McKinley Foundation at the University of Illinois v. Illinois Department of Labor

SUPREME COURT CASES

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State: Illinois

Court: 4th District Appellate

Docket No: 4-09-0512 Rel

Case Date: 09/10/2010

Preview:NO. 4-09-0512

Filed 9/10/10

IN THE APPELLATE COURT OF ILLINOIS FOURTH DISTRICT THE McKINLEY FOUNDATION AT THE ) Appeal from UNIVERSITY OF ILLINOIS, an Illinois ) Circuit Court of Not-for-Profit Corporation, ) Champaign County Plaintiff-Appellee, ) No. 08MR688 v. ) THE ILLINOIS DEPARTMENT OF LABOR, and ) CATHERINE SHANNON, Director of the ) Illinois Department of Labor, ) Defendants-Appellants, ) and ) STEVENS CONSTRUCTION CORPORATION; A&B ) DRYWALL; CHRIS GREEN, INC.; LOCH ) ACOUSTIC; ELECTRI-TEC; and UNKNOWN ) Honorable SUBCONTRATORS, ) Michael Q. Jones, Defendants-Appellees. ) Judge Presiding. _________________________________________________________________ JUSTICE POPE delivered the opinion of the court: In April 2009, plaintiff, the McKinley Foundation at the University of Illinois (McKinley), filed a motion for summary judgment against defendants the Illinois Department of Labor (Department) and its Director, Catherine Shannon (herein referred to collectively as the Department), seeking an order that the Prevailing Wage Act (Act) (820 ILCS 130/1 through 12 (West 2008)) is inapplicable to its construction project because McKinley is not a "public body" for purposes of the Act. That same month,

defendant Stevens Construction Corporation (Stevens), the construction company hired by McKinley to complete its project, also moved for summary judgment on the same ground as McKinley or, alternatively, if McKinley was a "public body," for damages on the ground that McKinley failed to give Stevens notice it

would have to pay its employees the prevailing wage rate. Stevens's subcontractors, defendants A&B Drywall; Chris Green, Inc.; and Electri-Tec, joined in Stevens's motion. Following a

May 2009 hearing, the circuit court granted summary judgment in favor of McKinley, Stevens, and the subcontractors. The Department appeals, arguing the circuit court erred in granting McKinley's and Stevens's motions for summary judgment because McKinley constitutes a "public body" for purposes of the Act since it financed its project with tax-exempt bonds issued under the Illinois Finance Authority Act (20 ILCS 3501/801-1 et seq. (West 2008)). We agree and reverse. I. BACKGROUND A. Factual Background McKinley is a not-for-profit corporation functioning as a Presbyterian ministry for college students. In June 2007,

McKinley contracted with Stevens to construct student housing and parking on its property located at 405 East John Street in Champaign. Although private donations fund McKinley, financing for its construction project, in part, stemmed from tax-free bonds issued through the Illinois Finance Authority (Authority). The

bonds were sold to private investors and backed by a letter of credit from Keybank, N.A., which paid the investors and then received reimbursement from McKinley. In the event of a default,

Keybank's sole recourse would have been against McKinley, and the private investors' sole recourse would have been against KeyBank. - 2 -

At no point would the State of Illinois be obligated or liable on the bonds. The only connection between the State and McKinley

was that McKinley paid the Authority a fee for acting as the accommodator for the bonds' issuance. In April 2008, a Department conciliator wrote McKinley, requesting information concerning the construction project to evaluate its conformance with the Act, which, in certain circumstances, requires contractors pay workers employed on public-works construction projects a minimum hourly wage based on pay for work of a similar character in the county where the work is performed. In written correspondence between the Department

and McKinley's counsel, McKinley acknowledged the project was a "public work" pursuant to the Act but denied being a "traditional public body" or "an institution supported in whole or [in] part by public funds." McKinley maintained both factors must exist to The Department disagreed. In a

trigger application of the Act.

letter to McKinley, the Department's chief legal counsel noted as follows: "[I]t is the opinion of [the Department] that because the fixed[-]work construction is a 'public work,' as explicitly defined in the Act, [McKinley] is, for purposes of that fixed[-]work construction, a 'public body[]' within the meaning of the Act. Accordingly,

as provided in [s]ection 3 of the Act, all laborers, workers[,] and mechanics employed - 3 -

by or on behalf of [McKinley] engaged in the construction of that public work must be paid the prevailing wage." original.) In August 2008, after receiving payroll forms from Stevens and several subcontractors, the Department (1) informed them "certain employees were paid less than the prevailing rate of wage," (2) ordered them to pay the total difference in wages, and (3) assessed penalties amounting to 20% of the total underpayment. B. Procedural History The following month, McKinley filed a complaint naming the Department, Director Shannon, Stevens, several subcontractors, and "unknown subcontractors" as defendants. complaint sought declaratory judgment that the Act was inapplicable to its construction project, which would thereby eliminate the obligation of Stevens and the subcontractors to pay their employees the prevailing wage rate. In response, Stevens The (Emphasis in

filed an answer, a counterclaim against McKinley, and a crossclaim against the Department and Director Shannon, requesting, inter alia, (1) a declaratory judgment stating the project fell outside of the Act's scope or, alternatively, (2) damages from McKinley in the event the project fell under the Act's purview because McKinley failed to give Stevens and the subcontractors notice they would have to pay their employees the prevailing wage rate. Stevens's subcontractors filed various cross-claims and - 4 -

answers containing affirmative defenses, none of which are pertinent to this appeal. In October 2008, the Department filed a motion to dismiss McKinley's and Stevens's complaints pursuant to sections 2-615 and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West 2008)), but the circuit court denied both motions. The Department then filed counterclaims against Stevens and several subcontractors, seeking underpaid wages, statutory penalties, and punitive damages. Stevens filed an answer, and

the subcontractors filed answers containing various counterclaims against Stevens and affirmative defenses to the Department's complaint. In April 2009, McKinley filed a motion for summary judgment, alleging that although its construction project fell within the Act's definition of "public work," McKinley is not a "public body" and thus the Act is inapplicable to its project. To its motion, McKinley attached an affidavit from its executive director, Reverend Heidi Weatherford, stating McKinley is (1) a 501(c)(3) tax-exempt foundation; (2) supported entirely by private funds; and (3) not supported in any way by public funds, including those from federal or state governments. The affidavit

further stated McKinley's project was partly financed by tax-free bonds issued by the Authority but that McKinley paid a fee to the Authority in exchange for issuance of the bonds and, in the event of a default, the state would never be liable or obligated on the bonds. Stevens filed a summary-judgment motion, which also - 5 -

alleged the Act was inapplicable to McKinley's construction project because McKinley was not a "public body." In May 2009, after hearing arguments on both motions, the circuit court granted summary judgment in favor of McKinley and Stevens and dismissed all counterclaims and cross-claims. During the hearing, the court reasoned as follows: "[T]he definition of [']public body['] does not say the State or any subdivision or an institution supported in whole or in part by public funds or an institution [that] has a project financed by the [Authority]. [The

legislature] saw fit to include that language to define what a public work is. They

apparently did not see fit to include that language in defining what a public body is. If this is an oversight of theirs, then they have to correct it. I'm not going to I will just

speculate one way or another.

say I'm going to read what was written and not read what wasn't written. The plain meaning of this Act is what McKinley and Stevens suggest to this [c]ourt that it is. There is a two-pronged test.

Not all public works are carried out by public bodies. Therefore, they suggest that

for the *** Act to apply[,] a public works - 6 -

[project] must be carried out by a public body and they tell me in black and white what a public body is. And from the [a]ffidavit

of Ms. Weatherford, they clearly are not a public body." In June 2009, the Department and Director Shannon timely filed notice of appeal. In December 2009, over McKinley's

and Stevens's objection, this court allowed a motion from the Indiana, Illinois, Iowa Foundation for Fair Contracting (Foundation), a not-for-profit labor-management corporation committee, for leave to file an amicus curiae brief in support of the Department and Director Shannon. amicus brief later that same month. II. ANALYSIS On appeal, the Department contends the circuit court erred in granting summary judgment in favor of McKinley and Stevens because both McKinley and its construction project fall within the Act's scope. Specifically, the Department alleges The Foundation filed its

because McKinley's construction project received partial financing from Authority bonds, the project is a public work, thereby indicating McKinley is a public body for purposes of this particular project. McKinley and Stevens counter that while the

project was partially financed by Authority bonds and thus constitutes a public work, McKinley is not a public body because it received no public funding and therefore the Act is inapplicable. - 7 -

"Summary judgment is appropriate where the pleadings, depositions, admissions[,] and affidavits on file, viewed in the light most favorable to the nonmoving party, reveal that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Kajima

Construction Services, Inc. v. St. Paul Fire & Marine Insurance Co., 227 Ill. 2d 102, 106, 879 N.E.2d 305, 308 (2007). We review

the circuit court's decision to grant summary judgment de novo. Stern v. Wheaton-Warrenville Community Unit School District 200, 233 Ill. 2d 396, 404, 910 N.E.2d 85, 91 (2009). A de novo

standard of review is also proper when the issue on appeal involves a matter of statutory construction (In re Estate of Ellis, 236 Ill. 2d 45, 50, 923 N.E.2d 237, 240 (2009)) or the constitutionality of a statute (People v. Johnson, 225 Ill. 2d 573, 584, 870 N.E.2d 415, 421 (2007)). A. Forfeiture As a threshold matter, we address McKinley's position the Department forfeited arguments raised in its brief by not raising them before the circuit court. Specifically, McKinley

alleges the arguments set forth in the Department's brief pertaining to (1) the ambiguity of the Act, (2) whether financing through the Authority can exist without compliance with the Act, and (3) whether a "public work" makes a private entity a "public body" are "inconsistent with the arguments that were presented in [the Department's] briefs and oral argument in the trial court." Issues not raised before the trial court are considered - 8 -

forfeited, and a party may not raise such issues for the first time on appeal. Vine Street Clinic v. HealthLink, Inc., 222 Ill.

2d 276, 300-01, 856 N.E.2d 422, 438 (2006). Regarding McKinley's argument the Department forfeited any argument concerning whether a "public work" makes a private entity a "public body" for purposes of the Act, the record before us on appeal establishes both parties continuously raised this issue before the circuit court--in oral argument and in written memoranda--and therefore no reason exists to deem it forfeited. B. The Act's Plain Language In the case at bar, the parties dispute no material facts, and thus the issue on appeal is one of statutory interpretation. Specifically, this court must determine whether

a private entity that avails itself of financing with Authority bonds is required to pay prevailing wages pursuant to the Act. The cardinal rule of statutory construction is to ascertain and give effect to the legislature's intent. Diggins, 235 Ill. 2d 48, 54, 919 N.E.2d 327, 331 (2009). People v. "The

best indicator of the legislature's intent is the language of the statute, which must be accorded its plain and ordinary meaning." Diggins, 235 Ill. 2d at 54, 919 N.E.2d at 331. To avoid

rendering any part of the statute meaningless or superfluous, statutes are construed in their entirety. Weather-Tite, Inc. v.

University of St. Francis, 233 Ill. 2d 385, 389-90, 909 N.E.2d 830, 833 (2009). Where the statutory language is clear and

unambiguous, a court must apply the statute as written without - 9 -

resorting to aids of statutory construction.

Solon v. Midwest

Medical Records Ass'n, Inc., 236 Ill. 2d 433, 440, 925 N.E.2d 1113, 1117 (2010). Section 1 of the Act states its purpose as follows: "It is the policy of the State of Illinois that a wage of no less than the general prevailing hourly rate as paid for work of a similar character in the locality in which the work is performed, shall be paid to all laborers, workers[,] and mechanics employed by or on behalf of any and all public bodies engaged in public works." (Emphasis added.) 820 ILCS 130/1 (West 2008). Accordingly, the Act's policy ensures people employed by or on behalf of public bodies engaged in public works are paid the prevailing wage in their locale. The Act was not meant to See Town of

dictate what private employers paid their employees.

Normal v. Hafner, 395 Ill. App. 3d 589, 597, 918 N.E.2d 1268, 1274 (2009) ("the purpose of the Act is to ensure laborers on public projects are paid the prevailing wage, not to interfere with economic development by private companies"); see also 820 ILCS 130/3 (West 2008) ("Not less than the general prevailing [wage] *** shall be paid to all laborers *** employed by or on behalf of any public body engaged in the construction of public works" (emphasis added)). Section 3 of the Act, in pertinent part, requires as - 10 -

follows: "Not less than the general prevailing rate of hourly wages for work of a similar character on public works in the locality in which the work is performed, and not less than the general prevailing rate of hourly wages for legal holiday and overtime work, shall be paid to all laborers, workers[,] and mechanics employed by or on behalf of any public body engaged in the construction of public works." (Emphasis added.) 820 ILCS

130/3 (West 2008). Section 2 sets out the scope of the Act, stating "[t]his Act applies to the wages of laborers, mechanics[,] and other workers employed in any public works *** by any public body and to anyone under contracts for public works." (West 2008). 820 ILCS 130/2

Section 2 defines "public works" to mean "all fixed

works constructed by any public body" and further provides: "'Public works' as defined herein includes all projects financed in whole or in part with bonds issued under *** the Illinois Finance Authority Act ***." (West 2008). Thus, under the Act, a public work is defined as a fixed work constructed by any public body, and that definition includes projects financed in whole or in part with Authority - 11 820 ILCS 130/2

bonds.

Since all parties agree this project was a "public work,"

and by definition a public work is a fixed work constructed by a public body (which includes projects financed with Authority bonds), the Department contends projects financed with Authority bonds are governed by the Act. interpretation of the Act. McKinley concedes its 405 John Street construction project is a public work but contends it is not a "public body" within the definition of the Act. The Department maintains that, This is not an unreasonable

for purposes of the project, McKinley is a public body solely because it performed a public work financed through Authority bonds. The definition of "public works" includes projects financed with bonds issued under certain enumerated statutes, including, as noted above, the Illinois Finance Authority Act (20 ILCS 3501/801-1 through 999-99 (West 2008)). If any entity that

avails itself of financing under one of the specifically enumerated financing acts is considered a public body, then McKinley is clearly a public body. position. McKinley's position is that the specifically enumerated financing acts merely define "public works" and have no relation to "public body." Many of the enumerated financing acts, like This is the Department's

the Illinois Finance Authority Act, do not use public monies to fund construction projects. By including these acts in the

definition of "public works," the legislature made clear that if - 12 -

the financing of a project is accomplished pursuant to an enumerated statute, like the Illinois Finance Authority Act, the project is considered a public work, even if no public funds are actually expended on the project. A project paid for wholly or

in part out of public funds is a "public work," but so is any project financed under any of the enumerated statutes. Thus, the

legislature expanded public works beyond those "paid for wholly or in part with public funds" to include those financed with conduit financing pursuant to the specifically enumerated statutes. However, the legislature made no similar expansion to Therefore, a "public body"

the definition of "public body."

remains any institution supported in whole or in part by public funds. McKinley's interpretation of the statute is not

unreasonable. Further, McKinley contends, the Department's interpretation would render the Act's requirement that the construction be accomplished by a "public body" mere surplusage. The Department, however, answers that the term "public body" is not surplusage because it still has relevance when one of the enumerated financing statutes is not involved in the project. The trial court pointed out the legislature demonstrated its ability to expand the definition of "public works" to include projects such as McKinley's construction project. However, it

failed to expand the definition of "public body" to include private institutions that avail themselves of financing under the enumerated statutes. While the court recognized this may have - 13 -

been a legislative oversight, it felt compelled not to speculate but, rather, applied the statute as written. Since the Act

requires both a public work and a public body and because McKinley is not supported in whole or in part with public funds, the court found the Act did not apply to the project. As noted

above, the McKinley position, adopted by the trial court, is not an unreasonable reading of the Act. Where there are two reasonable interpretations of a statute, we will look to the legislative history for guidance in order to discern the legislature's intent. Poindexter v. State

of Illinois, 372 Ill. App. 3d 1021, 1028, 869 N.E.2d 139, 146 (2006). Effective January 1, 1990, the General Assembly amended

section 2 of the Act to include in the definition of "public works" projects financed with bonds issued under various financing acts, including the Illinois Finance Authority Act (formerly the Illinois Development Finance Authority Act). See

Pub. Act 86-799,

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