Pa. Pub. Util. Comm'n v. Del. Valley Reg'l Econ. Dev. Fund

• Decision Date: 05 May 2021
• Docket Number: No. 491 M.D. 2018,491 M.D. 2018
• Parties: PENNSYLVANIA PUBLIC UTILITY COMMISSION, Petitioner v. DELAWARE VALLEY REGIONAL ECONOMIC DEVELOPMENT FUND, John Coffman, Lauri A. Kavulich, Thomas Jay Ellis, Gaetano Piccirilli, Albert Mezzaroba, Anthony DiSandro, Roseanne Pauciello, Jonathan Ireland, William Martin, Thomas Muldoon (in their official capacity), Respondents
• Court: Pennsylvania Commonwealth Court

255 A.3d 602

PENNSYLVANIA PUBLIC UTILITY COMMISSION, Petitioner

v.DELAWARE VALLEY REGIONAL ECONOMIC DEVELOPMENT FUND, John Coffman, Lauri A. Kavulich, Thomas Jay Ellis, Gaetano Piccirilli, Albert Mezzaroba, Anthony DiSandro, Roseanne Pauciello, Jonathan Ireland, William Martin, Thomas Muldoon (in their official capacity), Respondents

No. 491 M.D. 2018

Commonwealth Court of Pennsylvania.

Argued March 15, 2021

Decided May 5, 2021

Joseph P. Cardinale, Jr., Assistant Counsel, Harrisburg, for Petitioner.

Peter Breslauer, Philadelphia, for Respondents.

BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ELLEN CEISLER, Judge, HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION BY JUDGE McCULLOUGH

This matter returns to us on the Application for Summary Relief (Application) of Respondent Delaware Valley Regional Economic Development Fund (Fund), which requests dismissal of an action filed in this Court's original jurisdiction by Petitioner Pennsylvania Public Utility Commission (PUC).

Background

We summarized the background of this litigation in our prior decision, Pennsylvania Public Utility Commission v. Delaware Valley Regional Economic Development Fund , 2019 WL 2619952 (Pa. Cmwlth., No. 491 M.D. 2018, filed June 27, 2019) (unreported) ( DVREDF I ), in which we addressed Respondents’¹ preliminary objections to the PUC's Complaint.²

The Fund is a nonprofit corporation that was incorporated on December 20, 1994, for the stated purpose of, inter alia , organizing a group of citizens to promote the betterment, economic development, and national and international tourism and relations of the City of Philadelphia, the region commonly referred to as the "Delaware Valley," the Commonwealth of Pennsylvania, and the State of New Jersey. (Compl. ¶18.) In 1998, the Fund received approximately $21 million in funding from PECO Energy Company (PECO) ratepayers pursuant to a settlement order (1998 PECO Restructuring Settlement Order) entered by the PUC in connection with the Electricity Generation Customer Choice and Competition Act² and PECO's associated comprehensive Restructuring Plan. (Compl. ¶¶19, 21, 23-24, 28.) The 1998 PECO Restructuring Settlement Order required the Fund to use the funding for the issuance of loans and grants for economic development projects that have a job impact in PECO's service territory. (Compl. ¶¶19, 29.) In connection with the Fund's receipt of the funding, the PUC directed the Fund to file semi-annual reports, which detailed the Fund's activities and provided applicable statements of account, with the PUC's Bureau of Audits, so that the PUC and the public could monitor the Fund's activities to ensure that the funds were being used prudently and for the purpose for which the funds were intended.³ (Compl. ¶¶30-32.)

² 66 Pa. C.S. §§ 2801 - 2815.

³ The PUC initially required the Fund to file semi-annual reports for two fiscal years, beginning July 1, 1999, but thereafter extended the Fund's semi-annual reporting requirements until such time that the PUC approved any new transmission and distribution rates for PECO. (Compl. ¶¶30, 33-35.)

On May 21, 2010, as a result of the PUC's concerns regarding the Fund's lack of activity in issuing loans and grants as required by the 1998 PECO Restructuring Settlement Order and in an attempt to refocus the Fund on its obligations under the 1998 PECO Restructuring Settlement Order, the PUC and the Fund entered into an Agreement (2010 Settlement Agreement), whereby the Fund agreed to, inter alia : (1) submit quarterly reports with statements of accounts to the PUC's Bureau of Audits; (2) adhere to the loan and grant guidelines adopted by the Fund; (3) maximize the use of the PECO ratepayers’ funds for the purpose set forth in the 1998 PECO Restructuring Settlement Order; and (4) provide the PUC with quarterly documentation of the grants and loans that the Fund awarded. (Compl. ¶¶36, 55, 59 and App. B.) As consideration, the PUC agreed to not initiate an action against the Fund for a violation of the 1998 PECO Restructuring Settlement Order and to provide the Fund with reasonable notice and an opportunity to cure any breach of the 2010 Settlement Agreement. (Compl. ¶58 and App. B.) The PUC also acknowledged that, as of the date of the 2010 Settlement Agreement, the Fund had complied with the terms and conditions of the 1998 PECO Restructuring Settlement Order. (Compl. ¶58 and App. B.)

Based on information provided to the PUC, however, it appears to the PUC that the Fund's "loan and grant activity has steadily diminished and is presently moribund, while its portfolio has grown to 92% of its net assets" and that the Fund's "loans to assets ratio has decreased dramatically and has remained at an unacceptable low level." (Compl. ¶¶38-39, 77-78.) In addition, the PUC believes that the Fund does not have an "outreach program to identify and select credible economic projects" or a "marketing program to advertise its economic development purpose," has failed to update its website, and is unknown in the Philadelphia community. (Compl. ¶¶40-42.) The Fund has also stopped providing the PUC with information regarding its operations, and, therefore, the PUC is unable to determine whether the Fund is in compliance with the 1998 PECO Restructuring Settlement Order. (Compl. ¶43.) In other words, the PUC believes that the Fund has failed to use the PECO ratepayers’ funds prudently or for the purpose intended by the 1998 PECO Restructuring Settlement Order. (Compl. ¶45.)

On July 16, 2018, the PUC filed its Complaint, setting forth causes of action against Respondents for breach of fiduciary duty and breach of contract. In its breach of fiduciary duty claim (Count I), the PUC alleges that the Fund's Officers/Directors breached the duties of care and loyalty that they owed to the Fund because the Fund has failed to adhere to its legal obligations under the 1998 PECO Restructuring Settlement Order and the 2010 Settlement Agreement to maximize the use of the PECO ratepayers’ funds for the issuance of loans and grants for economic development projects that have a job impact in PECO's service territory. In its breach of contract claim (Count II), the PUC alleges that the Fund breached the 1998 PECO Restructuring Settlement Order and the 2010 Settlement Agreement by: (1) altogether ceasing to provide grants for economic development projects that have a job impact in PECO's service territory; (2) providing very few, if any, loans for economic development projects that have a job impact in PECO's service territory; (3) failing to provide the PUC with the documentation necessary for the PUC to determine whether the Fund has been utilizing the PECO ratepayers’ funds for economic development projects that have a job impact in PECO's service territory; and (4) focusing its loans and grants on projects that have questionable economic benefit.

DVREDF I , slip op. at 3-5.

In DVREDF I , this Court sustained Respondents’ preliminary objection to Count I—breach of fiduciary duty—under the "gist of the action" doctrine.³ We reasoned that "[t]he ‘gist’ of the PUC's action sounds in contract, not tort, as the PUC's breach of fiduciary duty claim is based on the same conduct that the PUC alleges is a breach of the 1998 PECO Restructuring Settlement Order and the 2010 Settlement Agreement ...." Id. at 9. We accordingly dismissed Count I of the PUC's Complaint. However, we overruled Respondents’ preliminary objections to Count II—breach of contract. We opined that the PUC had set forth sufficient facts to support its claim, thus overcoming Respondents’ demurrer. Id. at 10-12.

Relevant to the issue presently before us, we rejected Respondents’ request to dismiss Count II on statute of limitations grounds, finding the matter unsuitable for resolution on preliminary objections. Under Pennsylvania Rule of Civil Procedure No. 1030(a), all affirmative defenses, including the statute of limitations, must be pleaded in a responsive pleading as "new matter," and should not be raised on preliminary objections. Pa.R.C.P. No. 1030(a). We found no applicable exception to that rule, and because the PUC had challenged the premature assertion of the statute of limitations by filing a preliminary objection of its own, we sustained the PUC's preliminary objection and struck Respondents’ preliminary objection based upon the statute of limitations. DVREDF I , slip op. at 12-13.

The Fund filed an amended answer on September 13, 2019, and properly raised the statute of limitations defense in new matter, among other affirmative defenses. The PUC filed preliminary objections to the Fund's new matter, which this Court overruled in an order dated July 27, 2020. On August 22, 2020, the Fund filed an application for summary relief under Pennsylvania Rule of Appellate Procedure 1532, seeking dismissal of Count II of the PUC's Complaint on the basis of the statute of limitations. The PUC filed an application to quash on August 24, 2020, contending that the Fund's application was premature because the PUC had not yet filed an answer to the Fund's new matter. The PUC filed its answer two days later, on August 26, 2020.

The Fund then filed an answer to the PUC's application to quash, as well as preliminary objections to the PUC's answer and new matter, contending that the PUC's answer should be stricken as untimely because it was not filed within 20 days after this Court's July 27, 2020 order overruling the PUC's preliminary objections. In the event that this Court accepted the PUC's pleading, however, the Fund requested the opportunity to refile its application for summary relief, to allow it to address the content of the PUC's new pleadings. On October 16, 2020, this Court overruled the Fund's preliminary objections and accepted the PUC's answer as timely under Pa.R.A.P. 1516(b), which allows responsive pleadings in original jurisdiction actions to be filed within 30 days after service of the preceding pleading, rather than the 20 days...