U.S. Venture, Inc. v. Commonwealth

227 A.3d 462

U.S. VENTURE, INC., Petitioner

v.COMMONWEALTH of Pennsylvania, Department of Community and Economic Development; Commonwealth Financing Agency; and Scott D. Dunkelburger, Executive Director of the Commonwealth Financing Agency, Respondents

No. 78 C.D. 2019

Commonwealth Court of Pennsylvania.

Argued October 2, 2019

Decided February 18, 2020

Michael F. Nerone and Todd R. Brown, Pittsburgh, for Petitioner.

J. Michael Adams, Harrisburg, for Respondents.

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE CHRISTINE FIZZANO CANNON, Judge, HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE COVEY

U.S. Venture, Inc. (Petitioner) petitions this Court for review of the Pennsylvania Board of Claims' (Board) December 28, 2018 order (Board's Order) sustaining the Commonwealth of Pennsylvania (Commonwealth), Department of Community and Economic Development's (Department), Commonwealth Financing Authority's (CFA), and CFA Executive Director Scott D. Dunkelburger's (Dunkelburger) (collectively, Respondents) preliminary objections to Petitioner's statement of claim (Claim), and dismissing the Claim for lack of subject matter jurisdiction. Petitioner presents two issues for this Court's review: (1) whether the Board erred by ruling that it lacked subject matter jurisdiction over the Claim because a compressed natural gas (CNG) fueling station construction is not the type of construction contemplated by the Commonwealth Procurement Code (Procurement Code);¹ and (2) whether the Board erred by ruling that it lacked subject matter jurisdiction over the Claim because its exclusive jurisdiction over contract claims is the only exception to sovereign immunity and its public purpose is to prevent Commonwealth agencies from reneging on contracts with impunity. After a thorough review, this Court affirms.

By October 24, 2014 correspondence (October Correspondence), the Department notified Petitioner that the CFA had approved Petitioner's applications for two grants (Grants) through "The Alternative and Clean Energy [ (ACE) ] Program" (Program), which provides grants for the development and construction of alternative energy projects in the Commonwealth pursuant to the Alternative Energy Investment Act.² The CFA awarded Petitioner a $643,389.00 Grant and a $547,047.00 Grant to aid in the construction of two publicly accessible CNG fueling stations – one to be located in Bethel Township, and the other in Falls Township. The October Correspondence listed 10 conditions, including "comply with the [Program] [g]uidelines; be responsible for seeking competitive bids for all work; submit any substantial change to an approved [p]roject for consent of the [CFA]; [and] maintain full and accurate records for the project and make them available for inspection by the [CFA] if requested." Board Op. at 1-2, Finding of Fact (FOF) 6.

The parties executed written agreements pertaining to the Grants. Respondents did not monitor the projects, and although the CFA's grant documents contained nondiscrimination policies and competitive bidding requirements, they did not provide any construction guidelines, plan specifications or provisions permitting Respondents to oversee the construction. It was Respondents' expectation that Petitioner would submit reimbursement claims upon project completion.

In early 2017, Petitioner completed construction on both CNG fueling stations. Petitioner constructed the fueling stations on privately-owned land. Respondents have no ownership interest in the dispensing equipment used at the fueling stations and have no authority to participate in the CNG fueling stations' management or maintenance. Petitioner sought payment from Respondents. By July 31, 2017 letter (July 2017 Letter), Dunkelburger refused payment on Respondents' behalf, explaining, in relevant part:

ACE funds were specifically awarded to pay construction costs incurred by [Petitioner]. Unfortunately, [Petitioner] did not incur construction costs, instead electing to lease the CNG equipment/station. Therefore, there are no eligible costs for the [Grants] to reimburse. Grant funds cannot be used to pay lease payments for the equipment, fund operations, and make grant-sharing payments to the landowner.

The CFA was unaware that [Petitioner] had decided to lease the CNG equipment/station instead of owning it. The funding commitment letter provided in the original application stated that [Petitioner] would provide the matching funds. The application stated that the [G]rant funds would be used to purchase equipment and pay construction costs, not to make lease payments.

In addition, the material provided by [Petitioner] does not indicate that a competitive bidding process was utilized for the selection of [one of the contractors] for each of the projects as required in the [G]rant agreement.

Reproduced Record (R.R.) at 111a.

On January 23, 2018, Petitioner filed the Claim with the Board alleging breach of contract and sought equitable relief, wherein Petitioner averred that it justifiably relied on Respondents' representations and promises and that Respondents would be unjustly enriched if permitted to deny Petitioner payment. On February 15, 2018, Respondents filed preliminary objections in the nature of a demurrer alleging that the Board lacked jurisdiction over Petitioner's Claim and, thus, Respondents were immune from suit pursuant to the doctrine of sovereign immunity. On December 28, 2018, the Board's Order sustained Respondents' preliminary objections and dismissed Petitioner's Claim. Petitioner appealed to this Court.³

Initially,

[t]he Board was established in furtherance of a public policy extending more than 200 years ago to allow claimants who ordinarily would have been barred by sovereign immunity to have a method of redress against the Commonwealth. The [Pennsylvania] Supreme Court in [ Employers Insurance of Wausau v. Department of Transportation , 581 Pa. 381, 865 A.2d 825 (2005),] construed the Board's equity jurisdiction under the Procurement Code and expounded on its legislative scheme as follows:

[The legislature] recognized that claims arising from contracts involving the Commonwealth could sound in both assumpsit and equity, and expressly provided that, regardless of form, these claims should be decided by the [Board]. It is thus readily apparent that Pennsylvania's legislative scheme intended to vest the [Board] with expansive jurisdiction to decide disputes concerning contracts involving the Commonwealth ....

Wausau , ... 865 A.2d at 832-833.

Pursuant to [Section 1928(b)(7) of the Statutory Construction Act [of 1972 (Statutory Construction Act),] 1 Pa.C.S. § 1928(b)(7), statutory provisions that decrease the jurisdiction of a court of record must be strictly construed. In Armstrong School District v. Armstrong Educ [ation ] Ass'n , ... 595 A.2d 1139, 1144 ( [Pa.] 1991), the Supreme Court observed that ‘if the scope of equity's common law jurisdiction was to have been diminished [by a statute], the language therein should have been ... explicit ....’ Additionally, in Consumers Educ [ation ] & Protective Ass'n v. Schwartz , ... 432 A.2d 173, 178 ( [Pa.] 1981), the [C]ourt noted a well settled principle that ‘when the Legislature itself seeks to depart from salutary public policy principles, it must express its intention to do so explicitly , and any power so granted will be strictly construed .’ (Emphasis in original.)

Dep't of Health v. Data-Quest, Inc. , 972 A.2d 74, 78-79 (Pa. Cmwlth. 2009) (citation omitted).

Section 1724(a) of the Procurement Code, governing the Board's jurisdiction, provides in pertinent part:

Exclusive jurisdiction. — The [B]oard shall have exclusive jurisdiction to arbitrate claims arising from all of the following:

(1) A contract entered into by a Commonwealth agency in accordance with this part and filed with the [B]oard in accordance with [S]ection 1712.1 [of the Procurement Code, 62 Pa.C.S. § 1712.1 ] (relating to contract controversies).

62 Pa.C.S. § 1724(a). Thus, the Board generally has jurisdiction over claims arising from contracts entered into by a Commonwealth agency. "This Court has also broadly construed the Board's jurisdiction to include claims for damages on the theories of promissory estoppel and quasi-contract."⁴

Telwell, Inc. v. Pub. Sch. Emps.' Ret. Sys. , 88 A.3d 1079, 1086 (Pa. Cmwlth. 2014) ; see also Hanover Ins. Co. v. State Workers' Ins. Fund , 35 A.3d 849 (Pa. Cmwlth. 2012) ; Firetree, Ltd. v. Dep't of Gen. Servs. , 978 A.2d 1067 (Pa. Cmwlth. 2009).

Section 102(a) of the Procurement Code provides, in relevant part, that the Procurement Code "applies to every expenditure of funds, other than the investment of funds, by Commonwealth agencies under any contract, irrespective of their source[.]" 62 Pa.C.S. § 102(a). Importantly, Section 102(f) of the Procurement Code specifies: "This part does not apply to grants . For the purpose of this part, a grant is the furnishing of assistance by the Commonwealth or any person, whether financial or otherwise, to any person to support a program." 62 Pa.C.S. § 102(f) (emphasis added). However, Section 102(f) of the Procurement Code provides an exception to the aforementioned exclusion: "The term [‘grant’ ] does not include an award whose primary purpose is to procure construction for the grantor . Any contract resulting from such an award is not a grant but a procurement contract ." Id. (emphasis added). Thus, if a grant's "primary purpose is to procure construction for the grantor[,]" it is considered a procurement contract, and falls within the Board's jurisdiction. Id. (Emphasis added).

The Procurement Code defines "construction" as "[t]he process of building, altering, repairing, improving or demolishing any public structure or building or other public improvements of any kind to any public real property ." 62...