The opinion
J-A13005-19
2019 PA Super 333
CITY OF ALLENTOWN, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
LEHIGH COUNTY AUTHORITY : No. 3089 EDA 2018
Appeal from the Order Entered September 25, 2018
In the Court of Common Pleas of Lehigh County Civil Division at No(s):
2018-C-1765
BEFORE: SHOGAN, J., NICHOLS, J., and STRASSBURGER*, J.
OPINION BY SHOGAN, J.: FILED NOVEMBER 7, 2019
Appellant, the City of Allentown (“the City”), appeals from the order
entered in the Court of Common Pleas of Lehigh County on September 25,
2018, denying its motion for a preliminary injunction against Appellee, Lehigh
County Authority (“LCA”). We affirm.
The trial court summarized the factual history of this case as follows:
On May 1, 2013, the parties entered into the Allentown
Water and Sewer Utility System Concession and Lease Agreement
[(“the Agreement”)1]. The Agreement contains specific
obligations for ensuring that LCA maintains the water and sewer
utility systems it was leasing for a fifty-year time period. The
Agreement also contains express provisions limiting the extent to
which water and sewer bills sent to City residents can be increased
by LCA. Specifically, Article 7 of the Agreement generally governs
____________________________________________
1 Relevant excerpts of the Agreement are included in the certified record. The
full agreement is available at:
https://lehighcountyauthority.org/wp-content/uploads/Allentown-Water-and-
Sewer-Concession.-Lease-Agreement-May-1-2013.pdf.
____________________________________
* Retired Senior Judge assigned to the Superior Court.
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the imposition of Service Charges on City residents, and the
amount by which those service charges can be increased on an
annual basis.
Section 7.1(d) of the Agreement provides for the “Initial
Schedule of Rates” and substantially restricted LCA from revising
that Schedule without the prior approval of the City prior to
January 2016. Accompanying [the Agreement] was a set of
schedules. Schedule Three details the various service charges
imposed as of 2016 for water and sewer service based upon the
size of the piping serving a particular address. By and large, any
customer with a pipe size from 5/8” to one inch is a residential
ratepayer, while those addresses with wider pipe sizes are almost
uniformly commercial customers.
In addition, the Schedule listed the service charges, or
rates, to be imposed on residential and commercial customers
based on billing cycles. Residential customers were billed on a
quarterly basis, while commercial customers were billed on a
monthly cycle. This was the billing cycle pattern used by the City
when it operated the water and sewer systems. Respondent LCA
continued this billing cycle practice when it took over the operation
of the systems even though the express terms of [the Agreement]
do not compel the continuation of the quarterly billing cycle for
residential customers.
After the commencement of [the Agreement] in 2013, LCA
determined that approximately 750 residential and commercial
customers were being billed on the incorrect billing cycle, i.e.,
some residential customers were billed monthly and some
commercial customers were billed quarterly. However, LCA
notified the City it intended to correct, or “true up,” this anomaly.
The City understood this correction occurred by 2016.
Beginning in 2016, the Agreement permitted LCA to
increase rates on City customers subject to specific limitations. In
particular, Section 7.1(e) restricted LCA to increasing rates only
once per calendar year. That subsection also provides that for
each calendar year beginning in 2016, LCA may increase the
Service[] Charges billed for each class or type of Utility Service,
but any increase in service charges may not exceed the Permitted
Annual Rate Adjustment.
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The “Permitted Annual Rate Adjustment” is based on the
“Schedule of Service Charges” in effect for the prior year
multiplied by the combined sums of the “Index Change” for the
calendar year, and a fixed rate multiplier referred to as the
“Margin Change.” The “Index Change” generally corresponds to
any increase in the Consumer Price Index for Urban Consumers -
Northeast Region as compiled by the U.S. Department of Labor,
Bureau of Labor Statistics. According to the terms of [the
Agreement], the “Margin Change” from 2016 - 2032 is 2.5% per
year. That rate falls to 2.0% per year from 2033 until the
expiration of the lease agreement.
As of November 13, 2017, LCA published its proposed rates
for water and sewer service for both residential and commercial
customers effective January 1, 2018. The rates were quoted in
both monthly and quarterly billing rates for both types of
consumers. Until 2016, LCA had not published a schedule of new
rates listing both monthly and quarterly billed amounts for each
class of customers. For both 2017 and 2018, the published rates
indicated what the billed amounts would be for both residential
and commercial customers on both a monthly and a quarterly
billing cycle. Despite these two types of rates being included in
the schedules published in 2017 and 2018 for implementation the
following year, LCA continued the past practice of billing Small
Meter Customers on a quarterly basis, and Large Meter Customers
on a monthly rate schedule.
[The City] does not dispute that the 2017 rate schedule fell
within the permitted renewal rate adjustment, using the 2016
rates as the base figure. As was testified to at the hearing on the
motion for the preliminary injunction, the Index Change for 2016
was 0.8% for that year, meaning the annual rate adjustment for
2017 was only 3.3% (0.8% Index Change + 2.5% Margin
Change). For calendar year 2018, the Index Change from 2017
was 1.5%. When added to the fixed multiplier of 2.5%, the
permitted annual rate adjustment as published for 2018 was
4.0%.
However, on May 21, 2018, the LCA board unanimously
approved a resolution to convert from a quarterly billing schedule
to a monthly billing schedule for Small Meter Customers, effective
August 1, 2018. Based on the resolution approved by the LCA
Board, the amount paid annually by residential customers as of
August 1, 2018 would jump from $150 up to $311, an increase of
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107%. [The City] argues this level of rate adjustment is well
beyond the permitted annual rate change under the terms of [the
Agreement]. Additionally, [the City] asserts that such a midyear
rate adjustment violates the terms of Article 7.1(e).
Trial Court Opinion, 9/25/18, at 2-5 (internal citations omitted).
The City filed a complaint on July 10, 2018, and a motion for preliminary
injunction on July 16, 2018. LCA filed an answer to the complaint on August 2,
2018, and an answer to the motion for preliminary injunction on August 6,
2018. The trial court held an evidentiary hearing on the motion for preliminary
injunction on September 4, 2018. On September 25, 2018, the trial court
issued an order and opinion denying the motion for preliminary injunction.
The City filed a notice of appeal on October 24, 2018. The City and the trial
court complied with Pa.R.A.P. 1925.
The City presents the following issues for our review on appeal:
1. Whether the [t]rial [c]ourt committed reversible error in
concluding that the City of Allentown, which was a party to the
contract, did not have standing to bring the lawsuit against Lehigh
County Authority (“LCA”) for breach of contract.
2. Whether the [t]rial [c]ourt committed reversible error in
concluding that implementation of monthly billing would not
immediately and irreparably harm the City and its residents.
3. Whether the [t]rial [c]ourt committed reversible error in
concluding that the City did not provide evidence that a greater
injury would be suffered by the City if injunctive relief was denied.
4. Whether the [t]rial [c]ourt committed reversible error in
concluding that the City has not demonstrated that granting
injunctive relief would serve the public interest.
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5. Whether the [t]rial [c]ourt committed reversible error in
concluding that any claim by the City would be premature until
the rate increase goes into effect.
Appellant’s Brief at 2-3.
The standard of review applied when reviewing a decision to grant or
deny a preliminary injunction is as follows:
We recognize that on an appeal from the grant or denial of a
preliminary injunction, we do not inquire into the merits of the
controversy, but only examine the record to determine if there
were any apparently reasonable grounds for the action of the
court below. Only if it is plain that no grounds exist to support
the decree or that the rule of law relied upon was palpably
erroneous or misapplied will we interfere with the decision of the
trial court.
Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 828
A.2d 995, 1000 (Pa. 2003).
“The purpose of a preliminary injunction is to preserve the status quo
as it exists or previously existed before the acts complained of, thereby
preventing irreparable injury or gross injustice.” Santoro v. Morse, 781 A.2d
1220, 1229 (Pa. Super. 2001) (emphasis omitted). A petitioner seeking a
preliminary injunction must establish every one of the following prerequisites:
First, a party seeking a preliminary injunction must show that an
injunction is necessary to prevent immediate and irreparable harm
that cannot be adequately compensated by damages. Second,
the party must show that greater injury would result from refusing
an injunction than from granting it, and, concomitantly, that
issuance of an injunction will not substantially harm other
interested parties in the proceedings. Third, the party must show
that a preliminary injunction will properly restore the parties to
their status as it existed immediately prior to the alleged wrongful
conduct. Fourth, the party seeking an injunction must show that
the activity it seeks to restrain is actionable, that its right to relief
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is clear, and that the wrong is manifest, or, in other words, must
show that it is likely to prevail on the merits. Fifth, the party must
show that the injunction it seeks is reasonably suited to abate the
offending activity. Sixth, and finally, the party seeking an
injunction must show that a preliminary injunction will not
adversely affect the public interest.
The York Group, Inc. v. Yorktowne Caskets, Inc., 924 A.2d 1234, 1241
(Pa. Super. 2007) (quoting Summit Towne Centre, 828 A.2d at 1001).
In its first issue, the City argues that the trial court erred in concluding
that it lacked standing to bring the lawsuit against LCA for breach of contract.
Appellant’s Brief at 19. The City asserts that “[i]t is black letter law that direct
parties to a contract have a right to sue under the contract.” Id. The City
maintains that the cases relied upon by the trial court are inapposite and
distinguishes those cases from the factual scenario in this case. Id. at 21-24.
Specifically, the City explains that in those cited cases, the parties bringing
suit were not parties to the contract at issue, nor did they have a direct,
substantial interest in the matter, and therefore had no standing to sue. Id.
at 23-24. In contrast, the City posits in the case sub judice, “[T]he City of
Allentown is a party to and signatory to the Agreement in dispute, and it has
been directly harmed by LCA’s actions.” Id. at 24. Accordingly, it is the City’s
position that it has standing to sue LCA in this matter. Id. at 24.
In addressing the standing issue, the trial court provided the following
analysis:
[I]f the proposed rate increase were to go into effect as LCA has
suggested, it would be the residential customers, not the City,
who would suffer a harm from the alleged breach of the provision
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to cap possible annual rate increases. In order to have standing
to pursue a lawsuit, a party must show a substantial, direct and
immediate interest in the subject of the litigation. The
requirement of a “substantial interest” means there must be some
discernible adverse effect to some interest of the party other than
the abstract interest a municipality maintains on behalf of all its
citizens. See Wm. Penn Parking Garage, Inc. v. City of Pittsburgh,
464 Pa. 168, 346 A.2d 269 (1975). “[W]here it cannot in any
sense be regarded as a representative of the public or its
inhabitants or citizens, it has been held that such a (municipal)
corporation may not maintain an action to protect the rights of its
resident taxpayers where the litigation does not affect such a
corporation directly.” City of Hazleton v. Hazleton Area School
District, 276 A.2d 545, 547 (Pa. 1971).
Our appellate courts have concluded that a municipality
does not stand in the position of its residents or taxpayers when
attempting to pursue litigation in which the municipality cannot
allege a direct harm. Borough of Valley-Hi Incorporation Case,
381 A.2d 204 (Pa. Cmwlth. 1977); Upper Moreland Twp. v.
Pennsylvania Dept. of Transportation, 409 A.2d 118 (Pa. Cmwlth.
1979). The Court found that Appellant was unable to demonstrate
how the City, rather than the citizens, will suffer any direct harm
from LCA’s proposed change in its billing cycles.
Trial Court Opinion, 12/13/18, at 9-10.
Parties to a contract can move to enforce the contract when there is a
breach by another party. Liss & Marion, P.C. v. Recordex Acquisition
Corp., 983 A.2d 652, 659-661 (Pa. 2009). “A cause of action for breach of
contract must be established by pleading (1) the existence of a contract,
including its essential terms; (2) a breach of a duty imposed by the contract;
and (3) resultant damages.” Reformed Church of Ascension v. Theodore
Hooven & Sons, Inc., 764 A.2d 1106, 1109 (Pa. Super. 2000). Furthermore,
our Supreme Court has explained:
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Where one party to a contract without any legal justification,
breaches the contract, the other party is entitled to recover,
unless the contract provided otherwise, whatever damages he
suffered, provided (1) they were such as would naturally and
ordinarily result from the breach, or (2) they were reasonably
foreseeable and within the contemplation of the parties at the time
they made the contract, and (3) they can be proved with
reasonable certainty.
Ferrer v. Trustees of University of Pennsylvania, 825 A.2d 591, 610 (Pa.
2002) (citation omitted). Moreover, a party to the contract can seek a
preliminary injunction in an effort to enjoin a breach of contract. Allegheny
Anesthesiology Associates, Inc. v. Allegheny General Hosp., 826 A.2d
886, 891-893 (Pa. Super. 2003); see also Santoro, 781 A.2d at 1228
(“Pennsylvania courts sitting in equity have jurisdiction to prevent the
continuance of acts prejudicial to the interest of individual rights, including the
authority to enjoin wrongful breaches of contract where money damages are
an inadequate remedy.”).
In the case sub judice, the Agreement provides, inter alia, as follows:
This ALLENTOWN WATER AND SEWER UTILTIY SYSTEM
CONCESSION AND LEASE AGREEMENT (this “Agreement”) is
made and entered into as of this 1st day of May, 2013 by and
between the City of Allentown, a municipality and a city of the
third class of the Commonwealth of Pennsylvania duly organized
and existing under the Constitution and laws of said
Commonwealth and the City of Allentown Home Rule Charter (the
“City”), and Lehigh County Authority, a municipal authority duly
organized and existing under the Constitution and laws of said
Commonwealth (the “Concessionaire”).
The Agreement, 5/1/13, at 1. Furthermore, the “RECITALS” of the
Agreement, provide in relevant part:
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WHEREAS, the City owns and operates the Allentown Sewer Utility
System constituting the assets herein defined as the “Sewer Utility
System;” and
WHEREAS, the City owns and operates the Allentown Water Utility
System constituting the assets herein defined as the “Water Plant
and Distribution System” and the “Retained Water Supply
System”; and
WHEREAS, the Concessionaire desires to lease the Sewer Utility
System and the Water Plant and Distribution System from the City
and to obtain a grant from the City of the right to provide Utility
Services (as defined herein) in connection therewith, all as
hereinafter provided; and
WHEREAS, the City desires to lease the Sewer Utility System and
the Water Plant and Distribution System (collectively defined as
the “System”) to the Concessionaire and grant the Concessionaire
the right to provide Utility Services in connection therewith, all as
hereinafter provided; and
* * *
WHEREAS, the City is authorized by the City of Allentown Home
Rule Charter to enter into this Agreement providing for the lease
of the System, and the grant to the Concessionaire the right to
operate the System in order to provide Utility Services, subject to
the terms hereof; and
* * *
WHEREAS, the City will retain and continue to own, maintain and
operate the Retained Water Supply System and the City has
agreed to provide Raw Water (as herein defined) to the
Concessionaire from the Retained Water Supply System; and
The Agreement, 5/1/13, at 1.
As the above-referenced language of the Agreement makes clear, the
City is a party to the Agreement. The Agreement states that the City owns
the System and will continue to own the System, and that LCA is leasing the
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System to provide utility services. As an explicit party to the Agreement, the
City has the authority to enforce the provisions of the Agreement. Liss &
Marion, P.C., 983 A.2d at 659-661. Furthermore, as a party to the
Agreement, the City has the ability to seek a preliminary injunction in an effort
to enforce the provisions of the Agreement. Santoro, 781 A.2d at 1228.
Indeed, the Agreement itself addresses any legal action between the
parties as related to the Agreement. Section 16.1(a)(i-x) of the Agreement
identifies potential defaults by LCA. The Agreement, 5/1/13, at 110-112.
Section 16.1(b)(i-ix) provides remedies for the City upon LCA’s default and
allows the City to seek specific performance, injunction, or other equitable
remedies. Id. at 112-113. Moreover, Section 16.1(b)(x) provides that upon
LCA’s default, “the City may exercise any of its other rights and remedies
provided for hereunder or at law or equity.” Id. at 113.
Additionally, Article 19 of the Agreement provides for dispute resolution
between the Parties,2 including informal dispute resolution procedures,
mediation, and arbitration. The Agreement, 5/1/13, at 131-136. Specifically,
Section 19.1 provides: “Scope. Any dispute arising out of, relating to, or in
connection with this Agreement, including any question as to whether such
dispute is subject to arbitration, shall be resolved as set forth in this Article
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2 The Agreement defines “Party” and “Parties” as follows: “‘Party’ means a
party to this Agreement and ‘Parties’ means both of them.” The Agreement,
5/1/13, 21.
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19.” Id. at 131.
Furthermore, Section 20.12 provides, in relevant part:
Except as expressly provided herein to the contrary (including
with respect to such rights as are expressly granted to each
Leasehold Mortgagee pursuant to this Agreement), no term or
provision hereof shall be construed in any way to grant, convey or
create any rights or interests to any Person not a party to this
Agreement.
The Agreement, 5/1/13, at 138-139.
Accordingly, we are constrained to disagree with the trial court’s
conclusion that the City lacked standing to seek legal redress for breach of
contract.3 However, for reasons discussed below, we cannot agree that it is
entitled to relief on its request for a preliminary injunction.
The City’s remaining four claims on appeal relate to its argument that
entry of a preliminary injunction to enjoin LCA’s actions is appropriate. In
arguing that the trial court erred in failing to issue the preliminary injunction,
the City first argues that the trial court incorrectly concluded that
implementation of the monthly billing scenario would not immediately and
irreparably harm the City and its residents. Appellant’s Brief at 2. More
specifically, the City argues:
The evidence admitted at the preliminary injunction hearing
concretely established that, given the high poverty rate in the
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3 As asserted by the City, the cases relied upon by the trial court in support
of its conclusion that the City does not have standing to bring legal action
against LCA are distinguishable from the case sub judice because in those
cited cases, the party seeking legal action was not a party to a disputed
agreement.
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City, (a) the proposed rate increase would create an economic
hardship, causing some customers to have difficulty paying their
water and sewer bills and (b) would further exacerbate the City’s
blight problems, and that neither of these issues could be
remedied fully with monetary compensation.
Id. at 27.
In addressing this prerequisite, this Court has explained:
[A] plaintiff seeking a preliminary injunction must show that an
injunction is necessary to prevent immediate and irreparable harm
that cannot be compensated adequately by money damages. In
order to meet this burden, a plaintiff must present “concrete
evidence” demonstrating “actual proof of irreparable harm.” The
plaintiff’s claimed “irreparable harm” cannot be based solely on
speculation and hypothesis. Moreover, for purposes of a
preliminary injunction the claimed harm must be irreversible
before it will be deemed irreparable.
Greenmor, Inc. v. Burchick Const. Co., Inc., 908 A.2d 310, 314 (Pa.
Super. 2006) (internal citations omitted).
In its analysis addressing this prerequisite, the trial court provided the
following explanation:
Contrary to Appellant’s assertion, the [c]ourt’s holding with
respect to this element for a preliminary injunction was premised
upon the finding that Appellant failed to offer sufficient proof of
the existence of immediate and irreparable harm that cannot
adequately be compensated by damages.
Immediate and irreparable harm is injury for which
damages can only be estimated by conjecture and not by an
accurate pecuniary standard or cannot be adequately
compensated by an award of monetary damages. See Boehm v.
University of Pennsylvania School of Veterinary Medicine, 573
A.2d 575 (Pa. Super. 1990). []In order to meet this burden, a
plaintiff must present [“]concrete evidence[”] demonstrating
[“]actual proof of irreparable harm.[”] Kessler v. [Broder], 851
A.2d 944, 951 (Pa. Super. 2004) (citation omitted).
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Appellant failed to satisfy this element for a preliminary
injunction to issue for two reasons. First, its failure to present any
testimony or offer any exhibits showing that the rate increase
would cause residents to move outside of the [C]ity militated
against a finding of immediate and irreparable harm. To the
contrary, any harm alleged by the City was speculative.
Additionally, the [c]ourt did not receive any evidence that
implementation of the monthly billing would immediately and
irreparably harm any of the customers who would be affected in a
manner that could not be remedied by monetary damages. As
stated above, the billing cycle conversion was put on hold until
resolution of the litigation. Additionally, Liesel Gross, the chief
executive officer of LCA, testified that LCA would coordinate with
the City to provide a reimbursement program to those customers
if a court or arbitration panel determined that the change in the
quarterly-to-monthly billing cycle was improper. Gross also
testified that refunds could be sent via mailed check or that credits
could be applied towards customers’ next bill if necessary.
Given that any harm suffered by the City and/or its residents
is compensable by monetary damages, and that the City’s
contention on the impact of the rate changes is only speculative
at this time, the [c]ourt properly found the City has failed to
demonstrate that Appellant would suffer immediate irreparable
harm if the preliminary injunction [was] not granted.
Trial Court Opinion, 12/13/18, at 13-14 (emphasis in original).
We agree with the trial court’s determination. LCA has failed to present
“concrete evidence” demonstrating “actual proof of irreparable harm.”
Greenmor, Inc., 908 A.2d at 314. Furthermore, the claimed harm is not
irreversible and can be compensated adequately by monetary damages. Id.
Thus, the City has failed to meet the “irreparable and immediate harm”
prerequisite to issuance of a preliminary injunction. Accordingly, there were
“apparently reasonable grounds” for the trial court’s decision, and as such, we
are compelled to affirm its decision. Summit Towne Centre, Inc., 828 A.2d
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at 1001. Furthermore, because the City has failed to establish one of the
prerequisites, this Court need not address the others.4 Id.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/7/19
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4 Because Appellant’s remaining issues relate to the other prerequisites
necessary for issuance of a preliminary injunction and we have concluded that
there were “apparently reasonable grounds” for the trial court’s determination
that one of those prerequisites was not met, we need not address the
remaining prerequisites, Summit Towne Centre, Inc., 828 A.2d at 1001,
nor the City’s remaining issues raising those prerequisites.
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