Martin v. Garde

JUSTICE HARTMAN

delivered the opinion of the court:

Dennis Garde and Asbestos Control, Inc. (collectively ACI), appeal from the denial of their motion (1) for reconsideration of the order of October 30, 1987, granting the Department of Labor’s (Department’s) petition to enforce its administrative subpoena or, alternatively, (2) to suspend an earlier order of October 9, 1987, which granted the Department’s motion to enforce the subpoena, in effect, ACI’s cross-motion to permit limited discovery and to postpone the hearing on the petition to enforce.

The issues raised on appeal include whether: (1) the provisions of “An Act regulating wages ***” (the Prevailing Rate of Wages Act or Wage Act) (Ill. Rev. Stat. 1983, ch. 48, pars. 39s—1 through 39s—12) intend and require notice and a hearing when the Department invokes the powers of the court to enforce an administrative subpoena; (2) in view of the substantial allegations and attached documentary evidence that the subpoena was issued and enforcement of the subpoena was sought for reasons of coercion, intimidation and harassment, ACI and Garde were denied procedural due process of law by summary enforcement of the subpoena; and (3) ACI’s failure to provide a transcript in the record on appeal of the hearings precludes review of their claim that the hearing did not comport with due process.

ACI surveys and examines buildings for insulation and soundproofing materials containing asbestos and also removes those materials from buildings. Included among those buildings were schools, making the wages paid ACI’s employees subject to the Wage Act. Prior to October 22, 1984, William Spann of the Department informed ACI, based on an audit of its payroll records, that he believed ACI was not paying the prevailing wage as required by statute. In response, ACI made a Freedom of Information Act (FOIA) demand which requested records and documents relied upon by the Department to substantiate its claim that a rate other than that paid by ACI was the prevailing rate. On November 13, 1984, ACI submitted information regarding the nature and extent of the training it provided its employees and evidence that it performed in excess of 85% of the removal of asbestos on public works in Cook County. ACI contended that the rate it paid its employees in the removal of asbestos was the prevailing rate for that work, and asked the Department for a hearing. The Department did not respond to ACI’s FOIA request or its request for a hearing. On January 18, 1985, ACI again wrote the Department, asking for response to ACI’s requests for information and a hearing.

Ignoring ACI’s requests, the Department wrote to one of ACI’s clients, Arlington Heights Public School District No. 25 (District 25), and instructed it to withhold “the funds due [ACI] until a full investigation of the payroll records is complete.” On April 1, 1985, ACI again sought a response to its request for information and a hearing. On April 9, 1985, Superintendent Hayes of the Department’s Conciliation and Mediation Division replied that he would “do everything possible to have a written response in [ACI’s] hands no later than April 19, 1985.” The Department had not provided a written response when ACI contacted it on May 2, 1985, nor is there any indication in the record that the Department ever responded.

On July 26, 1985, the Department wrote to District 25 and advised it “that a serious violation has been uncovered by the Department of Labor. *** [ACI’s] pay records were audited and the audit revealed a deficiency in the wages paid to the employees” (emphasis added), and again instructed it not to pay ACI. ACI sued District 25 for the monies owed to it. On July 30, 1986, District 25 advised ACI that it had invited the Department to join in that litigation, which the Department declined to do. Shortly thereafter, District 25 paid the outstanding balance due ACI, stating:

“In that the Illinois Department of Labor was afforded an opportunity to intervene in the proceedings initiated by your counsel for collection of these funds and had declined to do so, the District does not believe it is under any further obligation to withhold payment of these funds as previously directed by that state agency.”

On July 22, 1985, the Department issued an administrative subpoena to ACI, requesting it to produce all payroll records for work performed in the Arlington Heights and Aurora school districts in connection with the Department’s investigation of the prevailing wage for asbestos removal. ACI failed to respond to the subpoena, and the Department took no action to enforce it. On September 15, 1986, the Department issued a second subpoena to ACI directing it to produce its records relating to the project payroll of the two school districts. ACI did not comply with the subpoena, but not until April 2, 1987, did the Department seek enforcement of the subpoena in court. ACI entered its appearance on May 22, 1987, and, three months later, on August 25, 1987, filed a response to the petition containing certain affirmative defenses alleging that the Department issued and sought enforcement of the subpoena for improper purposes. On October 1, 1987, ACI simultaneously filed two documents: (1) a motion to permit and expedite discovery and to postpone the hearing on the motion to enforce, and (2) a notice to produce two Department officers as witnesses at the hearing.

The Department’s petition to enforce the subpoena and ACI’s cross-motion for continuance and discovery were heard on October 9, 1987. Judge Richard L. Curry denied ACI’s motion and ordered compliance within 14 days. No record or transcript was made of these proceedings. The circuit court made no findings nor did it specify its reasons for denying ACI’s motion or for enforcing the subpoena. On October 26, 1987, ACI filed a motion to reconsider, requesting a suspension of the order enforcing the subpoena and the setting of a briefing schedule on the motions previously ruled upon by Judge Curry, namely, for enforcement of the subpoena and to permit discovery. These motions were denied, this time by Judge Robert L. Sklodowski, who stayed the order enforcing the subpoena pending this appeal.

Among the provisions of the Wage Act is the following (Ill. Rev. Stat. 1983, ch. 48, par. 39s—9):

“At any time within 15 days after a certified copy of the determination has been published as herein provided, any person affected thereby may object in writing to the determination ***. It shall thereafter be the duty of the public body or Department of Labor to set a date for a hearing on the objection after giving written notice to the objectors at least 10 days before the date of the hearing ***. If such a hearing is not held by the public body within the time herein specified, the Department of Labor may, upon request of the objectors, conduct the hearing on behalf of the public body.

*** At such hearing the public body or Department of Labor shall introduce in evidence the investigation it instituted which formed the basis of its determination, and the public body or Department of Labor, or any interested objectors may thereafter introduce such evidence as is material to the issue.”

It is clear from the history of this case that the Department has failed to comply with the spirit and policy of the Wage Act, from the inception of this controversy. The Department repeatedly ignored ACI’s requests for information and hearings, without explanation. Undeterred by ACI’s efforts to learn of the reasons for the Department’s position, the Department sent a letter to District 25 which stated, among other things:

“The contractor’s [ACI’s] pay records were audited and the audit reveals a deficiency in the wages paid the employees.” (Emphasis added.)

The letter affirms that ACI’s records already had been audited, and a deficiency, or violation, found. In our view, this was tantamount to a de facto finding under section 9 that a prevailing wage determination was made. For these reasons, it appears that ACI’s requests for a statutory hearing under section 9 should have been granted by the Department, but were not.

The affirmative defenses articulated by ACI raise the issues of harassment, coercion, and abuse of process, which were never answered and can well be deemed admitted. (See Ill. Rev. Stat. 1987, ch. 110, pars. 2—602, 2—610(b); Husted v. Thompson-Hayward Chemical Co. (1965), 62 Ill. App. 2d 287, 210 N.E.2d 614; Capital Development Board ex rel. P.J. Gallas Electrical Contractors, Inc. v. G. A. Rafel & Co. (1986), 143 Ill. App. 3d 553, 557, 493 N.E.2d 348.) This is particularly important where the Department’s letter to District 25 states that ACI’s books already were audited yet, apparently, the Department remained insistent upon securing the same records upon which the audit was made.

ACI argues that the circuit court erred in failing to hold a hearing on its allegations that the Department issued and sought enforcement of the subpoena for the improper purpose of intimidation, harassment and coercion. (Scott v. Association for Childbirth At Home, International (1981), 88 Ill. 2d 279, 299, 430 N.E.2d 1012, 1022 (“[A]n investigation that is arbitrary or in excess of statutory authority or undertaken for an improper purpose, such as to harass, violates due process”).) In support of its contentions, ACI also relies on People ex rel. Bernardi v. Lawrence & Ahlman, Inc. (1982), 105 Ill. App. 3d 470, 434 N.E.2d 503.

The respondent in Lawrence refused to comply with a Department subpoena commanding it to produce its records on two public work contracts. The Department sought enforcement of the subpoena in court, and Lawrence responded with a motion to dismiss, “alleging that the complaint failed to state a cause of action in that it lacked allegations of fact which would establish that the subpoena was lawfully issued.” (105 Ill. App. 3d at 471.) Lawrence also set forth facts which it claimed substantiated its allegation that the subpoena was issued for purposes of harassment and delay, and requested a continuance and a rescheduling to permit discovery. The circuit court denied Lawrence’s motions, “finding that its sole duty was to enforce the subpoena so long as it was ‘not overbroad and burdensome.’ ” (105 Ill. App. 3d at 472.) The appellate court reversed and remanded stating, in part (105 Ill. App. 3d at 472):

“Judicial review of an administrative subpoena is generally limited to a consideration of the constitutionality of the statute, whether the contemplated agency proceedings are included within the statutory authority, the reasonableness of the demand, and the relevance of the information sought. (Scott v. Association for Childbirth at Home, International (1981), 88 Ill. 2d 279, 430 N.E.2d 1012; Illinois Crime Investigating Com. v. Buccieri (1967), 36 Ill. 2d 556, 224 N.E.2d 236.) Nevertheless, administrative investigations are also subject to due process constraints and a subpoena issued for the purpose of harassment violates due process. (Scott v. Association for Childbirth at Home, International.) Moreover, when the court’s process is invoked to enforce an invalid subpoena, an abuse of judicial process occurs. (United States v. Powell (1964), 379 U.S. 48, 13 L. Ed. 2d 112, 85 S. Ct. 248.) Thus, when a prima facie case has been made challenging the legitimacy of the purpose behind the administrative subpoena, the court has a duty to resolve that issue prior to enforcement of the subpoena. A court may not permit its process to be abused. (United States v. Powell.)”

The appellate court found the circuit court erroneously believed that it had no discretion to order discovery in such cases. Here, the allegations of harassment, coercion and abuse of process raised by ACI were sufficient to establish a prima facie case challenging the legitimacy of the Department’s purpose in issuing the subpoena, in light of the case history established by the record, recited earlier.

The parties do not dispute that a hearing was held on October 9, 1987, before the judge who granted the petition to enforce the subpoena and, at the hearing, the judge had before him ACI’s response and affirmative defenses. Nothing in.the court’s order of that date reveals that any evidentiary hearing was held on that date. The Department claims that ACI’s failure to provide a transcript of the proceedings held prior to the court’s granting enforcement of the subpoena precludes review of this issue, relying on Foutch v. O’Bryant (1984), 99 Ill. 2d 389, 459 N.E.2d 958. In Foutch, however, the circuit court’s denial of the motion notes that the court heard evidence, adduced the arguments of counsel and, being fully advised in the premises, found that the motion should not be granted. Unlike Foutch, no such finding was included in the order entered on October 9, 1987, in the present case. ACI, relying on Walker v. Iowa Marine Repair Corp. (1985), 132 Ill. App. 3d 621, 477 N.E.2d 1335, asserts that a transcript of the first hearing is not necessary, because a transcript of the proceedings on its motion to reconsider is included in the record on appeal. In Walker, the appellate court held that the absence of a transcript from the hearing on defendants motion to transfer did not preclude proper review, ruling that “the record in the instant case contains all the relevant facts presented. Additionally, the trial court here could only have based its ruling on the pleadings and affidavits in the record presented, thus rendering the transcript nothing more than a memorialization of the arguments of the attorneys.” (132 Ill. App. 3d at 625.) The Walker court found Foutch “inapposite” because in the latter case the order recited that the judge had heard evidence, whereas the order in Walker, as in the case sub judice, did not include that language.

No occasion to conjecture arises in the present case as to whether evidence was heard. Firstly, the Department’s counsel at the hearing on the motion to reconsider continually noted that the facts and argument presented to both judges at the first and second hearings were the same. Secondly, ACI again asked the court for the same relief it had sought in the first hearing, which was denied: to direct that discovery be allowed in order to prove the allegations of harassment, coercion and abuse of process. This was the very evidence that ACI wanted to present at an evidentiary hearing. There would have been no reason to ask for leave to seek such evidence had it been considered and ruled on at the first hearing. The Department makes no contrary argument.

We hold that ACI established a prima facie challenge to the legitimacy of the Department’s purpose in issuing the administrative subpoena in this case under the facts presented, evidence of which the circuit court should have permitted to be secured and presented prior to the enforcement of the subpoena. Failure to have done so here was an abuse of discretion, which requires reversal and remandment for further proceedings consistent with this opinion.

Reversed and remanded with directions.

BILANDIC, J., concurs.