Opposition Brief — Acmat Corp. v. School District of Philadelphia

Petition No. 90-499

IN THE

SUPREME COURT OF THE UNITED

October Term, 1990

ACMAT CORPORATION,

Petitioner,

v.

SCHOOL DISTRICT OF PHILADELPHIA,

Respondent.

RESPONDENT’S BRIEF IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

André L. Dennis

John J. Murphy, III

STRADLEY, RONON, STEVENS

& YOUNG

2600 One Commerce Square

Philadelphia, Pennsylvania 19103

(215) 564-8034

Counsel of Record and

Attorneys for Respondent

PACKARD PRESS / LEGAL DIVISION, 1617 JFK BOULEVARD, PHILA, PA. 19103 (215) 563-9000

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JOSEPH F. SPANIO

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LERK JR

TABLE OF CONTENTS

COUNTER-STATEMENT OF THE CASE ............

PMP em ss

A.

THE DISTRICT COURT DID NOT DEPRIVE

ACMAT OF ITS PROCEDURAL DUE PROCESS

PUNE ENS Cob cben ceewenebageteasductdevesece

. THE DISTRICT COURT CORRECTLY INTER-

PRETED THE CONTRACT DOCUMENTS......

. THE DISTRICT COURT PROPERLY ENTERED

SUMMARY JUDGMENT ON ACMAT’S BREACH

OF CONTRACT CLAIMS. ..............2.cceeee

. THE DISTRICT COURT DID NOT DECIDE IM-

PROPERLY DISPUTED ISSUES OF MATERIAL

PREG 2 keveees SP TT ee PCIe TINT CO TTT ETT

. THE DISTRICT COURT PROPERLY DISMISSED

ACMAT’S CLAIMS FOR DELAY DAMAGES. ....

BASED UPON THE JUROKS’ ANSWERS TO SPE-

CIAL INTERROGATORIES, THE DISTRICT

COURT PROPERLY ENTERED JUDGMENT

FOR THE SCHOOL DISTRICT ON ACMATS

CLAIM FOR CONTRACT RETAINAGES........

. THE DISTRICT COURT PROPERLY DIS-

MISSED ACMAT’S QUANTUM MERUIT

ECA Sapbvetkan eee beueebeeeeanbecrcnccce

10

13

14

15

16

RE Ship sh 00k o ean 040550 cd abde es thnnen eases R.A.

THE SCHOOL DISTRICT OF PHILADELPHIA'S

MOTION FOR SUMMARY JUDGMENT....... R.

A. 1

TABLE OF CONTENTS — (Continued)

Page

ACMATS ANSWER TO THE SCHOOL DIS-

TRICTS MOTION FOR SUMMARY JUDG-

MENT... vcscccccccwscctcnsstccaceésesenseos R.A. 30

ACMATS MEMORANDUM OF LAW IN SUP-

PORT OF ITS MOTION FOR REARGUMENT. R.A. 68

LAS OMS te

TABLE OF AUTHORITIES

Cases: Page

Commonwealth v. Mitchell's Structural Steel Painting Co.,

18 Pa. Commw. 591, 336 A.2d 913 (1975) .......... 12

Commonwealth v. Seagram's Distiller’s Corp., 379 Pa. 411,

PR I BERL aa dni tedeicdcccccccccecss i7

Derry Twp. School Dist. v. Suburban Roofing Co., 102 Pa.

Commw. 54, 517 A.2d 225 (1986). .............. 17, 18

Dick Corp. v. State Public School Bidg. Auth., 27 Pa.

Commw. 498, 365 A.2d 663 (1976). ................ 14

F.D. Rich Co. v. Wilmington Housing Auth., 392 F.2d 841

Se I ie CEU Ee Rick Ca Wbeebs kcdekeccccccs 15

Goodwin v. Elkins & Co., 730 F.2d 99 (3d Cir. 1984), cert.

I, Se es BP ovo iccccccncccccccces 9

Hutchinson v. So. Central Bell Tel. Co., 815 F.2d 1058 (Sth

GUIS Wa Roba umhedewn be be ca de codecotsececs 8

John F. Harkins Co. v. School Dist. of Phila., 313 Pa.

Super. 425, 460 A.2d 260 (1983)... ................ 9

Keene Corp. v. Internat Fidelity Ins. Co., 736 F.2d 388

RES a a 8

Layne & Bowler Corp. vo. Western Well Works, Inc., 261

i ehh nauk end ceneh su eeensseceee 6

Nether Providence Twp. School Auth. v. Thomas M.

Durkin & Sons, Inc., 505 Pa. 42, 476 A.2d 904

Appeal of Sykesville Boro., 91 Pa. Super. 335 (1927) ..... 17

Teodori v. Penn Hill School Dist. Auth., 413 Pa. 127, 196

ETE SR aca ecnsncepevccssoncceeences 10, il

United Contractors v. United States, 368 F.2d 585 (Ct. Cl.

ee EL ee ccceckdnecceetecccses 13

United States v. Spearin, 248 U.S. 132, 39 S.Ct. 59, 63

ss omni casees 13

TABLE OF AUTHORITIES — (Continued)

Statutes: Page

0 Pia ic Mm GIBB, «06 kinds i vecceccusatdosseis 8, 18

OUT OTTI TTT eTER eh OL 6

oe Fe Fk OR TVIITTE Tiree eed Le 9

DD. .Bey SOE ND SED ox sewpaccctcsvsvesdevwnctes 14

iv

Sh A ti.

RE Ao RN ae NS AS CO ECL BER 5s -

Petition No. 90-499

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1990

ACMAT CORPORATION,

v.

SCHOOL DISTRICT OF PHILADELPHIA,

Respondent.

RESPONDENT'S BRIEF IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

COUNTER-STATEMENT OF THE CASE

A. Prior Proceedings

This is an action by Acmat Corporation (“Acmat”) to recover

damages for alleged extra work Acmat contends it performed in

connection with three asbestos removal contracts with the

School District of Philadelphia (“School District”). Acmat com-

menced this action by Summons and Complaint in the United

States District Court for the Eastern District of Pennsylvania on

December 9, 1985. The Complaint set forth claims for breach of

toppel and under the Racketeer Influenced Corrupt Organiza-

tions Act.!

Following the completion of discovery, the School District

filed a Motion for Summary Judgment on each of Acmat’s claims

on August 15, 1988. (R.A. 1).* The School District advanced the

following positions in support of its motion: (1) Acmat was

prohibited from recovering on any contractual or quasi-

contractual claims for additional work because Acmat failed to

obtain the approval of the School Board for the alleged extra

work, as required under its contracts and under the provisions of

the Pennsylvania Public School Code; (2) Acmat was precluded

from recovering delay damages under the terms of its contract;

(3) Acmat was barred from contesting the Schoo! Board’s deter-

mination on labor and materials expended in the two instances

where the School Board did approve additional work; and (4)

Acmat was responsible under its contracts for ascertaining the

full scope of its work and had a contractual obligation to perform

the work it claimed it was unaware of when it submitted its bids.

Acmat conceded in its response to the motion that as a

general rule it would not be able to obtain payment for alleged

extra work in the absence of School Board approval. (R.A. 33).

However, Acmat argued that an exception existed in those

“instances dealing with situations where time is of the essence

and the delay in waiting for School Board approval would be

detrimental to the citizens of the Commonwealth.” (R.A. 34).

Acmat also contended it was entitled to pursue its claim since (1)

equitable adjustment was “mandated” under the contracts; (2)

the extra work arose from “unforeseen conditions”; and (3) a

1. Acmat’s negligence and Racketeer Influenced and Corrupt Organiza-

tions Act (“RICO”) claims were voluntarily dismissed with prejudice. Acmat's

punitive damages and two fraud counts were withdrawn without prejudice. A

single fraud count was later reinstated by Acmat.

2. “R.A.” refers to the sequentially numbered pages of Respondent's

Appendix attached hereto.

Ue i

3

factual dispute existed which precluded enforcement of the “no

damage for delay” clause. (R.A. 45, 39, 55).

The District Court issued a 22-page Order in response to

the School District's motion on December 21, 1988. (App. C 5a-

24a).2 The District Court found that Acmat’s contract and

quasi-contract claims were barred as a matter of law under the

provisions of the Pennsylvania Public School Code due to the

absence of School Board approval of the alleged extra work.

Acmat’s fraud claim was dismissed for failure to state a claim.

The District Court also determined that a provision of the

contract relating to an equitable adjustment was likewise subject

to the provision in the contracts requiring Board approval of all

changes in contract scope and price. In response to the unfore-

seen conditions argument of Acmat, the District Court ruled

that Acmat did not comply with the procedures set forth in the

contract requiring School Board approval of any change in the

scope of work or contract price occasioned by the discovery of

conditions not allegedly reasonably anticipated and that Acmat

was bound by its contractual responsibility to ascertain the

nature and location of the work. Acmat’s Gaim for delay damages

was rejected by the Court because it was barred by the specific

language of the written contracts.‘ (App. C at Sa-24a).

More than six months after the entry of the Court’s Order

of December 21, 1988, Acmat moved for reargument of the

District Court's earlier order granting partial summary judg-

ment to the School District. (R.A. 68). In addition to reiterating

Acmat’s prior position that there were unforeseen conditions

3. Appendices A through J are attached to Acmat’s Petition and are

numbered sequentially from la through 245a.

4. After making these rulings, the District Court, nevertheless, pro-

ceeded to determine on an item-by-item basis whether Acmat was entitled to

receive damages for individual items of alleged extra work and the amount

thereof. At the conclusion cf the order, the District Court determined that

Acmat was entitled to a total credit of $203,723.79 against the School District's

counterclaim. Due to adjustments, this amount was later reduced to

$132,420.70. The District Court's decision to award damages to Acmat,

notwithstanding the lack of School Board approvel, is the subject of the School

District's Cross-Petition for a Writ of Certiorari.

and materials. (R.A. 86).

The jury trial on the School District's counterclaim against

Acmat took place from July 7 to July 14, 1989. In accordance

with the jury's answers to special interrogatories, the District

1989, in favor of the School District in the amount of $23,480.92

on the School District’s Counterclaim for delay damages and in

the amount of $16,975.42 on the School District’s claims for

contract-completion costs. (App. F at 97a). In the same Judg-

ment, the District Court entered judgment in favor of the

School District and against Acmat on Acmat’s claim for payment

of contract balances in the amount of $150,909.14, and deducted

the jury award in favor of the School District from the court's

earlier summary judgment award to Acmat for a net award to

Acmat of $91,964.40. (Id.)

Acmat did not file any post-trial motion for a new trial or

judgment notwithstanding the verdict. Post-trial motions filed

by the School District were denied. Acmat filed an appeal to the

United States Court of Appeals for the Third Circuit, and the

School District, thereafter, filed a cross-appeal. The Court of

;

i

3

:

conditions which can affect the work or the cost thereof.” (App.

E at 88a). Acmat further acknowledged that any failure on its

part to ascertain the extent of its work under the contracts would

not relieve it of “responsibility for successfully performing the

work without additional expense to the School District.” (fd.,

stances, including those instances where such delays were

caused by acts or neglect of the School District. (App. E at 92a).

Instead, Acmat agreed in each of its contracts that it could seek

extensions of time to complete its contracts as a result of any

delays on the job sites. (Id. ).

6

where a contractor [Acmat] claimed it discovered site conditions

differing from those shown in the contract drawings and speci-

fications. (Id.).

The School District and Acmat agreed, with Board ap-

proval, to a single written change order for the work at the

Fairhill School. The Board did not approve, nor did the School

District ever issue, any change orders with respect to work at

the Lincoln School. The parties agreed, with Board approval, to

a single written change order at the Rush School. No other

change orders or requests for additional compensation were

approved by the School Board.

Acmat failed to complete its work at the three work sites

within the time required under its contracts with the School

District. The total fixed price for all three contracts was

$2,001,283. Acmat, however, subsequently sought nearly

$6,000,000 for alleged contract extras.

REASONS FOR DENYING THE PETITION

This case involves nothing more than a garden variety

contract dispute between an asbestos-removal contractor and a

property owner which is limited solely to issues of Pennsylvania

law. As such, this case does not satisfy even remotely the

standards which would support review on a Writ of Certiorari.

A review on a Writ of Certiorari is not a matter of right, but

of judicial discretion. The rules of this Court provide that a

Petition for a Writ of Certiorari will be granted “only when there

are special and important reasons therefor.” Sup. Ct. R. 10. This

Court has explained certiorari should be granted only “in cases

involving principles the settlement of which is of importance to

the public as distinguished from that of the parties, and in cases

where there is a real and embarrassing conflict of opinion and

authority between the Circuits.” Layne & Bowler Corp. v.

Western Well Works, Inc., 261 U.S. 387, 393 (1923).

Rule 10 of the Supreme Court Rules sets forth certain

situations in which the Court will consider exercising its discre-

tion to review on a Writ of Certiorari. None of these standards

even remotely applies here. This case does not involve a split

lS a ag gs Cina GAS ES Pt si OAR

7

between the circuit courts on an important legal issue. More

importantly, Acmat voluntarily dismissed its RICO claim and,

therefore, has not pursued any claim under federal law against

the School District. This case does not involve a situation where

a United States court of appeals has decided a federal question

in conflict with a state court of last resort or where a United

States court of appeals has decided an important question of

federal law which was not then, but should be, settled by this

Court. Finally, this case does not involve a situation where a

court of appeals has sanctioned an action by a District Court

which has “departed from the accepted and usual course of

judicial proceedings” contemplated by Rule 10, supra. As

explained more fully below, there was more than an adequate

legal and factual basis to support the actions of the District

Court.

Acmat asks this Court merely to interpret provisions in

asbestos-removal contracts and to interpret provisions of Penn-

sylvania law governing public school contracts in a fashion which

has already been rejected by the District Court and the Court of

Appeals. Acmat has failed to present any compelling basis for a

review of these state law questions. Furthermore, many of the

arguments Acmat has made to this Court and the Court of

Appeals were never presented in a timely fashion to the District

Court at the time it adjudicated the claims between the parties

and are, therefore, beyond this Court’s scope of review.

A. The District Court Did Not Deprive Acmat Of Its Proce-

dural Due Process Rights.

In ruling on the School District’s Motion for Summary

Judgment, the District Court held that the great majority of

Acmat’s claims against the School District were barred as a

matter of law because Acmat had failed to obtain approval in

advance for this alleged extra work from the School Board, as

under the terms of its contracts and under the provi-

sions of §5-508 of the Pennsylvania School Code. (App. C at 5a).

5. The Pennsylvania School Code of 1949 provides, in pertinent part,

that:

8

The District Court, however, determined that Acmat was

entitled to additional compensation with respect to a limited

number of claims for additional work and determined the

amount of additional compensation Acmat was entitled to based

on the record before the Court. Acmat now complains that this

aspect of the summary judgment Order was improper and that it

should have been afforded a hearing to present further evidence

concerning its alleged damages.

Significantly, Acmat did not contend at the time it re-

sponded to the School District’s Motion for Summary Judgment

that Paragraph 14(b) of the contracts between Acmat and the

School District, making the School District the final arbiter of

Acmat’s cost of labor and materials, violated public policy or

Acmat’s due process rights. (R.A. 30). Acmat first raised this due

process argument in an untimely motion for reargument of the

District Court’s order granting, in part, the School District's

Motion for Summary Judgment. The District Court denied

Acmat’s motion for reargument because it concluded that Acmat

had raised nothing which could not have been raised by Acmat

when it filed its response to the Motion for Summary Judgment.

(App. D at 5la-52a). The District Court’s refusal to consider

these new arguments on a motion for reconsideration was well

founded. See Hutchinson v. So. Central Bell Tel. Co., 815 F.2d

1058 (5th Cir. 1987) (“a party who presents his case on one

theory and loses should not, in the absence of good reason, be

permitted to have a second chance for the presentation of a new

rationale”); Keene Corp. v. International Fidelity Ins. Co. 736

F.2d. 388, 393 (7th Cir. 1984) (a party cannot raise new legal

theories in a motion for reconsideration or on appeal).

NOTES (Continued)

[t]he affirmative vote of a majority of all the members of the board of

school directors in e very school district, duly recorded, showing how each

member voted, shall be required in order to take action on the following

subjects: . . . [c]reating or increasing any indebtedness . . . [e]ntering into

contracts of any kind . . . where the amount exceeds $100.00 . . . [failure

to comply with the provisions of this section shall render such acts of the

board of school directors void and unenforceable.

24 Pa. Stat. Ann. §5-508.

9

Even if Acmat had challenged the “final arbiter provision”

in its contracts in a timely fashion, any such challenge would be

without merit. Acmat’s reliance, for example, upon the case of

John F. Harkins Co. v. School Dist. of Phila., 313 Pa. Super.

425, 460 A.2d 260 (1983) is misplaced. Acmat cites Harkins for

the proposition that it was entitled to offer proof of additional

damages even where the School District was the final arbiter of

the contractor's net cost. However, Acmat did not submit any

proper evidence by affidavit in opposition to the School Dis-

trict’s Motion for Summary Judgment to demonstrate its costs

exceeded the amount approved by the Board.

Furthermore, Acmat’s reading of Harkins is incorrect.

Harkins involved the issue of whether a “total cost” method for

evaluating additional work performed under a contract was

appropriate. Reversing the trial court's use of the total cost

method and its decision in favor of Harkins, the Pennsylvania

Superior Court stated “[o]ur independent review of the record

persuades us that this was error. In the first place, the School

District was to be the final arbiter of the contractor's net costs.”

313 Pa. Super. at 434, 460 A.2d at 265. Thus, the final arbiter

clause was both enforceable and relied upon by the Superior

Court in its decision. Further, the Harkins case involved only an

evaluation of the “total cost” method. There is nothing in the

record here to demonstrate that the School District argued that

the final arbiter clause was binding and conclusive with respect

to its determination of damage.

Finally, the District Court and the United States Court of

Appeals for the Third Circuit are not bound by decisions of the

Pennsylvania Superior Court in interpreting Pennsylvania law.

Goodwin v. Elkins & Co., 730-F.2d 99 (3d Cir. 1984), cert.

denied, 105 S.Ct. 118 (1984). The only decisions they are bound

to follow in interpreting Pennsylvania law are the decisions of

the Pennsylvania Supreme Court. Id. As explained more fully

below, the Pennsylvania Supreme Court has refused to permit

contractors to recover against school districts in those instances

where base contract work or modifications have not been

formally approved in advance by school boards.

10

In short, Acmat has not been denied any procedural due

process rights under the terms of its contracts. Having freely

agreed to the provisions in its contracts and having offered

absolutely no proper evidence under Rule 56 of the Federal

Rules of Civil Procedure at the time the School District filed its

Motion for Summary Judgment, that the costs figures deter-

mined by the School District (and later approved by the court)

were improper, Acmat has absolutely no basis to contend its

procedural due process rights have been abridged.

B. The District Court Correctly Interpreted The Contract

Documents.

Acmat next argues that the District Court incorrectly

interpreted the “differing site conditions” provision in the

asbestos-removal contracts between Acmat and the School Dis-

trict. Once again, Acmat is merely asking this Court to serve as

the final arbiter of certain contract provisions which are to be

interpreted under Pennsylvania law. This issue does not provide

even remotely a “special and important” reason for this Court to

review this case on a Writ of Certiorari.

Moreover, Acmat’s argument is simply incorrect. Acmat’s

attempt to recover under the differing site conditions clause fails

for three reasons. First, the final sentence of Paragraph 14(c) of

the contracts provides that any increase or decrease of cost shall

be adjusted in the manner provided in the contract for adjust-

ment as to change. (App. E at 91a). This provision clearly relates

back to the provision requiring School Board approval for

contract modifications. Second, Acmat relies incorrectly upon

the case of Teodori v. Penn Hill School Dist. Auth., 413 Pa. 127,

196 A.2d 306 (1964), for the proposition that a differing site

condition clause is not modified by a “changes and alterations”

clause requiring formal approval of all contract changes. Teodori

involved a dispute as to whether a “changes and alterations

section requiring a written order or differing provisions clause”

governed the dispute. Id. The case did not involve a provision

present in the contracts between Acmat and the School District

relating to Board approval of changes to the contract or contract

eR a ee et ne ee ee ee Ee Le Ee eT ec a

Said

Pee ee Te Pee a ee ne eed

SA Sn EN ely pg AF ON LMS ge Pa aS Ud ths

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price. Further, the contract language in Teodori is materially

different from the contract language in the present case. In

Teodori, the parties followed the contractually mandated steps.

Here, Acmat was required to provide proper notice to the

School District of the alleged differing conditions pursuant to

Paragraph 14(c). If that had been done, the School District was

to investigate, and if it found materially differing conditions, it

was to make changes in the drawings and/or specifications as it

found necessary. Even if Acmat had gotten to the point where

change in drawings and specifications was necessary, it required

Board approval under Paragraph 14(a). Paragraph 14(a) expressly

provides that the School District may, subject to Board ap-

proval, make changes in the drawings and/or specifications in

the contract.

Furthermore, the court in Teodori specifically found that

the differing conditions included work in the original contract,

and no physical changes or alterations in the contract documents

were necessary. 413 Pa. at 132-33, 196 A.2d at 309. By contrast,

Acmat sought payment in this action for extra work that it

contended was not within the provisions of its original contracts.

Third, Acmat cannot recover under the “differing condi-

tions” clause is that it failed to conduct an inspection of the

building site prior to submitting its bid to determine the full

scope of the work at the project. Acmat expressly agreed in its

contract that it was responsible for inspecting the site and

acknowledged it would be responsible for all charges and costs

resulting from its failure to verify the conditions at the site.

6. In moving for summary judgment, the School District presented

extensive evidence concerning Acmat's failure to inspect the building site

before it submitted its bids. The School District, for example, submitted

deposition testimony from Acmat’s own job foteman that the extent of

overspray at the Rush School was readily apparent as soon as Acmat began

moving the ceiling tiles on the first floor. The School District also submitted

deposition testimony that Acmat typically performs an inspection before

submitting its bids for asbestos removal contracts, and that these inspections

include removal of ceiling tiles. In response, Acmat merely submitted an

affidavit which was not based on personal knowledge and did not include any

statement that Acmat was prevented by any action of ‘he School District from

making a proper inspection.

12

(App. E at 88a). Further, each contract provided that Acmat was

responsible for ascertaining the nature and location of the

working conditions which could affect the work, and that any

failure to do so would not relieve Acmat from the “responsibility

for successfully performing the work without additional expense

to the School District.” (Id., emphasis added). Under Pennsy]-

vania law, once a public contractor assumes responsibility for

being aware of the conditions it will encounter on the site, its

duty cannot be excused simply because its visual inspection was

inadequate. Commw. v. Mitchell’s Structural Steel Painting

Co., 18 Pa. Commw. 591, 336 A.2d 913 (1975).

The Pennsylvania Supreme Court expressly rejected the

argument Acmat now makes in Nether Providence Twp. School

Auth. v. Thomas M. Durkin & Sons, Inc., 505 Pa. 42, 476 A.2d

904 (1984). In Durkin, a school authority entered into an

agreement with a contractor to construct a new high school for a

fixed price. After construction began, the contractor noticed

discrepancies between the site plan topography contour lines

and the actual topographical conditions. As a result, the contrac-

tor was required to clear additional ground at the job site.

Before the job was completed, the parties disputed who

would bear the cost of the additional work which had to be

performed. Like Acmat, the contractor in Durkin was obligated

to examine the site, ascertain the nature and location of the work

and the general local conditions which would affect the work or

cost thereof. Id., at 46, 476 A.2d at 906. The contractor sought

to recover for the extra work due to actual site conditions which

differed from the contract documents and site plan provided by

the School District. The Court denied the claim since the School

Board had never approved the extra work.

The District Court here properly rejected Acmat’s attempt

to impose the cost of differing site conditions on the School

District due to Acmat’s failure to inspect the building site before

it submitted its bids. The District Court stated that Acmat's

failure to “ascertain what was entailed in performing the con-

tracted work could not be visited upon the School District but

‘ill

eer an

— “in Athen sth, lth

.

13

would be the contractor’s responsibility for successfully perform-

ing ... without additional expense to the School District.”

(App. C at 8a). The court concluded that:

[tlo permit a contractor to claim belatedly it could not

discover the scope of the work through a pre-bid inspec-

tion, and without more, to collect for work not approved as

an extra, would nullify the contract provisions controlling

bidding and performance and undermine the fiscal author-

ity and responsibility of the public contracting body.

(Id.). The District Court’s reasoning is entirely consistent with

the holding and spirit of the Pennsylvania Supreme Court in

Durkin, which explained, “[w]e have always rigidly imposed

strict standards on contractors who deal with public bodies to

prevent the unwarranted plundering of public funds. . . .” 505

Pa. at 48-49, 476 A.2d at 907.

Acmat’s reliance upon the decisions in United States v.

Spearin, 248 U.S. 132, 39 S.Ct. 59, 63 L.Ed. 166 (1918) and

United Contractors v. United States, 368 F.2d 585 (Ct. Cl. 1966)

is misplaced. Neither of these cases involves interpretations of

Pennsylvania law and its strict requirements concerning Board

approval in advance of all contract work or modifications.

C. The District Court Properly Entered Summary Judgment

on Acmat’s Breach of Contract Claims

The District Court properly granted the School District's

summary judgment motion on Acmat’s breach of contract

claims. Relying upon the Pennsylvania Supreme Court's deci-

sion in Durkin, the District Court held that Acmat had failed to

obtain the necessary approval from the School Board for its

claims for alleged extra work, as required under the provisions of

the Pennsylvania Public School Code and the provisions of its

contracts with the School District. Well after the entry of

summary judgment on behalf of the School District, Acmat

argued for the first time that certain claims were beyond the

scope of its contracts with the School District and were,

therefore, entitled to adjudication under common law princi-

ples. (R.A. 88). Specifically, Acmat contended it had performed

14

“protest work”, which was somehow separately compensible as

a breach of contract, the requirement of Board approval not-

withstanding. This issue was raised for the first time by Acmat in

its untimely motion for reargument.’ As the School District has

pointed out, Acmat was not permitted to raise these claims

belatedly in an effort to set aside the entry of summary

judgment. Further, Acmat is prohibited from recovering for

“protest work” because it continued to perform its contract

without obtaining School Board approval. See Dick Corp. v.

State Public School Bldg. Auth., 27 Pa. Commw. 498, 365 A.2d

663 (1976) (rather than proceeding with extra work without

written authorization, contractor may refuse to perform it until

it receives the contractually required written authorization).

D. The District Court Did Not Decide Improperly Disputed

Issues of Material Fact.

Acmat takes issue with various legal and factual findings by

the District Court at the time it ruled upon the School District's

Motion for Summary Judgment. Acmat believes, for example,

that the District Court should have characterized certain work as

base contract work rather than extra work. Acmat also believes

there were disputed issues of fact as to whether or not Acmat

conducted a reasonable pre-bid site inspection.

Once again, these efforts to reargue the evidence do not

even remotely qualify as “special and important reasons” to

require the issuance of a Writ of Certiorari. Furthermore,

Acmat is simply incorrect. Acmat does not point to even a single

example of how the District Court improperly determined that

certain work was base contract work, as opposed to “extra work.”

Acmat’s second argument, that there were disputed issues of

material fact as to the adequacy of Acmat’s pre-bid inspection, is

equally unfounded. As the School District has previously

pointed out, Acmat failed to submit any proper evidence when

the District Court decided the Motion for Summary Judgment

7. Local Rule 20(g) of the Rules of the United States District Court for

the Eastern District of Pennsylvania requires that a motion for reargument or

reconsideration be filed within ten days of the order or decree concerned.

—— ee el

15

to establish it conducted an adequate pre-bid inspection. It was

not until many months after the Motion for Summary Judgment

was decided that Acmat, in its motion for reargument, at-

tempted to submit evidence for the first time concerning the

adequacy of its pre-bid inspection. This evidence was properly

disregarded by the District Court, since it could and should

have been submitted by Acmat at the time it opposed the School

District's original Motion for Summary Judgment.

In short, Acmat’s arguments concerning disputed issues of

material fact provide no compelling basis for a Writ of Certiorari

and, furthermore, were never properly before the District

Court.

E. The District Court Properly Dismissed Acmat’s Claims for

Delay Damages.

Acmat agreed in each of its contracts with the School

District that it would not seek to recover damages if it were

delayed in concluding its work under the three asbestos removal

contracts.* This clause prohibits Acmat from seeking damages

from the School District even if it was delayed by acts of the

employees or agents of the School District. This is merely one

more instance where Acmat is asking this Court to interpret

contractual issues under Pennsylvania law.

Contract provisions which prohibit damages for delay are

“now universally accepted as valid.” F.D. Rich Co. v. Wilming-

ton Housing Authority, 392 F.2d 841, 843 (3d Cir. 1968). Acmat,

however, now claims the School District caused delays by

8. Each of Anmat’s equecments with the Scheel Distuict contains the

following delay damages provision

eee ie leah ba caiehilban tthe ih be iaeaen of

resulting from any of the aforesaid causes. (App. E at 92a, emphasis

added).

16

interfering with the prosecution of its work. This is simply

another instance where Acmat is now making a conclusory

argument which was not properly supported by affidavit or other

competent evidence at the time the District Court decided the

School District’s motion. Acmat presented no competent evi-

dence to suggest, much less prove, that the School District had

deliberately delayed Acmat in the prosecution of its work.

Under the circumstances, the District Court properly entered

judgment in favor of the School District on Acmat’s claim for

delay damages.

F. Based Upon The Jurors’ Answers To Special Interrogato-

ries, The District Court Properly Entered Judgment For

The School District On Acmat’s Claim Fer Contract Retain-

The School District retained contract balances from Acmat

because Acmat failed to provide copies of dump tickets evidenc-

ing the proper disposal of asbestos-contaminated materials. The

contracts between Acmat and the School District provided in no

less than three different sections that Acmat had to dispose of

asbestos-contaminated materials removed from the schools in an

approved landfill certified to receive hazardous waste, obtain

signed dump tickets from the landfill and submit the dump

tickets with its final payment requisition.

The School District produced overwhelming evidence at

the counterclaim trial that the dump tickets had not been

provided to it by Acmat. The jurors, by answers to special

interrogatories, concluded that Acmat did not prove that it

supplied to the School District all the asbestos site dump tickets

in compliance with the contract specifications and conditions.

The District Court, therefore, entered judgment against Acmat

and in favor of the School District on Acmat’s claim for the

contract balances.

Acmat now contends that the District Court erred by not

instructing the jury that the failure to provide dump tickets was

an immaterial breach of the contracts. This argument is without

merit for several reasons. First, it is self-evident that proof of

nti sa ee ee

School District on Acmat’s claim for contract retainages.

contractaal eiee when:the seuetremante of @ publie statete

have not been satisfied. See Commw. v. Seagram's Distiller’s

Corp., 379 Pa. 411, 108 A.2d 184 (1954) (rejecting contractor's

quantum meruit claim where contractor failed to comply with

statutory requirements); Appeal of Sykesville Boro., 91 Pa.

Super. 335 (1927) (rejecting contractor's quasi-contractual claims

against school district where required approval was not

obtained).

The decision in Derry Twp. School Dist. v. Suburban

Roofing Co., 102 Pa. Commonw. 54, 517 A.2d 225 (1986) does

not relieve Acmat of its obligation to obtain prior Board ap-

proval. Acmat seeks to recover for extra work, for which it never

obtained Board approval. Derry did not involve a claim for extra

work. The expansive reading of Derry advanced by Acmat would

9. Not surprisingly, Acmat did not include its points for charge in either

its appendix to its Appeal to the United States Court of Appeals for the Third

Circuit or its appendix to its Petition for a Writ of Certiorari.

18

make Derry wholly inconsistent with the decision of the Penn-

sylvania Supreme Court in Durkin, supra, since many claims for

extra work invariably involve a dispute between the contractor

and the owner over each party's responsibilities under the

Derry did not apply to the facts of this case.!®

CONCLUSION

For all of the foregoing reasons, it is respectfully requested

that Acmat Corporation’s Petition for a Writ of Certiorari be

denied.

Respectfully submitted,

André L. Dennis

John J. Murphy, III

STRADLEY, RONON, STEVENS

& YOUNG

2600 One Commerce Square

Philadelphia, Pennsylvania 19103

(215) 564-8034

Counsel of Record and

Attomeys for Respondent

Dated: October 22, 1990

10. In fact, the Commonwealth Court in Derry reaffirmed that Durkin

prohibited a contractor from recovering compensation for extra work per-

formed under a change order which was never approved by the School Board

in accordance with contract requirements.

EEO —— ‘a

RESPONDENT'S

APPENDIX

“a

a

=)

>

R.A.1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ACMAT CORPORATION : CIVIL ACTION

Plaintiff:

vo.

SCHOOL DISTRICT OF PHILADELPHIA :

Defendant : No. 85-7067

MOTION FOR SUMMARY JUDGMENT OF THE

SCHOOL DISTRICT OF PHILADELPHIA

The School District of Philadelphia hereby moves the Court

pursuant to Rule 56 of the Federal Rules of Civil Procedure for

the entry of judgment on its behalf with respect to each and

every claim asserted by Acmat Corporation in its Amended

Complaint. The School District of Philadelphia is entitled to the

entry of judgment on its behalf because there is no genuine issue

as to any material fact and because the School District is entitled

to judgment as a matter of law under the provisions of the

Pennsylvania Public School Code and under the provisions of its

contracts with Acmat Corporation. The School District relies

upon the memorandum of law which accompanies this motion as

well as the attached Affidavit of Herman Mattleman, Esquire,

President of the Board of Education of the School District of

Philadelphia.

André L’ Dennis

John J. Murphy, III

Paul D. Shaffner

STRADLEY, RONON, STEVENS

& YOUNG

2600 One Commerce Square

Philadelphia, PA 19103-7098

(215) 564-8000

Attorneys for Defendant

The School District of Philadelphia

R.A.2

MEMORANDUM OF LAW OF THE SCHOOL DISTRICT

OF PHILADELPHIA IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ACMAT CORPORATION ' : CIVIL ACTION

Plaintiff :

oD.

SCHOOL DISTRICT OF PHILADELPHIA :

Defendant : NO. 85-7067

MEMORANDUM OF LAW OF THE SCHOOL DISTRICT

OF PHILADELPHIA IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT

I. INTRODUCTION

Acmat Corporation (“Acmat”) has filed claims against the

School District of Philadelphia (the “School District”) seeking

additional compensation under three separate written agree-

ments for the removal of asbestos at Fairhill Elementary School,

Lincoln Senior High School and Rush Middle Schooi in Phila-

delphia, Pennsylvania. The School District not only denies that

Acmat is entitled to any additional compensation but insists it is

entitled to substantial credits for work Acmat did not have to

perform under the three agreements. In addition, the School

District has asserted a counterclaim against Acmat and seeks in

excess of $400,000 due to Acmat’s failure to complete the

contracts within the time required in the agreements and to

complete all labor and provide all materials called for in each of

the agreements.

The School District now moves for summary judgment on

its behalf pursuant to Rule 56 of the Federal Rules of Civil

Procedure because there is no genuine issue as to any material

fact and because the School District is entitled to judgment in its

,

R.A.3

favor as a matter of law under the terms of its contracts with

Acmat and the provisions of the Pennsylvania Public School

Code.

The terms of Acmat’s three contracts with the School

District are not in dispute.! The first of the three contracts is

B-137 (“Fairhill Contract”) under date of April 16, 1984 for the

fixed price of $446,000. (Exhibit No. 1) The School District, with

School Board approval, and Acmat subsequently agreed on June

26, 1984 to a price change on the Fairhill Contract in the amount

of $18,000 and a change in specifications known as the “Work

Practices Supplement”. (Exhibit No. 2). The School District

agreed to no other change in price on the Fairhill Contract.

(Mattleman Aff. at 993-4).

The second contract is B-163 (“Lincoln Contract”) under

date of June 11, 1984, in the fixed amount of $223,000. (Exhibit

No. 3) The provisions in the Work Practices Supplement were a

part of the specifications for the Lincoln Contract. No change

order was issued by the School District with respect to this

contract. Id. |

The third contract is B-216 (“Rush Contract”) under date of

June 11, 1984, relating to the second floor of the Rush School in

the fixed amount of $595,000. (Exhibit No. 4) Provisions of the

Work Practices Supplement were also part of the specifications

for the Rush Contract. Under date of October 30, 1984, the

School District and Acmat entered into a Supplemental Agree-

ment B-43 to the Rush Contract. (Exhibit No. 5) The Supple-

mental Agreement, with School Board approval, added the first

floor of the Rush School to Acmat’s contract for an additional

$656,000. On April 29, 1985, the School District, with School

Board approval, and Acmat agreed to Change Order No. 1 in the

amount of $63,282.89 for extra labor, material and equipment

necessary to wet wipe items in closets and cabinets required

because of the presence of asbestos. (Exhibit No. 6) No other

1. Copies of each contract, supplemental agreement and change order

have been separately bound and submitted to this Court previously as Exhibits

of the School District's Response to the Statement of Claim of Acmat Pursuant

to Order of April 23, 1986. The exhibit numbers used in this memorandum

conform to the exhibit numbers in that submission.

R.A.4

change order was issued by the School District with respect to

this contract. (Mattleman Aff. at {__).

‘Acmat agreed in each of these contracts with the School

District that it would be solely responsible for “ascertaining the

nature and location of the work and the general and local

conditions which can affect the work or the cost thereof.”

(Fairhill Contract, General Conditions at {9(a); Lincoln Con-

tract, General Conditions at {7(a); Rush Contract, General

Conditions at {7(a)). Acmat further acknowledged that any

failure on its part to ascertain the effect of its work under the

contracts would not relieve it from “responsibility for success-

fully performing the work without additional expense to the

School District.” Id. (Emphasis added).

Acmat further agreed it would not be entitled to recover

delay damages from the School District under any circum-

stances, including those instances where such delays are caused

by acts or neglect of the School District. (Fairhill Contract,

General Conditions at 417(c); Lincoln Contract, General Con-

ditions at 915(c); Rush Contract, General Conditions at 415(c)).

The asbestos removal contracts further provide that the

School District may, subject to the approval of the School

Board, make changes in the contracts. Each of the agreements,

however, expressly cautions that verbal instructions given by

any officer, agent or employee of the Board which depart from

the contract documents shall not be binding upon the Board.

(Fairhill Contract, General Conditions at 416; Lincoln Contract,

General Conditions at 414; Rush Contract, General Conditions

at 14).

The total fixed price for all three contracts was

$2,001,283.00. Acmat, however, now seeks somewhere be-

tween $5 Million and $6 Million in damages from the School

District for alleged contract extras and modifications.?

2. Even at this late stage in the litigation, the precise amount of Acmat's

claimed damages is unknown. Acmat has yet to provide either the School

District or the Court with a final calculation of the damages it claims it incurred

in connection with its work at the three schools. Acmat has attached to its

pretrial memorandum a portion of a report by Kellogg Corporation which

purports to set forth a “preliminary estimate of damages” incurred by Acmat on

R.A.5

The School District relies upon seven basic legal grounds in

support of this motion:

(1) All of Acmat’s claims for additional work must be

rejected since Acmat failed to obtain the approval of the

School Board for this alleged extra work as required under

its contracts with the School District and under the provi-

sions of the Pennsylvania Public School Code;

(2) Acmat’s contracts with the School District and the

case law provide that verbal requests by School District

representatives shall not be binding upon the Board.

(3) Acmat is prohibited from recovering against the

School District under any quasi-contractual theory of re-

covery since it has failed to comply with the provisions of

the Pennsylvania School Code and its contracts with the

School District;

(4) Acmat'’s fraud claim against the School District must

be dismissed as a matter of law since Acmat is attempting to

superimpose a tort theory on what is essentially a contrac-

tual cause of action and because Acmat has failed to

establish that it reasonably relied upon any alleged misrep-

resentations by representatives of the School District;

(5) Acmat is precluded from seeking to recover delay

damages against the School District under the terms of its

contracts even in those instances where such delays may be

attributable to acts or neglect on the part of the School

District;

The School District of Philadelphia is a separate and

independent School District administered, operated and man-

aged by the Board of Education in accordance with state and

local laws. The Pennsylvania Public School Code of 1949

the three projects in the amount of $5,387,670. Following the submission of

this motion, the School District will seek a conference with the Court or will

file a motion seeking to compel Acmat to respond to the School District's

discovery requests and provide it with a final accounting of the damages it

claims it is entitled to under the three contracts.

R.A.6

provides, in pertinent part, that: “[t]he affirmative vote of a

majority of all the members of the Board of School Directors in

every school district, duly recorded, showing how each member

voted, shall be required in order to take action on the following

subjects”:

. .. Entering into contracts of any kind, including contracts

for the purchase of fuel or any supplies, where the amount

involved exceeds One Hundred Dollars ($100.00) ....

Failure to comply with the provisions of this section shall

render such acts of the board of school directors void and

unenforceable.

24 Pa. Stat. Ann. §5-508. Each of Acmat’s contracts with the

School District provide that they are entered into subject to the

provisions of the Pennsylvania School Code of 1949.

The plaintiff bears the burden of establishing both the

validity of the underlying contract as well as approval of the

contract by a majority of Board members. Rudolph v. Albert

Gallatin School District, 60 Pa. Commw. 456, 431 A.2d 1171

(1981). Without a proper resolution, an action against the School

District is precluded.

The Pennsylvania courts have insisted that contractors

comply with the requirements of the School Code. In Framlau,

supra., the Court declined to enforce settlement terms agreed

to by the president of the Philadelphia School Board and its

attorney because the School Board declined to approve the

Agreement as required under Section 5-508 of the School Code.

Despite the apparent harshness of the result, the Court rea-

soned:

One who contracts with the School District must, at his own

peril, know the extent of the power of the School District's

officers in making the contract . . . [and] know that the

Board of Directors may repudiate any contract provisiun to

which it is assented. . . It is the general rule that where

formal action is necessary to bind the School District, such

a requirement must be met in order to predicate liability.

In the absence of a compliance with the applicable statutory

R.A.7

provisions pertaining to the motive by which a board of

school directors may make a contract, no enforceable

contract will result.

Id. at 627-28.

Modifications to a school district contract likewise require

approval by a majority of Board members. Matevish v. Ramey

Borough School District, 167 Pa. Super. 313, 74 A.2d 797

(1950). In Matevish, the Court rejected a claim by a transpor-

tation company that the secretary of a School Board had orally

modified the requirements of a contract for the busing of

students. The Court concluded that modification of the contract

required the approval of the School Board in compliance with

the same Public School Code provisions which applied to the

formation of the original contract. Absent compliance with the

provisions of the School Code, the Court concluded that no

liability could be imposed upon the School District for any

alleged. modifications to the contract.

2. Contract Requirements.

Acmat’s contracts with the School District, like the School

Code, provide that any modifications to the contract must be

approved by the School Board:

[t]he School District may, . . . , subject to approval of the

Boerd . . . make changes in the drawings and/or specifica-

tions of this contract if within its general scope, such

changes to be made in writing. If such changes cause an

increase or decrease in the contractor's cost of, or time

required for, performance of the contract, an equitable

adjustment shall be made and the contractor notified in

writing accordingly, any such change in the contract price

being subject to the approval of the Board.

General Condition 916(a) (emphasis added). Each contract also

expressly cautions that “[v]erbal instruction given by any of the

officers, agents, or employees of the Board which depart from

the contract document shall not be binding upon the Board.

General Condition $16(d). Thus, Acmat clearly agreed that: (1)

R.A.8

any modifications to the contract were required to be in writing;

(2) any modifications were subject to the approval of the Board;

(3) any change in the contract price was subject to the approval

of the Board; and (4) verbal instructions which departed from the

contract document were not binding upon the Board.

It is well recognized under Pennsylvania Law that strict

compliance with the contractual provisions in a public service

contract is necessary to support a claim under a contract for extra

work or material. Nether Providence Township School Authority

v. Thomas M. Durkin & Sons, Inc., 505 Pa. 42, 476 A.2d 904

(1984). In Nether Providence, a School Authority entered into an

agreement with a contractor to construct a new high school for

the Authority for a fixed price. After construction began, the

contractor noticed discrepancies between the site plan topogra-

phy contour lines and the actual topographical conditions. As a

result, the contractor was required to clear additional ground at

the job site.

Before the job was completed, the parties disputed who

would bear the cost of the additional work which had to be

performed. The School Authority’s President authorized the

School Authority's secretary to write to the contractor to ac-

knowledge the dispute and recommend that the contractor

continue the work with resolution of the disagreement at a later

time. After the job was completed, the contractor submitted a

claim to the School Authority for the extra work claiming that he

had been induced to perform the work by the letter authorized

by the School Authority’s President. When the School Authority

rejected the contractor's claim, the contractor brought an action

against the School Authority seeking compensation for the extra

work.

Recognizing the long line of Pennsylvania cases requiring

strict adherence to the provisions of public contracts, the

Pennsylvania Supreme Court rejected these claims for addi-

tional compensation. The Court noted that the contract obli-

gated the contractor to determine the amount of cut and fill

needed to complete the job and to inspect the work site in order

to verify conditions and assess the work which was required to

be performed. The contract also provided that “no change in the

| —

R.A.9

contract shall be made without the written approval of the

Board.” The Court, therefore, declined to allow the contractor

to recover since written approval of the Board was never

obtained. In so concluding, the Court stated:

[w]e have always rigidly imposed strict standards on

contractors who deal with public bodies to prevent the

unwarranted plundering of public funds, to uphold the

integrity of the bidding process, and we see no reason to

change our long-established precedents today. We reiterate

that public agreements can be altered only by the same

formal municipal action that created them or express rati-

fication by resolution of the public body.

The Court in Nether Providence rejected the contractor's

claim that the School Authority had waived the requirement that

changes to the contract needed the approval of the Board. The

Court held that a provision in a public contract relating to the

manner in which changes to the contract can be made can be

waived only by formal written action of the Board or by express

ratification of the extra work by resolution of the Board. The

Court, therefore, held that a letter prepared by the School

District’s president and secretary was not the act of the full

board and that the formal written action vequirement for waiver

was not satisfied. The Court also observed that the Board had

never adopted a resolution ratifying the extra work.

The Supreme Court's decision in Nether Providence is

consistent with a long line of Pennsylvania cases which require

strict compliance with contractual provisions regarding extra

work in public contracts. In Morgan v. Johnstown, 306 Pa. 456,

160 A.696 (1931), written orders for the city engineer for alleged

extra work were required by the terms of the contract. The

Court held that, in the absence of a written order from the city

engineer, the contractor could not recover for alleged extra

work. Similarly, in Montgomery v. Philadelphia, 391 Pa. 607,

139 A.2d 347 (1958) the contract required the contractor to

obtain a written order from the city engineer before proceeding

with extra work. The Corrt refused to allow any recovery for

additional work absent the required approval and explained that

ee eeeeeEOOeeoe

R.A.10

authorization by a subordinate of the designated official would

Building

Authority, 27 Pa. Commw. 498 (1 rather than proceeding

wth aie wah then ealaneaeieaiee es

refuse to perform until it receives Sy seminar + a

B. Oral or Written Directives of School District Represen-

tatives Do Not Constitute School Board Approval.

4 Nor can Acmat point to a single instance where the School Board, by

formal resolution, waived adherence to the provision in its contracts requiring

| ' ones ,

R.A.11

this argument which have already been discussed at some length

above: (1) The School Code requires formal Board approval of

any contracts or modifications to contracts; (2) Acmat’s contracts

with the School District provide that all modifications to the

contract must be approved by the School Board; and (3) Acmat’s

contracts further provide that any verbal instructions by repre-

sentatives of the School District shall not be binding upon the

The Pennsylvania Courts have consistently rejected efforts

by contractors to circumvent the statutory or contractual re-

quirements on the basis of alleged oral or written directives. In

Morgan v. Johnstown, 306 Pa. 456, 160 A.696 (1931), the Court

held a contractor could not recover for extra work on the basis

that members of City Council had orally directed extra work be

done when the contract required a written order of the city

engineer. Similarly, in Montgomery v. Philadelphia, 301 Pa.

591, 139 A.2d 347 (1958), the Court held that when written

orders of the city engineer for extra work were required, the

contractor could not recover on the basis of authorization by

subordinates of the city engineer. Authorization for extra work

must be made in strict compliance with the contract provisions

or the contractor is barred from pursuing claims for additional

work.

"Individuals who contract with public bodies governed by

public statutes make agreements outside the parameters of the

statute at their own risk. Commonwealth v. Seagram Distillers

Corp., 378 Pa 411, 109 A.2d 184 (1954). The Court in

refused to enforce an oral agreement between Seagram and the

Board. The Board was required by statute to approve any such

contracts. The Court stated that it was the obligation of Seagram

to determine the extent of the authority of the Director of

Operations to bind the Board by an oral agreement since

“[p]ersons contracting with a governmental agency must, at

their peril, know the extent of the power of its officers making

the contract.” Id. at 417, 109 A.2d at 186. The Court held that

Seagram's oral agreement with the Board’s subordinates did not

constitute formal action by the Board and was, therefore,

invalid. See also Vona v. Redevelopment Authority of Delaware

esteem

R.A. 12

County, 109 Pa. Commw. 156, 530 A.2d 1018 (1087) (Plaintiff

acted at his peril when he performed additional work on the

basis of representations made by the Authority's counsel be-

cause counsel lacked proper authorization to enter into the

agreement).

C. Aemat Is Prohibited From Recovering Against The

School District Under Any Quasi-Contracrural Theory

Of Recovery.

In addition to its contract claims, Acmat has asserted

various quasi-contractual theories in ‘ts Amended Complaint.

Count VI sets forth a theory based upon quantum meruit, Count

VII sets forth a claim for unjust enrichment and Count XI sets

forth a claim based upon promissory estoppel.

By asserting these equitable claims, Aemat seeks to render

the requirement of approval in the School Code mean-

ingless and circumvent the requirements of its asbestos removal

contracts. The Pennsylvania courts have consistently rejected

quasi-contractual claims when the requirements of a public

statute have not been satisfied. In Commonwealth v. Seagrams

Distillers Corp., supra., the Court refused to permit Seagrams

be no quasi-contractual recovery. The Court further held that

“the doctrine of quasi-contract does not extend to benefits which

by there very nature cannot be surrendered, and the retention

of which is therefore involuntary.” Id. at 410, 100 A.Qd at 187.

The Court observed that where benefits conferred upon a public

body pursuant to an invalid contract, by their very nature,

cannot be surrendered, no implied obligation arises on the part

of the municipality to make compensatory payment. As a result,

Seagrams could not recover under any quasi-contractual theory

of recovery.

—————————————————————aaaaEEEE——————

District, 170 Pa. Super. 477, 87 A.2d 98 (1952) (Unless statutory

provisions are observed there could be no enforceable contract

entered into by a school board nor can a plaintiff recover on the

basis of quantum merwit).

Furthermore, a party may not recover on a quasi-

to comply with contractual provisions governing modifications to

the contract or extra work. In Montgomery v. Philadelphia, the

Court explained the rationale for this rule as follows:

Where a contractor has attempted to recover for either

additional work or work necessitated by a change in the

plans and specifications, all of the cases in this jurisdiction

have denied recovery where the contract prescribed a

procedure for the oval of such additional work,

and such edure has not been followed. The

reasons for the requirement of strict adherence to the

contractual provisions are obvious. Municipal construction

contracts, whose terms are in a large part governed by

statute, are designed to provide, from the initial bidding to

R.A.14

final completion, for as many reasonably foreseeable con-

tingencies as practicable, to forestall any possible collusion

between city officials and contractors and to protect public

funds against wanton dissipation.

391 Pa. at 616, 139 A.2d at 350. The court in Montgomery,

accordingly, denied any recovery, contractual or otherwise by

the part of the contractor.

Acmat’s auantum meruit theory is clearly barred because

Acmat failed to proceed in accordance with the requirements of

the School Code on its contracts with the School District.

Likewise, Acmat’s claim for unjust enrichment is barred since it

Acunat’s cleien for enjust entidiuant te leo bemed clace eny

“benefit” conferred on the School District, by its very nature,

R.A.15

D. Acmat May Not Recover Against the School District on a

Theory of Equitable Estoppel.

The provisions of the School Code and its contracts not-

withstanding, Acmat suggests it may recover against the School

District in the absence of School Board approval under a theory

of equitable estoppel. Acmat directs the Court's attention to the

case of Derry Township School District v. Suburban Roofing

Co., Inc., 102 Pa. Commw. 54, 517 A.2d 225 (1986). Acmat’s

reliance upon Derry is misplaced. If anything, Derry merely

re-affirms the commitment to the principle that a contractor

cannot recover for alleged extra work absent compliance with

the School Code and contractual requirements.

The School District in Derry awarded a contract to defen-

dant to replace the roof on the School District's high school. The

contract required the contractor to replace concrete planks on a

unit price basis. The School District's inspector was to make the

determination as to which planks had to be replaced. Initially,

the School District's inspector determined that approximately

400 planks needed to be replaced and the contractor ordered

sufficient replacement planks. However, a new school district

inspector subsequently determined that a number of the planks

did not have to be replaced thereby leaving the contractor with

an excess supply of custom-made planks which were useful only

to the School District on its high school. The contractor sought

to recover against the School District for its out-of-pocket costs

for the unused planks.

The Commonwealth Court in Derry re-affirmed that the

Pennsylvania Supreme Court's decision in Nether Providence

prohibited a contractor from recovering compensation for extra

work performed under a change order which was never ap-

proved by the School Board in accordance with contract require-

ments. The court in Derry, however, noted that the builder was

not seeking to recover for the increased costs of extra work due

to a school district's oral changes to the contract. Rather, the

court emphasized that the builder was claiming compensation

for its reasonable costs “incurred in reliance upon the District's

interpretation of the Contractor's performance under the terms

R.A.16

of the contract, which interpretation thé District later altered to

the Contractor's detriment.” 517 A.2d at 229.

The Derry decision has no application to the facts in this

case. Acmat was required under each of its contracts with the

School District to remove asbestos from three Philadelphia

public schools. Like the plaintiff in Nether Providence, Acmat

now seeks to recover for extra work for which it never obtained

board approval. This is not a case where the School District

initially interpreted the contracts one way and later another and

where Acmat had to “special order” materials which would be

useless to Acmat if the School District later determined that less

work and materials would be involved. Nether Providence

remains the law in Pennsylvania and Acmat’s claims are, there-

fore, barred due to its failure to obtain proper board approval for

work it now claims is extra to its contracts.

E. Acmat Cannot Recover on a Fraud Theory Against the

School District.

Acmat purports to state a fraud claim against the School

District in Count VIII of the Amended Complaint. Acmat

alleges, inter alia, (1) that the School District asked Acmat to

perform various modifications and work not called for in its

original contracts (Amended Complaint at $43), (2) that the

School District represented to Acmat that it would be paid for

this alleged extra work (Id. at 951), (3) that the School District

made these representations notwithstanding its belief that it was

not required to compensate Acmat for this work absent express

approval from the School Board (Id. at $44), (4) that the School

District, therefore, never had any intention to pay Acmat for this

alleged extra work (Id. at 945), and (5) that Acmat justifiably

relied upon these alleged misrepresentations to its detriment.

(Id. at 953.)

There are at least two major deficiencies in Acmat's fraud

claim, each of which requires its dismissal as a matter of law.

First and foremost, Acmat’s fraud count is nothing more than a

thinly veiled attempt to recast contract claims as an action for

fraud. A similar attempt to superimpose a tort theory of recovery

R.A.17

on what is essentially a contractual claim was rejected in the case

of Iron Mountain Security Storage Corp. v. American Specially

Foods, Inc., 457 F. Supp. 1158 (E.D.Pa. 1978).

The Court in Iron Mountain stated the distinction between

tort and contract as follows:

Tort actions lie for breaches of duties imposed by law

as a matter of social policy while contract actions lie for only

breaches of duties imposed by mutual consentual agree-

ments between particular individuals. in tort actions, dam-

ages are awarded to compensate the plaintiff for all loss

suffered by breach of the duty, whereas in contract actions,

damages are limited by the scope of the agreement it must

be forseeable at the time the agreement is made. If a

tort-feasor breaches a duty imposed by society, a monetary

levy beyond that which is compensatory may be imposed

against him to punish the wrongdoing and serve as a

deterrent. Such punitive damages are not assessed for

breach of mere contractual duties, however.

Id. at 1165.

The Pennsylvania Supreme Court has also stated that to

permit tort claims for garden variety breaches of contract actions

“would erode the usual rules of contractual recovery and inject

confusion into our well-settled forms of actions. Most courts

have been cautious about permitting tort recovery for contrac-

tual breaches and we are in full accord with its policy.” Glazer v.

Chandler, 414 Pa. 304, 308-09 (1964).

This principle was also recognized in the case of Argo

Welded Products, Inc. v. J.T. Reyerson Steel & Sons, Inc., 528

F. Supp. 583 (E.D.Pa. 1981). The plaintiff in Argo brought suit

against the defendants for providing steel which failed to meet

specifications set forth in plaintiffs purchase order. The plaintiff

pleaded separate counts under tort and contractual theories.

The court concluded that, under Pennsylvania law, the plaintiff s

tort count was insufficient. The court reasoned that any duties

which may have been breached as to the plaintiff were purely

contractual in nature. Tort recovery is permissible, however,

solely as recompense for breaches of social obligations. Since any

R.A.18

duty which may have breached extended only to the plaintiff,

the court held that the plaintiff could not recover for negligence.

Similarly, in this case, if there has been any breach of

obligation, it would be an obligation solely to Acmat and such a

breach would be purely contractual in nature. Any duties which

allegedly have been breached in this case were imposed solely

by a mutual agreement between the School District and Acmat.

Plaintiffs claim is contractual in nature and does not involve the

breach of duty imposed as a matter of social policy for which an

action in tort would lie. The genesis of this matter is the

underlying contracts and Acmat is not permitted to inject fraud

claims into a purely contractual dispute.

Furthermore, it is readily apparent as a matter of law that

Acmat cannot satisfy the necessary elements to support a fraud

claim. In order to recover on a fraud claim against the School

eee te eee

misrepresentation to Acmat; (2) that the

false; €¥) tisk Gas meiebepccsclionban coke oc coated Get: 10 that

the School District intended that Acmat rely on the misrepre-

sentation; (5) that Acmat justifiably relied on the misrepresen-

wt

Supp. 884, 894 (E.D.Pa. 1981), aff'd., 688 F.2d 820 (3rd Cir.

1982).

Acmat contends that it justifiably relied upon alleged

representations by School District representatives that it would

be paid for alleged extra work. If Acmat ever relied upon these

alleged misrepresentations, however, such reliance was wholly

at odds with the provisions in Acmat’s contract which carefully

set forth the procedures for the approval of extra work on the

projects.

As the School District has already pointed out, Acmat

expressly agreed in each of its contracts with the School District

that any changes to the contracts by the School District would be

subject to approval by the School Board. The contracts further

provide that verbal instructions given by any of the officers,

agents or employees of the Board which depart from the contract

R.A.19

documents, shall not be binding upon the Board. Finally, each

of Acmat’s contracts with the School District provide that the

contracts are entered into subject to the provisions of the Public

School Code of 1949 which provides that a School District may

not be held liable for a contractual obligation unless the plaintiff

can show that the contract was approved by formal resolution of

a majority School Board members.

Given these provisions and the requirements of the Public

School Code of which Acmat had actual or constructive know!-

edge, Acmat can hardly argue that it justifiably relied upon any

alleged oral or written representation by representatives of the

School District as to whether or not it would be paid for alleged

extra work. Acmat was well aware and expressly agreed that any

such representations by School District employees or represen-

tatives would not be binding upon the Board. The School

District, therefore, is entitled to the entry of judgment on its

behalf an Count VIII of the Amended Complaint as a matter of

law and in accordance with the provisions of its contracts with

F. Acmat May Not Recover Delay Damages Under its Con-

tracts with the School District.

Acmat agreed in each of its contracts with the School

District that it would not seek to recover damages from the

School District if it was delayed for any number of reasons in

completing its work under the thee asbestos removal contracts.

Each of Acmat’s agreements with the School District contains

the following delay damages provision:

If any contractor shall be delayed in the completion of

his work by reason of unforseeable causes beyond his

control and without his fault or negligence, including but

not restricted to, acts of Ged, acts or neglect of the School

District, acts or neglect of any other contractor, fires,

floods, epidemics, quarantine, restrictions, strikes, or

freight embargoes, the period hereinabove specified for

completion of his work may be extended by such time as

shall be fixed by the School District, but the contractor shall

R.A.20

not be entitled to any damages or compensation from the

School District on account of any delay or delays resulting

from any of the aforesaid causes.

(Fairhill Contract at 417(c); Lincoln Contract at 915(c); Rush

Contract at §15(c)). This clause prohibits Acmat from seeking

damages from the School District even if it is delayed by acts of

the employees or agents of the School District.

These contractual provisions notwithstanding, Acmat has

asserted multiple claims against the School District in which it

now seeks to recover damages for alleged delays it attributes to

the School District. These claims which are set forth in Acmat’s

Statement of Claim which has previously been submitted to the

Court, can be summarized as follows:

FAIRHILL SCHOOL

Item 6 — Acmat seeks in excess of $200,000 for alleged

delays due to late test reports, disruptions and acceleration

in the level of work, failure of the School District’s inspec-

tors to timely inspect additional cleaning and recleaning,

etc.

Item 7 — Acmat alleges it was delayed in completing its

work at the Fairhill School due to a lack of elevator service.

Item 11 — Acmat contends its productivity was reduced

and that its work on the Fairhill School was delayed by a

requirement of the School District that its employees wear

fullface respirators instead of half-face masks.

Item 12 — Acmat seeks to recover the costs it contends it

had to pay to its independent air monitoring contractor for

being at the Fairhill School longer than Acmat originally

scheduled.

Item 13 — Acmat seeks payment for what it characterizes as

extended home office overhead and the value of field

equipment for a period of two months.

R.A.21

LINCOLN HIGH SCHOOL

Item 4 — Acmat contends it lost productivity because of the

alleged failure by the School District’s air quality inspectors

to conduct inspections on a timely basis.

Item 5 — Acmat claims its work was disrupted by a work

stoppage order on or about October 20, 1984.

Item 6 — Once again, Acmat contends its productivity was

lowered by a requirement of the School District that its

employees wear full-face respirators instead of half-face

masks.

Item 8 — Acmat seeks to recover for delays due to alleged

delayed test results, disruptions and acceleration in the

level work, failure of the School District’s inspectors to

timely inspect the additional cleaning and recleaning, etc.

Item 11 — Once again, Acmat seeks payment for what it

characterizes as extended home office overhead and the

value of field equipment for a period of two months.

RUSH SCHOOL

Item 18— Acmat seeks to recover monetary damages for

alleged lost productivity and inefficient labor which it

claims resulted from lack of heat in the building. Acmat

contends loss of heat was caused by the School District's

failure to provide heat during the winter months.

Item 32 — Acmat seeks payment for what it characterizes as

extended home office overhead and the value of field

equipment for a period of ten months.

Each of the foregoing claims represents an effort by Acmat to

recover for delays it experienced in completing the three

asbestos removal contracts with the School District. The fact

that Acmat attributes some of these delays to the School District

is of no consequence. Acmat’s contracts expressly provide that

delay damages shall not be recoverable even in those instances

where delays are attributable to the acts or neglect of the School

District. The delay damages provisions could not be clearer and

R.A.22

Acmat must be precluded from now seeking to recover damages

it freely and unequivocally agreed to forego in its contracts with

the School District.

G. The School District is Entitled to Make the Final Determi-

nation as to Net Costs of Labor and Materials Under its

Contracts with Acmat.

The three asbestos removal contracts between Acmat and

the School District each provide that the School District may,

subject to approval by the School Board, make changes in the

asbestos removal contracts. The agreements further provide that

the contractor may, in certain limited circumstances, be com-

pensated on a labor and materials basis in connection with any

additional work performed under the contracts. However, in

each instance where the contractor performs work on a labor and

materials basis, the contracts provide that the School District

“will make the final determination as to net costs of labor and

materials.” (Fairhill Contract at $16(b); Lincoln Contract at

{14(b); Rush Contract at 414(b)).

Two requests by Acmat for additional compensation were

submitted to the School Board: the first request involved the

decontamination of school books, supplies and other materials at

the Rush School; the second related to the Work Practices

Supplement at the Fairhill School. The School Board considered

each of these requests and issued resolutions approving payment

of additional compensation to Acmat. Acmat now seeks money

damages for these items in an amount which exceeds the amount

expressly approved by the School Board. At the Rush School, for

example, the Board issued a change order in the amount of

$63,282.89 for the decontamination work performed by Acmat.

The Board determined this was the reasonable value of the work

performed by Acmat after spending in excess of three weeks

reviewing Acmat’s change order requests. Acmat, however,

disagrees with this determination and seeks an additional

$85,115.33 payment on this item. (Acmat Statement of Claim,

Rush School, Item 1).5 This portion of Acmat’s claim, however,

5. Acmat also seeks additional compensation in connection with the

$18,000 change order it agreed to in connection with the Work Practices

H. Acmat is Responsible for the Costs of Removing Asbestos

Overspray at the Rush School.

Acmat seeks in excess of $400,000 from the School District

because it contends it encountered more asbestos overspray at

the Rush School than it originally anticipated when it submitted

its bid to the School District. Acmat describes this work as

follows in its Statement of Claim:

ic nye pr oan goed ar ges shag amoaghe

ered extra because this area should not have had any

fireproofing whatsoever.

(Statement of Claim at p. 39). Eugene Lord, who served as

Acmat’s superintendent at the Rush School, has testified that

asbestos overspray typically extends from between twelve to

eighteen inches on either side of the structural steel beam.

(Lord Dep. at pp. 231-32).° Acmat does not contend that it is

entitled for reimbursement for the removal of all overspray;

Supplement at the Fairhill School. Acmat, for example, seeks $185,000 for

removing carpeting and scraping of carpet glue even though it had agreed in

writing this work was included in the $18,000 Work Practices Supplement.

Similarly, Acmat seeks to recover because of alleged defective testing proce-

dures although it had expressly agreed to these procedures in the Work

Practices Supplement.

6. Relevant portions of Mr. Lord’s deposition testimony are attached

hereto as Exhibit “A”.

R.A.24

rather, it complains that it is entitled to additional compensation

because the overspray at the Rush School was even more

extensive than originally con

Although Acmat wishes to impose the cost of removing the

overspray on the School District, a close examination of the

contract documents reveals that Acmat is solely responsible for

this work. Acmat’s asbestos removal contract for the Rush School

expressly requires the removal of “. . . all asbestos containing

spray-on fireproofing materials.” (Specifications, Section 2080

{7101C, 3.04B). The contract does not distinguish between

asbestos fireproofing sprayed on steel beams and any overspray

surrounding those beams. Acmat now complains that at least a

portion of the overspray was not shown on drawings provided by

the School District. Acmat, however, expressly agreed in its

contract with the School District that anything mentioned in

either of the drawings or the specifications “. . . shall be of like

effect as if shown or mentioned in both. In case of differences

between drawings and specifications, the specifications shall

govern.” (Rush School Specifications at 913(a)).

Furthermore, Acmat’s contract with the School District

expressly required Acmat to conduct an inspection of the

building site prior to submitting its bid to determine the full

scope of its work at the project. The contract expressly provides:

EXAMINATION OF THE SITE

The Contractor bidding on this work must inspect the

sites before submitting the proposal and will be responsible

for informing himself fully on all determinable, existing

conditions and limitations of the sites and will assume

responsibility for all charges and costs resulting from his

failure to verify same.

(Rush Contract, Special Conditions, SC-07). Acmat also agreed

to the following clause in its contract:

CONDITIONS AFFECTING THE WORK

The Contractor shall be responsible for ascertaining

the nature and location of the work and the general and

R.A.25

local conditions which can affect the work or the costs

229-30). Lord further testified that Acmat typeally performs «

thorough inspection before submitting its bids

HE i He

ie oa tig

i fi th! na fi

bee Hi iil 8

i ils He

sitter

R.A.27

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ACMAT GonPomatiON ==-—=—s:_—« CIVIL ACTION

Plaintiff :

v.

THE SCHOOL DisTRICT OF

PHILADELPHIA :

Defendant : NO. 85-7067

AFFIDAVIT

COMMONWEALTH OF PENNSYLVANIA:

: 88

COUNTY OF PHILADELPHIA

1. 1 was appointed to the Board of Education of the

Schoo: District of Philadelphia in 1981 and have served as

R.A.28

1984 to a price change on the Fairhill Contract in the

amount of $18,000 and a change in specifications known as

the “Work Practice Supplement.” Under date of October

30, 1984, the School District, with School Board Approval,

and Acmat entered into a Supplemental Agreement to the

Rush Contract. This agreement added the first floor of the

Rush School to Acmat'’s contract for an additional $656,000.

In addition, the School District, with School Board ap-

proval, and Acmat agreed to Change Order No. 1 in the

amount of $63,282.89 for extra labor, material and equip-

ment necessary to wet wipe items in closets and cabinets at

the Rush School.

4. Other than the amendment to the Rush Contract

and the two change orders I have just reviewed, no other

change orders or requests for additional compensation were

ever approved by the Board of Education or issued by the

School District in connection with the Rush, Lincoln or

Fairhill contracts.

5. At no time did the Board of Education, by formal

resolution or otherwise, ever waive compliance with the

provisions of the Pennsylvania Public School Code or the

provisions in Acmat Corporation's contracts with the School

District which required formal approval of any modifica-

tions to Acmat Corporation’s contracts by the Board of

Education.

6. At no time, furthermore, did the Board of Education

ever authorize any employee, agent or representative of the

School District of Philadelphia to issue change orders or to

otherwise enter into agreements for the payment of addi-

tional compensation to Acmat Corporation without the

approval of the Board of Education.

ee a

Sworn to and Subscribed

Before me this 15th day

of August, 1988.

R.A.29

NOTARY PUBLIC

FRANCES FIORELLA

Notary Public, Phila., Phila. Co.

My Commission Expires Aug. 29,

1988

R.A.30

ANSWER OF ACMAT CORPORATION TO MOTION FOR

SUMMARY JUDGMENT OF THE SCHOOL DISTRICT OF

; PHILADELPHIA

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ACMAT CORPORATION

Plaintiff : CIVIL ACTION

oD.

SCHOOL DISTRICT OF PHILADELPHIA :

Defendant

and :

HUGHES URETHANE CONSTRUCTION, :

INC. :

Third Party Defendant : NO. 85-7067

ANSWER OF ACMAT CORPORATION

TO MOTION FOR SUMMARY JUDGMENT

OF THE SCHOOL DISTRICT OF PHILADELPHIA

The School District of Philadelphia is not entitled to the

entry of judgment on its behalf, because there exist genuine

issues of material fact and because the School District is not

entitled to judgment as a matter of law. In opposing the Motion

for Summary Judgment, ACMAT relies upon its accompanying

memorandum of Law, the exhibits thereto, and ACMAT's

Memorandum of Law on Disputed or Unusual Legal Issues

previously filed with its Pretrial Memorandum, a copy of which

is attached hereto. KORN, KLINE & KUTNER

Bie y wad AT

ae A. Korn, gm

1845 Walnut Street

21st Floor

Philadelphia, PA 19103

(215) 751-0500

Attorney for Plaintiff

ACMAT Corporation

R.A.31

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ACMAT CORPORATION CIVIL ACTION

HUGHES URETHANE

CONSTRUCTION, INC.

Third Party Defendant : NO. 85-7067

MEMORANDUM OF LAW OF ACMAT CORPORATION

IN OPPOSITION TO MOTION FOR SUMMARY

JUDGMENT OF THE SCHOOL DISTRICT OF PHILA-

DELPHIA

I. INTRODUCTION

ACMAT Corporation (“ACMAT’) entered into three sepa-

rate contracts with the Schoo! District of Philadelphia (“School

District”) for asbestos abatement at Fairhill Elementary School,

Lincoln Senior High School and Rush Middle School. ACMAT,

having completed its work at the three schools, now seeks to

recover damages in the amount of $4,389,268.00, allocated as

follows:

Rush _ $2,436,556.00

Fairhill _ $1,134,021.00

Lincoln _ $ 818,691.00

The original contracts, before extras and modifications,

totaled $2,001,283.00. Owing to defects in the contract docu-

ments as bid, the School District’s requiring of extra work

outside the scope of the contract, incorrect and inconsistent

R.A.32

interpretation and administration of the work practices under

each contract, unreasonable requests by the School District

personnel or its agents, and other improper acts of the School

District, ACMAT’s project costs rapidly escalated. The School

District failed to pay amounts due ACMAT, and ACMAT now

has claimed balances due under the base contract, balances due

for authorized and recognized extra work, balances due for work

performed beyond the scope of the original contract document,

and other damages particularized in the claim submitted by

ACMAT.

The School District has filed a Motion for Summary Judg-

ment. That Motion should not be granted because there exist

genuine issues of material fact, and the School District is not

entitled judgment as a matter of law. The moving party has the

burden of establishing the non-existence of genuine issues of

material fact. Adickes v. S. H. Kress & Co., 398 U.S. 144,

159-60, 90 S.Ct. 1598, 1609-10, 26 L.Ed.2d 142 (1970). The

School District has failed to meet this burden. Summary judg-

ment is not appropriate if there is the “slightest doubt,”

concerning the existence of material facts. Tomalewski v. State

Farm Life Insurance Co., 494 F.2d 882, 884 (3d Cil,. 1974).

The pertinent facts, conveniently overlooked by the School

District, were that School District employees and agents or-

dered ACMAT, verbally and in writing, to perform extra work.

ACMAT was threatened with termination and liquidated dam-

ages if it refused to comply with those mandates.

ACMAT submitted timely clairns for additional compensa-

tion. When payment was not forthcoming, ACMAT was prom-

ised that if it continued to perform, its claims would be equitably

adjusted. The School District never advised ACMAT that its

claims would not be submitted to the Board of Education or that

the School District never intended to pay ACMAT for millions of

dollars of extra work, of which they had knowledge. How

convenient to now argue that ACMAT's claim cannot be be-

tween $5-6 million, when the base contracts total $2.001,283.00.

The explanation is simple —the School District’s employment of

R.A.33

people untrained and incompetent in asbestos abatement, cou-

pled with the ordering of extra work, resulted in significant cost

overruns.

The facts, and the law applied to the facts, require a denial

of this Motion. The balance of this Memorandum of Law will

amplify upon this introductory statement and will address the

relevant factual and legal issues which require denial of tile

School District’s motion.

Il. ARGUMENT

A. As A Matter Of Law, ACMAT Is Entitled To Assert A

Claim For Additional Compensation From The School

District Under Both The Pennsylvania Public School

Code And The Contract Between ACMAT And The

School District é

Under the provisions of both the Pennsylvania Public

School Code and the contracts for asbestos removal entered into

by ACMAT and the School District, ACMAT is entitled to assert

claims for additional compensation for work it performed on the

three school projects. The foregoing is true even though AC-

MAT did receive formal approval from the School Board for the

majority of the items of additional work for which it now seeks

additional compensation. Under the facts of this case, the

non-receipt of School Board approval does not preclude recov-

ery of additional compensation.

1. Public School Code Requirement

Under the statutory law of the Commonwealth of Pennsyl-

vania, a Public School Board must formally approve all contacts

for work which has a value greater than One Hundred Dollars

($100.00). 24 Pa. C.S.A. §5-508 (Supp. 1987). Such a provision

includes all modifications to a contract which had been entered

into by the School District. Matevish v. Ramey Borough School

District, 167 Pa. Super. 313, 74 A.2d 797 (1950).

Absent specific statutory approval, contracts with school

districts generally are not enforceable unless formally approved

by the appropriate School Board. School District of Philadelphia

R.A.34

v. Framlau Corp., 15 Pa. Comm. 621, 328 A.2d 866 (1974).

There are, however, exceptions to this general rule. Primarily,

these exceptions include instances dealing with situations where

time is of the essence and the delay in waiting for School Board

approval would be detrimental to the citizens of the Common-

wealth. See In re: Chester School District's Audit, 301 Pa. 203,

219, 151 A. 81 (1930). If an emergency or other circumstance

exists which limits the time available for Board approval, a

School District or Board is justified in not meeting the require-

ments of the statute. Id.

In the case of Smith Laboratories v. Chester School Dis-

trict, 33 Del. Co. 97 (1946), the Court was faced with a situation

where time was of the essence and School Board approval could

not be obtained in adequate time. In Smith Laboratories, the

pupils and teachers at a certain school were being made ill as a

result of unknown causes and conditions at the school. The

School District, through duly authorized officers, hired an

investigator to determine the cause of the illnesses. The School

District, however, had taken no formal action to have the hiring

of the investigator approved by the School Board. Once the

investigator discovered the cause of the illness, the School

District refused to accept responsibility for his bill. Id. at 98.

The Court held that:

In view of the emergency existing and the lack of know!l-

edge as to what cost might be incurred, the defendant

directors were fully justified in contracting for the services

by their proper officers without waiting for a formal meeting

in order to record the minutes of such action. Neither the

time nor the conditions permitted any delay or discussion

.... The safety of the school child is at all times the

primary factor, and if necessary all requirements should be

passed over in order to protect them.

Id. at 99-100.

The circumstances involved here are similar. ACMAT was

involved in the removal and abatement of asbestos from three

public schools during the summer break at all three schools. Its

contracts provided that time was of the essence, and the hazard

R.A.35

imposed by the asbestos clearly jeopardized the health and

welfare of the students and teachers. Faced with a constant

demand for extra work from the School District, ACMAT could

simply not wait for the formal approval of the Board. To do so

would have created additional costs and expenses because

ACMAT would have been required to stop what it was doing,

clean up that area as best as possible, and begin anew in another

part of the school, causing large scale inefficiences. Once formal

approval was given, ACMAT would have had to restart in each

room where it was forced to stop. The asbestos removal process,

which required that an isolated area be totally cleaned and kept

from further contamination thereafter simply did not lend itself

to a piecemeal removal process. The extra cost would have been

astronomical, and re-contamination of areas would have been

likely.

Furthermore, the additional costs arising from the exist-

ence of asbestos overspray in the schools and other extra work

was unknown during the course of its work. From its vantage

point, ACMAT could not discern a reasonable cost for the extra

work and, therefore, was compelled to perform on a time and

material basis. Consequently, the School District could not

submit a known price to the School Board until after ACMAT

was done with the extra work. The work ACMAT encountered

was out of the ordinary and a price could not have reasonably

been set beforehand as would have been the usual case. Thus, as

in Smith Laboratories, unknown cost, health and safety require-

ments, and time requirements justified performance of extra

work without Board approval.

Because time was of the essence, the health and welfare of

the citizens of the Commonwealth were involved, and the value

of the work to be performed was unknown, the statutory

provision requiring formal approval by the School Board could

not have possibly been met at the time the work was to be done.

This does not mean, however, that the statute should be

. On the contrary, once the work had been com-

pleted for each change order, the School District, as required by

the contract, should have made an equitable adjustment to the

Contract amount. See, e.g., Fairhill contract §16, quoted infra

R.A.36

in Section IIB. When such an adjustment was made, the School

Board would make the final approval of the adjustment and

enter its approval into the School Board minutes as required by

the statute. As with any act of government, a reasonableness

standard would be applied to School Board approval at that

time. It was inequitable and unconscionable for the School

Board to use the statute at that time to withhold payment from

ACMAT.

The cases.cited by the School District in its Memorandum

of Law in Support of its Motion for Summary Judgment do not

involve the conditions present here. The Framlau case, supra,

involves a situation in which a plaintiff entered into a settlement

agreement with the School District which was approved by the

counsel for the School Board and the School Board president.

Framlau, supra, 328 A.2d at 868. The Board, however, later

rescinded the settlement agreement, saying that it was never

formally approved by the Board as required by the statute. Id.

at 869. The Court held for the School Board and ruled that the

settlement agreement was unenforceable. That case does not

involve a “time of the essence” problem, a health and welfare

question, or a situation where the costs of the changes in the

contract were unknown. Furthermore, the contract in Framlau,

unlike those here, was expressly conditioned on subsequent

approval by the Board, and did not affirmatively provide for an

equitable adjustment. Id. at 870. Consequently, Framlau is

clearly distinguishable from this case.

The Matevish opinion, supra, is distinguishable on the

same grounds. There, a conflict arose when a plaintiff furnished

a six year old bus rather than a new one as required under the

transportation contract entered into with the School District.

The use of the old bus was agreed to orally but was never

formally approved by the School Board. Matevish, 167 Pa.

Super. at 315-16. The Court ruled that the modification of the

contract had to be approved by the School Board and, therefore,

the contract was unenforceable. Id, at 317. Matevish does not

involve questions of time, health, welfare, or uncertain costs.

Nor did the contract involved require an equitable adjustment.

The case deals with a bus, not the removal of asbestos which had

R.A.37

to be done in a limited amount of time and with the safety of the

public in mind. It is therefore inapposite.

2. Contract Requirements

The requirement for approval by the School Board outlined

in 24 Pa. C.S.A. §5-508 is supplemented by a provision in the

contract between the School District and ACMAT which sub-

jects adjustments to the contract or contract price to School

Board approval. The clause states, “If such changes cause an

increase or decrease in the contractor's costs of, or time required

for, performance of the contract, an equitable adjustment shall

be made and the contractor notified in writing accordingly, any

such change in the contract price being subject to the approval

of the Board.” Fairhill contract, General Conditions, §16(a)

(emphasis added).

Under such a provision. ACMAT is entitled to an equitable

adjustment to the contract for any changes in the drawings or

specifications of the contract. If such a change is made, the new

contract price is subject to the approval of the School Board.

Such clauses have been the subject of numerous legal actions in

Pennsylvania, as well as other jurisdictions.

The School District seeks to bar ACMAT’s claim for addi-

tional compensation for extra work by relying extensively on the

case of Nether Providence Township School Authority v.

Thomas M. Durkin & Sons, Inc.. 505 Pa. 42, 476 A.2d 904

(1984). In Durkin, the contractor entered into a contract for the

construction of a new high school. Soon after the construction

began, the contractor noticed discrepancies between the site

plan provided by the School District under a separate contract

with an engineering firm and the actual site conditions. The

resolution of these discrepancies required additional work. The

Authority's president sent a letter to the contractor recommend-

ing that the contractor continue working on the project and that

the problem would be resolved at a later date. Relying on the

president's representation, the contractor completed the work

despite a contract provision requiring all change orders for extra

work to first be approved by the School Board.

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were sent authorizing the extra work. Consequently, the Board

would be unjustly enriched if it could reap the benefits of

ACMAT's performance without fully compensating the contrac-

tor. See also Lindbrook Construction v. Mukilteo School District

No. 6, 458 P.2d 1 (Wash. 1969) (holding that a School District

was estopped from denying its obligation to pay when its

representative directed work to proceed without a written

order, even though one was required by the contract) and

C. Norman Peterson v. Container Corp., 218 Cal. Rpter. 592,

172 Cal. App. 3d 55 (1985)(holding that clauses requiring change

orders to be approved in writing can be waived by an extremely

tight time schedule as well as cardinal changes to the scope of

the contract).

The case law upon which the School District relies is clearly

distinguishable. None of those cases contain clauses providing

for an equitable adjustment of the contract; none of them involve

a situation in which time is of the essence; none of them involve

circumstances which would not permit a contractor to simply

stop its work and wait for the approval of the School Board; and

none of them involve a continual pattern of threats of termina-

tion and liquidated damages which force the contractor to

continue. To allow a School District to take advantage of a

contractor because of such conditions would work an immense

injustice. In such a situation, the oral or written directives of the

School District representatives must be held to be the equiva-

lent of School Board approval. If they do not rise to that level,

the directives must be found to have given ACMAT the right to

an equitable adjustment which would be subject to the reason-

able approval of the School Board at a later time.

ACMAT is not attempting to circumvent either the statute

or the contractual requirement of School Board approval.

Rather, it is attempting to abide by these provisions as best it

can under the circumstances involved. Given the conditions

under which ACMAT was performing its contractual duties, it

would have been unreasonable for ACMAT to await School

Board approval. Furthermore, to allow the School District to

take advantage of ACMAT's position with the School District's

endless threats of termination and liquidated damages and for

R.A.43

the School District to later argue that ACMAT is not entitied to

further compensation because of the statute or contractual

provisions would create a grave inequity. While the purpose of

these provisions is to protect the public from fraud and a

plundering of its treasury, they should not be used to allow the

School District to plunder its contractors.

B. As A Matter Of Law, ACMAT Is Entitled To Assert A

Claim For The Reasonable Cost Of Work Performed

Beyond The Scope Of Its Written Contracts, Under

Theories Of Equitable Estoppel And Quasi-Contract

Even if the Court were to conclude that ACMAT is not

entitled to compensation for extra work performed because such

work was not formally approved by the School Board in writing,

ACMAT is nonetheless entitied to reasonable compensation

under quasi-contract and estoppel theories. ACMAT’s claims

under these theories are supportable based on the terms of the

School District's contracts, and as a matter of law.

The School District's arguments against quasi-contract and

estoppel recovery are simply regurgitations of its argument that

the School Code and written contract provisions required School

Board approval for work beyond the scope of the contracts. The

School District argues that if a party does not expressly comply

with a contractual provision requiring written approval of a

public Board or authority, recovery under an estoppel or

quasi-contract theory may never be had, no matter what the

facts or circumstances. This is allegedly so because, otherwise,

the sanctity of the formal approval process would be violated.

School District Memorandum of Law, pp. 17-19.

The School District’s argument that ACMAT is entitled

only to compensation for School Board approved changes in the

contracts ignores the terms of the contracts which expressly, and

affirmatively provide for an “equitable adjustment” to compen-

sate ACMAT for work beyond the scope of the contract. Each

contract’s General Conditions provides, as in Section 16 of the

Fairhill contract:

R.A.44

(a) The School District may, at any time, subject to

approval of the Board and without notice to the sureties,

make changes in the drawings and/or specifications of this

contract if within its general scope, such changes to be

made in writing. If such changes cause an increase or

decrease in the contractor’s cost of, or time required for,

performance of the contract, an equitable adjustment shall

be made and the contractor notified in writing accordingly,

any such change in contract price being subject to the

approval of the Board.

(b) The determination of the increase or decrease in

compensation to be paid to the contractor for additions to or

reductions in the work, respectively, shall be determined

by application of unit prices when such are set forth in the

Special Conditions of the contract, or in those cases where

unit prices are not applicable, by a lump sum mutually

agreed upon by the Board and the contractor. If however,

unit prices are not applicable and if the parties cannot agree

upon a lump sum, then additional compensation to be paid

the contractor shall be determined by the actual cost in

labor and materials, plus fifteen percent (15%) for profit and

overhead. Reductions in the contract price in the form or

credits shall be determined by the actual net cost in labor

and materials if the aforementioned lump sum cannot be

agreed upon. The fifteen percent (15%) for profit and

overhead will be retained by the contractor. The School

District will make the final determination as to net cost of

labor and materials.

(c) Should the contractor encounter subsurface and/or

other conditions at the site materially differing from those

shown on the drawings or indicated in the specifications, he

shall immediately give notice to the School District of such

conditions, before they are disturbed. The School District

will investigate the conditions and if it finds that they

materially differ from those shown on the drawings or

indicated in the specifications, it shall make such changes in

the drawings and/or specifications as it may find necessary.

R.A.45

Any increase or decrease of cost resulting from such

changes shall be adjusted in the manner provided herein for

adjustment as to changes.

(d) Verbal instruction given by way of the officers,

agents, or employees of the Board which depart from the

contract documents shall not be binding upon the Board.

Subsection (a) specifically requires “equitable adjustments” in

the contract price. Use of the word “shall” mandates an equita-

ble adjustment where contract changes cause an increase in the

contractors cost of or time for performance. Although Subsection

(a) states that any increased cost of performance is “subject to

approval of the board”, mandatory language of the contracts

relating to equitable adjustments in the contract price created an

affirmative obligation of the School District to present all such

requests for equitable adjustments to the School Board, and

required the School Board to exercise reasonableness in evalu-

ating requests for equitable adjustments. The contract's lan-

guage mandating an “equitable adjustment”, “subject to” School

Board approval does not make Board approval a condition

precedent to recovery. At best, it creates an ambiguity in the

contract with respect to whether and when Board approval was

required, which, since it was drafted by the School District,

must be resolved against it by implying a requirement that the

School Board employ a “reasonableness” standard in its review

of any requests for equitable adjustment. See Restatement

(Second) of Contracts, §205.1

None of the cases cited by the School District in opposition

to recovery in quasi-contract or estoppel involve contracts, like

those here, with affirmative language mandating equitable

adjustments. That the contracts make the equitable adjustments

“subject to School Board approval” does not require that such

adjustments be rejected. To the contrary, the contract language

1. That the contracts contemplate reasonableness in determining the

amount of an equitable adjustment is bolstered by Subsection (b) which sets

forth a formula for compensation in the absence of an agreement between the

School District and a contractor.

R.A.46

imposes a good faith obligation on the School District to present

all claims to the School Board, and on the School Board to fairly

and reasonably evaluate them. See Tamaqua Borough v. Rush

Township Sewer Authority, 85 Pa. Comm. 421, 482 A.2d 1167,

1173 (law implies agreement to perform things according to

reason and justice that party should perform in order to carry out

purpose for which contract was made and to refrain from doing

anything that would destroy other party's right to receive fruits

of contract). Absent application of this standard, it cannot be said

that the adjustment process imposed by the contracts was in any

sense “equitable” ,? as required by the contracts.

The record before this Court reflects 2 consistent pattern of

oral and written School District approvals to ACMAT to perform

work beyond the scope of its written contracts. See Exhibits

1-35. In reliance on these explicit instructions, ACMAT per-

formed hundreds of thousands of dollars of extra work. Yet, it is

uncontroverted that most of ACMAT’s requests for extra work

were never even placed before the School Board for review, let

alone fairly considered by the School Board for equitable

adjustment. See Exhibits 42-44. The School District’s contracts

state that an equitable adjustment shall be made for extra work.

Thus, the School District’s argument, reduced to essentials,

becomes a tautology: ACMAT cannot be accorded equitable

relief because the School Board (although permitted to approve

equitable relief) was not given the opportunity to approve

payment for alleged extra work performed by ACMAT.* Buried

within the rationale of this argument lies this flawed premise:

the School Board is the sole and exclusive arbiter of ACMAT's

2. “Equitable” means “Just; conformable to the principles of justice and

right . . . just, fair, and right, in consideration of the facts and circumstances

of the individual case.” Black’s Law Dictionary, Revised 4th Ed.

3. The discovery record establishes that many of ACMAT’s requests for

compensation for extra work were considered and rejected by lower level

School District officials, without further review by the School Board. (Exhibits

42-43). In so doing, the School District officials clearly acted as agents for the

School Board. If agents in rejecting ACMAT's claims, these School District

officials must also be agents, binding the School Board, for all extra work

approved by them and on which ACMAT was instructed to proceed.

R.A.47

entitlement to equitable compensation. The contracts do not so

provide, as they mandate equitable adjustment for extra work

performed.

In none of the cases cited by the School District did the

contracts involve certain clauses, like those in this case, affirma-

tively mandating an equitable adjustment for extra work. In

Commonwealth v. Seagrams Distillers Corporation, 379 Pa. 411

(1954), an oral contract for the transportation and delivery of

liquor was construed. Quasi-contract recovery was denied,

therefore, in the absence of an affirmative contract provision, as

here, mandating an equitable adjustment. Once the School

District chose to provide for an equitable adjustment in AC-

MAT’s contract price, it exposed itself to quasi-contractual relief

based on principles of estoppel. Montgomery v. Philadelphia,

391 Pa. 591 (1958) is not to the contrary. In that case, the

contract provided that no claim for extra work would be allowed

unless “ordered in writing by the engineer and approved by the

recreation commissioner”, a condition precedent to recovery.

Here, the contract creates a right to an equitable adjustment,

subject to subsequent School Board approval. This right to an

equitable adjustment cannot be unreasonably witheld, given the

contract language. See Teodori v. Penn Hills School District

Authority, 413 Pa 127, 196 A.2d 306 (1964).

The School District also argues that ACMAT is not entitled

to quantum meruit recovery because “ACMAT failed to proceed

in accordance with the requirements of the School Code” to

obtain School Board approval. However, the question of

whether School Board approval was improperly witheld by the

School District is a question of fact which can be resolved only

upon determination of whether the work performed by ACMAT

was in fact an extra to the contract. ACMAT has alleged: that

certain work which the School District required was a “cardinal

change” to the contract which fundamentally altered the con-

tractual undertaking; that unforeseen and unforseeable condi-

tions existed which created “differing site conditions” creating a

right to additional compensation: and that the School District

actively interfered with its work, thereby creating additional

costs. Equitable adjustment for the claimed extra work is

R.A.48

contemplated by the contacts, subject to reasonable and fair

approval and evaluation by the School Board. Because the

question of whether the School Board actually, or should have,

reviewed ACMAT’s requests for extra compensation in a rea-

sonable and fair way is one of fact, summary judgment should

not be granted.

The disputed facts giving rise to ACMAT's claim have been

fully developed in discovery. ACMAT can prove that it received

written directives from high level and project level School

District employees to perform thousands of dollars of extra

- work. The School District had an affirmative duty, based on the

contracts, to submit ACMAT’s requests for additional compen-

sation to the School Board, and the School Board was required

to promptly, fairly, and reasonably review those requests. As

developed in discovery, neither the School Board nor the School

It is overwhelmingly clear that ACMAT relied on instruc-

tions from School District employees in performing large

amounts of extra work. To prohibit recovery as a matter of law

would be to permit the School Board to use its potentially bad

faith refusal to evaluate ACMAT's claims as a sword to preclude

ACMAT from proving its entitlement to compensation. The law

does not and should not sanction this harsh result.

Where a contractor relies to his detriment on representa-

tions of a public authority, Pennsylvania law provides a quasi-

contractual remedy based on estoppel. in Derry Township

School District v. Suburban Roofing, 102 Pa. Comm. 54, 517

A.2d 225 (1986), the court held that theories of equitable

promissory estoppel are applicable to public contracts

governmental agencies, and expressly rejected a School Dis-

applicable to public contracts. 517 A.2d at 228-229.

In Derry, a School District official modified the amount of

material which it had previously orally ordered a contractor to

procure pursuant to a contract for replacing a roof. Because the

R.A.49

contractor had relied on an earlier representation, it had or-

dered material some of which was useless as a result of the

changes. The change had not been approved in writing as

required by the contract. The court held that because the School

District had induced the contractor to purchase supplies which

thereafter could not be used, promissory or equitable estoppel

prevented it from denying liability. Id at 229.

The School District attempts to distinguish Derry from this

case because, supposedly, “this is not a case where the School

District initially interpreted the contracts one way and later

another in which ACMAT had to ‘special order’ materials which

would be useless to ACMAT if the School District later deter-

mined that less work and materials would be involved”. School

District Memorandum of Law, p.22. To the contrary, this is a

case where differences in contract interpretation by the School

District resulted in the expenditure of huge amounts of addi-

tional labor and material. The proper scope of ACMAT’s work

under the contracts forms the primary basis for much of its

claim. During its performance, ACMAT and the School District

were continually at odds over what was expected of ACMAT

under the contract; this case is almost exclusively about differ-

ences in contact interpretation. Because the essence of the

dispute between ACMAT and the School District is one of

contract interpretation, and the proper scope of work as defined

in the contracts, equitable and promissory estoppel theories,

pursuant to Derry, are cognizable against the School District.

Moreover, the contracts in this case affirmatively require an

equitable adjustment for work performed which is outside the

scope of the contracts. To argue that the mandate of Derry does

not apply here merely because “special order” materials are not

involved is to unfairly and disingenuously limit its holding, and

would produce the absurd result of permitting estoppel claims

against public authorities only where its promises resulted in

“useless” materials being ordered. Derry’s holding is not so

limited; it permits recovery against a public agency based on

R.A.50

estoppel principles where, as a result of contract interpretation,

work outside the scope of a contact is performed.

In deciding the issue of ACMAT’s entitlement to recover

based on equitable and promissory estoppel principles, the

Court should be mindful that the doctrine of equitable estoppel

is one of fundamental fairness. Brog Pharmacy ov. Department of

Public Welfare, 87 Pa. Comm. 181, 687 A.2d 49 (1985). Penn-

sylvania law emphatically authorizes recovery against public

agencies based on estoppel principles. Plymouth Twp. Council

v. Montgomery Co., 531 A.2d 1158, 1162 (Pa. Comm. 1987);

Commonwealth o. Dixon Contracting Company, 80 Pa. Comm.

438, 471 A.2d, 934 (1984); Frank v. County of Greany, 50 Pa.

Comm. 30, 412 A.2d 663 (1980).

Here, the facts as developed in discovery reflect that the

School District repeatedly ordered ACMAT to perform work,

much of which ACMAT believed to be outside the scope of its

contracts. See Exhibits 1-37. In so doing, the School Board

reeatedly represented in writing to ACMAT that it would be

compensated for extra work. Yet, the facts reflect that the School

District presented only two change order requests to the School

Board, leaving the lion’s share of ACMAT s claims for extra work

compensation, totalling hundreds of thousands of dollars, unre-

viewed by the very Board whose review is required by the

contracts! ACMAT had no control over the School Board review

process. Therefore, the School District had an affirmative

obligation to submit all of ACMAT’s claims to the School Board;

it clearly did not do so. To grant summary ‘udgment to the

School District based on lack of School Board approval would be

4. The Derry decision distinguishes Nether Providence Twp. School

Authority 0. Durkin & Sons, Inc., 505 Pa. 42, 476 A.2d 904 (1984) because

Derry involved “contract interpretation” and Durkin involved the enforceabil-

ity of an oral change order. The Durkin decision did not bar estoppel claims

against public authorities; it held simply that based on the facts of that case an

oral change order was not enforceable. Where, as here. the primary issue is

one of contract interpretation, Derry is clearly incompatible with Durkin and

permits recovery, based on estoppel theory, for claims based on oral and

written representations of School District officials, whether or not formally

approved by the School Board.

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R.A.51

to condone a system in which authorized representatives of a

School District can: 1) repeatedly instruct a contractor, orally

and in writing, to perform work which the contractor believes to

be beyond the scope of a contract; 2) promise orally and in

writing that the contractor will be paid for this work: 3) threaten

the contractor with termination of its contract and liquidated

damages if the extra work is not performed; 4) fail to submit the

contractor's requests to the School Board for approval; and 5)

cess would give a license to public school districts to use lack of

School Board approval as a sword to defeat contractors, legiti-

mate claims for work performed based on express instructions

from School Discrict officials. This would surely be the moral

equivalent of acquitting a child for the murder of his parents

because he was an orphan! Not having followed its own contract,

the School District cannot use that contract's processes to defeat

ACMAT's claim. _

Equity will not allow a School District to act as both judge

and jury with respect to « contractor's claim. Given that

ACMAT's contracts affirmatively require an equitable adjust-

ment, that the facts reflect that the School Board was given the

opportunity to review or approve ACMAT's extra work claim,

and that ACMAT performed work based on written and oral

promises of compensation from School District officials, AC-

MAT's claims based on equitable and promissory estoppel are

cognizable as a matter of law.

Lastly, a substantial portion of ACMAT's claim for equitable

adjustment arises from unforeseen conditions which required an

inordinate amount of work not anticipated by ACMAT. For

instance, ACMAT claims that asbestos overspray on large por-

tions of concealed portions of the Rush School was unforeseeable

and resulted in a significant amount of additional work.

Subsection (c) (e.g. section 16(c) of the Fairhill Contract) of

the contracts’ general conditions quoted above provides for

adjustment to the contract price arising from the discovery of

conditions materially differing from the drawings or specifica-

tions. School Board approval of the increase or decrease for work

approval , contract adjustments based on unforeseen con-

ditions under the contracts did not require approval by the

School Board.

In Teodort v. Penn Hills School District 413 Pa

127, 196 A.2d 306 (1964), the Pennsylvania Supreme Court held

that a School District's contract which for price

adjustments for unforeseen conditions formal School

In its Motion, the School District argues that ACMAT

should not be permitted to recover on its fraud theory. How-

ever, ACMAT’s fraud theory is viable and should withstand the

School District's Motion for Summary Judgment, in that: (1) this

Court has already ruled on a large part of the School District's

Motion regarding fraud: (2) ACMAT's fraud claim is separate and

distinct from ACMAT’s breach of contract claims and may be

pursued independently: and (3) there are genuine issues as to

the material facts forming the basis of ACMAT’s fraud claim.

At an earlier stage of this litigation, the School District filed

a Motion to Dismiss the fraud count (Count VIII) of ACMAT's

Amended Complaint. This earlier Motion raised arguments

ruled in favor of ACMAT. For instance, the School District

argued there, as it does in the present Motion, that ACMAT's

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R.A.53

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its fraud claim, despite the fact that it has brought contact claims

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an implied contractual duty of good faith and fair dealing under

the circumstances and therefore dismissed the count alleging

that claim. The Court in Iron Mountain did not state that a party

is barred from bringing a fraud cause of action based upon

misrepresentations made in connection with a contractual un-

that Pennsylvania would not allow tort recovery for the breach of

Argo Welded Products, Inc. v. J.T. Ryerson Steel & Sons,

Inc., 528 F.Supp. 585 (E.D. Pa. 1981), also cited by the School

District, likewise did not involve a claim based on fraud. There

the plaintiff pursued claims for breach of contract and negligence

R.A.54

in supplying non-conforming goods. The failure to supply non-

conforming goods was in actuality a breach of the contractual

— and therefore the cause of action in negligence was

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America, 564 F.Supp. 1140 (E.D. Pa. 1064). the

plaintiff's Complaint both breach of contract and fraud.

District's instructions and in reliance on the representations of

the School District that ACMAT would be paid. See Exhibits

1-49. it is a question of fact as to the r of ACMAT’s

a

D. A Factual Dispute Exists With Respect To The Enforce-

ability Of That Portion Of The Contracts Parporting To

Exelade Damages For Delay

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R.A.56

District’s interference into the manner in which it would

perform its contracts. The delays sustained by ACMAT there-

fore do not come within the ambit of the “no damage for delay

clause,” Commonwealth State Highway & Bridge Authority v.

General Ashpalt Paving Co., 46 Pa. Comm. 114, 405 A.2d 1138

(1979).

Moreover, a factual dispute exists between ACMAT and the

School District as to whether the School District prevented

ACMAT from timely performing its contracts. When one party

to a contract prevents or impedes performance by the other

party, it may not avail itself of exculpatory contract provisions

which benefit it. Simply put, a party to a contract may not take

advantage of its own breach thereof. Rainier v. Champion

Container Co., 294 F.2d 96 (3rd Cir. 1961): Craig Cool Moving

Co. v. Romaini, 513 A.2d 437, 355 Pa. Super. 296 (1986), alloc.

granted 522 A.2d 50. A question of fact exists here as to whether

the School District breached its contracts with ACMAT by

actively interfering with ACMAT’s performance. Therefore,

applicability of the “no damages for delay clause” must await

resolution of the aforementioned factual dispute. The Motion for

Summary Judgment should therefore be denied.

E. The School District Does Not Have Total, Unrestrained

Authority To Determine The Net Costs Of Labor And

Materials For Purposes Of ACMAT’s Compensation For

Additional Work

In its Memorandum of Law, the School District takes the

position that in certain circumstances, it has the right to make

the final determination as to net costs of labor and materials for

purposes of compensating ACMAT for additional work per-

formed. The School District claims that in these circumstances,

it is the “final arbiter of labor and material costs.” School District

Memorandum of Law, p. 32. The School District fails to

acknowledge that any right it may have to determine labor and

material costs is subject to the standards of reasonableness and

SE te ee

R.A.57

It is well-recognized that “[e]very contract imposes upon

each party a duty of good faith and fair dealing in its performance

and its enforcement.” Restatement (Second) of Contracts. §205.

See Baker v. Lafayette College, 350 Pa. Super. 68, 504 A.2d 247,

255 (1986) (evaluation and review process of faculty member

Manufacturing Co. v. Rawlinson, 341 Pa. Super. 42, 491 A.2d

138, 148 (1985) (court imposed on contracting party a promise to

act in good faith in determining and setting amount owed); Loos

& Dilworth v. Quaker State Oil Refining Corp., 347 Pa. Super.

477, 500 A.2d 1155, 1160 (1985). See also Daniel B. Van Campen

Corporation v. Building and Construction Trades Council, 202

Pa. Super. 118, 122, 195 A.2d 134 (1963) (law implies agreement

by contracting parties to perform those acts that according to

reason and justice they should perform in order to carry out

purpose of contract and to refrain from doing anything that

would injure other party's right to receive fruits of contract).

Thus, in making any adjustment in compensation payable to

ACMAT for work performed, any determination of the School

District must be within the confines of good faith and reason-

ableness. ACMAT disputes the good faith and reasonableness of

the School District in making such determinations under the

contract. See report of Kellogg Corporation concerning dam-

ages, which was submitted with ACMAT’s pretrial memoran-

dum. Whether or not the School District exercised good faith

and reasonableness is a factual issue in dispute. The School

District has pointed to no factual basis to support its determi-

nations, and the propriety of its determinations represents a jury

question. Summary judgment should be denied on this issue.

F. The School District Is Responsible For The Cost of

Removing Asbestos Overspray At The Rush School

ACMAT is entitled to additional compensation from the

School District of Philadelphia for removal of overspray at the

Rush School. This claim arises by reason of the failure of the

School District to advise ACMAT, prior to the date on which its

R.A.58

bid was submitted to the School District, that overspray at the

Rush School was far greater than normal.

The overspray resulted from the application, out of se-

quence, of asbestos fireproofing above the ceiling at the Rush

Middle School. Contrary to usual practice, fireproofing had

been applied after ceiling grids were installed, after light fixtures

were installed, after ducts were installed, and after conduit was

run. See Affidavit of Henry W. Nozko, Jr., attached hereto.

A pre-bid inspection was held at the Rush Middle School.

Representing ACMAT at the pre-bid inspection was Fred

Dalton. A walking tour of the second floor of the Rush School did

not reveal to ACMAT's representative, or to the representatives

of other contractors present, the serious, pervasive overspray

problem at the Rush Middle School. iisias: Mie taltpnetion

took place during the school year when students were attending

class, because no one was suited-up in protective clothing and

wearing respirators, because the leader of the tour (a School

District representative) never mentioned the overspray prob-

lem, and because the contract documents did not address the

serious overspray problem, ceilings were not removed to inspect

above the ceilings. In fact, such an inspection would have

exposed the inspectors, students, teachers and others within the

building to a potential serious health hazard. See Affidavit of

Henry Nozko, Jr.

It is therefore understandable why ACMAT depended

upon the accuracy of the plans and specifications in submitting

its bid, since it could not conduct an inspection above the

ceiling. It was the absolute responsibility of the School District

to acquaint ACMAT with any unusual conditions which might

affect the amount of its bid. Overspray, to the extent found in

the Rush School, was such an unusual condition.

Unlike conditions on any job that ACMAT had previously

encountered, spray-on fireproofing at the Rush Middle School

had been applied after the ceiling grid was installed, after the

light fixtures were hung, after conduit was run, and after ducts

R.A.59

the Rush School. The job ACMAT ultimately performed was not

the job that ACMAT was asked to perform.

Certainly, the School District, during the bid stage, should

have informed ACMAT that there was an extensive overspray

problem. No one knew, or could have known, the job better

than the School District. In fact, prior to the job’s being bid by

ACMAT and others, the School District conducted bulk sam-

pling tests at the Rush Middle School. The School District had

an affirmative obligation to inform ACMAT about the overspray

condition, of which it had knowledge.

Ace ee nat kaon

bars ACMAT's claim. The School District

prensa = tea aman ena

that ACMAT should have discovered the problem. Having failed

to do so, ACMAT’s claim is barred. says the School District.

Almost all bid packages for construction documents require

bidders to conduct an inspection of the job site prior to

submitting bids. The obvious import of this language is to place

upon the contractor the risk of coping with whatever conditions

might have been ascertained on a “reasonable inspection”. The

key word is “reasonable”.

In M. A. Mortenson Co., 87-1 BCA (CCH) $19,598 (1987)

Mortenson contracted to construct a B-IB support facility at the

Ellsworth Air Force Base in South Dakota. Mortenson’s contract

contained standard provisions regarding site inspection and

conditions affecting the work. The bid package included draw-

ings showing the areas wherein concrete and asphalt had to be

removed in order to perform the work. Mortenson performed

the site inspection as required by the bid instructions. Following

the award of the contract to Mortenson, it discovered quantities

of concrete far greater than it had anticipated. Mortenson

advised the government that additional work would be required

to perform the contract and requested an equitable adjustment

for the extra work and delays. The contracting officer denied

Mortenson’s claim, saying that the contract site investigation

provision and the drawings identified the areas wherein con-

crete and asphalt would have to be removed.

R.A.60

The Board of Contract Appeals (BCA) granted Mortenson’s

claim for an equitable adjustment, basing its decision on the fact

that the drawings and site investigation would not have alerted

it to the additional work. Mortenson established that the bid

drawings did not indicate the requirement of additional concrete

removal and it was impossible to determine from the drawings

and site investigation that such work would ultimately be

required.

Space prohibits citing each and every case which stands for

the proposition that the ultimate resolution of a claim for

additional compensation based on a differing site condition

depends on whether or not the contractor's interpretation of the

plans and inspection of the site were “reasonable”. See Minter

Roofing Co., 87-1 BCA (CCH) 19,386 (1986), wherein the BCA

denied the contracting officer's Motion for Summary Judgment

because of the existence of genuine issues of fact as to the

reasonableness of the contractor's interpretations of the plans

and the availability of site access to ascertain whether the

contract documents had been complied with. See also Granite-

Groves v. Washington Metropolitan Area Transit Authority,

845 F.2d 330, 334 (D.C. Cir. 1988), where the court stated that

in interpreting a contract, it is proper for the court to place itself

into the shoes of a “r le and prudent” contractor and

decide how such a contr would act in the situation at hand.

There exists in this case a genuine issue of material fact.

That being so, this Motion for Summary Judgment must be

denied. Jurors should determine whether ACMAT was reason-

able in its interpretation of the plans: whether the contract

documents showed the extensive overspray: whether ACMATs

pre-bid inspection should have revealed the existence of exten-

sive overspray; whether ACMAT had access to the area where

the extensive a pray existed: whether it was reasonable to

look above the ceilings; whether ACMAT would have created a

health hazard to occupants of the brilding if it had boen

permitted to conduct an extensive site investigation; whether

ACMAT would have exposed its employees and others to danger

if an inspection was undertaken without appropriate protection;

whether ACMAT had sufficient opportunity to discover the

R.A.61

condition; whether ACMAT was reasonable in relying on the

fact that spray on fireproof is almost never performed out of

sequence as it was at the Rush School; whether ACMAT was

reasonable in its reliance on the plans and specifications which

did not alert ACMAT to the existence of pervasive overspray; —

and whether the School District possessed or should have

possessed superior knowledge to ACMAT as to the existence of

extensive overspray. Considered individually or together, these

questions raise genuine issues of fact that must be resolved by a

The School District relies heavily on the contract language

to support its argument that ACMAT's claim should be barred.

Referring to the Rush contract, Special Conditions, SC-07, the

School District argues that ACMAT had the responsibility to

examine the site before bidding the project. The contractor had

the responsibility of “. . . . informing himself fully of all deter-

minable existing conditions and limitations of the sites and will

assume responsibility for all charges and costs resulting from his

failure to verify same.” It was clearly a factual issue whether the

extensive overspray was “determinable” given the circum-

stances existing when the inspection was conducted and the

“limitation of the site(s).” Beyond any doubt, a jury question

exists. These issues are not determinable by a motion for

summary judgment.

R.A.62

: Ill. CONCLUSION

For all of the foregoing reasons, plaintiff, ACMAT Corpo-

ration, respectfully requests that the motion for Summary

Judgment of the School District of Philadelphia be denied.

KORN, KLINE & KUTNER

A

et Pe

Robert A. Korn, Esquire

1845 Walnut Street

21st Floor

Philadelphia, PA 19103

(215) 751-0500

Attorney for Plaintiff

ACMAT Corporation

__ .

R.A.63

AFFIDAVIT OF HENRY W. NOZKO, JR.

¥

WT 6 a ee

er le x ~

R.A.64

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ACMAT CORPORATION, : CIVIL ACTION

Plaintiff, : NO. 85-7067

o.

THE SCHOOL DISTRICT OF

PHILADELPHIA,

Defendant.

STATE OF CONNECTICUT :

: SS. East Hartford

COUNTY OF HARTFORD =:

Henry W. Nozko, Jr., being duly sworn according to law,

deposes and states as follows:

1. I am the Executive Vice President of ACMAT

Corporation

2. I am familiar with the contract between the School

District of Philadelphia and ACMAT Corporation relating

to the removal of asbestos from the Rush Middle School.

3. ACMAT Corporation submitted a bid to the School

District of Philadelphia for the removal of asbestos at the

Rush Middle School.

4. The bid was submitted after a pre-bid meeting was

held by the School District of Philadelphia.

5. The pre-bid meeting was attended by Fred Dalton,

a former employee of ACMAT Corporation.

6. The pre-bid meeting was held on January 24, 1984.

ACMAT Corporation visited the Rush Middle School prior

to submitting its bid.

7. Fred Dalton, representing ACMAT Corporation,

attended the pre-bid meeting along with representatives of

other asbestos removal contractors.

R.A.65

8. Fred Dalton took a walking tour of the Rush Middle

School.

9. The walking tour included rooms on the second floor

of the Rush Middle School.

10. On the date of the tour, the Rush Middle School

was in use, occupied by students, teachers, and others.

11. Fred Dalton had been advised that there was

asbestos above the ceilings on the second floor of the Rush

Middle School.

12. During the inspection, Fred Dalton was not wear-

ing a respirator and protective clothing, nor were any of the

nee At dialed etcaeme aaned oak.

13. Fred Dalton did not look above the ceilings

because “friable” asbestos, located above the ceilings, could

not be disturbed since it would create a potential health

hazard to the inspectors and occupants of the building.

14. To fully ascertain the extent of overspray above the

ceilings, one would have to perform demolition work to the

building which was an activity beyond the scope of the

perfunctory pre-bid walking tour.

15. A bulk sampling test, performed at the Rush

Middle School prior to the date on which ACMAT submit-

ted its bid, could not reveal the extensive overspray

problem at the Rush Middle School.

16. The contract documents, including the plans and

specifications, did not disclose to ACMAT the extensive

overspray problem at the Rush Middle School.

17. The School District does not deny the existence of

extensive overspray, only our right to be compensated for

the cuneate of naam ahaa aemionst,

18. The overspray problem at the Rush Middle School

was the most extensive that ACMAT has encountered since

it began asbestos removal work in 1975.

:

33 He He

mul ; il

Hy! e

iH ] iH

He i

Sworn to and subscribed

before me this 30th day

of August, 1988.

Notary Public

R.A.67

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICY OF PENNSYLVANIA

ACMAT CORPORATION : CIVIL ACTION

Plaintiff ;

R.A.68

| MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF'S

a MOTION FOR REARGUMENT

: IN THE UNITED STATES DISTRICT COURT

4 FOR THE EASTERN DISTRICT OF PENNSYLVANIA

R.A.69

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Th. memorandum is submitted im support of the plaintiff s

prop eras yt shaper 9 a ma

oad hee a eC

to was at

he were helt Sr tp eel

adjudication i «aga

ne me cet a aie

tract documents is and not in with the

terms of the contract or law. The claims asserted by

R.A.70

FACTS

In or about April and June 1984, Acmat Corporation

(“Acmat”) and the School District of Philadelphia (“School

District”) entered into separate contracts for asbestos abatement

at three school buildings in the City of Philadelphia. The schools

were Fairhill Elementary School, Lincoln Senior High School

and Rush Middle School. The Fairhill contract, dated April 16,

1984, was for a fixed price in the sum of $446,000. In June 1984

the School District initiated a change in specifications relating to

air monitoring and work practices at the Fairhill School. School

Board approval was obtained for the change in work and for an

increase in the contract price in the sum of $18,000.00.

The Lincoln contract, dated June 11, 1984, was for a fixed

price in the sum of $223,000. School Board approval was

obtained.

The Rush contract, dated June 11, 1984, was for a fixed

price in the sum of $595,000 and involved asbestos removal from

the second floor only. Thereafter, the School District chose to

remove asbestos from the first floor of the Rush School and

entered into a Supplemental Agreement dated October 30,

1984, for the sum of $656,000. Formal School Board approval

was obtained for the initial agreement and the Supplemental

Agreement. The School District also elected to clean certain

property stored in closets and cabinets in the building. This

work was not included in the original contract and the School

District issued a change order with School Board approval.

Although the change order in the sum of $63,282.89 was

executed by both parties, Acmat expressly reserved its right to

seek additional compensation. The School District executed the

change order and unilaterally deleted the language inserted by

Acmat.

All of the aforementioned contracts and unilaterally initi-

ated changes by the School District were approved by the

School Board.

During the performance of its work Acmat encountered

unanticipated differing site conditions that caused significant

increases in the amount of work it had agreed to perform and in

R.A.71

the cost of performance. The record is replete with correspon-

dence and other documentation in which the School District

acknowledged the additional work Acmat encountered due to

the differing site conditions. Indeed, the School District, in

many instances, ordered that the additional work be performed

and even attempted to amicably adjust the compensation due

Acmat for this work. The site conditions simply caused an

increase in the amount of work Acmat had agreed to perform.

The fact that claims could arise from differing site conditions was

expressly contemplated by the agreements. See paragraph 14(c)

of the Rush Contract for an example.!

Other claims involve the amount owed for work unilaterally

ordered by the School District with School Board approval.

Another category of claims are based on work which Acmat

asserts lie outside the scope of the contract. This is work that the

School District ordered Acmat to perform in the mistaken belief

that it was within the scope of the contract. This work was not

the result of a unilateral decision of the School District to modify

the scope of the contract pursuant to paragraph 14(a) of the

contract, but was insisted upon by the School District in the

erroneous belief that it was included in the contract. Even the

most cautiously drafted construction contract will include terms

and drawings which may be interpreted differently by parties to

an agreement. Interpretation is often based on custom and usage

in a particular trade. The claims that come within this category

are the result of a simple common law breach of contract and

there is no procedure in the contract for their resolution. They

are compensable against the School District in accordance with

the common law, as they would be against any party that

breached a contract. The School District’s improper administra-

tion of the contract and interference with Acmat’s work also give

rise to claims for breach of contract. A prime example is the

unreasonable inspections and late reporting of test results that

delayed Acmat and caused it to perform more work. Other

1. For ease of reference, citations to the construction contracts corre-

spond with sections in the Rush agreement.

R.A.72

examples are conflicting and late directions to do work and the

directions to wear full face masks and to install a third layer of

polyethylene.

Another category of claims are based on the increased costs

caused by owner generated disruptions and delays to the

performance of the contracts. These claims were summarily

dismissed by the order of December 21, 1988, on the basis of the

“No Damage for Delay” clause in the parties’ agreement. See

paragraph 15(c) of the Rush Contract for example. However, for

reasons set forth herein, the scope of these clauses has been

limited by the courts and Acmat should have the opportunity to

present this issue to the jury.

An additional claim is for the contract balance which has

been retained by the School District in the appare.© sum of

$142,090.72.

For its part, the School District has counterclaiimed for

liquidated damages and credits for work which was allegedly

omitted or improperly performed.

Argument

POINT I

THE PROVISIONS OF THE CONSTRUCTION

CONTRACTS DO NOT PRECLUDE RECOVERY

OF THE CLAIMS ASSERTED BY ACMAT —

The School District’: interpretation of the agreement im-

properly merges the paragraphs of Article 14 of the General

Conditions of the contract and distorts the manifested intent of

the parties. .

The reality of a construction project is that despite the many

hours of planning by design professionals and construction

experts, contingencies arise that require changes in the methods

and manner of performance by the contractor. The construction

contract may set forth different procedures for dealing with

contingencies. The particular procedure to be utilized will

usually depend on the cause of the changed work.

R.A.73

A. Paragraph 14(a) is a unilateral changes clause.

Paragraph 14(a) is designed to deal with changes initiated

by the School District. Clauses such as these are unique to

construction contracts because they allow the owner to issue

unilateral orders directing a deviation from a contract that has

already been assented to by the parties.? Otherwise, major

construction, in which large sums of money have been commit-

ted, could come to a standstill while the parties negotiate and try

to come to an agreement on a modification to their contract. This

being the case, the contractors only remedy is to seek additional

compensation if it believes that the adjustment allocated by the

owner is insufficient. Paragraph 14(b) deals with the equitable

adjustment of the contract price when changes to work have

been made in accordance with paragraph 14(a). Of course, all

contracts may be amended at any time by the mutual assent of

the parties and the procedure therefor need not be expressed in

the agreement.

School Board approval was properly obtained for the work

unilaterally initiated by the School District pursuant to para-

graph 14(a). Acmat became obligated to perform the work

whether it wanted to or not because it was within the general

scope of the contract and because paragraph 14(a) left it with no

choice. However, the School District cannot unilaterally dictate

the compensation to be paid for this work. Paragraph 14(b) sets

forth a formula to make the adjustment but the School District

cannot dictate the amount of the net costs to be used in the

calculation. The final sentence of paragraph 14(b) which at-

tempts to give the School District this right is a nullity and must

be disregarded.* Thus, the price adjustment for work ordered

under paragraph 14(a) must be mutually assented to by the

parties in a change order or left for the determination of the trier

of fact.

Change Order No. 1 to the Rush School Contract is a case

in point. The School District decided that it wanted to clean the

2. Paragraph 14(a) refers only to changes by the School District and

makes no mention of assent by Acmat.

3. Discussion of this issue begins on page 23.

R.A.74

personal property stored in closets and cabinets. It directed

Acrat to do the work pursuant to paragraph 14(a) and School

Board approval was obtained. See Mattleman affidavit sworn to

August 15, 1988. Although a “proceed order” could have issued

at that point, the School District attempted to make an agree-

ment with Acmat for the fixed price of $63,282.89 and issued a

change order for its signature. Acmat balked at the price and

reserved its right to seek additional compensation and so stated

in the change order. Thus, Acmat was asserting its right to seek

an equitable adjustment under paragraph 14(b). However, the

School District unilaterally crossed out Acmat’s language and

stated that it had the absolute right to dictate the price to be paid

for the change. See Exhibit “2” annexed hereto. Thus, it is clear

that there was no “meeting of the minds” as to the price for this

change and Acmat proceeded with the work in accordance with

paragraph 14(a) of the contract. The claimed amount for per-

forming this work is in the sum of $148,398.22.

Another interesting situation arose from the additional work

unilaterally directed by the School District and approved by the

School Board at the Fairhill School. According to the documen-

tation annexed hereto, the Board approved the addition of a

work practices supplement to the contract. See Exhibit “3”. The

School District and the Board had this right pursuant to

paragraph 14(a) of the contract and Acmat became obligated to

perform as directed. However, no change order has been

produced showing Acmat’s assent to a price. The documentary

evidence shows only a proposal by Acmat to apply one coat of

encapsulating sealer at soffits. It does not show an agreement to

perform the sealer work for a fixed amount and certainly does

not show an agreement to 23 pages of work practices at any

price. In the final analysis, Acmat was required by paragraph

14(a) to perform in accordance with the work practices supple-

ment, but never agreed to a price. The School District's

memorandum to file appears to be simply a self-serving hearsay

document which is entitled to little or no consideration. Accord-

ingly, all of Acmat’s claims arising out of performance of the

work practices supplement are entitled to an equitable adjust-

ment.

R.A.75

The first claim in the sum of $18,000 is for the sealant

referred to previously.

The claim involving the removal of carpet is an item to be

equitably adjusted.

Other claims arising from the work practices supplement

are contained in the claim designated as No. 8. It includes the

work imposed on Acmat by the supplement and the breaches

committed by the School District in its implementation.

B. Paragraph 14(c) is a differing site condition clause and

governs the changes that were unexpectedly encountered

at the Project.

The agreements contain a differing site condition clause

that is designed to deal with conditions that differ from those set

forth in the contract documents or which are normally found in

construction. It has nothing whatsoever to do with changes

within the scope of the contract which are unilaterally ordered

by the School District pursuant to paragraph 14(a) or changes

outside the scope of the contract which require the assent of

both parties and the School Board pursuant to 24 Fa. Stat. Ann.

§ 5-508.

Differing site condition clauses became commonplace in

government contracts during the last 25 years in order to hold

down the cost of construction. Without a differing site condition

clause, contractors assume the risk of unexpected costs and

difficulties which can be sustained when differing site conditions

are encountered. Consequently, bids were exaggerated to cover

unknown contingencies which might never occur. Government

entities found that they could save money on their overall

expenditures for construction if they contracted for the proposed

work without a mark-up for contingencies since a large number

of projects were being built without encountering different

conditions. Thus, there was a net savings, even though, some

projects cost more because of unexpected contingencies. Con-

sequently, the differing site condition clause allows a builder to

bid a project safe in the knowledge that it will be equitably

compensated if an unexpected condition arises.

R.A.76

It is well documented that Acmat encountered conditions

on these projects which were different from what was described

on the plans and specifications and different from anything else

it had experienced in its long history of asbestos abatement.

The issue is whether the differing site conditions clause in

paragraph 14(c) is modified by the unilateral changes clause

found in paragraph 14(a). The answer was given in the negative

by the Pennsylvania Supreme Court in Teodori v. Penn Hill

School District Authority, 413 Pa. 127, 196 A.2d 306 (1964). In

Teodori an excavation contractor encountered a differing site

condition that caused it to perform additional work and to

experience a delay. The contractual language was very similar to

the wording used by the School District in the case at bar. The

contract contained a differing site condition clause, an extra

work provision and a section for computing payment for extra

work. The Court found that the differing site condition clause

was separate and apart from the provisions for extra work.

The following pertinent remarks were made by the Su-

preme Court of Pennsylvania:

Authority next argues that the contract between the parties

provided no agreement to pay for extra work in the amount

claimed by Teodori. This contention is based upon the

“Changes and Alterations” section of the contract, which

clearly provides that such “changes and alterations” be

made by written order. This argument completely ignores

the section of the contract dealing with “Conditions Differ-

ing From Those Shown On Plans Or Indicated In Specifi-

cations”, set forth in full above. The parties obviously

contemplated the possibility of the exact type of contin-

gency which arose, and provided for it in the contract.

We agree with the conclusion of the court below, that

Teodori’s right to extra compensation, if any, is governed by

the “differing conditions” clause, and not by the “changes

and alterations” clause, the extra compensation not being

sought for “changes” and/or “alterations” as those terms

were used in the contract.

—— a ST

= - lee rrr

R.A.77

Nor are we moved by Authority's argument that the award

of extra compensation is contrary to the provisions of the

School Code or Municipality Authorities Act. The statutory

authority for Authority to award contracts is contained in

the Municipality Authorities Act of 1945, as amended by

the Act of May 6, 1957, P.L. 112, Sec.1, 53 P.S. §312. That

act provides, in substance, that contracts for construction

and repair work involving a cost in excess of $1,000.00, shall

be awarded only on the basis of competitive bids.

The contract in the instant case was entered into under

circumstances which fully complied with the above statute.

The extra work which the plaintiff was required to do and

upon which his claim is based was a natural extension of the

quantum of the work contemplated by the original contract

and was clearly covered by an express provision thereof. No

work not encompassed in the original contract was pre-

sented by discovery of the gasoline line, and thus no

physical changes or alterations in the contract documents

were necessitated thereby. The end product of the site

preparation remained exactly as originally planned; only the

manner of accomplishing it was affected. The contract

unequivocally provided for this contingency, and the plain-

tiff had a clear contractual right to adjust his method of

operation and to recover his additional costs within the

contract framework.

Here, the contract foresaw the possibility of what actually

occurred, and Teodori complied with the governing provi-

sions of the contract. The architect investigated the condi-

tions, found them materially different from those shown or

indicated in the plans and specifications and made the

necessary changes for the conduct of the work, thereby

entitling Teodori to an increase in compensation in accor-

dance with the “Extra Work” section of the contract.

Teodori v. Penn Hills School District Authority, 196 A.2d at

309.

R.A.78

Thus, it is quite apparent that procedures for additional

work caused by differing site conditions are independent from

these governing additional work under the changes clause in

paragraph 14(a). The only link between paragraphs 14{a) and

14(c) is that the cost for additional work is to be calculated in

accordance with paragraph 14(b). Paragraph 14(c) specilically

states that “[a}]ny increase or decrease of cost resulting from such

changes shall be adjusted in the manner provided herein for

adjustment as to changes.” This is a clear reference to paragraph

14(b) since it deals with costs due to changes made under

paragraph 14(a).

Accordingly, paragraphs 14(a) and 14(c) are separate and

distinct from each other. Changes that are caused by differing

site conditions do not require School Board approval and need

not be in writing. See Teodori v. Penn Hill School District

Authority, supra.

C. The site inspection clauses have no bearing on the claims

asserted by Acmat.

Reliance on the site investigation clause of the contracts to

nullify paragraph 14(c) is misplaced. The courts are reluctant to

read such exculpatory clauses broadly and to relieve owners of

their liability for changed conditions. An interpretation which

shifts the risk of differing site conditions to the contractor would

render paragraph 14(c) meaningless and undermine the very

reasons for its insertion in the contracts. It must be remembered

that differing site condition clauses were inserted by govern-

ment entities to reduce the cost of construction. An interpreta-

tion which voids paragraph 14(c) on this basis would allow an

owner to reduce a contractor's price and then deny an equitable

adjustment if a differing site condition is found. See Town of

Longboat Key v. Carl E. Widell & Son, 362 So.2d 719. (Fla. 2nd

DCA 1978).

In United Contractors v. U.S., 368 F.2d 585, 598, the court

wrote the following:

But we have held, in comparable circumstances, that board

exculpatory clauses (identical in effect with t

This text is long and has been trimmed here. Open the source document for the complete record.