# Opposition Brief — Acmat Corp. v. School District of Philadelphia > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_2864%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1991 - **Citation:** 498 U.S. 1024 ## Text 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 BEST AVAILABLE COPY” jam anes a fhe sigh be ae a S Be: ume + an JOSEPH F. SPANIO JR. 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 ll 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. | | ; mine the amount of “cut and fill” needed to jl E | Es i Lise ¥ : fe 2A ite nt an Hi Hie SLE i z He (HI ih i ails to make his own estimate of the necessary excavation and submit a bid including the additional excavation costs. Thus, Durkin stands for the proposition that a contractor is required to follow asus agg ALN ba Tee Eee fi ai ete Ap : PBR (yieeitae 1 ti + i eet Le bet IRL ERE RUT HHA ai Hadad Hl is R.A.40 HEH TH ee rH {iil 4 i Beare at stl Tea Ht eee HE vii ul eal anutilieian Hoan porta Hae SUH HH TRL ATH aa Ht Hi SHH HAE a ILE H ath TE in ea it TATE ‘ He 13842) F ay iy iis HEP null ine ht Ant HIE a TT Te R.A.41 R.A.42 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. eit numa 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 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_2864%3A2. Public record. Not legal advice.