Opinion
No. 411 C.D. 2012
05-06-2013
Jeffrey Berman, Petitioner v. Office of Health Care Reform, Respondent
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE ANNE E. COVEY, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE LEAVITT
Jeffrey Berman, M.D., petitions for review of an adjudication of the Board of Claims dismissing his claim for payment of services he performed for the Governor's Office of Health Care Reform. In doing so, the Board concluded that it lacked jurisdiction because Dr. Berman had failed to exhaust his administrative remedies before filing his claim with the Board or, in the alternative, failed to file his claim with the Board in a timely manner. Concluding that Dr. Berman failed to exhaust his administrative remedies, we affirm.
The facts are taken from Dr. Berman's statement of claim. Dr. Berman is a physician specializing in internal medicine, pulmonary medicine and health care policy. On January 21, 2003, by executive order number 2003-1, Governor Edward G. Rendell established the Office of Health Care Reform to coordinate a health care reform agenda and direct the restructuring of the Commonwealth's health care delivery system. Governor Rendell invited Dr. Berman, a personal acquaintance, to work for the Office of Health Care Reform as a consultant to develop ways to expand access to affordable, quality health care coverage for every Pennsylvanian.
In July 2005, Dr. Berman, a Florida resident, traveled to Pennsylvania and attended a meeting with, inter alia, Governor Rendell; the Governor's Secretary of Policy and Planning, Donna Cooper; and the Director of the Office of Health Care Reform, Rosemarie Greco. Dr. Berman agreed to accept a position as a consultant to provide advice on health policy and Medicaid program integrity. On August 9, 2005, Donna Cooper sent Dr. Berman an e-mail detailing his compensation for the consultant job, and it stated, in relevant part, as follows:
[I]n terms of pay - we would pay you a flat fee for service $50,000 divided into 12 monthly payments. You would need to pay whatever federal and state taxes apply to you as a Florida resident.Reproduced Record at 10 (R.R. ___).
***
Boy did they get a bargain!!
From September 1, 2005, through January 31, 2007, Dr. Berman provided consulting services to the Office of Health Care Reform. He spent approximately two weeks per month in Pennsylvania at the Office of Health Care Reform, where he had been given an office, and he also worked from his home in Florida. Dr. Berman treated the consulting position as a full-time job.
Dr. Berman was not compensated on a monthly basis as had been agreed to in Ms. Cooper's August 9, 2005, e-mail communication. However, Susan Anderson, Chief of Staff of the Office of Health Care Reform, reassured Dr. Berman on numerous occasions that he would be compensated for his services. At the direction of B.J. Holland, a staff attorney for the Office of Health Care Reform, Dr. Berman submitted invoices throughout 2006 seeking payment. On January 8, 2007, Anderson e-mailed Dr. Berman, stating that "Bj (sic) is working on getting you paid. I am really embarrassed but this is bureaucracy!" R.R. 14. Later that month, Anderson told Dr. Berman that he would be paid within the first few months of 2007. He was not paid. Dr. Berman continued to contact Anderson about payment throughout 2007 and was told that it would be forthcoming.
In October 2009, the Director of the Office of Health Care Reform, Ann Torregrossa, made efforts to have Dr. Berman paid. Her efforts resulted in a $5,000 payment in December 2009.
At some point in 2010, the Office of Health Care Reform ceased to exist. Dr. Berman then spoke directly with Governor Rendell, informing him of his outstanding invoices. Governor Rendell instructed the Secretary of the Budget, Mary Soderberg, to assist Dr. Berman, and he received another $5,000 payment in January 2011. That same month, Dr. Berman submitted another invoice to Secretary Soderberg and was advised that his invoice would be processed through the Department of Public Welfare; however, Dr. Berman received no further payments.
On January 18, 2011, Governor Rendell's administration came to a close.
In June 2011, Dr. Berman, by his lawyer, wrote to the Governor's Office of General Counsel seeking payment from the Commonwealth in the amount of $60,833.33, for his 17 months of service plus interest. The letter requested that if "the Commonwealth's position is that Dr. Berman will not be paid in full, please inform me in writing so that Dr. Berman can file a complaint with the Board of Claims." R.R. 51.
The letter is undated. The Office of General Counsel acknowledged that it received the letter on June 28, 2011.
By letter dated July 1, 2011, the Office of General Counsel responded that "Dr. Berman's demand for payment is denied." R.R. 17. The Office of General Counsel explained the denial as follows:
Your correspondence fails to establish the existence of any validly approved and executed contract for which the Commonwealth is obligated to pay Dr. Berman the sum demanded. Moreover, more than four (4) years have elapsed since the accrual of any alleged contractual claim Dr. Berman now asserts. Accordingly, the Commonwealth denies any liability for the sums demanded in your correspondence on behalf of Dr. Berman.R.R. 18.
On November 25, 2011, Dr. Berman filed the instant statement of claim with the Board of Claims seeking a judgment against the Commonwealth for breach of contract or, in the alternative, in quasi-contract. The Office of General Counsel filed preliminary objections asserting that the Board lacked jurisdiction because Dr. Berman had failed to comply with the requirements of Section 1712.1 of the Procurement Code, 62 Pa. C.S. §1712.1, for pursuing a breach of contract claim against the Commonwealth.
The text of Section 1712.1 appears infra.
The Board agreed with the Office of General Counsel and dismissed Dr. Berman's statement of claim. The Board found that Dr. Berman's claim against the Commonwealth accrued on July 1, 2011, when the Office of General Counsel refused to pay him, and that he had six months from that date to pursue an administrative remedy, but he did not do so. In the alternative, the Board reasoned that were Dr. Berman's June 2011 letter to the Office of General Counsel to be construed as the initiation of the administrative remedy, then it was denied by the Office of General Counsel on July 1, 2011. At that point, his deadline for filing a statement of claim with the Board was July 16, 2011, and he missed that deadline by several months. In either case, the Board lacked jurisdiction. Dr. Berman then petitioned for this Court's review.
This Court's review of an order of the Board sustaining preliminary objections and dismissing a complaint is limited to determining whether the Board abused its discretion or committed an error of law. Buchart Horn, Inc. v. Department of Transportation, 1 A.3d 960, 964 n.6 (Pa. Cmwlth. 2010), petition for allowance of appeal denied, 610 Pa. 601, 20 A.3d 489 (2011). All well-pleaded material facts must be taken as true and the preliminary objections may be sustained only if the result is clear and free from doubt. Id. Whether preliminary objections were properly granted involves a question of law over which this Court's standard of review is de novo and our scope of review is plenary. Id.
On appeal, Dr. Berman argues that the Board erred. Dr. Berman contends that under the unique facts of his case, it was not possible for him to exhaust his administrative remedy because there was no Office of Health Care Reform by the time his claim was denied. His only alternative was to file a claim directly with the Board, and he did so timely, i.e., within six months of his claim denial. Dr. Berman also contends that, in any case, the Commonwealth should be estopped from challenging the Board's jurisdiction because its actions frustrated Dr. Berman's attempts to be paid.
We begin with a review of the Procurement Code. Section 1724 vests the Board with "exclusive jurisdiction to arbitrate claims arising from ... a contract entered into by a Commonwealth agency." 62 Pa. C.S. §1724(a)(1). However, the statute specifies that the Board "shall have no power and exercise no jurisdiction over [such] a claim ... unless it is filed with the [B]oard in accordance with section 1712.1." 62 Pa. C.S. §1724(c). Section 1712.1 sets forth the procedure for resolving contract disputes between a contractor and the Commonwealth, and it states as follows:
(a) Right to claim.--A contractor may file a claim with the contracting officer in writing for controversies arising from a contract entered into by the Commonwealth.62 Pa. C.S. §1712.1(a)-(f) (emphasis added).
(b) Filing of claim.--A claim shall be filed with the contracting officer within six months of the date it accrues. If a contractor fails to file a claim or files an untimely claim, the contractor is deemed to have waived its right to assert a claim in any forum. Untimely filed claims shall be disregarded by the contracting officer.
(c) Contents of claim.--A claim shall state all grounds upon which the contractor asserts a controversy exists.
(d) Determination.--The contracting officer shall review a claim and issue a final determination in writing regarding the claim within 120 days of the receipt of the claim unless extended by consent of the contracting officer and the contractor. If the contracting officer fails to issue a final determination within the 120 days unless extended by consent of the parties, the claim shall be deemed denied. The determination of the contracting officer shall be the final order of the purchasing agency.
(e) Statement of claim.--Within 15 days of the mailing date of a final determination denying a claim or within 135 days of filing a claim if no extension is agreed to by the parties, whichever occurs first, the contractor may file a statement of claim with the board.
(f) Applicability.--The provisions of 2 Pa. C.S. (relating to administrative law and procedure) shall not apply to this section.
In sum, where a contract dispute arises between a contractor and the Commonwealth, the contractor must file a claim with the "contracting officer within six months of the date [the claim] accrues." 62 Pa. C.S. §1712.1(b). The contracting officer must review a claim and "issue a final determination in writing regarding the claim." 62 Pa. C.S. §1712.1(d). The contractor then has 15 days from the mailing date of the written final determination to file a "statement of claim" with the Board. 62 Pa. C.S. §1712.1(e). If these steps are not followed, the Board has "no power" to hear the claim. 62 Pa. C.S. §1724(c). Indeed, the contractor loses the right "to assert a claim in any forum." 62 Pa. C.S. §1712.1(b).
Dr. Berman argues that his claim did not accrue until he was notified on July 1, 2011, that the Commonwealth would not pay him. Under Section 1712.1, he had six months to file a claim with the contracting officer. However, it was impossible for him to do so because the Office of Health Care Reform no longer exists, and Donna Cooper is no longer employed with the Commonwealth. Given those circumstances, he argues that the six-month filing deadline applied to a filing of his claim with the Board, which he met by filing on November 24, 2011. Dr. Berman denies that his letter to the Office of General Counsel was a "claim" or that the reply from the Office of General Counsel constituted a "final determination" within the meaning of 62 Pa. C.S. §1712.1(d). The Commonwealth responds that Dr. Berman had six months to seek an administrative hearing and he failed to do so. The procedural prerequisites in Section 1712.1 cannot be bypassed. Accordingly, Dr. Berman has lost his right to assert his claim in any forum.
There is no question, as Dr. Berman observes, that his case is studded with unusual circumstances. By the time he first received word that he would not be paid, the person who hired him was gone as was the agency for which he worked. Nevertheless, this does not change the Court's task, which is to parse the statute and apply it to Dr. Berman's claim for unpaid contractual work.
The first question is when Dr. Berman's claim accrued for purposes of Section 1712.1(b). Our Supreme Court has adopted this Court's two-part test for determining when a contract claim accrues. That test follows:
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 Employes' Retirement System, 549 Pa. 1, 6, 700 A.2d 395, 397 (1997) (emphasis added). The Commonwealth's denial of a claim must be unequivocal in order for a claim to accrue. Id. The Board held that Dr. Berman received this unequivocal denial on July 1, 2011. We agree and, in fact, Dr. Berman does not challenge the Board's conclusion that his claim accrued on July 1, 2011.
This is consistent with K-B Offset Printing, Inc. v. Department of General Services, (Pa. Cmwlth., No. 2137 C.D. 2011, filed April 18, 2012), an unreported decision that can be cited for its persuasive value. In K-B Offset Printing, the contractor sent a letter to the Department of General Services demanding payment. Upon receiving a written denial from the Department, the contractor immediately filed a claim with the Board and not with the Department. The Board dismissed his claim for failure to exhaust his administrative remedy. On appeal, the contractor argued that his demand was the claim, and the Department's response was the denial, which completed the administrative process. We rejected that theory, holding that the Department's denial was the date on which the claim accrued, obligating the contractor to obtain an administrative hearing.
Section 1712.1(b) of the Procurement Code states that a claim must be submitted to a contracting officer within six months after it has accrued. Exhausting administrative remedies in the manner prescribed by Section 1712.1 is mandatory, not "optional," and cannot be achieved by "alternative methods." Buchart Horn, 1 A.3d at 964-65. Dr. Berman acknowledges, as he must, that he did not submit his claim to a contracting officer. However, he argues that it was impossible because the Office of Health Care Reform no longer existed and, further, no "contracting officer" had ever been identified.
A "contracting officer" is defined as a "person authorized to enter into and administer contracts and make written determinations with respect to contracts." 62 Pa. C.S. §103. According to Dr. Berman, the original contracting officer was Donna Cooper. Dr. Berman was able to secure a $5,000 payment through the Secretary of the Budget. The Board held that even when there is no clearly identified contracting officer, the contractor must still submit its claim to some officer within the agency "reasonably believed to have authority to address said claim." Board Adjudication at 7; R.R. 102. The Office of General Counsel represents "the Commonwealth of Pennsylvania, the Governor, members of the Cabinet, and the executive and independent agencies that manage the business of the Commonwealth." It was to this Office that Dr. Berman presented his payment demand. It was the denial by this Office that caused Dr. Berman's claim to accrue on July 1, 2011. He should have presented his Section 1712.1(b) claim to that same Office. He had six months to do so, and he did not.
See http://www.ogc.state.pa.us/portal/server.pt/community/about_the_office/3252.
Dr. Berman's failure to pursue his Section 1712.1(b) claim as prescribed in the Procurement Code deprived the Board of any power to act on his claim. The Board properly sustained the Commonwealth's preliminary objections and dismissed Dr. Berman's statement of claim for failure to exhaust administrative remedies.
This is so even if the Office of General Counsel's July 1, 2011, letter makes it appear that a denial of a subsequent claim might have been a foregone conclusion. See Clairton Slag, Inc. v. Department of General Services, 2 A.3d 765, 781 (Pa. Cmwlth. 2010) (explaining that this Court will not assume that the administrative process provided for in Section 1712.1 would be futile).
Dr. Berman relies on the Board's opinion in Data-Quest, Inc. v. Department of Health, Docket No. 3919, dated April 10, 2008. In that case, Data-Quest spent four years developing and tailoring a software program which the Department of Health repeatedly assured Data-Quest it was going to purchase. There was, however, no written contract and, therefore, no identified contracting officer. When it became apparent that the Department was not going to purchase the system, Data-Quest sent a series of letters to the Department demanding payment for its services. The Department declined to make payment, and Data-Quest filed a claim with the Board of Claims asserting theories of promissory estoppel and quasi-contract. Data-Quest asserted that its letters to the Department fulfilled its exhaustion requirement. The Department argued that the letters did not satisfy the exhaustion requirement because they were not addressed to the Department's contracting officer. The Board held that it was sufficient for Data-Quest to send its demands for payment setting out the substance of its claim to the Department in general because the contracting officer was unknown to Data-Quest. The Board specified that its ruling was limited to this narrow issue and did not involve "timing or any other aspect of Data-Quest's claims as submitted to [the Department]." Board Adjudication at 11 n.13.
DataQuest does not support Dr. Berman's assertion that he did not have to file a claim with the Office of General Counsel before proceeding before the Board. In fact, it suggests the opposite, i.e., that he should have submitted a claim, in letter form or otherwise, to the Office of General Counsel. It may appear redundant to require a person to file a claim with an agency that has just said "no." However, the futility of an administrative remedy cannot be presumed. See Canonsburg General Hospital v. Department of Health, 492 Pa. 68, 422 A.2d 141 (1980) (holding that even where the hospital sought to challenge the agency head's action, it was necessary to request an administrative hearing from that agency before seeking a writ of mandamus).
Accordingly, the order of the Board is affirmed.
/s/_________
MARY HANNAH LEAVITT, Judge
ORDER
AND NOW, this 6th day of May, 2013, the order of the Board of Claims dated February 17, 2012, in the above captioned matter is hereby AFFIRMED.
/s/_________
MARY HANNAH LEAVITT, Judge