37 F.

3d 212
129 Lab.Cas. P 33,161, 2 Wage & Hour Cas.2d
(BNA) 647

IRWIN COMPANY, INC., Plaintiff-Appellant,

v.
3525 SAGE STREET ASSOCIATES, LTD., Defendant,
v.
Robert B. REICH, U.S. Department of Labor, Secretary of
Labor, Third-Party Defendant-Appellee.
No. 92-2929.

United States Court of Appeals,

Fifth Circuit.
Nov. 4, 1994.

William C. Boyd, Patterson, Boyd & Lowery, Houston, TX, for appellant.
Traci L. Bransford, Marianne K. Tomecek, U.S. Attorney's Office,
Houston, TX, for appellee.
Joan Brenner, William J. Stone, Washington, DC, for U.S. Dept. of Labor,
Office of the Sol.
Appeal from the United States District Court for the Southern District of
Texas.
Before POLITZ, Chief Judge, JONES, Circuit Judge, and FULLAM* ,
District Judge.
EDITH H. JONES, Circuit Judge:

A subcontractor who underpaid employees appeals the district court judgment

ordering it to tender, to the Department of Labor for distribution to the
underpaid employees, monies that had been withheld by the general contractor,
826 F.Supp. 1067. We affirm.

BACKGROUND
2

The facts in this case are undisputed. 3525 Sage Street Associates, Ltd. (Sage)
was the developer, and later prime contractor, on a federally-assisted
construction project, whose loan was insured by the Department of Housing
and Urban Development (HUD). Irwin Company was hired as a plumbing and
air conditioning subcontractor. As part of its loan contract with the government,
Sage agreed that laborers and mechanics would be paid prevailing wages as
determined by the Secretary of Labor pursuant to the National Housing Act, 12
U.S.C. Sec. 1715c(a) and the Davis-Bacon Act, 40 U.S.C. Sec. 276a.
Contractors and subcontractors hired by Sage agreed in their contracts to pay
prevailing wages under these terms.

Irwin completed its contract May 23, 1986. On October 8, 1986, Sage paid off
the HUD loan on the project. Pursuant to the terms of Irwin's subcontract,
however, Sage withheld approximately ten percent of the contract price as
retainage pending Sage's approval of Irwin's work and its satisfaction that Irwin
"ha[d] fully performed [its] obligations," which included paying its laborers the
requisite prevailing wages. For present purposes, the withheld payments
equalled $107,522.

At some point--it is not clear when--the Department of Labor investigated

Irwin's employment practices under these subcontracts and determined that
Irwin had underpaid its employees. On May 12, 1988 that Department sent
Irwin and Sage notification letters regarding its findings. Sage, subject to joint
and several liability for Irwin's underpayments, did not request a hearing and
the investigation findings became final as to it. Significantly, Sage agreed with
DOL to release the retainage monies it was holding on Irwin's subcontract, but
Irwin resisted this solution. Irwin requested an administrative hearing to contest
the findings. On November 1, 1990, the administrative law judge (ALJ) issued
his decision and order finding Irwin liable for underpayments in an amount
totalling $136,024.72. Irwin did not appeal this decision, which is now final and
unappealable.

Meanwhile, in December 1986 Irwin had filed an action in Texas state court
against Sage for release of the payments that Sage had retained. Sage tendered
the disputed monies to the court, apparently in January 1988. Irwin then posted
a combination of bonds and a letter of credit (which later expired) and obtained
control of the tendered monies. In December 1991 Sage brought in the
Secretary of Labor as a third-party defendant. In January 1992 the Secretary
removed the case to federal court.

In district court, Irwin and the Secretary presented cross motions for summary
judgment. The district judge held that Sage had retained the disputed money for
the benefit of Irwin employees, that Irwin did not have a property interest in the
money, and that the instant case was therefore essentially a collection suit
based on liability found by the ALJ.

DISCUSSION
7

Irwin presents two grounds for reversal of the district court's summary
judgment. Irwin asserts that the Secretary is barred from claiming this money
by the statute of limitations, and more broadly, that the Secretary has no
statutory or regulatory authority to pursue this action.

Statute of Limitations
8

Actions for unpaid minimum wages brought under the Davis-Bacon Act are
governed by section 6(a) of the Portal-to-Portal Act, which requires that a
claim be commenced within two years after the cause of action accrued, except
in a cause of action arising out of a willful violation, which must be
commenced within three years after the cause of action accrued. 29 U.S.C. Sec.
255(a). Because Irwin completed its contract by May 23, 1986, Irwin contends
that any claim the Secretary had was proscribed after May 23, 1989 at the
latest.

The Secretary asserts that this action technically is brought not under the DavisBacon Act, but under the National Housing Act pursuant to regulations issued
by the Secretary. See 29 C.F.R. Sec. 5.5 (1993). The Department issued these
regulations pursuant to Reorganization Plan No. 14, prepared by President
Truman in 1950 pursuant to a declaration by Congress. Under the
Reorganization Plan, the President directed the Secretary to promulgate and
coordinate administrative matters for the Davis-Bacon Act and its related
statutes. This case arises under one of those Related Acts, the National Housing
Act of 1934. 12 U.S.C. Sec. 1715c(a) (requiring as a prerequisite to obtaining
federal loan or mortgage insurance that contractors certify that laborers and
mechanics "have been paid not less than the wages prevailing in the locality ...
as determined by the Secretary of Labor, in accordance within the Davis-Bacon
Act.")

10

The only case cited to us discussing this issue is Glenn Electric Co. v.
Donovan, 755 F.2d 1028 (3d Cir.1985), which held that the Portal-to-Portal
Act applied to actions brought under the Davis-Bacon Act, but not to actions
brought under the Related Acts, i.e., those that refer to prevailing wages as

determined under the Davis-Bacon Act. Glenn Electric rejected the argument
that reference in the Related Acts to the Davis-Bacon Act incorporated the
Davis-Bacon Act in toto and held that as a matter of statutory construction, the
limitations provisions in the Portal-to-Portal Act did not extend to the Related
Acts. Instead, the Third Circuit held that actions brought under the Related Acts
are subject to the general limitations period for actions founded on contracts
brought by the government, 28 U.S.C. Sec. 2415, which is ordinarily six years.
There is an exception to the six-year limitation where the government raises a
claim against an opposing party which has itself brought a claim arising out of
the same transaction or occurrence. 28 U.S.C. Sec. 2415(f). The Secretary
contends that we should follow the Third Circuit and apply Sec. 2415.
11

Irwin presents sensible arguments for universal application of the Portal-toPortal Act limitation period in all cases contesting Davis-Bacon prevailing
wages. The regulations explicitly govern both the Davis-Bacon Act and Related
Acts. 29 C.F.R. Sec. 5.1. Moreover, the Supreme Court has recognized that the
goal of President Truman's reorganization plan "was to introduce consistency
into the administration and enforcement of the Act and related statutes...."
Universities Research Ass'n Inc. v. Coutu, 450 U.S. 754, 783, 101 S.Ct. 1451,
1468, 67 L.Ed.2d 662 (1981). On the other hand, the Third Circuit in Glenn
Electric presents cogent arguments for adopting the longer limitations period.
As there is much to be said for a uniform approach among the circuits, we
adhere to the Glenn Electric approach.

12

Irwin raises as a related question whether the Secretary has even submitted a
claim in this case. She has not filed a complaint nor a formal cross-claim. In her
answer, however, the then-Secretary Lynn Martin stated "the only claim the
Department of Labor has to prosecute against Irwin Company, Inc. and 3525
Sage Street is their joint and several liability for those back wages." The answer
went on in its final paragraph to state

13
WHEREFORE,
having fully answered, [the Secretary] prays for judgment in her
favor in releasing the $107,552.01 paid into the registry of the state court by [Sage]
to her for back wages owed due to Irwin['s] violations of the Davis-Bacon Act, 40
U.S.C. Sec. 276a et seq. as determined by the Administrative Law Judge ... and that
she be awarded attorney's fees and costs, [and] all other and further relief as may be
necessary and appropriate.
14

This is hardly a model of good legal draftsmanship, but it suffices, under the
liberal approach of the Federal Rules of Civil Procedure, to assert the
Secretary's request for affirmative judicial relief.1 Existence of A Cause of
Action

15

Irwin argues that under U.S. v. Capeletti Brothers, Inc., 621 F.2d 1309 (5th
Cir.1980), the Davis-Bacon Act does not grant the Secretary a right to pursue
an action on behalf of underpaid employees. In Capeletti, a class action was
filed on behalf of ironworkers allegedly underpaid under a contract financed in
part by the federal government. The contract was subject to the Davis-Bacon
Act by virtue of the Federal Water Pollution Control Act, 33 U.S.C. Sec. 1372.
Thus, Capeletti was brought pursuant to a Related Act just as is the instant
case. The court analyzed the case as a Davis-Bacon Act claim, found that
Congress had expressly provided a set of particular remedies under the DavisBacon Act, and held that no private cause of action existed under that Act to sue
employers.

16

The district court agreed with the Secretary that under these facts Capeletti is
inapposite, and that this lawsuit is essentially a collection suit based on
violations previously found. In the context of this case, we agree. We do not
speculate further than the facts before us.

17

Contrary to Irwin's assertions, the Secretary has engaged in no bold,

overreaching action by making a claim to Sage Street's retainage held for Irwin.
The Secretary pursued appropriate administrative procedures against both Sage
Street and Irwin, and her adverse determinations were never appealed. As a
result, Sage Street became jointly and severally liable to the Secretary for
Irwin's underpayments of the prevailing wage. Rather than face this liability
alone, Sage Street employed its contractually authorized right to withhold
retainage from Irwin to cover a large portion of the assessment. It is true that
the Secretary, having paid out all of the contract monies to Sage Street, could
no longer withhold payments from Sage Street on the challenged project
pursuant to 29 C.F.R. Sec. 5.5(a)(2). The Secretary did, however, have the
power to offset Sage Street's liability against any other government contracts in
which Sage Street participated or to seek debarment of Sage Street from further
federal contract work until the wages were properly paid. 29 C.F.R. Sec. 5.5(a)
(2); Sec. 5.12. Sage Street had every incentive to cooperate with the Secretary's
enforcement of her order. By withholding Irwin's retainage from this project for
Irwin's default under its contractual obligation to comply with the Davis-Bacon
wage rates, Sage Street availed itself of a permissible state law contractual
remedy. Sage Street then impleaded the Secretary as the ultimate recipient of
the funds (for the benefit of the workers). The end result is no different than
would have occurred if the Secretary had more timely investigated Irwin's
practices and had herself effected a withholding of Irwin's contract payments.
That Sage Street rather than the Secretary directly withheld the funds owed on
the project in question is immaterial.

18

Further, it is absurd to suggest that the Secretary, after being hailed into court
by Sage, was without authority to assert her claim to the fund. Irwin contends
that such action is not available to the Secretary. By the same logic, however, if
Irwin had appealed the Secretary's adverse determination, she could not have
counterclaimed for enforcement of her order because there is no regulation that
specifically authorizes it. See Glenn Electric, supra.2 On the contrary, we
believe it is a necessary incident of the Secretary's authority that she, like any
other litigant, may defend her position when she becomes a defendant in court
on a claim such as this.

19

As this discussion implies, Irwin's reliance on Capeletti is misplaced. The

Secretary is not a private litigant seeking an implied remedy under the DavisBacon Act or related acts. Thus, neither Capeletti nor the Supreme Court's
decision in Universities Research Association, Inc. v. Coutu, supra, directly
applies. The policies underlying the decision whether to imply a private right of
action to enforce a federal statute are entirely different than those pertaining to
the scope of a federal agency's enforcement of its statutorily created duties. In
Capeletti, the ironworkers sought either to duplicate or circumvent the
Secretary of Labor's administrative proceeding, whereas in this case, the
Secretary seeks to enforce the outcome of an unappealed administrative
determination. Further, as was previously noted, in defending her position as a
claimant to Irwin's retainage funds, the Secretary did not overstep her
regulations, because of her continuing authority over Sage. Sage was persuaded
to withhold funds from Irwin to reduce their joint liability to DOL on the
project.

20

It is unfortunate that the Secretary did not expeditiously determine Irwin's

underpayment in the first place, so that DOL initially could have withheld
contract funds according to the letter of the regulations. It is even more
distasteful, however, that Irwin contrived to put its hands on the impleaded
retainage funds by posting a bond that it later permitted to expire before this
lawsuit could be completed. Irwin's dissipation of the retainage should not be
allowed to prevent the Secretary from obtaining a judgment for the
underpayments. In short, while Capeletti would have added an entirely new
dimension to enforcement of prevailing wage rates, the instant action, and the
judgment to which the Secretary has become entitled, are but an outgrowth of
the unusual procedural posture of this particular lawsuit.

21

For these reasons, the judgment of the district court is AFFIRMED.

District Judge of the Eastern District of Pennsylvania, sitting by designation

*
1

District Judge of the Eastern District of Pennsylvania, sitting by designation

The Secretary also contends that the "claim" was effectively filed with the
issuance of a "charging letter" sent prior to the administrative hearing. The
terms of the statute of limitations urged by the Secretary, however, bar an
action "unless the complaint is filed ... within one year after final decisions
have been rendered in applicable administrative proceedings." 28 U.S.C. Sec.
2415(a). These terms effectively rebut the Secretary's argument that the
charging letter served as a complaint for limitations purposes
The Secretary also argues that Sage held the monies in a constructive trust for
the underpaid employees, and that Irwin has no property interest in these
monies. To support this argument, the Secretary cites Pearlman v. Reliance Ins.
Co., 371 U.S. 132, 83 S.Ct. 232, 9 L.Ed.2d 190 (1962). Pearlman, however, is
distinguishable in three important respects. First, it focused on a surety's right of
subrogation for underpayments it had paid to employees. Second, the
underpaying bankrupt employer in Pearlman never obtained control over the
disputed monies, which had been properly withheld by the government and
tendered to the bankruptcy trustee. Finally, there was never a question whether
the surety had a cause of action against the trustee