Case Name: Virginia K. McCANN, Petitioner, v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent
Court: Commonwealth Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1998-12-11
Citations: 723 A.2d 246
Docket Number: 
Parties: Virginia K. McCANN, Petitioner, v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent.
Judges: Before COLINS, President Judge, and DOYLE, J., McGINLEY, J., SMITH, J., PELLEGRINI, J., FRIEDMAN, J. and LEADBETTER, J.
Reporter: West's Atlantic Reporter, Second Series
Volume: 723
Pages: 246–254

Head Matter:
Virginia K. McCANN, Petitioner, v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent.
Commonwealth Court of Pennsylvania.
Argued Sept. 16, 1998.
Decided Dec. 11, 1998.
As Amended Jan. 5, 1999.
Donald Marritz, Gettysburg, for petitioner.
Roger H. Caffier, Harrisburg, for respondent.
Before COLINS, President Judge, and DOYLE, J., McGINLEY, J., SMITH, J., PELLEGRINI, J., FRIEDMAN, J. and LEADBETTER, J.

Opinion:
PELLEGRINI, Judge.
Before the Court is Virginia K, McCann's (McCann) motion that counsel fees be assessed against the Unemployment Compensation Board of Review (Board) pursuant to Pennsylvania Rule of Appellate Procedure 2744. In McCann v. Unemployment Compensation Board of Review (No. 2658 C.D. 1996, filed March 26, 1997), this Court reversed the Board's order that denied McCann unemployment compensation benefits. In her motion for counsel fees, McCann contends that fees may be assessed against the Board, an administrative tribunal, for its obdurate, dilatory or vexatious conduct in defending its decision on appeal to this Court, and that the Board's conduct in this case warrants an assessment of counsel fees in her favor.
In the underlying appeal on the merits, McCann had appealed from a decision of the Board denying her benefits under Section 402(e) of the Unemployment Compensation Law (Law). McCann had worked for CR's Friendly Market (Employer) as a cashier until she was terminated on April 30, 1996, for allegedly going into the purse of another employee without permission. McCann applied for unemployment compensation benefits, which were initially denied by the Office of Employment Security, and she appealed to the Referee. Before the Referee, Employer offered the testimony of Gregory Golden (Golden), the store manager at the store at which McCann had worked, who testified that he had been informed by an employee that McCann had allegedly gone through her purse and had shown a two dollar bill she found in her purse to another employee. Golden admitted that he had not witnessed the incident but had only heard of it from McCann's co-workers. Employer also introduced an unsworn signed statement by another employee-witness stating that he had seen McCann searching through the purse of an employee for a two dollar bill that had previously been in the cash register drawer.
During her testimony before the Referee, McCann admitted that she had looked into the purse of her fellow employee and had seen a two dollar bill that she showed to that employee and inquired as to how she had obtained that bill. However, McCann stated that she only had seen the two dollar bill because the side pocket of the employee's purse was open and not because she had searched through or opened the employee's purse. The Referee concluded that Employer had offered no evidence to establish that McCann had engaged in willful misconduct and awarded benefits accordingly.
Employer appealed to the Board which found:
• Claimant did intentionally and purposefully look into the personal property of her co-worker, a purse.
• Claimant did not have good cause for looking into her co-worker's purse.
• Claimant knew or should have knows [sic] that such would be considered an invasion of the co-worker's privacy.
Citing McCann's admission that she had seen the two dollar bill in the employee's purse, the Board rejected as incredible her statement that the side pocket of the purse was open and denied her benefits based on its conclusion that her behavior constituted willful misconduct.
McCann appealed to this Court and we reversed, holding that the only evidence presented by Employer was hearsay evidence consisting of Golden's testimony of what an employee had told him and an unsworn statement it submitted from one of McCann's coworkers. Essentially abandoning its conclusion that substantial evidence existed to find that McCann searched through the purse, the Board then raised the argument that the mere showing of the two dollar bill to another employee constituted willful misconduct. The Board argued that "[e]ven if [McCann] saw the contents of her co-worker's purse by chance, she did not thereafter have carte blanche to disclose said contents to others, especially when that disclosure was designed to further a perceived personal pecuniary gain." It also argued:
At minimum, Claimant admits to accidentally viewing a content of a co-worker's purse... We cannot fault a claimant for accidentally viewing the contents of a coworker's purse. However, it is a far more serious matter to knowingly convey that accidentally viewed private information to a third party while pursuing a prospective personal economic interest. Put succinctly, Claimant violated her co-worker's privacy in an attempt to pursue her desire to acquire the unusual bill in Employer's register. This, of course, is relevant to be [sic] inquiry as to whether Claimant had good cause to act as she did. (Emphasis in original).
The Board went on to argue that revealing another employee's personal information as here would result in a finding of willful misconduct.
Although the Board rejected McCann's testimony as not credible, we held that substantial evidence did not support the Board's finding of willful misconduct because Employer had the burden to prove willful misconduct and because all of the testimony was hearsay. In reversing the denial of benefits and rejecting the Board's argument, we stated:
The Board essentially agrees that there is no substantial evidence in the record to support a finding that [McCann] intentionally searched a fellow employee's purse. Instead of agreeing with [McCann's] arguments and withdrawing its opposition thereto, the Board contends that [McCann] had nevertheless engaged in willful misconduct by showing the two dollar bill to her co-worker. However, Employer did not raise McCann's showing the two dollar bill to a co-worker as a basis for her discharge, there was no work rule prohibiting such conduct on the part of Claimant, and the Board, in its decision, did not state. that such conduct was the basis for its determination that Claimant had engaged in willful misconduct. As such, the Board is precluded from raising that issue as grounds for discharge for the first time on appeal and we refuse to consider the Board's argument on that issue.
Significantly, we went on to note that:
In the past, when its decision was unsupported by the record, the Board indicated as such and withdrew its opposition to the Claimant's appeal rather than proceed on the merits. Here, however, the Board raises a different reason for [McCann's] discharge than it did in its decision, i.e., that Claimant had shown the two dollar bill to her co-worker, in a last ditch effort to justify its otherwise insupportable action.
Based on that comment, Claimant then filed her request for counsel fees pursuant to Pa. R.A.P. 2744, which provides that this Court may award a party reasonable counsel fees "if it determines that an appeal is frivolous or taken solely for delay or that the conduct of the participant against whom costs are to be imposed is dilatory, obdurate or vexatious."
McCann initially contends that counsel fees may be imposed against the Board regardless of its prior role as a tribunal because it acted as a litigant in the appeal before this Court. The Board contends that it should not be liable for counsel fees because it is immune from liability for its conduct as a tribunal when making a determination and because it .is an involuntary respondent before the court under Pa. R.A.P. 1513(b), requiring generally that the government unit which made the determination under review be named as a respondent.
Both the Board and General Counsel rely on Arbuckle v. Unemployment Compensation Board of Review, 84 Pa.Cmwlth. 145, 478 A.2d 545 (Pa.Cmwlth.1984) to support their contention that counsel fees under Pa. R.A.P. 2744 cannot be imposed against an administrative tribunal such as the Board. In Arbuckle, we considered whether costs could be imposed upon the Board as a losing party pursuant to Pa. R.A.P. 2741. That rule provides that "except as otherwise provided by law, when an appellant is successful, costs shall be taxed against the appellee." Pa. R.A.P. 2741. Although we determined that as a general matter, Pa. R.A.P. 2741 permits a court to impose the costs of an appeal on the Commonwealth as a losing party, we declined to apply that rule to a Commonwealth party who had performed an adjudicative function in the underlying matter. We held that "if we were to impose costs upon the Board, we would, in effect, be taxing costs against a judicial body for rendering a decision which was later held to be incorrect." Arbuckle, 478 A.2d at 548.
While it is true that if Pa. R.A.P. 2741 costs were imposed against the Board, it could be penalized simply as a result of its decision. However, unlike Pa. R.A.P. 2741, Pa. R.A.P. 2744 imposes counsel fees based upon conduct, not merely upon result. Therefore, under Pa. R.A.P. 2744, before the Board can be held responsible for counsel fees, irrespective of whether it was successful on appeal, there must be a showing that its conduct was "dilatory, obdurate or vexatious." Unlike in Arbuckle, there is no possibility here that the Board will be held liable for costs or penalized due to its adjudicatory function. It is only when the Board's conduct as a party litigant rises to the level of "dilatory, obdurate or vexatious" that counsel fees may be imposed. Accordingly, Arbuckle is not controlling here.
Other state courts that have addressed whether counsel fees should be imposed upon an administrative tribunal point out that these agencies are not only tribunals, but are also participants in the litigation. In Brown v. Adult Family Services, 293 Or. 6, 643 P.2d 1266 (1982), on remand, Davidson v. Employment Division, 63 Or.App. 600, 666 P.2d 261 (1983), the Supreme Court of Oregon considered the issue of whether counsel fees could be imposed against the Employment Division, an entity similar to that of our Board, which acted as both a party and adjudicator in the underlying litigation. That court held:
[t]o say that the Employment Division has only a disinterested adjudicatory role is not in accord with reality. We believe that to let those aspects of the Division's role which are quasi-judicial control to the exclusion of the Division's activities as a party violates the legislative intent underlying ORS 183.495 . the statute vests discretion to award attorney fees in the Court of Appeals and we believe that this vesting of discretion implies that in appropriate cases attorney fees will be awarded. The rule which the Court of Appeals has established [in the underlying case] declares, in effect, that with the Employment division there are no appropriate cases. We do not think that the statute condones such a blanket policy. Whether an award of attorney fees is to be made . is still a matter to be entrusted to the discretion of the Court of Appeals. (Emphasis added).
293 Or. at 14, 643 P.2d at 1270.
The Supreme Court of Arizona has likewise considered the issue of whether an award of attorney fees against a state agency charged with administration of a legislative enactment, which includes a quasi-judicial function and is a party to such a case on appeal, could be awarded under its applicable statutes. In Cortaro Water Users' Association v. Steiner, 148 Ariz. 314, 714 P.2d 807 (1986), the Supreme Court of Arizona held that where the Department of Water Resources, a state agency, acted as both an administrative agency and a party defendant, no attorney fees were to be awarded against the state at the administrative level because at that level, "the agency is acting essentially as a trial judge in a quasi-judicial capacity," not "pursuant to its prosecutorial power." Id. 148 Ariz. at 318, 714 P.2d at 811. However, that court held that the dual roles should be analyzed separately because agencies can act as both prosecutors and adjudicators, and once the Department undertook a role as an advocate or party in the appeal, if unsuccessful, it could be financially responsible for attorney fees pursuant to the applicable Arizona statutes.
Applying the rationale of Brown and Cor-taro to the instant case, where counsel fees are authorized by Pa. R.A.P 2744, they can be imposed against an agency acting in a dual function as a quasi-judicial agency and a litigant. Just because the Board acted as a tribunal in the appeal below is of no consequence when it comes before this Court as a party participant. Even if the Board was required to act as a party before this Court pursuant to Pa. R.A.P. 1613(b), it was not relieved of its obligation to pay counsel fees where applicable under Pa. R.A.P 2744, because nothing in Pa. R.A.P. 1513(b) controlled its conduct as a party before this Court. If, as a party participant, it engages in obdurate conduct, it should suffer the same consequences as any other party participant and should not escape liability for the successful party's counsel fees merely because it acted at some point as an adjudicatory body when it appeared before us as an advocate, not as some disinterested party.
Because we have determined that counsel fees may be assessed against the Board where it engages in obdurate, vexatious or dilatory conduct, we must now reach the issue of whether the Board's conduct here constituted such conduct. Pursuant to Pa. R.A.P. 2744, counsel fees may be awarded against a party if we determine that the "appeal is frivolous or taken solely for delay or that the conduct of the participant against whom costs are to be imposed is dilatory, obdurate or vexatious." An appeal is "frivolous" where it lacks any basis in law or fact. Thunberg v. Strause, 545 Pa. 607, 682 A.2d 295 (1996). Obdurate conduct includes the act of being "stubbornly persistent in wrong doing." Webster's Ninth New Collegiate Dictionary 814 (1989). "Vexatious" conduct has been defined as that which is "without sufficient grounds and serving only to cause annoyance." Santoro v. City of Philadelphia, 59 Pa.Cmwlth. 114, 429 A.2d 113, 117 (Pa.Cmwlth.1981).
McCann alleges that the Board acted in a frivolous, dilatory, obdurate and vexatious manner in a non-adjudicatory fashion by raising reasons not relied on in its opinion. By contending for the first time before this Court that her showing the two dollar bill to a co-worker was grounds for her discharge, McCann contends that the imposition of counsel fees pursuant to Pa. R.A.P. 2744 is warranted.
Had the Board merely defended its findings and conclusions rendered in its opinion denying benefits before this Court, even if legally unsupportable, counsel fees would not have been warranted. However, rather than defend its findings, the Board assumed the position of advocate, changing theories on appeal to contend for the first time that even if McCann had accidentally viewed the two dollar bill, her subsequent actions in informing a co-worker of what she had seen constituted an invasion of her co-worker's privacy and was done solely for her own pecuniary interests and for that reason rose to the level of willful misconduct. Because the Board acted in a vexatious and obdurate manner in abandoning its holding of misconduct and acting as an advocate, raising an equally unsupportable new theory on appeal, we agree with McCann that counsel fees should be imposed against the Board pursuant to Pa. R.A.P. 2744.
Accordingly, McCann's request for counsel fees is granted.
ORDER
AND NOW, this 11th day of December, 1998, the motion for counsel fees filed by Virginia K. McCann, No. 2658 C.D.1996, is granted. An itemized bill for counsel fees shall be submitted within thirty days. The Board has twenty days to respond to the request for fees.
Dissenting opinion by Judge SMITH in which Judge DOYLE joins.
Dissenting opinion by Judge LEADBETTER.
. Pa. R.A.P. 2744 provides that:
In addition to other costs allowable by general rule or Act of Assembly, an appellate court may award as further costs damages as may be just including:
(1) a reasonable counsel fee and
(2) damages for delay at the rate of 6% per annum in addition to legal interest, if it determines that an appeal is frivolous or taken solely for delay or that the conduct of the participant against whom costs are to be imposed is dilatory, obdurate or vexatious. The appellate court may remand the case to the trial court to determine the amount of damages authorized by this rule. See also 42 Pa. C.S. §2503.
.Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. §802(e). Section 402(e) of the Law provides:
An employe shall be ineligible for compensation for any week -
(e) In which his unemployment is due to his discharge or temporary suspension from work for willful misconduct connected with his work.
. McCann had allegedly gone through her coworker's purse looking for a two dollar bill that had previously been in the cash register drawer and which she had sought to purchase.
. The Board responded that the hearsay was sufficiently corroborated and the circumstantial evidence sufficiently persuasive to sustain its findings of fact.
. By order entered in this matter on April 29, 1997, we stated that McCann's motion for counsel fees would be scheduled for oral argument. By the terms of the order, "[tjhe issue to be addressed is whether fees can be awarded in defense of a tribunal decision under [Pa. R.A.P.] 2744." Although McCann initially argued that she was entitled to costs under Pa. R.A.P. 2741 and counsel fees under Pa. R.A.P. 2744, the Court's order specifically limited argument to the counsel fees issue only. In any event, on reargument, McCann abandoned any contention that she is entitled to costs under Pa. R.A.P. 2741.
. Also arguing before this Court as Amicus Curiae and supporting the Board's position is the Office of General Counsel (General Counsel) and the Industrial Board. The Board, General Counsel and Industrial Board argue that the Board is immune from liability for counsel fees under the doctrine of sovereign immunity. At issue here is not a claim against the Commonwealth but a request for counsel fees associated with the litigation. See City of Pittsburgh v. Commonwealth, Department of Transportation, 41 Pa.Cmwlth. 247, 399 A.2d 141 (Pa.Cmwlth. 1979).
. Although Judge Smith's dissent relies on Ar-buckle, that case only dealt with record costs and did not address whether the Board's conduct was obdurate, dilatory or vexatious. Similarly, Section 3 of the Act of December 13, 1982, P.L. 1127, as amended, 71 P.S. §2033, imposes counsel fees merely because a party prevails, while Pa. R.A.P. 2744 awards counsel fees and costs based solely on conduct before the Court. Finally, as to the impact of this decision, every other entity in this Commonwealth including local governments, state agencies, corporations and citizens, are subject to this rule without disruption in this Court's process. If we were to hold in a significant number of cases that agencies were engaged in obdurate, vexatious or dilatory conduct in the processing of cases, (unlikely), then the burden on this Court, if any, would ultimately be well worth the effort to prevent needless appeals. More importantly, it would have the salutary effect of having adjudicative agencies defend their decisions and would not allow them to turn them into advocates for one side by raising new issues not raised by the parties before them.
mORS 183.495 provides that "[ujpon judicial review of a final order of an agency when the reviewing court reverses or remands the order it may, in its discretion, award costs, including reasonable attorney's fees, to the petitioner to be paid from the funds appropriated to the agency."
. A.R.S. §12-348(A)(3) provides:
In addition to any costs which are awarded as prescribed by statute, a court shall award fees and other expenses to any party other than this state or a city, town or county which prevails by an adjudication on the merits in any of the following:
A court proceeding to review a state agency decision, pursuant to chapter 7, article 6 of this title, or any other statute authorizing judicial review of an agency decision.
And, pursuant to A.R.S. §908, in an action to review a final decision of an administrative agency, the agency must be made a party defendant to the appeal so that the Arizona Department of Water Resources was an indispensable party in this appeal.
. See Smith v. Board of Probation & Parole, 524 Pa. 500, 574 A.2d 558 (1990), where our Supreme Court held that for the purposes of assessing attorney fees and costs for a frivolous appeal, despite the constitutional right to counsel in an appeal from a criminal conviction, costs and attorney fees may be assessed against a court-appointed appellate counsel for filing a frivolous appeal.
.If the Board were really nothing more than a disinterested party, then under Pa. R.A.P. 1513(b), it would not be required to be named as a respondent. Pa. R.A.P. 1513(b) provides:
The government unit which made the determination sought to be reviewed, and no other party, shall be named as a respondent, except where the petition seeks review of an order of a government unit which is in fact disinterested in the subject matter of the order, in which case all real parties in interest before such government unit shall be named as respondents and the governmental unit shall not be named as a respondent. (Emphasis added).
. The dissent contends that because an appellate court may affirm a decision on a different ground than that relied upon by the tribunal under review, the Board, in its role as advocate as in this case, can urge this court to affirm on other grounds without counsel fees being imposed for conduct that is considered vexatious or obdurate. However, even if we found the Board was acting as an advocate when it defended its position in Claimant's appeal to this Court, the Employer in this case never defended its termination of Claimant before the Referee or on appeal to the Board by arguing that when she revealed another employee's personal information, she was guilty of willful misconduct. Because that argument was never raised before the Referee by the Employer, who was the party named as the defendant, that issue was forever waived on appeal to the Board. Because it was waived before the Board, the Board could not raise it before this Court. See Pa. R.A.P. 1551. Although the dissent believes the Board's action of arguing a novel argument on appeal was no different than that action taken by other appel-lees, the Board was acting as a tribunal and we can find no justification for allowing it to raise a novel argument on appeal to this Court to justify its unsupportable action. As we noted earlier in this opinion, in the past, the Board withdrew its opposition to a claimant's appeal when its decision was unsupported by the record and its failure to do so here constituted obdurate and vexatious conduct.