Ferguson Electric Co. Inc. v. Dep't Of Gen. Serv.

3 A.3d 681

FERGUSON ELECTRIC CO., INC., Petitioner

v.DEPARTMENT OF GENERAL SERVICES, Respondent.

Commonwealth Court of Pennsylvania.

Argued March 15, 2010.

Decided July 1, 2010.

Publication Ordered Aug. 31, 2010.

COPYRIGHT MATERIAL OMITTED.

Roy S. Cohen, Philadelphia, for petitioner.

David L. Narkiewicz, Harrisburg, for appellee.

BEFORE: COHN JUBELIRER, Judge, McCULLOUGH, Judge, FLAHERTY, Senior Judge.

OPINION BY Judge McCULLOUGH.

Ferguson Electric Co., Inc. (Ferguson) appeals from the September 23, 2009, order of the Board of Claims (Board), which sustained the preliminary objections filed by the Department of General Services (DGS) and dismissed Ferguson's claim for lack of jurisdiction. We affirm.

On January 14, 1994, DGS and Ferguson entered into a contract for the performance of electrical work in the construction of the state correctional institution at Houtzdale, Pennsylvania. The contract provides, among other things, that disputes arising between a contractor and DGS are to be resolved in accordance with the following three-step procedure: (1) a construction conference; (2) a pre-claim hearing, and (3) a claim filed with the Board pursuant to the Act of May 20, 1937, P.L. 728, as amended, formerly 72 P.S. §§ 4651-1-4651-10 (the Board of Claims Act). (Reproduced Record (R.R.) at 702a-04a.) This “three-tiered” dispute resolution procedure was in effect until 1998, when the Commonwealth Procurement Code (Code) was enacted. ¹

During the course of construction, Ferguson sought payment from DGS for the cost of additional work associated with numerous change orders. On December 5, 1996, in accordance with the contract, the parties participated in a construction conference on the outstanding change orders. ² (R.R. at 320a-36a.) At the conclusion of the conference, DGS granted Ferguson the opportunity to submit evidence of the actual costs it incurred in performing the work for each of the change orders. DGS advised Ferguson that it could not address the change orders until evidence of actual costs was submitted. (R.R. at 321a-22a.)

By letter dated September 12, 1997, DGS informed Ferguson that DGS had not yet received any additional information and asked Ferguson to confirm that it still intended to submit evidence of actual costs. (R.R. at 338a.) Ferguson did not respond to the correspondence and did not submit any additional evidence. Believing that it was Ferguson's responsibility to advance its own claim, DGS did not make a second request for additional evidence or initiate any further communication with Ferguson.

Ferguson took no action for approximately five years. Then, on May 20, 2002, Ferguson submitted a claim to DGS, which included a demand for payment of the change orders. (R.R. at 346a-58a.) By letter dated May 24, 2002, DGS returned the claim to Ferguson's legal counsel, explaining that the claim should have been filed with the Board, and not DGS. However, Ferguson did not file the claim with the Board; instead, via a series of letters in 2002, Ferguson ultimately informed DGS that it wished to resolve this matter in accordance with the procedures established by the Code. Ferguson promised to provide DGS with supporting documentation but never did. ³ (R.R. at 363a, 364a, 371a, and 475a.) On October 1, 2003, Ferguson filed a Right-to-Know Act ⁴ request with DGS demanding the production of numerous documents related to the construction project. ⁵ (R.R. at 373a-75a.)

Approximately five years later, on April 23, 2007, Ferguson sent a letter to DGS, asking it to schedule a construction claims conference. By letter dated August 1, 2007, and sent certified mail, DGS responded as follows:

[T]he Department deems that Ferguson Electric Company breached their duty to submit the information in a timely manner, thereby prejudicing the Department's ability to conduct a meaningful review of any claim. In fact, the Construction Inspection Manager on the project has passed away.

The claim has had several attorneys of record working for various law firms that have, for the past ten years, issued unfulfilled assurances to submit documentation of actual costs ‘shortly’ and ‘in an expeditious fashion,’ following the December 5, 1996 Construction Conference. Now, 127 months after the Construction Conference and almost 12 years after Final Inspection on the project, your firm is attempting to continue the claim, which is disingenuous at best. Ferguson's failure to submit the information constitutes a waiver of the right to pursue the claim.

(R.R. at 377a.) (Emphasis added.) On August 15, 2007, Ferguson sent a letter to DGS, objecting to the rejection of its claims and requesting another construction conference. (R.R. at 476a.) DGS did not respond.

On March 12, 2008, Ferguson filed a claim with the Board, which contained counts for breach of contract, unjust enrichment, and quantum meruit. Ferguson averred that its total damages on the construction project were $1,607,415.90. The claim was filed more than seven months, approximately 224 days, after DGS's August 1, 2007, letter.

In response, DGS filed preliminary objections to the claim asserting: (1) lack of jurisdiction; (2) insufficient specificity of the pleading; (3) legal insufficiency of the pleading; and (4) failure to exhaust a statutory remedy.

The Board conducted evidentiary hearings on November 5, 2008, and December 4, 2008. After review, the Board found that DGS's August 1, 2007, letter constituted definitive and affirmative notice to Ferguson that its claim would not be paid. Applying section 1712.1 of the Code, the Board concluded that Ferguson's March 12, 2008, claim was untimely filed, and, therefore, the Board lacked jurisdiction. Accordingly, the Board sustained the preliminary objection regarding lack of jurisdiction and dismissed Ferguson's claim. ⁶

On appeal to this Court, ⁷ Ferguson first contends that the Board erred as a matter of law by determining that its claim accrued on August 1, 2007. Under the 1998 and 2002 versions of the Code, as well as the repealed Board of Claims Act, the limitation period on a claim commences when it “accrues.” A claim accrues when (1) a claimant is first able to litigate his or her claim, e.g., when the amount due under the claim is known and the claimant is capable of preparing a concise and specific written statement detailing the injury, and (2) the claimant is affirmatively notified that he or she will not be paid by the Commonwealth. Darien Capital Management, Inc. v. Public School Retirement System, 549 Pa. 1, 700 A.2d 395 (1997). The denial of a claim must be unequivocal, id., and both prongs of the Darien test must be satisfied before a claim may be considered to have accrued. Knorr.

Ferguson argues that the August 1, 2007, letter from DGS did not affirmatively and unequivocally deny any of its claims because the letter does not expressly state that the claims would not be paid. In its August 1, 2007, letter, DGS unequivocally stated that Ferguson waived its right to pursue its claim. While DGS did not use the words “will not be paid” or “denied,” the clear import of the letter is that Ferguson would not be paid. Ferguson recognized this in the August 15, 2007, letter, stating that it was inappropriate for DGS to “blindly reject” the claims. (R.R. at 476a.) Further, the August 1, 2007, letter was DGS's final response to Ferguson's intermittent attempts to receive payment from DGS for the change orders.

Ferguson argues that this case is controlled by Knorr, where the Court determined that a letter issued by an agency did not contain a final and unequivocal denial of the appellant's claim. However, in contrast to the facts here, the letter at issue in Knorr was not a clear and unequivocal statement that the appellant's claim would not be paid, but rather was merely a summary of the problems experienced on the construction project and a request for additional information. Also, while the Court observed that the agency's letter lacked language stating that it was a final decision and informing the contractor that it had a right to appeal, Knorr did not hold that such language is mandatory.

Moreover, the record reflects that Ferguson was capable of preparing a concise and specific written statement detailing the injury as early as May 20, 2002, when Ferguson submitted a claim to DGS that set forth the details of its alleged losses and demanded specific amounts of money. (R.R. at 347a-58a.) Also, by letter dated April 23, 2007, Ferguson informed DGS that it had hired an expert and prepared documentation to support its entitlement to additional funds. (R.R. at 376a.) Therefore, we conclude that Board correctly determined that Ferguson's claim accrued on August 1, 2007.

Next, Ferguson contends that the Board erred by applying section 1712.1 of the Code to this dispute, instead of the three-tier procedure set forth in the parties' contract, to determine that its claim was untimely. However, the record reflects that the parties did initially follow the three-tier procedure, but that process was suspended following the 1996 construction conference in order to allow Ferguson to submit evidence of the actual costs it incurred in performing the work for change orders. The suspension became perpetual due to Ferguson's failure to submit any additional evidence. During this protracted period, the General Assembly enacted the Code and changed the procedure for enforcing a contract claim. Importantly, the record reveals that Ferguson informed DGS that Ferguson wished to proceed in accordance with the new procedure established by the Code. Ferguson's counsel confirmed this by letter dated August 7, 2002:

As you know, this firm represents Ferguson Electric. Please allow me to confirm that Ferguson Electric agrees to proceed with its claim under the new claim procedure outlined in the Commonwealth Procurement Code, 62 PA. C.S. section 1712....

(R.R. at 475a.)

Also, the General Assembly included a...