Southeastern Pennsylvania Transp. Authority v. Union Switch & Signal, Inc.

• Decision Date: 14 January 1994
• Court: Pennsylvania Commonwealth Court
• Parties: SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY, Petitioner, v. UNION SWITCH & SIGNAL, INC., Respondent.

Page 662

637 A.2d 662

161 Pa.Cmwlth. 400

SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY, Petitioner, v. UNION SWITCH & SIGNAL, INC., Respondent.

Commonwealth Court of Pennsylvania.

Argued Sept. 14, 1993.

Decided Jan. 14, 1994.

[161 Pa.Cmwlth. 401] Victor P. Stabile, for petitioner.

George D. Wenick, for respondent.

Before DOYLE and PELLEGRINI, JJ., and RODGERS, Senior Judge.

PELLEGRINI, Judge.

The Southeastern Pennsylvania Transportation Authority (SEPTA) appeals from an order of the Board of Claims denying its motion to dismiss for lack of jurisdiction because the Board of Claims determined that it had exclusive jurisdiction to hear a contract claim filed against SEPTA by Union Switch & Signal, Inc. (Union Switch).

On January 23, 1989, Union Switch and SEPTA entered into a contract by which Union Switch agreed to supply and install electrical equipment and material for power and signal systems as part of the construction of the Broad Street Subway Express Tract. The contract established that SEPTA would pay Union Switch $5,500,000 for the work and set the completion date of the project at May 1, 1990. The project, however, was not completed until December of 1991.

Union Switch filed a complaint against SEPTA on March 20, 1992, with the Board of Claims seeking payment of over $5,000,000 for costs it incurred due to SEPTA's alleged delay, disruption and inefficiency of the project, as well as attorney's fees. ¹ It filed the complaint with the Board of Claims because pursuant to Section 4 of the Act of May 20, 1937 (Board of Claims Act), P.L. 728, as amended, 72 P.S. § 4651-4, the Board of Claims has exclusive jurisdiction over actions arising from a contract with the Commonwealth when the amount of the controversy exceeds $300. Union Switch reasoned that while "Commonwealth" is not defined in the Board of Claims Act, an entity is the Commonwealth for purposes of deciding jurisdiction if it enjoys sovereign immunity. Because SEPTA, as a transportation authority, is an "agency and instrumentality of the Commonwealth" and enjoys sovereign immunity from tort liability under Section 8521 of the Judicial Code, 42 Pa.C.S. § 8521, Union Switch concluded it follows that SEPTA is the sovereign for all purposes, including contract claims. As such, the Board had jurisdiction over this action.

SEPTA responded by filing preliminary objections in which it requested, inter alia, ² that the Board of Claims dismiss Union Switch's complaint because it lacked jurisdiction to hear the matter. Specifically, SEPTA argued that while the Board of Claims has exclusive jurisdiction to hear all claims against the Commonwealth arising from contracts where the amount in controversy is The Board of Claims denied SEPTA's request to dismiss for lack of jurisdiction finding that SEPTA is an agency of the Commonwealth, ³ and in the absence of an appellate court decision holding that the Board of Claims does not have jurisdiction to entertain contract claims against SEPTA, it would assume jurisdiction of those matters. ⁴ SEPTA filed an application with the Board of Claims requesting that it amend its decision and permit certification of the issue of the Board of Claims' jurisdiction to this court. The Board of Claims granted SEPTA's application and amended its order to permit SEPTA to seek interlocutory review of the jurisdictional question. SEPTA then petitioned this court for permission to appeal the Board of Claims' order which we granted.

$300 or more, SEPTA is not the "Commonwealth" for purposes of contract claims. Consequently, jurisdiction is not with the Board of Claims but with the Court of Common Pleas in the county in which SEPTA can be served that has jurisdiction over this matter.

The only issue before this court is whether SEPTA is considered to be the "Commonwealth" for purposes of determining jurisdiction when contract claims are filed against it with the Board of Claims. If SEPTA is part of the Commonwealth, then contract claims against it must be filed with the Board of Claims. If it is a local agency, then contract claims filed against it must be filed with the Court of Common Pleas in the county in which SEPTA can be served. The resolution of this issue is important not only because it will determine jurisdiction of contract claims filed against SEPTA or, for that matter, against all authorities, but it will also define whether non-contract and non-tort actions against SEPTA are in this court's original jurisdiction (rather than in the Court of Common Pleas), with the attendant automatic appeal of right from this court to our Supreme Court. See Pa.R.A.P. 1101(a)(1). ⁵

The difficulty in determining the status of SEPTA or, for that matter, any authority, is directly related to the reasons behind their creation and authorization by the General Assembly. Although authorities owe their existence to the various units of government and their governing boards are appointed by those entities, they are not considered part of the normal governmental structure. Unlike municipal corporations that have "governmental" and "proprietary" functions, authorities engage only in the latter. Authorities are "public corporations, being corporate agencies engaged in the administration of civil government." ⁶ Lighton v. Abington Township, 336 Pa. 345, 353, 9 A.2d 609, 613 (1939). Generally, authorities are established for the purpose of financing and the need for an administrative agency to manage public enterprises which, in certain case, have commercial characteristics, e.g., Metropolitan Transportation Authorities (SEPTA); Parking Authorities;

managing various revenue producing projects of a public nature or other activities that are not considered to be part of core governmental activities; they are a governmental business venture, a form of quasi-privatization. The circumstances prompting their creations are usually for one or more of the following reasons:

. the need for an agency which can cross governmental boundary lines for the effective handling of intercommunity problems, e.g., SEPTA;

the need for a method to carry out activities that are constitutionally or statutorily proscribed such as the need to finance public improvements without running afoul of the constitutional limits on debt. ⁷ (See Lesser v. Warren Borough, 237 Pa. 501, 85 A. 839 (1912) and more recently, to give or lend federal funds given to local governments for community development that otherwise would be constitutionally proscribed by Article 9, Section 9 of the Pennsylvania Constitution. ⁸

While the first two reasons for the creation are very similar to reasons why a private corporation would create a subsidiary to carry out an enterprise or would enter into joint venture with another company, ⁹ the last reason, the need to avoid constitutional impediments, is the one that causes the confusion as to whether authorities are part of the Commonwealth and, if so, for what purposes. Because of the need to get around these constitutional impediments, the legislation authorizing the creation of authorities contains language that the authority is not an agency of the governmental unit(s) that creates it and appoints its board members, but is considered an agency of the Commonwealth. Typical of the language contained in most acts is the language contained in Section 1 of the Metropolitan Transportation Authorities Act, 74 P.S. 1502, ¹⁰ which states that:

An authority shall in no way be deemed to be the instrumentality of any city or county or other municipality or engaged in the performance of a municipal function, but shall exercise the public powers of the Commonwealth as an agency and instrumentality thereof. ¹¹

Even when the authorizing legislation is silent, because of the reason behind the creation of authorities to avoid restrictions on local governments, those authorities are still considered an instrumentality of the Commonwealth. See Application of the Municipal Authority of The Township of Upper St. Clair, 408 Pa. 464, 184 A.2d 695 (1962). ¹²

While authorities may be considered an "instrumentality of the Commonwealth", that does not mean that they are automatically considered to be "the Commonwealth" for all purposes. To determine whether they should be considered as "the Commonwealth", we examine the intent of the General Assembly in enacting a particular piece of legislation. For example, our Supreme Court in Marshall v. Port Authority of Allegheny County [PAT], 524 Pa. 1, 568 A.2d 931 (1990), looked to the definitions contained in that portion of the Judicial Code relating to sovereign immunity to determine whether a "Port Authority" created under the Second Class Port Authority Act ¹³ was a "commonwealth party." It stated:

Clearly, PAT may claim sovereign immunity if it is a "commonwealth party." A "commonwealth party" is defined in 42 Pa.C.S. § 8501 as "[a] Commonwealth agency and an employee thereof ..." Under 42 Pa.C.S. § 102, commonwealth agency is defined as "[a]n executive agency or independent agency." Agencies are classified as "executive" if they are under the supervision and control of the Governor, and, if they are not, as "independent." Id. Both of these types of agencies are expressly defined as including entities such as boards, commissions, authorities, and other agencies "of the Commonwealth government." Id. "Commonwealth government" is, in turn, defined as encompassing the following:

... the departments, boards, commissions, authorities and officers and agencies of the commonwealth, but the term does not include any political subdivision, municipal or other local authority, or any officer or agency of any such political subdivision or local authority. (Underline in original, bold text added.)

Id. at 4-5, 568 A.2d at 933. ¹⁴

Because, like SEPTA, its authorizing legislation provides that "it exercises the powers of the Commonwealth as an agency thereof", our Supreme Court found that PAT was a "commonwealth party...