIFORNIA, ET AL. V. G & G
FIRE SPRINKLERS, INC.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
No. 00-152. Argued February 26, 200l-Decided April 17, 2001
The California Labor Code (Code) authorizes the State to order
withholding of payments due a contractor on a public works project
if a subcontractor on the project fails to comply with certain Code
requirements; permits the contractor, in turn, to withhold similar
sums from the subcontractor; and permits the contractor, or his
assignee, to sue the awarding body for alleged breach of the
contract in not making payment to recover the wages or penalties
withheld. After petitioner State Division of Labor Standards
Enforcement (DLSE) determined that respondent G & G Fire
Sprinklers, Inc. (G & G), as a subcontractor on three public
works projects, had violated the Code, it issued notices directing
the awarding bodies on those projects to withhold from the
contractors an amount equal to the wages and penalties forfeited
due to G & G's violations. The awarding bodies withheld payment
from the contractors, who in turn withheld G & G's payment. G
& G filed a 42 U. S. C. § 1983 suit against DLSE and other
state petitioners in the District Court, claiming that the issuance
of the notices without a hearing deprived it of property without
due process in violation of the Fourteenth Amendment. The court
granted G & G summary judgment, declared the relevant Code
sections unconstitutional, and enjoined the State from enforcing
the provisions against G & G. The Ninth Circuit affirmed. This
Court granted certiorari, vacated that judgment, and remanded for
reconsideration in light of its decision in
American Mfrs. Mut.
Ins. Co. v.
Sullivan, 526 U. S. 40, that the
respondents there had no property interest in payment for disputed
medical treatment pending review of the treatment's reasonableness
and necessity, as authorized by state law. On remand, the Ninth
Circuit reinstated its prior judgment and opinion, explaining that
G & G's rights were violated not because it was deprived of
immediate payment, but because the state statutory scheme afforded
no hearing at all.
Held: Because state law affords G & G sufficient
opportunity to pursue its claim for payment under its contracts in
state court, the statutory scheme does not deprive it of due
process. In each of this Court's
190
cases relied upon by the Ninth Circuit, the claimant was denied
a right by virtue of which he was presently entitled either to
exercise ownership dominion over real or personal property, or to
pursue a gainful occupation. See,
e. g., United States v.
James Daniel Good Real Property, 510 U. S. 43, 62. Unlike
those claimants, G & G has not been deprived of any present
entitlement. It has been deprived of payment that it contends it is
owed under a contract, based on the State's determination that it
failed to comply with the contract's terms. That property interest
can be fully protected by an ordinary breach-of-contract suit. If
California makes ordinary judicial process available to G & G
for resolving its contractual dispute, that process is due process.
Here, the Code, by allowing a contractor to assign the right of
suit, provides a means by which a subcontractor may bring a
breach-of-contract suit to recover withheld payments. That damages
may not be awarded until the suit's conclusion does not deprive G
& G of its claim. Even if G & G could not obtain
assignment, it appears that a breach-ofcontract suit against the
contractor remains available under state common law, although final
determination of the question rests in the hands of the California
courts. Pp. 195-199.
204 F.3d
941, reversed.
REHNQUIST, C. J., delivered the opinion for a unanimous
Court.
Thomas S.
Kerrigan argued the cause and filed
briefs for petitioners.
Jeffrey A. Lamken argued the cause for the United States as
amicus curiae urging reversal. With him on the brief were Solicitor
General Waxman, Assistant Attorney General Ogden, Deputy Solicitor
General Kneedler, Mark B. Stern, Jacob M. Lewis, and Daniel L.
Kaplan.
Stephen A. Seideman argued the cause and filed a brief
for respondent. *
*Briefs of
amici curiae urging reversal were filed for
the American Federation of Labor and Congress of Industrial
Organizations by
Jonathan P. Hiatt, James B. Coppess, Scott A.
Kronland, and
Laurence Gold; and for the Port of Oakland
et al. by
David L. Alexander and
Christopher H.
Alonzi.
191
CHIEF JUSTICE REHNQUIST delivered the opinion of the Court.
The California Labor Code (Code or Labor Code) authorizes the
State to order withholding of payments due a contractor on a public
works project if a subcontractor on the project fails to comply
with certain Code requirements. The Code permits the contractor, in
turn, to withhold similar sums from the subcontractor. The Court of
Appeals for the Ninth Circuit held that the relevant Code
provisions violate the Due Process Clause of the Fourteenth
Amendment because the statutory scheme does not afford the
subcontractor a hearing before or after such action is taken. We
granted certiorari, 531 U. S. 924 (2000), and we reverse.
Petitioners are the California Division of Labor Standards
Enforcement (DLSE), the California Department of Industrial
Relations, and several state officials in their official
capacities. Respondent G & G Fire Sprinklers, Inc. (G & G),
is a fire-protection company that installs fire sprinkler systems.
G & G served as a subcontractor on several California public
works projects. "Public works" include construction work done under
contract and paid for in whole or part by public funds. Cal. Lab.
Code Ann. § 1720 (West Supp. 2001). The department, board,
authority, officer, or agent awarding a contract for public work is
called the "awarding body." § 1722 (West 1989). The California
Labor Code requires that contractors and subcontractors on such
projects pay their workers a prevailing wage that is determined by
the State. §§ 1771, 1772, 1773 (West 1989 and Supp. 2001). At the
time relevant here, if workers were not paid the prevailing wage,
the contractor was required to pay each worker the difference
between the prevailing wage and the wages paid, in addition to
forfeiting a penalty to the State. § 1775
192
(West Supp. 2001).1 The awarding body was required to include a
clause in the contract so stipulating.
Ibid.
The Labor Code provides that "[b]efore making payments to the
contractor of money due under a contract for public work, the
awarding body shall withhold and retain therefrom all wages and
penalties which have been forfeited pursuant to any stipulation in
a contract for public work, and the terms of this chapter." § 1727.
If money is withheld from a contractor because of a subcontractor's
failure to comply with the Code's provisions, "[i]t shall be lawful
for [the] contractor to withhold from [the] subcontractor under him
sufficient sums to cover any penalties withheld." § 1729 (West
1989).2
The Labor Code permits the contractor, or his assignee, to bring
suit against the awarding body "on the contract for alleged breach
thereof in not making ... payment" to recover the wages or
penalties withheld. §§ 1731, 1732 (West Supp. 2001). The suit must
be brought within 90 days of completion of the contract and
acceptance of the job. § 1730. Such a suit "is the exclusive remedy
of the contrac-
1 The Code also imposes restrictions on recordkeeping and
working hours, and at the time relevant here, the contractor was
similarly penalized if the contractor or subcontractor failed to
comply with them. Cal. Lab. Code Ann. §§ 1776(a), (b), (g) (West
Supp. 2001),1813 (West 1989). The awarding body was required to
include a clause in the contract so stipulating. §§ 1776(h),
1813.
Sections 1775, 1776, and 1813 were subsequently amended to
provide that both contractors and subcontractors may be penalized
for failure to comply with the Labor Code. §§ 1775(a), 1776(g),
1813 (West Supp. 2001). Amendments to § 1775 also state that either
the contractor or the subcontractor may pay workers the difference
between the prevailing wage and wages paid. § 1775(a).
2 Amendments to the Labor Code effective July 1, 2001, impose
additional requirements on contractors. See § 1727(b) (West Supp.
2001) (contractor shall withhold money from subcontractor at
request of Labor Commissioner in certain circumstances); §
1775(b)(3) (contractor shall take corrective action to halt
subcontractor's failure to pay prevailing wages if aware of the
failure or be subject to penalties).
193
tor or his or her assignees." § 1732. The awarding body retains
the wages and penalties "pending the outcome of the suit." §
1731.3
In 1995, DLSE determined that G & G, as a subcontractor on
three public works projects, had violated the Labor Code by failing
to pay the prevailing wage and failing to keep and/or furnish
payroll records upon request. DLSE issued notices to the awarding
bodies on those projects, directing them to withhold from the
contractors an amount equal to the wages and penalties forfeited
due to G & G's violations. The awarding bodies withheld payment
from the contractors, who in turn withheld payment from G & G.
The total withheld, according to respondent, exceeded $135,000.
App. 68.
G & G sued petitioners in the District Court for the Central
District of California. G & G sought declaratory and injunctive
relief pursuant to Rev. Stat. § 1979, 42 U. S. C. § 1983, claiming
that the issuance of withholding notices without a hearing
constituted a deprivation of property without due process of law in
violation of the Fourteenth Amendment. The District Court granted
respondent's motion for summary judgment, declared §§ 1727,
1730-1733, 1775, 1776(g), and 1813 of the Labor Code
unconstitutional, and enjoined the State from enforcing these
provisions
3 Sections 1730-1733 of the Code have been repealed, effective
July 1, 2001. Section 1742 has replaced them. It provides that
"[a]n affected contractor or subcontractor may obtain review of a
civil wage and penalty assessment [under the Code] by transmitting
a written request to the office of the Labor Commissioner." §
1742(a). The contractor or subcontractor is then entitled to a
hearing before the Director of Industrial Relations, who shall
appoint an impartial hearing officer. Within 45 days of the
hearing, the director shall issue a written decision affirming,
modifying, or dismissing the assessment. A contractor or
subcontractor may obtain review of the director's decision by
filing a petition for a writ of the mandate in state superior
court. §§ 1742(b), (c). These provisions are not yet in effect and
these procedures were not available to respondent at the time of
the withholding of payments at issue here.
194
against respondent. App. to Pet. for Cert. A85-A87. Petitioners
appealed.
A divided panel of the Court of Appeals for the Ninth Circuit
affirmed. G & G
Fire Sprinklers, Inc. v.
Bradshaw,
156 F. 3d 893, 898 (1998)
(Bradshaw I). The court
concluded that G & G "has a property interest in being paid in
full for the construction work it has completed," id., at 901, and
found that G & G was deprived of that interest "as a result of
the state's action," id., at 903. It decided that because
subcontractors were "afforded neither a pre- nor postdeprivation
hearing when payments [were] withheld," the statutory scheme
violated the Due Process Clause of the Fourteenth Amendment.
Id., at 904.
Following Bradshaw I, we decided American Mfrs. Mut.
Ins. Co. v.
Sullivan, 526 U. S. 40 (1999), where
respondents also alleged a deprivation of property without due
process oflaw, in violation of the Fourteenth Amendment.
Sullivan involved a challenge to a private insurer's
decision to withhold payment for disputed medical treatment pending
review of its reasonableness and necessity, as authorized by state
law. We held that the insurer's action was not "fairly attributable
to the State," and that respondents therefore failed to satisfy a
critical element of their § 1983 claim.
Id., at 58. We also
decided that because state law entitled respondents to reasonable
and necessary medical treatment, respondents had no property
interest in payment for medical treatment not yet deemed to meet
those criteria.
Id., at 61. We granted certiorari in
Bradshaw I, vacated the judgment of the Court of Appeals,
and remanded for reconsideration in light of
Sullivan.
Bradshaw v. G & G
Fire Sprinklers, Inc., 526 U. S.
1061 (1999).
On remand, the Court of Appeals reinstated its prior judgment
and opinion, again by a divided vote. The court held that the
withholding of payments was state action because it was
"specifically directed by State officials ... [and] the withholding
party has no discretion." G & G
Fire
195
Sprinklers, Inc. v.
Bradshaw, 204 F.3d
941, 944
(CA9 2000). In its view, its prior opinion was
consistent with
Sullivan because it "specifically held that
G & G did not have a right to payment of the disputed funds
pending the outcome of whatever kind of hearing would be afforded,"
and "explicitly authorized the withholding of payments pending the
hearing." 204 F. 3d, at 943. The court explained that G & G's
rights were violated not because it was deprived of immediate
payment, but "because the California statutory scheme afforded no
hearing at all when state officials directed that payments be
withheld."
Id., at 943-944.
Where a state law such as this is challenged on due process
grounds, we inquire whether the State has deprived the claimant of
a protected property interest, and whether the State's procedures
comport with due process.
Sullivan, supra, at 59. We assume,
without deciding, that the withholding of money due respondent
under its contracts occurred under color of state law, and that, as
the Court of Appeals concluded, respondent has a property interest
of the kind we considered in
Logan v.
Zimmerman Brush
Co., 455 U. S. 422 (1982), in its claim for payment under its
contracts. 204 F. 3d, at 943-944. Because we believe that
California law affords respondent sufficient opportunity to pursue
that claim in state court, we conclude that the California
statutory scheme does not deprive G & G of its claim for
payment without due process of law. See
Logan, supra, at 433
("[T]he Due Process Clause grants the aggrieved party the
opportunity to present his case and have its merits fairly
judged").
The Court of Appeals relied upon several of our cases dealing
with claims of deprivation of a property interest without due
process to hold that G & G was entitled to a reasonably prompt
hearing when payments were withheld.
Bradshaw I,
supra, at 903-904 (citing
United States v.
James
Daniel Good Real Property, 510 U. S. 43 (1993);
FDIC v.
Mallen, 486 U. S. 230 (1988);
Barry v.
Barchi, 443 U. S. 55
196
(1979)). In
Good, we held that the Government must afford
the owner of a house subject to forfeiture as property used to
commit or to facilitate commission of a federal drug offense notice
and a hearing before seizing the property. 510 U. S., at 62. In
Barchi, we held that a racetrack trainer suspended for 15
days on suspicion of horse drugging was entitled to a prompt
postdeprivation administrative or judicial hearing. 443 U. S., at
63-64. And in
Mallen, we held that the president of a
Federal Deposit Insurance Corporation (FDIC) insured bank suspended
from office by the FDIC was accorded due process by a notice and
hearing procedure which would render a decision within 90 days of
the suspension. 486 U. S., at 241-243. See also
Sniadach v.
Family Finance Corp. of Bay View, 395 U. S. 337 (1969)
(holding that due process requires notice and a hearing before
wages may be garnished).
In each of these cases, the claimant was denied a right by
virtue of which he was presently entitled either to exercise
ownership dominion over real or personal property, or to pursue a
gainful occupation. Unlike those claimants, respondent has not been
denied any present entitlement. G & G has been deprived of
payment that it contends it is owed under a contract, based on the
State's determination that G & G failed to comply with the
contract's terms. G & G has only a claim that it did comply
with those terms and therefore that it is entitled to be paid in
full. Though we assume for purposes of decision here that G & G
has a property interest in its claim for payment, see
supra,
at 195, it is an interest, unlike the interests discussed above,
that can be fully protected by an ordinary breach-of-contract
suit.
In Cafeteria & Restaurant Workers v. McElroy, 367 U. S.
886, 895 (1961) (citations omitted), we said:
"The very nature of due process negates any concept of
inflexible procedures universally applicable to every imaginable
situation. '''[D]ue process," unlike some legal rules, is not a
technical conception with a fixed
197
content unrelated to time, place and circumstances.' It is
'compounded of history, reason, the past course of decisions ....
'"
We hold that if California makes ordinary judicial process
available to respondent for resolving its contractual dispute, that
process is due process.
The California Labor Code provides that "the contractor or his
or her assignee" may sue the awarding body "on the contract for
alleged breach thereof" for "the recovery of wages or penalties."
§§ 1731, 1732 (West Supp. 2001). There is no basis here to conclude
that the contractor would refuse to assign the right of suit to its
subcontractor. In fact, respondent stated at oral argument that it
has sued awarding bodies in state superior court pursuant to §§
17311733 of the Labor Code to recover payments withheld on previous
projects where it served as a subcontractor. See Tr. of Oral Arg.
27, 40-41, 49-50. Presumably, respondent brought suit as an
assignee of the contractors on those projects, as the Code
requires. § 1732 (West Supp. 2001). Thus, the Labor Code, by
allowing assignment, provides a means by which a subcontractor may
bring a claim for breach of contract to recover wages and penalties
withheld.
Respondent complains that a suit under the Labor Code is
inadequate because the awarding body retains the wages and
penalties "pending the outcome of the suit," § 1731, which may last
several years. Tr. of Oral Arg. 51. A lawsuit of that duration,
while undoubtedly something of a hardship, cannot be said to
deprive respondent of its claim for payment under the contract.
Lawsuits are not known for expeditiously resolving claims, and the
standard practice in breach-of-contract suits is to award damages,
if appropriate, only at the conclusion of the case.
Even if respondent could not obtain assignment of the right to
sue the awarding body under the contract, it appears that a suit
for breach of contract against the contractor remains available
under California common law. See 1
198
B. Witkin, Summary of California Law §§ 791, 797 (9th ed. 1987)
(defining breach as the "unjustified or unexcused ... failure to
perform a contract" and describing the remedies available under
state law). To be sure, § 1732 of the Labor Code provides that suit
on the contract against the awarding body is the "exclusive remedy
of the contractor or his or her assignees" with respect to recovery
of withheld wages and penalties. § 1732 (West Supp. 2001). But the
remedy is exclusive only with respect to the contractor and his
assignees, and thus by its terms not the exclusive remedy for a
subcontractor who does not receive assignment. See,
e. g., J
&
K Painting Co., Inc. v.
Bradshaw, 45 Cal. App.
4th 1394,1402, 53 Cal. Rptr. 2d 496, 501 (1996) (allowing
subcontractor to challenge Labor Commissioner's action by petition
for a writ of the mandate).
In J &
K Painting, the California Court of Appeal
rejected the argument that § 1732 requires a subcontractor to
obtain an assignment and that failure to do so is "fatal to any
other attempt to secure relief."
Id., at 1401, n.7, 53 Cal.
Rptr. 2d, at 501, n.7. The Labor Code does not expressly impose
such a requirement, and that court declined to infer an intent to
"create remedial exclusivity" in this context.
Ibid. It thus
appears that subcontractors like respondent may pursue their claims
for payment by bringing a standard breach-of-contract suit against
the contractor under California law. Our view is necessarily
tentative, since the final determination of the question rests in
the hands of the California courts, but respondent has not
convinced us that this avenue of relief is closed to it. See id.,
at 1401, and n. 4, 53 Cal. Rptr. 2d, at 500, and n. 4 (noting that
the contractor might assert a variety of defenses to the
subcontractor's suit for breach of contract without evaluating
their soundness). As the party challenging the statutory
withholding scheme, respondent bears the burden of demonstrating
its unconstitutionality. Cf.
INS v.
Chadha, 462 U. S.
919, 944 (1983) (statutes presumed constitutional). We
199
therefore conclude that the relevant provisions of the
California Labor Code do not deprive respondent of property without
due process of law. Accordingly, the judgment of the Court of
Appeals is reversed.
It is so ordered.
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