Opinion
No. 265 C.D. 2014
02-23-2015
Haines & Kibblehouse, Inc., Subcontractor to Balfour Beatty Construction, Inc., Petitioner v. Department of Transportation, Respondent
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE LEADBETTER
Haines & Kibblehouse, Inc. (H&K), subcontractor to Balfour Beatty Construction, Inc. (Balfour), appeals from an order of the Board of Claims that sustained the preliminary objections of the Department of Transportation and dismissed, in its entirety, H&K's amended complaint. In this case, H&K removed its claims from Balfour's action pending before the Board and filed its own complaint. We conclude that the subcontractor's attempt to use the general contractor's timely filings as a basis for the Board's jurisdiction over its subsequent complaint warranted dismissal of the subcontractor's complaint and, accordingly, affirm.
This matter originated with the Department's project to improve the State Route (SR) 222 bypass in Lehigh County by constructing a bridge to carry it over the Pennsylvania Turnpike. In March 2004, the Department and Balfour entered into a $57,000,000 contract whereby Balfour was to serve as the general contractor and complete the project by July 2006. In an April 2004 subcontract, Balfour chose H&K to perform jack and bore work, paving, subbase and other sundry construction activities for $13,000,000.
Before the bridge could be constructed, a sanitary sewer line running beneath the Turnpike had to be rerouted. In its complaint, H&K claimed that it was adversely impacted by this rerouting in that all jack and bore work had to be suspended because the Department changed the proposed location of the sewer line several times. In addition, H&K maintained that the Department did not select the final location for the line until November 2004, at the close of the first construction season, and that H&K encountered unforeseen subsurface conditions at that location. As a result of those unforeseen conditions and in accordance with the contract, Balfour issued a request for information seeking guidance from the Department regarding the problems related to proceeding with the jack and bore work. When the Department nonetheless insisted that the jack and bore work proceed, Balfour notified the Department that it disagreed with that decision and that it reserved its right to recover potential extra costs connected therewith. Subsequently and as directed, H&K proceeded with as much of the jack and bore work as possible given the subsurface conditions.
In February 2007, Balfour filed six binders with the Department containing the details of an administrative claim for costs, delay and recovery of liquidated damages. When the Department did not respond to Balfour's claim, Balfour filed a July 2007 complaint against the Department with the Board at Docket No. 3899, claiming damages in the amount of $17,000,000. Subsequently, a judge for the Board held a September 2011 status conference and issued a scheduling order, which H&K alleged afforded Balfour until October 31, 2011 to amend its complaint to include specific damage calculations for H&K's claims against the Department. After Balfour and H&K disagreed as to how to proceed, H&K filed an October 2011 complaint with the Board against the Department at Docket No. 4025. In its complaint, H&K alleged that Balfour presented and preserved all of H&K's claims arising from the project in Balfour's complaint at Docket No. 3899, but failed to include any specific claim for damages for H&K. Accordingly, H&K attached and incorporated Balfour's complaint as Exhibit A of its complaint and pled three causes of action: Count I-breach of contract; Count II-unjust enrichment (breach of quasi contract); and Count III-violation of the Prompt Pay Act.
In pertinent part, Section 1712.1(d) of the Commonwealth Procurement Code (Code) provides that, "[i]f the contracting officer fails to issue a final determination within 120 days unless extended by consent of the parties, the claim shall be deemed denied." 62 Pa. C.S. § 1712.1(d). Section 1712.1(e) of the Code provides that, a contractor may file a claim with the Board "[w]ithin 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 . . . ." 62 Pa. C.S. § 1712.1(e).
As the Board observed, "[t]he normal procedure for a subcontractor to assert a claim against a Commonwealth agency/owner is for the subcontractor's claim to be included in the general contractor's administrative claim and then, if not resolved, filed with the Board as a 'pass-through claim' by the general contractor." Board's January 28, 2014 Decision at 12-13. The general contractor designates such a claim "as filed 'for the benefit of' the subcontractor . . . and [t]his 'standard' practice, which requires at least some modicum of cooperation between the general contractor and subcontractor, avoids the problem present in this case." Id. at 13.
What is commonly called the Prompt Pay Act is found in 62 Pa. C.S. §§ 3901 - 3942.
Following the Department's first set of preliminary objections, H&K filed an amended complaint in July 2012, again pleading the aforementioned three causes of action. It also alleged that, in light of Balfour's failure to amend its complaint at Docket No. 3899 to include the specific damage amounts of H&K's claims, Balfour was not representing H&K in connection with H&K's claim for damages in the case pending at Docket No. 3899. Accordingly, H&K asserted that its separate claim for damages in excess of $3,000,000 constituted a technical clarification and was authorized under extant case law. H&K's July 3, 2012 Amended Complaint at Docket No. 4025, ¶ 25; Reproduced Record (R.R.) at 179a.
H&K is not challenging the Board's dismissal of Count III, which included attorney's fee and penalty and interest provisions inapplicable to Department construction contracts for highways and bridges.
In August 2012, the Department filed six preliminary objections to H&K's amended complaint. The first three were demurrers to Counts I, II and III. The fourth was a failure to exhaust a statutory remedy and the fifth and sixth, respectively, were lack of jurisdiction over the person of the defendant and the subject matter. The Board sustained the Department's preliminary objections and dismissed H&K's amended complaint in its entirety. H&K's timely petition for review to this Court followed.
In reviewing an order of the Board sustaining preliminary objections and dismissing a complaint, we are limited to determining whether the Board abused its discretion or committed an error of law. Dubaskas v. Dep't of Corrs. 81 A.3d 167, 171 n.5 (Pa. Cmwlth. 2013) (citation omitted). It is well established that, in reviewing preliminary objections, "all well pleaded relevant and material facts are to be considered as true, and preliminary objections shall only be sustained when they are free and clear from doubt." Id. We note that such review raises a question of law as to which our standard of review is plenary. Id.
In Count I of its amended complaint, H&K alleged that the Department was "directly liable to H&K for the additional costs incurred by H&K to complete its work under the Prime Contract and the Subcontract." Id., ¶ 72; R.R. at 186a. The Board, however, concluded that it did not have subject-matter jurisdiction over Count I because it was based on a written contract between Balfour and H&K, not between H&K and the Department. In support, the Board cited Section 1724(a)(1) of the Commonwealth Procurement Code (Code), 62 Pa. C.S. § 1724(a)(1), which grants it exclusive jurisdiction over claims arising from a contract entered into by a Commonwealth agency in accordance with the Code and filed with the Board in accordance with Section 1712.1 of the Code, 62 Pa. C.S. § 1712.1.
In pertinent part, a contract is defined as "[a] type of written agreement, regardless of what it may be called, for the procurement or disposal of supplies, services or construction and executed by all parties . . . ." Section 103 of the Code, 62 Pa. C.S. § 103.
H&K acknowledges that it did not have a contract with the Department, but alleges that the Board had jurisdiction for the following reasons: 1) H&K's claims relate to and arise from the prime contract; 2) Balfour presented H&K's claims both to the Department and to the Board; and 3) it was appropriate for H&K to sever its claims from those of Balfour already pending before the Board and pursue them separately from the remainder of Balfour's claims. In support of its argument that a subcontractor has a right to step in and become a direct party regarding claims that were originally filed by the general contractor, H&K cites Department of General Services v. Weinberger Co., Inc., 441 A.2d 1341 (Pa. Cmwlth. 1982), and Department of Transportation v. Brayman Construction Corp.-Bracken Construction Co., 513 A.2d 562 (Pa. Cmwlth. 1986). These cases, however, are distinguishable.
The Board determined that Balfour's administrative claim, filed with the Department, "identified and presented the factual predicates for substantially all of the claims H&K asserts here at the Board for impacted work on the project." Board's January 28, 2014 Opinion at 16. H&K maintains that there is a factual issue as to whether Balfour's subsequent complaint to the Board included H&K's claims. We do not find this to be a material fact.
In Weinberger, the general contractor initiated an action before the Board when the Department of General Services withheld a sum from its contract payments. When the contractor, in turn, withheld the same amount from the subcontractor, this Court held that the Board did not err in permitting the subcontractor to intervene in the contractor's action in light of the fact that, "[t]he proceeding certainly affected the likelihood of [the subcontractor's] receiving the money withheld by [the contractor] . . . giving rise to an equitable interest best protected by the subcontractor's participation." Weinberger, 441 A.2d at 1344. Weinberger, however, involved the intervention of a subcontractor in a contractor's complaint. It did not involve the piggybacking of a subcontractor's complaint on to that of a contractor, the removal of the subcontractor's claims from the contractor's complaint and the subsequent filing of an independent complaint by the subcontractor.
In Brayman, this Court held that a general contractor could recover on behalf of its subcontractor before the Board where the general contractor neither alleged nor proved that it, as opposed to its subcontractor, suffered damages. In addition, we held that the amendment of the caption of the contractor's complaint to indicate that it had commenced the action on behalf of its subcontractor constituted a mere technical clarification in that the Department of Transportation had adequate notice that the subcontractor was the entity for whom the general contractor was seeking damages. Brayman, however, is analogous to the present case only to the extent that it depicts the situation before H&K removed its claims from Balfour's pending action. In other words, like the contractor in Brayman, Balfour was attempting to pursue its subcontractor's claims via its complaint as the general contractor.
In the present case, H&K somehow determined that, simply because the Board had jurisdiction over H&K's claims when they were included in Balfour's complaint, the Board similarly would have jurisdiction over those same claims when H&K removed them from Balfour's complaint and included them in an independent complaint. Such is not the case. H&K cannot use the prime contract as a basis from which to assert its own claims as a subcontractor. As the Department maintains, therefore, "H&K's case lives and dies on its unjust enrichment claim." Department's Brief at 33. We turn now to Count II.
In Count II, H&K alleged unjust enrichment and breach of a quasi-contract. Although the Board rejected the Department's argument that the Board lacked subject-matter jurisdiction over quasi-contract claims against Commonwealth agencies, it nonetheless concluded that it could not exercise jurisdiction over H&K's claim because it was not filed in accordance with Section 1712.1 of the Code. Specifically, the Board concluded that H&K filed its unjust enrichment claim approximately four years too late.
In Department of Health v. Data-Quest, Inc., 972 A.2d 74, 79-80 (Pa. Cmwlth. 2009), we held that the Board's jurisdiction extended to claims against the Commonwealth based on quasi-contracts.
Section 1724(c) of the Code, 62 Pa. C.S. § 1724(c), provides that the Board does not have any power or jurisdiction over a claim asserted under subsection (a)(1), unless it "is filed with the board in accordance with section 1712.1." Section 1712.1(b) of the Code, 62 Pa. C.S. § 1724(b), requires a contractor to file its claim with the contracting officer within six months of the date it accrues. If the contractor fails to do so or files an untimely claim, it is deemed to have waived its right to assert a claim in any forum. Id. Accordingly, a contractor is required to exhaust its administrative remedies before filing a subsequent claim with the Board pursuant to Section 1712.1(e) of the Code, 62 Pa. C.S. § 1724(e).
Section 1712.1(a) of the Code provides that only a contractor is permitted to file a claim with the Commonwealth's contracting officer "for controversies arising from a contract entered into by the Commonwealth." 62 Pa. C.S. § 1724(a). Section 103 of the Code defines a "contractor" as "[a] person that has entered into a contract with a Commonwealth agency." At all times, H&K maintained that it was Balfour's subcontractor. Joint Stipulation between the Department and H&K, ¶¶ 2 and 3; R.R. at 383a. We need not, however, resolve the issue of whether H&K constitutes a "contractor" in order to affirm. --------
In the present case, although H&K did not invoke the procedure outlined in Section 1712.1(b) of the Code with regard to any unjust enrichment claim against the Department, it claimed that it fulfilled this requirement by virtue of the fact that its claims were included in Balfour's timely administrative claim. The Board accepted H&K's contention, reasoning as follows:
Were we to rule otherwise, we would, in effect, be requiring every subcontractor on a Commonwealth project to file a separate administrative claim on every job where a dispute arose in order to protect itself from the event that they have a falling out with their general contractor during the claims procedure (and that general contractor fails to pursue a pass[-]through claim for the subcontractor here at the Board). We believe creating a need for such redundancy would be contrary to good public policy, counterproductive to administrative and judicial efficiency, and simply unnecessary where the substance of the subcontractor's claim has been put before the agency for administrative review by the prime contractor in the first instance.Board's January 28, 2014 Decision at 13-14.
Nonetheless, we need not decide this issue because, even assuming for the sake of argument that H&K satisfied the Section 1712.1(b) administrative claim requirement, H&K failed to file a timely complaint with the Board in compliance with Section 1712.1(e) of the Code. Pursuant to that section, H&K would have had to have filed its complaint with the Board "[w]ithin 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 . . . ." 62 Pa. C.S. § 1712.1(e). As the Board concluded, H&K's October 2011 complaint was untimely because, pursuant to the parties' stipulated facts, the two possible filing dates to preserve a timely administrative claim would have been either February 27, 2007 or June 29, 2007. Joint Stipulation between the Department and H&K, ¶¶ 9 and 13; R.R. at 384-85a. Thus, H&K would have had to have filed its complaint in either July or November 2007. H&K's October 2011 complaint, therefore, was late even under the most generous analysis.
Accordingly, we conclude that the Board lacked jurisdiction over H&K complaint and, therefore, affirm.
/s/_________
BONNIE BRIGANCE LEADBETTER,
Judge ORDER
AND NOW, this 23rd day of February, 2015, the order of the Board of Claims granting the preliminary objections of the Department of Transportation and dismissing the amended complaint of Haines & Kibblehouse, Inc., in its entirety, is hereby AFFIRMED.
/s/_________
BONNIE BRIGANCE LEADBETTER,
Judge