Seda-Cog Joint Rail Authority v. Carload Express, Inc.

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Seda-Cog Joint Rail Authority :

:

v. : No. 617 C.D. 2017

: Argued: April 10, 2018

Carload Express, Inc., Susquehanna :

Union Railroad Company, and Northern :

Plains Railroad, Inc. :

:

Appeal of: Carload Express, Inc. :

BEFORE: HONORABLE ROBERT SIMPSON, Judge

HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION

BY JUDGE SIMPSON FILED: May 3, 2018

Carload Express, Inc. (Carload), a private railroad operator, appeals

from an order of the Court of Common Pleas of Clinton County (trial court) granting

summary judgment in favor of Seda-Cog Joint Rail Authority (Authority) and

denying Carload’s summary judgment motion. The Authority is subject to the

Municipal Authorities Act (Act), 53 Pa. C.S. §§5601-5623. The trial court agreed

with the Authority that a vote of seven of its board members in favor, three against,

and six abstaining was insufficient to award an operating agreement to Carload. On

appeal, we reverse the trial court’s entry of summary judgment in favor of the

Authority, and we remand for entry of summary judgment in favor of Carload.

I. Background

The Authority owns and maintains rail lines in several Pennsylvania

counties. The Authority contracts with a private railroad operator to provide the

actual freight services on the rail lines. The current operator is Susquehanna Union

Railroad Company (Susquehanna).

In 2014, the Authority issued a request for proposals (RFP) for a new

operating agreement. The RFP provided for a two-stage selection process. The first

stage was open to all operators desiring to submit proposals. From those initial

proposals, the Authority selected three operators to participate in the second phase.

In the second phase, the Authority evaluated those three operators and assigned point

scores for various criteria. The RFP contemplated that the highest scoring operator

would receive the new operating agreement.

The Authority’s Board of Directors has 16 members appointed by the

various member counties. Based on their relationships with companies that deal

with Susquehanna in some capacity, six board members voluntarily decided not to

participate in the selection process. The parties disagree whether those members

actually recused themselves or merely abstained from voting.1 In either event, and

of significance, it was clear to all parties throughout the selection process that no

more than 10 votes would be cast in deciding which operator would be awarded the

new operating agreement.

The Act provides that an authority may take any permitted action upon

the vote of a majority of the members “present” at a meeting, unless the authority’s

bylaws contain a different voting provision. 53 Pa. C.S. §5610(e). The Authority’s

1

The minutes of an Authority meeting in August 2014 reflect that the board voted to

accept an “offer of recusal” from the six abstaining members, all of whom abstained from that

vote. Reproduced Record (R.R.) at 1816a.

2

bylaws do not vary from the voting provision of the Act, other than to state that a

majority of the members will constitute a quorum. Reproduced Record (R.R.) at

121a.

During the selection process, the Authority informed the candidates it

would require the affirmative votes of at least nine board members before awarding

a new operating agreement to any candidate. Thus, knowing that only 10 board

members would be participating, the Authority essentially required nine of 10 votes

to be cast in favor of a new operating agreement. The Authority did not include this

purported requirement in the RFP; nor did it amend either the RFP or its bylaws to

provide specifically for a majority vote of all members of the board in order to award

an operating agreement. However, Carload did not protest this purported vote

requirement when the Authority announced it.

At the conclusion of the evaluations, Carload had the highest point

score. Susquehanna was second, with just one point fewer than Carload. The

Authority held a meeting attended by all 16 board members. There were seven votes

in favor of awarding the new operating agreement to Carload, three opposed, and six

abstaining. Based on its prior announcement of the nine-vote requirement, the

Authority took the position that no new operating agreement was awarded.

After Carload protested the Authority’s refusal to award it the new

operating agreement, the Authority filed a civil suit in the trial court, seeking a

declaration that the 7-3 vote was ineffective to award the new operating agreement.

Carload filed a counterclaim seeking declarations that the vote was effective and that

3

the Authority was required to execute a contract awarding Carload the new operating

agreement.2

Ultimately, the trial court granted summary judgment in favor of the

Authority. This appeal by Carload followed.

II. Issues

The Act requires a majority vote of the members “present” at a meeting

in order for the Authority to act. 53 Pa. C.S. §5610(e). On appeal,3 Carload contends

the members “present” at a meeting, as that term is used in the Act, include only

those members who actually vote. A quorum of the Authority was 9 members. As

10 members actually voted, and seven votes constituted more than a majority of the

quorum, Carload argues the vote was valid.4 Thus, Carload asserts the 7-3 vote was

effective to award the operating agreement, where all 16 members were in

attendance, but six abstained.

2

The Authority named all three of the second phase candidates as defendants in its

complaint. Northern Plains Railroad, Inc., the third place candidate, withdrew its proposal and did

not participate in the lawsuit. Susquehanna concurred with the Authority’s position. Susquehanna

also asserted an alleged ethics violation by one of the voting board members, which is not at issue

in this appeal.

3

On appeal from a trial court’s order granting or denying summary judgment, our

standard of review is de novo and our scope of review is plenary. Brewington v. City of Phila.,

149 A.3d 901 (Pa. Cmwlth. 2016). Summary judgment is properly entered only when, “after

examining the record in the light most favorable to the non-moving party, and resolving all doubts

as to the existence of a genuine issue of material fact against the moving party, the moving party

is clearly entitled to judgment as a matter of law.” Pyeritz v. Commonwealth, 32 A.3d 687, 692

(Pa. 2011).

4

In a later vote, the Authority voted 5-4 to award the contract to Carload, with the same

six members abstaining. That vote is not at issue in this appeal. Notably, however, five votes also

constituted a majority of the quorum.

4

The Authority contends Carload is bound by the Authority’s advance

announcement that nine affirmative votes would be required to award the operating

agreement. The Authority did not amend its RFP or its bylaws regarding voting.

However, the RFP contained a general reservation of rights, on which the Authority

relies as empowering it to depart from the normal voting requirements. The

Authority further asserts Carload is estopped from protesting the nine-vote

requirement because it did not do so at the time the Authority announced it.

Without regard to whether the challenged vote was valid or invalid,

Carload argues that as the high scorer in the evaluation process, it is entitled to be

awarded the operating agreement in accordance with the criteria and award process

provided by the Authority in its RFP. The Authority, again in reliance on its general

reservation of rights in the RFP, insists it has no obligation to award the operating

agreement.

III. Discussion

A. Majority Vote of Those “Present”

1. Common Law

Under the common law, once a quorum of a body is present, a majority

of those present and voting, also described as a majority of the quorum, may act on

behalf of the body. See, e.g., Dougherty v. Heller, 138 A.3d 611 (Pa. 2016) (the

principle is almost universal that the majority of a quorum may act for the body);

Raynovich v. Romanus, 299 A.2d 301 (Pa. 1973) (the majority of a quorum can

validly act, at common law); Meixell v. Borough Council of Hellertown, 88 A.2d

594 (Pa. 1952) (the majority of a quorum could conduct business).

5

Importantly, this is true even if, because of abstentions, the majority of

the affirmative votes constitutes only a plurality of the members in attendance.

DiGiacinto v. Allentown, 406 A.2d 520 (Pa. 1979) (number of votes necessary to

take official action does not depend on whether abstaining members choose to attend

meeting, provided a quorum is present; otherwise, member’s choice to attend and

abstain could cause a different result from member’s absence); Meixell (abstaining

members do not count in computing number of votes required to constitute

majority); Ronald H. Brown Charter Sch. v. Harrisburg City Sch. Dist., 928 A.2d

1145 (Pa. Cmwlth. 2007) (under common law, abstaining member cannot demand

that majority vote requirement count that member’s presence); see also McAdoo

Borough v. Pa. Labor Relations Bd., 469 A.2d 693 (Pa. Cmwlth. 1983) (citing

Meixell and Raynovich) (where member of municipal body has personal or

pecuniary interest in matter, neither his vote nor his presence can count toward either

quorum or majority); Cmty. Coll. of Beaver Cty. v. Aliquippa Sch. Dist., 287 A.2d

844 (Pa. Cmwlth. 1972) (those who are unwilling or unable to vote are bound by

majority vote of those who do vote); Commonwealth v. Fleming, 23 Pa. Super. 404

(1903) (members’ presence makes vote decisive and binding whether they actually

vote or not; object of vote cannot be defeated by refusal of any members to vote

when present).

Carload urges application of the common law rule in this case.

2. Municipal Authorities Act

The Act provides that an authority may act upon the vote of a majority

of the members “present” at a meeting. 53 Pa. C.S. §5610(e). Carload argues

6

abstaining members are not “present” for purposes of determining a majority.

Carload is correct, if the common law applies.

Prior to 1937, statutes in derogation of the common law were strictly

construed, under the presumption that no change in the common law was intended

beyond what the statute clearly and definitely prescribed. Heaney v. Mauch Chunk,

185 A. 732 (Pa. 1936); Boles’s Estate, 173 A. 664 (Pa. 1934). Under 1 Pa. C.S.

§1928, post-1937 statutes in derogation of the common law are no longer construed

with a presumption in favor of the common law. However, where a post-1937 statute

in derogation of the common law is substantially a reenactment of a pre-1937 statute,

the rule of strict construction will continue to apply. Commonwealth v. Chiappini,

782 A.2d 490 (Pa. 2001); see 1 Pa. C.S. §1962 (“Whenever a statute is repealed and

its provisions are at the same time reenacted in the same or substantially the same

terms by the repealing statute, the earlier statute shall be construed as continued in

active operation …”).

Here, the Act is a substantial reenactment of a prior statute first enacted

in 1935,5 repealed and substantially reenacted in 1945.6 The current Act is a 2001

codification of the 1945 statute. To the extent the Act’s requirement, in 53 Pa. C.S.

§5610(e), of a majority vote of those “present” is deemed to be in derogation of the

common law, Carload is correct in asserting the statute must be strictly construed

(presumed to follow common law).

5

Act of June 28, 1935, P.L. 463, No. 191.

6

Act of May 2, 1945, P.L. 382, No. 164.

7

The critical issue is whether the inclusion of the word “present”

expressly alters the common law rule.

3. Similar Statutory Language

There is a dearth of authority in Pennsylvania addressing the

construction of statutory language like that at issue here. The limited authority that

is available is in apparent conflict.

In an archaic decision, Commonwealth ex rel. Swartz v. Wickersham,

66 Pa. 134, 136 (Pa. 1870), a statute authorized election of a county superintendent

by a majority of the directors “present.” There were 112 directors in attendance at a

meeting to elect the county superintendent. One candidate obtained 56 votes, the

other obtained 55 votes, and 1 director abstained. Our Supreme Court found the vote

ineffective, despite the fact that one candidate received a majority of the votes cast.

The Court refused to deem the abstaining director “virtually absent,” concluding:

“It would be dangerous to fritter away the express provision of the statute by

construing an actual presence into a virtual absence.” Id. However, in Swartz, the

Court did not discuss the common law; nor did it consider whether statutory

language requiring affirmative votes of a majority of those “present” was sufficiently

specific to supplant the common law. There was also no indication whether the

Court considered or applied any rules of construction in its interpretation of the

statute.

More than a century later, in Commonwealth ex rel. Bagnoni v. Klemm,

454 A.2d 531 (Pa. 1982), our Supreme Court seemed to take the opposite position,

8

albeit in a discussion not essential to its decision. Under Section 3(b) of the

Pennsylvania Higher Education Assistance Act of 1963,7 “the act of a majority of

the directors present at any meeting shall be deemed the act of the [b]oard .…” Id.

at 534. The Court pointed to this provision as an example of legislative language

“codifying the Common Law Rule, thus requiring only a majority of a quorum ….”

Id. (citing Stoltz v. McConnon, 373 A.2d 1096 (Pa. 1977)). Although Bagnoni did

not specifically address whether “present” should be construed as “present and

voting” under the quoted statute, the common law rule does contemplate that

meaning. Therefore, under Bagnoni, a statute that codifies the common law also

includes that meaning.

In McAdoo, this Court reached a similar conclusion. Section 1001 of

the former Borough Code8 provided that the borough could act “‘by vote of the

majority of council present at a meeting ….’” Id. at 696 (quoting former 53 P.S.

§46001). This Court found that statutory provision contained no language limiting

the application of the common law. Therefore, we concluded “the common law

maxim that a majority of a quorum may act for a body has not been abrogated by the

General Assembly in The Borough Code.” Id. Like Bagnoni, McAdoo did not

address whether members attending but abstaining were “present” for purposes of

determining a majority of the votes. Nevertheless, this Court, citing Bagnoni,

described the common law as providing “that a majority of those voting in the

presence of a quorum can act for the body.” Id. at 696 n.8 (emphasis added).

7

Act of August 7, 1963, P.L. 549, §3(b), as amended, 24 P.S. §5103(b) (Supp. 1982-83).

8

Act of February 1, 1966, P.L. (1965) 1656, No. 581, 53 P.S. §46001, repealed by the

Act of April 18, 2014, P.L. 432, No. 37, §3(2).

9

Thus, both our Supreme Court in Bagnoni and this Court in McAdoo

concluded that statutory language substantially the same as that at issue here did not

abrogate the common law regarding a determination of majority votes.

4. Result of Statutory Construction

There is logic to this conclusion as applied to this case. Here, the six

abstaining members left an Authority meeting on a prior occasion before a vote

relating to the RFP. R.R. at 1824a. On that occasion, the Authority acted based on

a 7-3 vote after the six abstaining members left the room. R.R. at 1827a. However,

based on uncertainty whether that vote was effective, a new vote was taken at a

subsequent meeting. The six abstaining members again left the room, but the

Authority’s solicitor advised it would be “appropriate” to require nine votes to pass

the motion at issue, thus treating the absent members as though they were present

and voting against the motion. R.R. at 1833a-34a.9

If the Act’s language supplanted the common law, it would ironically

allow the abstaining members to control the outcome of the vote by choosing to

abstain. Such a result is absurd. See DiGiacinto. Assuming the Act’s language was

in derogation of the common law, such an outcome would also be inconsistent with

the requisite strict construction of the statutory language (presumed to follow the

common law).

9

When the Authority voted on awarding the new operating agreement, the six abstaining

members elected to remain in the room.

10

5. Holding

For the foregoing reasons, we conclude that common law voting

principles apply. Accordingly, this Court finds the Authority’s 7-3 vote was

effective to award the operating agreement to Carload notwithstanding the physical

presence of the six abstaining members.

B. The Authority’s Pre-Announced Nine-Vote Requirement

Carload argues the Authority’s announcement that it would require nine

votes to award the operating agreement was ineffective. The Authority counters that

the requirement was within its power. Further, the Authority asserts Carload

acquiesced in the nine-vote requirement and is therefore estopped from challenging

it.

As discussed above, the Act provides that an authority may take action

based on the vote of a majority of the members present, unless the authority’s bylaws

provide otherwise. Here, the Authority’s bylaws contain no contrary provision.

Therefore, the bylaws as presently constituted do not empower the Authority to

require more than a majority of the votes cast before awarding a new operating

agreement.

Article VIII of the Authority’s bylaws requires a majority vote of the

members, at a regular or special meeting, in order to amend the bylaws. R.R. at

118a. The bylaws do not contemplate exceptions to the bylaw provisions in the

absence of formal amendments. The Authority has not amended its bylaws. Further,

it has not pointed to any statutory authority for its departure from the normal voting

11

requirements in this one instance. Alteration of voting requirements in the absence

of a formal amendment to the bylaws is not authorized. Accord Beh v. Scranton,

560 A.2d 276 (Pa. Cmwlth. 1989) (overriding a voting provision not consistent with

agency’s enabling statute).

The RFP likewise contains no provision authorizing a change in the

vote requirement to award the operating agreement. The Authority’s reliance on its

boilerplate reservations of rights in the RFP is unavailing. Where a municipal entity

voluntarily undertakes to follow a specified procedure in awarding a contract, it must

adhere to that process. Lasday v. Allegheny Cty., 453 A.2d 949 (Pa. 1982) (citing

Am. Totalisator Co. v. Seligman, 414 A.2d 1037 (Pa. 1980)). The contract award

process must also be in accord with basic standards of fairness; a municipal entity

cannot disclaim that obligation by a purported reservation of rights to reject any or

all proposals. Id.

The Authority argues Carload’s failure to object at the time the

Authority announced its intention to apply the nine-vote requirement constituted a

misleading silence that estopped Carload from later asserting the sufficiency of the

seven-vote plurality to award the operating agreement. Contrary to the Authority’s

argument, estoppel offers no basis to prevent Carload from challenging the

unauthorized nine-vote requirement. Estoppel requires not only misleading words

or silence by the party to be estopped, but reasonable reliance on such words or

silence by the party asserting the estoppel. Makoroff v. Pa. Dep’t of Transp., 938

A.2d 470 (Pa. Cmwlth. 2007). Although the Authority asserts it relied on Carload’s

silence, it avers no facts that genuinely support such reliance or demonstrate any

12

detriment suffered as a result. The Authority does not aver it would have scored

Carload’s proposal any differently had Carload questioned the vote requirement in

advance; nor would such an averment have any merit, as principles of fairness would

preclude use of such a criterion as part of the evaluation process. Further, the

Authority does not contend that the 6 members who abstained would have done

otherwise had Carload complained about the purported 9-of-10 vote requirement in

advance. Nor does the Authority suggest that had those members voted, Carload

would not have been awarded the operating agreement.

Accordingly, this Court concludes that Carload was not estopped from

asserting a challenge to the Authority’s requirement of nine affirmative votes before

awarding the operating agreement.

C. Execution of an Operating Agreement

In its counterclaim, Carload requested a declaration that it is entitled to

an award and immediate execution of an operating agreement with the Authority as

described in the RFP. The Authority again errs by relying on its purported

reservation of rights in the RFP. As explained above, the Authority, in the RFP,

voluntarily undertook to follow a particular procedure in awarding the operating

agreement. By doing so, the Authority obligated itself to adhere to that procedure

throughout the selection process. Lasday (citing Am. Totalisator). It could not rely

on a boilerplate reservation of rights provision to disclaim that obligation. Id.

The Authority provided a detailed description in the RFP of the

selection process it would use to award the new operating agreement. The RFP

13

plainly contemplated that the highest scoring proposal would be awarded the

contract. The Authority offered no substantive reason for declining to award the

operating agreement to Carload, which received the highest score under the

Authority’s own scoring process. Notably, the Authority is not permitted to award

the operating agreement to another entity by ignoring its own selection procedure as

mandated by the RFP. See Am. Totalisator (where the Commonwealth failed to

abide by the terms of its own RFP, it lacked discretion to award a contract contrary

to those terms, thus warranting judicial intervention).

Therefore, we conclude Carload has a legal right to be awarded the

operating agreement.

IV. Conclusion

The 7-3 vote of the Authority was effective to award the operating

agreement to Carload. Therefore, Carload is entitled to immediate execution of an

operating agreement consistent with the terms contemplated in the RFP. We

therefore reverse the entry of judgment in favor of the Authority and remand this

matter with a direction to the trial court to enter judgment in favor of Carload.

ROBERT SIMPSON, Judge

14

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Seda-Cog Joint Rail Authority :

:

v. : No. 617 C.D. 2017

:

Carload Express, Inc., Susquehanna :

Union Railroad Company, and Northern :

Plains Railroad, Inc. :

:

Appeal of: Carload Express, Inc. :

ORDER

AND NOW, this 3rd day of May, 2018, the Court of Common Pleas of

Clinton County’s entry of summary judgment in favor of Appellee, Seda-Cog Joint

Rail Authority, is REVERSED. This matter is remanded to the trial court for entry

of summary judgment in favor of Appellant, Carload Express, Inc.

Jurisdiction is relinquished.

ROBERT SIMPSON, Judge