R. Highley and B. Hurst v. PennDOT

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Richard Highley and Brian Hurst, :

Petitioners :

:

v. : No. 36 M.D. 2018

: Argued: September 12, 2018

Commonwealth of Pennsylvania :

Department of Transportation, :

Leslie M. Richards, Individually and :

in her Capacity as Secretary of :

Department of Transportation, :

Kenneth McClain, Individually and :

in his Capacity as District Executive :

for PennDOT Engineering District :

6-0 and Contracting Officer for all :

District 6-0 Construction Contracts, :

Respondents :

BEFORE: HONORABLE P. KEVIN BROBSON, Judge

HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE JAMES GARDNER COLINS, Senior Judge

OPINION BY JUDGE BROBSON FILED: October 15, 2018

Richard Highley and Brian Hurst (collectively Petitioners) are

employees of Allen Myers, LP (Myers), a nonunion highway construction

contractor. Petitioners filed a petition for review in the nature of a complaint in

equity to challenge a construction project in Montgomery County. Currently before

this Court for disposition are the preliminary objections of the Commonwealth of

Pennsylvania, Department of Transportation (PennDOT), Secretary of

Transportation Leslie M. Richards, and PennDOT’s District Executive Kenneth

McClain (collectively, Commonwealth Respondents). Commonwealth

Respondents object on the grounds that Petitioners lack standing and their claims are

barred by sovereign immunity. For the reasons set forth below, we sustain the first

preliminary objection by Commonwealth Respondents and dismiss the petition for

review.

I. BACKGROUND

In their petition for review, Petitioners aver that in 2013, PennDOT

began making improvements to Markley Street/U.S. 202 South in Norristown,

Montgomery County (Markley Street Project). J.D. Eckman won the bid for the first

part of the Markley Street project, underbidding the closest union contractor by more

than $500,000. J.D. Eckman completed the first part of the Markley Street Project

a year ahead of schedule. Petitioners point out that the bid solicitation for the first

part of the Markley Street Project did not require contractors to sign a project labor

agreement (PLA) as a condition of bidding.

Petitioners also aver that, in August 2017, PennDOT issued a bid

solicitation for Contract No. 80021, the second part of the Markley Street Project.

PennDOT’s August bid solicitation provided that all contractors were required to

sign a PLA with the Building and Construction Council of Philadelphia and Vicinity

(Building and Construction Council) as a condition of bidding on the project. Under

that PLA, contractors were bound to the collective bargaining agreements (CBAs)

between various local unions and the Building and Construction Council. Multiple

contractors, both union and nonunion, filed taxpayer lawsuits, bid protests, and a

motion for preliminary injunction to challenge the August bid solicitation. By the

end of August 2017, PennDOT withdrew its August bid solicitation.

2

Petitioners further aver that, in December 2017, PennDOT issued

another bid solicitation for Contract No. 80021. The December bid solicitation also

required contractors to sign a revised PLA with the Building and Construction

Council. The revised PLA again binds contractors to the CBAs between the

Building and Construction Council and 11 local unions. The revised PLA requires

craft labor personnel employed to be hired through the 11 local unions. Finally,

differing from the original PLA, the revised PLA provides that if the successful

bidder already has a CBA with United Steelworkers, that bidder is not subject to the

hiring requirements of the revised PLA and is instead permitted to use its United

Steelworkers workforce.1

Petitioners allege standing as employees of Myers—a company that

would have bid on this contract if the revised PLA was not a condition of bidding.

Both are highway construction workers with prior experience working on PennDOT

roadway projects. Petitioners additionally allege that they have standing as

taxpaying residents of Montgomery County.

Petitioners filed the subject petition for review, asking this Court to

enjoin PennDOT from requiring contractors to sign the revised PLA as a condition

for bidding and performing work on the Markley Street Project. Petitioners allege

that the revised PLA precludes nonunion contractors from bidding on the Markley

Street Project and applies different standards to different bidders. As such,

Petitioners allege that PennDOT’s imposition of the requirement that contractors

1

Petitioners suggest in their petition for review that the original PLA eliminated the

candidacy of several union contractors that had already signed a CBA with United Steelworkers,

because if those union contractors signed the original PLA, then they would be in violation of their

CBA with United Steelworkers and subject to immediate sanctions. (Pet. at ¶ 5.) The petition for

review implies that PennDOT revised the PLA to be more union-contractor-friendly.

3

sign the revised PLA violates the Commonwealth Procurement Code2 and the State

Highway Law.3

Commonwealth Respondents filed two preliminary objections. First,

Commonwealth Respondents averred that Petitioners lack standing under both the

requirements for traditional standing and for the taxpayer exception to traditional

standing. Second, Commonwealth Respondents averred that Petitioners’ claims are

barred by sovereign immunity under our Supreme Court’s decision in Scientific

Games International, Inc. v. Department of Revenue, 66 A.3d 740 (Pa. 2013).4

II. DISCUSSION

Setting the stage for our analysis is the standard for preliminary

objections. In ruling on preliminary objections, we accept as true all well-pleaded

material allegations in the petition for review and any reasonable inferences that

we may draw from the averments. Thomas v. Corbett, 90 A.3d 789, 794 (Pa.

Cmwlth. 2014). The Court, however, is not bound by legal conclusions,

unwarranted inferences from facts, argumentative allegations, or expressions of

opinion encompassed in the petition for review. Id. We may sustain preliminary

objections only when the law makes clear that the petitioner cannot succeed on

his claim, and we must resolve any doubt in favor of the petitioner. Id.

A. Standing

With the enactment of the Procurement Code in 1998 and its subsequent

amendments, bidders, offerors, prospective bidders or offerors, and prospective

2

62 Pa. C.S. §§ 101-2311.

3

Act of June 1, 1945, P.L. 1242, as amended, 36 P.S. §§ 670-101 to -1102.

4

In their petition for review, Petitioners also seek attorney’s fees, and Commonwealth

Respondents object to this request on the basis that Petitioners did not allege facts that provide a

basis for an award for attorney’s fees. In their brief in the instant appeal, Petitioners agree with

Commonwealth Respondents that their request should be stricken.

4

contractors have a statutory right to protest the solicitation or award of a contract

with the head of a purchasing agency or his designee. 62 Pa. C.S. § 1711.1(a). The

Procurement Code both reaffirms the Commonwealth’s sovereign immunity and

waives sovereign immunity for bid protests under Section 1711.1 of the Procurement

Code. 62 Pa. C.S. § 1702. While Sections 1711.1 and 1702 of the Procurement

Code govern bidders, offerors, prospective bidders or offerors, and prospective

contractors, Petitioners do not fall within any of those categories. They are

employees of a prospective bidder, Myers, and they bring their suit in equity as

taxpayers. The question, then, is whether they have standing under the traditional

standing requirements or the taxpayer exception and, if so, whether their claims are

nonetheless barred by sovereign immunity.

1. Traditional Standing

Prior to judicial resolution of a dispute, an individual must demonstrate

that he has standing to bring the action. Pittsburgh Palisades Park, LLC v. Cmwlth.,

888 A.2d 655, 659 (Pa. 2005). That is, the party initiating legal action must show

that he has been “aggrieved”—i.e., that he has a “substantial, direct, and immediate

interest in the outcome of the litigation.” Id. at 659-60. An interest is “substantial”

if it surpasses the common interest of all citizens in procuring obedience to the law.

Id. at 660. An interest is “direct” where it shows that the matter complained of

caused harm to the party’s interest and “immediate” if the causal connection is not

remote or speculative. Id. “The keystone to standing in these terms is that the person

must be negatively impacted in some real and direct fashion.” Id.

Here, Petitioners argue that they meet these traditional standing

requirements. They contend that their interest in the project is substantial and

surpasses the common interest of all Pennsylvanians, because, as long-time

5

construction workers dependent on government construction contracts, their

livelihood is affected more than that of the average citizen. They suggest that they

may be forced to join a union, that they may not be accepted into union membership,

and that they still might not work on this project. Petitioners contend that their

interest is direct because there would be no harm to their interest in the absence of

the PLA requirement. Finally, Petitioners contend that their interest is immediate

because their injury stems directly from the PLA requirement in the bid solicitation.

In response, Commonwealth Respondents argue that the alleged harm

to Petitioners depends on a “string of contingencies.” (Commonwealth

Respondents’ Br. at 10.) Commonwealth Respondents point out that Myers has not

even bid on the project. Myers would have to not only bid on the project,

Commonwealth Respondents argue, but Myers would have to win the contract and

assign Petitioners to work on the contract. Commonwealth Respondents argue that

any interest of Petitioners is too attenuated to confer standing.

We agree with Commonwealth Respondents that Petitioners do not

have an interest that is substantial, direct, and immediate. Neither bid on this project,

and the only relation they have to the bidding process is that their employer may

have submitted a bid if there were no PLA requirement. While there are conceivable

scenarios where Petitioners would be employed to work on this project, there are

just as many scenarios where they would not. Both could be terminated tomorrow;

both could quit and work for another contractor. Both could continue working for

Myers but be assigned to different construction projects. Petitioners are not,

therefore, sufficiently aggrieved to meet the requirements for traditional standing.

6

2. Taxpayer Standing

This is not the end of the inquiry, however, as the Pennsylvania

Supreme Court articulated an exception to the traditional requirements for standing

in Application of Biester, 409 A.2d 848 (Pa. 1979). Under this exception, a taxpayer

has standing to challenge a governmental action provided he satisfies the following

requirements:

(1) the governmental action would otherwise go

unchallenged;

(2) those directly and immediately affected by the

complained of matter are beneficially affected and

not inclined to challenge the action;

(3) judicial relief is appropriate;

(4) redress through other channels is unavailable; and

(5) no other persons are better situated to assert the

claim.

Pittsburgh Palisades Park, 888 A.2d at 662 (summarizing Biester taxpayer

exception standing requirements) (emphasis added). The Supreme Court stressed

that the impetus behind the taxpayer standing exception was the desire to “enable

the citizenry to challenge government action which would otherwise go

unchallenged in the courts because of the standing requirement.” Id. at 661.

We need not be too exhaustive in addressing this exception, however,

as Petitioners are unable to meet the first two Biester requirements. Two nonunion

contractors, J.D. Eckman and Myers, the latter being Petitioners’ employer, have

filed bid protests for this exact government contract under Section 1711.1 of the

Procurement Code.5 See 62 Pa. C.S. § 1711.1 (establishing the right to challenge

procurements by Commonwealth agencies). The same counsel that represents

5

Docketed with this Court at 313 C.D. 2018 and 314 C.D. 2018, respectively.

7

Myers in that bid protest represents Petitioners in this matter. In other words, the

bid for this project is being challenged in pending litigation, and Petitioners know as

much. There is simply no danger that the government action at issue would

otherwise go unchallenged. For this same reason, this case fails the second prong of

Biester. Based on the allegations in the petition for review, it is clear to this Court

that Petitioners’ employer, Myers, as a nonunion contractor, is directly and

immediately affected by the PLA requirement in the bid solicitation. As evidenced

by Myers’ bid protest, it neither considers itself beneficially affected by the PLA

requirement nor was it inclined to refrain from challenging the inclusion of the PLA

mandate. Accordingly, as Petitioners cannot satisfy the first two prongs of Biester,

they do not have taxpayer standing to maintain this action.

3. Cases from this Court

Petitioners argue that there is, in fact, a third type of standing available

to them as taxpayers under the precedent of this Court. They argue that they meet

the standing requirements in the specific context of a taxpayer in a bidding award

case, citing Brayman Construction Corporation v. Department of Transportation

(Pa. Cmwlth., No. 527 M.D. 2008, filed February 17, 2009), aff’d, 13 A.3d 925

(Pa. 2011); Reich v. Berks County Intermediate Unit No. 14, 861 A.2d 1005 (Pa.

Cmwlth. 2004), appeal denied, 881 A.2d 821 (Pa. 2005); Marx v. Lake Lehman

School District, 817 A.2d 1242 (Pa. Cmwlth. 2003); and Balsbaugh v. Department

of General Services, 815 A.2d 36 (Pa. Cmwlth.), aff’d per curiam, 815 A.2d 628

(Pa. 2003). Petitioners argue that, because they are challenging a bid award for a

contract with PennDOT, they do not need to meet the 5-prong test in Biester. We

address these cases in turn, but note at the outset that Petitioners are mistaken; these

cases do not confer a third option for standing.

8

In Brayman, a construction company and its president brought suit as

taxpayers to challenge PennDOT’s use of a “Design-Build Best Value” program

during the bidding process. Brayman, slip op. at 1 n.1. Relevant to the instant case,

this Court mentioned, in passing, that taxpayers have standing to bring an action

aimed at preventing unauthorized or unlawful expenditure of money because

taxpayers have an interest in public funds and bidders do not have standing to

challenge an award.6 Id. Standing was so undeveloped in Brayman that, on appeal,

the Pennsylvania Supreme Court determined that PennDOT waived the issue of

whether the company and president lacked standing to challenge the bidding process.

Brayman Constr. Corp., 13 A.3d at 931.

Brayman is unhelpful to Petitioners for several reasons. First, Brayman

was an unreported, nonbinding decision by this Court.7 Second, the Court mentioned

standing in Brayman in passing, but it was not a central issue of the case. PennDOT

did not contest standing in Brayman, as evinced by the Supreme Court’s holding that

PennDOT waived that issue. There was no standing analysis, by this Court or the

Supreme Court on appeal, that could aid us in the instant matter. Third, the footnote

in our opinion in Brayman that mentioned that the construction company and its

president had standing as taxpayers appears to have done so in part because they

could not challenge the award as disappointed bidders. Here, in contrast, that is

clearly not the case, so what little standing analysis there was in Brayman does not

6

It is unclear why this Court’s opinion in Brayman determined that bidders do not have

standing to challenge an award. Given the enactment of the Procurement Code in 1998, the

company and its president in Brayman likely did have standing as prospective bidders under

Section 1711.1 of the Procurement Code, 62 Pa. C.S. § 1711.1.

7

Pursuant to Commonwealth Court Internal Operating Procedure § 414(a), 210 Pa.

Code § 69.414(a), an unreported panel decision issued by this Court after January 15, 2008, may

be cited “for its persuasive value, but not as binding precedent.”

9

apply. Two prospective bidders, Myers and J.D. Eckman, have already challenged

the December bid solicitation.

In Reich, we discussed the taxpayer standing exception in the context

of a taxpayer challenging the authority of an intermediate unit to enter into a busing

contract with the taxpayer’s local school district. We distinguished the school

district taxpayer’s case from those of disappointed bidders by the nature of the action

brought in Reich. We explained that the school district taxpayer was challenging the

intermediate unit’s authority not the award of a bid with the Commonwealth. As a

result, we applied the 5-prong test set forth in Biester and held that the taxpayer

resident of that school district lacked standing.

Reich is inapplicable because, like Brayman, there is no holding or

determination regarding taxpayer standing in a bidding context.8 In fact, Petitioners

only cite to Reich for its reference to other cases that are, again, readily distinguished.

Reich primarily addressed and distinguished Marx. In Marx, we

addressed taxpayer standing in the context of a challenge to a bid award for electrical

work for a school district. This Court determined that there was a relaxed standard

for taxpayers to challenge bid awards and held that the taxpayer in Marx met that

standard. Paramount to that determination was our reasoning that “because

competitors are not granted standing in bidding award cases, the process relies upon

taxpayers to bring actions” to challenge the procurement. Marx, 817 A.2d at 1245

(emphasis added). Marx is distinguishable because there is no bar in this case that

prevents competitors or bidders from challenging the bidding process for the

8

Petitioners also rely on On-Point Technology Systems, Incorporated v. Department of

Revenue, 753 A.2d 911 (Pa. Cmwlth. 2000), which is inapplicable for the same reason that

Brayman and Reich are. There was no standing determination in On-Point Technology. Instead,

this Court determined that the period for challenging a bid award did not apply to taxpayers that

brought a suit in equity to challenge a bid award; it applied only to disappointed bidders.

10

Markley Street Project; there is no doubt they have standing. Myers and J.D.

Eckman have already demonstrated that as they both mounted challenges against the

requirements surrounding the December bid solicitation and the revised PLA. The

reasoning in Marx does not apply here because disappointed bidders have standing

under the Procurement Code to challenge an award of a bid by a Commonwealth

agency. 62 Pa. C.S. § 1711.1; see also Reich, 861 A.2d at 1009 (noting that

challenge to bidding award in Marx was not brought under Procurement Code).

In Balsbaugh, two contractors bid on a solicitation by the Department

of General Services (DGS) for a new chemistry building at Pennsylvania State

University. The losing contractor submitted a bid protest with DGS, arguing that

the winning contractor’s bid was defective in that it was unsigned. DGS denied that

bid protest, and the losing contractor did not appeal from that decision.

Subsequently, employees of a subcontractor used by the losing contractor brought a

complaint in equity in this Court’s original jurisdiction. DGS argued that the

subcontractor employees lacked standing because the enactment of the Procurement

Code granted a statutory remedy to disappointed bidders challenging an award of a

government contract. We rejected that argument and held:

Here, there is no dispute that [the subcontractor

employees] are taxpayers in the Commonwealth. Because

they have filed a complaint in equity with this Court, they

have standing to bring this action.

Balsbaugh, 815 A.2d at 40. We explained that while the enactment of the

Procurement Code provided standing to disappointed bidders, it did not take away

the right of taxpayers to bring an action in equity before this Court.

Balsbaugh undoubtedly bears similarities with the case sub judice: the

government party was a Commonwealth agency, rather than a political subdivision,

so the contract was governed by the Procurement Code; the petitioners were

11

employees of a subcontractor and thus employees of an entity that did not actually

bid on the solicitation; and the disappointed bidder, the general contractor, did file a

bid protest, thus evincing the ability to challenge the government action.

There are crucial differences, however, between this matter and

Balsbaugh. In Balsbaugh, DGS argued that the subcontractor employees lacked

standing because they were “straw parties” for the general contractor, and because

the exclusive remedy was for the general contractor to bring a challenge under the

Procurement Code. This Court held that the subcontractor employees did have

standing in light of that argument, but we did not employ an analysis of the factors

set forth in Biester. It appears we did not have cause to do so, and we can only guess

why—perhaps Biester was not thoroughly developed in the parties’ briefs. Taxpayer

standing under Biester is briefed in the matter now before this Court, and we are

bound as an intermediate court to follow our Supreme Court’s precedent.

While the enactment of the Procurement Code did not take away the

right of taxpayers to bring an action in equity in our original jurisdiction, taxpayers

still must satisfy Biester to do so. For the reasons set forth above, Petitioners do not

satisfy the Supreme Court’s test for taxpayer standing.

B. Sovereign Immunity

Commonwealth Respondents also object to the petition for review on

the ground that Petitioners’ claims are barred by sovereign immunity under our

Supreme Court’s decision in Scientific Games. Because we have decided that

Petitioners lack standing, we need not address this issue.

III. CONCLUSION

For the reasons discussed above, Petitioners lack standing to bring their

petition for review under traditional standing requirements or the taxpayer

12

exception. We will, therefore, sustain Commonwealth Respondents’ first

preliminary objection and dismiss Petitioners’ petition for review.

P. KEVIN BROBSON, Judge

Judge Fizzano Cannon did not participate in the decision of this case.

13

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Richard Highley and Brian Hurst, :

Petitioners :

:

v. : No. 36 M.D. 2018

:

Commonwealth of Pennsylvania :

Department of Transportation, :

Leslie M. Richards, Individually and :

in her Capacity as Secretary of :

Department of Transportation, :

Kenneth McClain, Individually and :

in his Capacity as District Executive :

for PennDOT Engineering District :

6-0 and Contracting Officer for all :

District 6-0 Construction Contracts, :

Respondents :

ORDER

AND NOW, this 15th day of October, 2018, the preliminary objection

by the Commonwealth of Pennsylvania, Department of Transportation (PennDOT),

Secretary of Transportation Leslie M. Richards, and PennDOT Executive Director

Kenneth McClain to the petition for review based on lack of standing is

SUSTAINED, and the petition for review is DISMISSED with prejudice.

P. KEVIN BROBSON, Judge

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Richard Highley and Brian Hurst, :

Petitioners :

:

v. : No. 36 M.D. 2018

: Argued: September 12, 2018

Commonwealth of Pennsylvania :

Department of Transportation, :

Leslie M. Richards, Individually and :

in her Capacity as Secretary of :

Department of Transportation, :

Kenneth McClain, Individually and :

in his Capacity as District Executive :

for PennDOT Engineering District 6-0 :

and Contracting Officer for all District :

6-0 Construction Contracts, :

Respondents :

BEFORE: HONORABLE P. KEVIN BROBSON, Judge

HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE JAMES GARDNER COLINS, Senior Judge

DISSENTING OPINION BY

SENIOR JUDGE COLINS FILED: October 15, 2018

I respectfully dissent from the well-researched, well-written opinion of

the majority. However, I cannot agree that we should disregard Balsbaugh v.

Department of General Services, 815 A.2d 36 (Pa. Cmwlth.), aff’d per curiam, 815

A.2d 628 (Pa. 2003), as precedent and, therefore, would find that Petitioners have

standing in equity to challenge the award of the contract in question.

Therefore, I would overrule the preliminary objections.

______________________________________

JAMES GARDNER COLINS, Senior Judge