Opinion ID: 2321104
Heading Depth: 3
Heading Rank: 1

Heading: Streamlining the Issues and Contentions

Text: This appeal is substantially more convoluted than it should be as a result of a very modest factual record omitting important details, such as material terms of the leases; imprecision and/or artfulness in the depiction of the factual circumstances both in the stipulation and in the briefs; repeated extra-record assertions; and a failure, on the part of the Commonwealth Court, to provide a complete and creditable analysis of the Board's rationale and the Bureau's arguments on their terms, see, e.g., supra notes 14-18. In this disordered landscape, we offer the following preliminary comments to clarify our own decisional focus. Initially, there appears to be a fair degree of intermixing of several different, albeit overlapping, questions. Firstand the issue of greatest public importance in this appealis the question of whether, or under what circumstances, a pre-development lease implicates regulation under the Wage Act. The second question concerns the degree to which parties which have entered into a lease incorporating a public funding component (here, the October 1, 2006, lease's allocation to the procurement of certain construction materials and equipment of the $1.6 million security deposit comprised of bond proceeds) may later alter their agreement to eliminate the public funding aspect. The third, interrelated question can be framed in terms of whether such a modification can be accomplished by phasing the development or by bifurcating the construction project into shell and fit-out stages. The first of these questions represents our main concern, given its wider significance, and is the subject of our main discussion below. The second, at least in its broadest frame, has not been squarely presented by the Bureau, which is the appellant at this stage of the litigation and therefore bears the responsibility to frame the issues it wishes to be heard. See, e.g., Commonwealth v. Reed, 605 Pa. 431, 438, 990 A.2d 1158, 1163 (2010) (referencing the ordinary rule that the appellant bears the obligations of issue preservation and presentation). By way of further explanation, a subtext of this appeal arises out of the questionable behavior of the Foundation and/or Developer in styling the tender of $1.6 million in public funds to be used to finance construction materials as a security deposit, while failing to request a determination from the Department of prevailing wage rates, and denying any involvement of public (or charter-school) funds when the Bureau opened an investigation. The Bureau, however, has participated in generating a factual presentation in this litigation which downplays the particulars of the October 1, 2006, lease. For example, the stipulation comprising the core factual record in the case simply passes over this lease, omitting it from its chronological sequence in the recitation of the material facts. Indeed, there seems to be an overall reluctance on the part of all the parties to develop the role of the $1.6 million security deposit in these affairs. Furthermore, the Bureau has not offered legal authority to support any sort of estoppel theory, by which Appellees might be considered to be bound to the circumstances prevailing under the initial lease. Thus, consistent with the manner in which the appeal has been presented to us, we will center our own review on the March 1, 2007, lease amendment. [21] As to the third question, absent some sort of estoppel, there does not appear to be any reason why parties to a contract or lease cannot modify their relationship to account for legal requirements (such as prevailing wages) which may attach to one, but not another, manner of transacting. [22] Additionally, we agree with Appellees that there can be as strong and logical a demarcation between shell and fit-out work relative to commercial premises as there is between site preparation and ensuing structural construction. There is no dispute that interior construction in commercial premises is often tailored to the specific needs and interests of the occupant, and, thus, that the lessee may desire greater participation and supervision over fit-out construction. Therefore, we reject the Bureau's position that the latitude accorded in Penn. National I to legitimately phased construction does not apply to the demarcation between shell and fit-out construction of commercial premises. See Penn. Nat'l I, 552 Pa. at 398, 715 A.2d at 1074 (Nothing in section 5 of the Act mandates that an entire construction project be covered by the Act.); accord City of Long Beach v. Dep't of Indus. Relations, 34 Cal.4th 942, 22 Cal. Rptr.3d 518, 102 P.3d 904 (2004) (finding that prevailing wages were not required for the construction of a building even though public money was used to pay professionals involved in pre-construction activities, such as architects, project managers, lawyers, and surveyors). [23] Although Penn. National I should not be read to authorize artificial construction phasing bearing no independent business justification, its rationale by its terms extends to major, commonly-appreciated construction milestones, such as the completion of site preparation or of a commercial building's shell. In this regard, it appears undisputed that bifurcation of an office building into a shell and its fit-out is an industry practice which may allow for the creation of a generic exterior, with prospective tenants retaining the ability to tailor the interior for their needs. See Columbia-Pac. Bldg. & Constr. Trades Council, AFL-CIO v. Oregon Comm'n on Pub. Broad., 102 Or.App. 212, 794 P.2d 438, 442 (1990) (observing that the building at issue is in major part a general office building, and that the interior is convertible for use by other lessees, if [the public tenant] does not purchase the building or terminates the lease early), superseded by statute as stated in Portland Dev. Comm'n v. State ex rel. Bureau of Labor & Indus., 216 Or.App. 72, 171 P.3d 1012, 1015-16 (2007). We agree with the Bureau, however, that Penn. National I 's holding does not answer all questions arising in pre-development lease scenarios, as such setting presents its own unique concerns in the application of the Wage Act. Thus, our main focus, going forward, is on whether the Phoenix Field Office test, or some other appropriate litmus, should pertain to screen against artful drafting of contracts to evade wage regulation.